Natural gas transportation

Results

Total revenue amounted to €986 million, down by €94 million, or 8.7%, compared with the first half of 2015 (€1,080 million). Total revenue, net of components offset in costs⁸, amounted to €898 million, down by €82 million, or 8.4%, compared with the corresponding period of the previous year.

Revenue from regulated activities amounted to €969 million, largely related to fees for the natural gas transportation service (€953 million) and €16 million related to income from natural gas sales made in order to balance the gas system. Revenue from regulated activities, net of components that are offset in costs, amounted to €881 million, down by €66 million, equal to 7.0% compared with the first half of 2015. The reduction is essentially due to the rate adjustment mechanisms (-€109 million) and, specifically, to the updating of the invested capital return rate which went from 6.3% in 2015 to 5.4% in 2016, partly offset by the contribution from investments made in 2014 (+€39 million).

Non-regulated revenues (€17 million) fell by €16 million compared with the first half of 2015. The reduction is mainly due to lower income from sales of natural gas no longer a part of operations (-€20 million).

EBIT amounted to €515, down by €76 million, or 12.9%, compared with the first half of 2015. The reduction was due to lower revenues (-€82 million, net of items offset in costs) and greater amortisation and depreciation (-€8 million, 3.2%) following the entry into service of new infrastructures, partly offset by the reduction in operating costs (+€14 million, -10%) mainly due to lower withdrawals for natural gas sales.

Technical investments amounted to €391 million in the first half of 2016, up by €41 million (+14.7%) compared with the corresponding period of the previous year (€278 million). The investments were classified in accordance with Resolution 514/2013/R/gas of the Electricity, Gas and Water Authority (hereinafter “AEEGSI” or the “Authority”), which identified various categories of projects with different rates of return.

The main investments for the development of new transportation capacity on the National Network to bolster import and export capacity, for which a higher return of 2.0% (€108 million) is projected, concern the following:

• as part of the initiative to support the market in the north-west of the country and to make it possible to reverse the physical transportation flows at the interconnection points with northern Europe (€85 million) in the Pianura Padana area: (i) the continuation of the reconnection construction works and the Zimella-Cervignano natural gas pipeline complementary works; (ii) the continuation of the main construction works for upgrading the Poggio Renatico Station; (iii) the continuation of the major construction works for the new Minerbio hub; (iv) the continuation of the operations for the supply of turbochargers for the new Sergnano and Minerbio stations;
• as part of the projects to upgrade the transportation network from the entry points in southern Italy (€20 million): (i) the continuation of the major construction works for the Biccari-Campochiaro natural gas pipeline, in Campania-Apulia-Molise; (ii) the continuation of the construction works for reconnecting the Massafra-Biccari natural gas pipeline.

The main investments for the development of new transportation capacity on the Regional Network with a greater return of 1.0% (€49 million) relate to numerous works to upgrade the network and to connect to new regional and national redelivery points, including:

• the continuation of construction works relating to the upgrading of the Gavi-Pietralavezzara pipeline in Piedmont-Liguria (€16 million);
• the continuation of the natural gas pipeline and connection works as part of the natural gas conversion project in Calabria (€6 million);
• the continuation of the major construction works for the Montebello Jonico and Melito di Porto Salvo diversion (€4 million);
• the continuation of the major construction works for the Lainate-Olgiate Olona and the Mornico al Serio-Travagliato natural gas pipeline, Mornico-Chiari section as part of the upgrading of the network in Lombardy (€4 million).

Investments involving replacement and other investments with a basic rate of return (€162 million) concern works aimed at maintaining the security and quality levels at plants (€128 million), the acquisition of other key operating assets (€8 million), including real estate investments (€2 million), projects relating to the development of new information systems and the implementation of existing ones (€12 million) and works relating to compensation for third parties (€8 million) and upgrading redelivery points (€6 million).

Operating review

Injections and withdrawals of gas in the transportation network

Gas volumes are expressed in standard cubic metres (SCM) with a traditional higher heating value (HHV) of 38.1 MJ/SCM (10.572 Kwh/SMC). The basic figure is measured in energy (MJ) and obtained by multiplying the physical cubic metres actually measured by the relative heating value.

In the first half of 2016 a total of 34.07 billion cubic metres of gas was injected into the network, an increase of 1.30 billion cubic metres (+4.0%) compared with the first half of 2015.

Injections into the network from domestic production fields or their collection and treatment centres totalled 2.70 billion cubic metres, down by 0.53 billion cubic metres (-16.4%) compared with the first half of 2015.

A total of 31.37 billion cubic metres of gas was injected into the network, an increase of 1.83 billion cubic metres (+6.2%) compared with the first half of 2015. The increase was mainly due to the greater volumes injected at the Mazara del Vallo entry points (+5.07 billion cubic metres), partly offset by the lower volumes injected at the Gries Pass entry point (-1.96 billion cubic metres, -42.7%) and Gela entry point (-1.41 billion cubic metres, -37.0%).

Other information

Council of State - Ruling 2888/2015

Through ruling 2888/2015, filed on 12 June 2015, the Council of State (hereinafter CoS) rejected the appeal introduced by the AEEGSI for the reform of the LOMBARDY - MILAN regional court ruling, which cancelled the provisions in resolutions ARG/gas/184/09, 192/09, 198/09 and 218/10 on natural gas transportation and dispatching tariffs for the period 2010-2013.

With regard to the determination of tariffs, the CoS acknowledged that the Authority had apparently not provided “sufficient logistical/regulatory support” with respect to the breakdown of the capacity and commodity components in the amount of 90% and 10%. The CoS also declared that the mechanism was unlawful for determining the contribution for gas intended for Snam’s compression stations according to a new criterion based on in-house consumption (entailing a direct withdrawal in kind of fuel metered on the basis of the utilisation of transportation companies for the purposes of the operation of compression stations).

By means of Resolution 428/2015/C/gas, the Authority decided to file an appeal for the aforementioned ruling to be overturned on the grounds of factual error. The appeal was notified to Snam Rete Gas on 7 October 2015.

Simultaneously, the Authority initiated, with Resolution 430/2015/R/gas, a procedure for compliance with the CoS ruling 2888/2015, to be completed by 31 December 2015. Under the scope of these proceedings, through the subsequent resolution 607/2015/R/gas, a consultation was launched for the formulation of the final provision. This consultation was followed by another launched through document 321/2016/R/gas of 16 June 2016, which set 17 July 2016 as the deadline for observations.