Reclassified statement of financial position

The reclassified balance sheet combines the assets and liabilities of the compulsory format included in the Annual Report and the Half-Year Report based on how the business operates, usually split into the three basic functions of investment, operations and financing.

Management believes that this format presents useful additional information for investors as it allows identification of the sources of financing (equity and third-party funds) and the application of such funds for fixed and working capital.

Fixed assets (€18,875 million) increased by €795 million compared to 31 December 2016, due essentially to the increase in property, facilities and equipment, in intangible assets (+510 million euros), and also thanks to the inclusion of Infrastrutture Trasporto Gas within the scope of consolidation (+€179 million in total), as well as to the greater financial claims instrumental to operating activities (+€160 million) and the increase in investments (+€92 million).

The change in property, plant and equipment and in intangible assets can be broken down as follows:

Other changes (+€37 million) relate essentially to:(i) the effects of adjusting the present value of disbursements for the dismantling and restoration of sites (-€19 million), mainly due to a reduction in the expected discounting rates;²⁷ (ii) the change in inventories of pipes and related accessory materials purchased for investment activities and not yet used to construct the plants (-€10 million); and (iii) grants for the period (-€8 million).

The change in the scope of consolidation (+179 million euros) refers to the entry of Infrastrutture Trasporto Gas, effective as of 13 October 2017, following the acquisition of 100% of the company’s share capital from Edison S.p.A.

The technical investments of 2017 of the continuing operations total €1,034 million²⁸ (€906 million in 2016) and principally refer to the sectors of transport (€917 million) and storage (€101 million).

Compulsory inventories

The fixed warehouse stock – compulsory inventories– equal to €363 million (equal at 31 December 2016), comprise a minimum degree of natural gas that the storage company is required to withhold in accordance with Italian Presidential Decree31 January 2001, no. 22. The quantities of natural gas in stock, equal to around 4.5 billion standard cubic metres, are determined annually by the Ministry of Economic Development.²⁹

Equity investments

The item investments (€1,591 million) includes:(i) the valuation of equity investments using the equity method and refers to the companiesTrans Austria Gasleitung GmbH – TAG (€508 million), T IGF Holding S.A.S.(€471 million), Trans Adriatic Pipeline AG – TAP (€223 million), Italgas S.p.A.(€160 million), AS Gasinfrastrucktur Beteiligung GmbH (€129 million) and Gasbridge 1 B.V. and Gasbridge 2 B.V.(€56 million cumulatively); (ii) the valuation of the minority interest in the company Terminale GNL Adriatico S.r.l.(Adriatic LNG) acquired by Edison on 13 October 2017 (€ 44 million).

Financial receivables held for operating activities

The financial credits instrumental to operating activities (€373 million), an increase of €160 million in respect to 31 December 2016, refer to the Shareholders’ Loan issued in favour of the affiliate Trans Adriatic Pipeline AG (TAP).³⁰

Net working capital (-€ 1,079 million) increased by € 596 million in respect to 31 December 2016.The reduction is mainly due to:(i) the increase in other liabilities (-€ 437 million) mainly due to the allocation of the amount owed to shareholders for the 2017 interim dividend payment equal to €0.0862 per share (-€ 294 million euros) distributed in January 2018, and to increased payables to the CSEA relating to the transport sector (-€ 183 million), mainly attributable to the additional tariff components, which, starting from 1 January 2017, are reversed with a different timing and on the basis of the volumes invoiced in the two months of reference instead of the volumes recorded in the relevant two months; (ii) the increase in accrued liabilities and deferred income from regulated activities (-€ 158 million) essentially due to the higher fees invoiced to transport users compared to the revenue restriction established by the ARERA Regulatory Authority.

Information about the individual equity items and changes therein compared with 31 December 2016 is given in Note 23 to the consolidated financial statements,“Shareholders’ Equity”.

On 31 December 2017 the net financial debt totalled 11,550 million euro, an increased of 494 million euro (11,056 million euro as at 31 December 2016).

Net cash flow from operating activities (€1,864 million) made it possible to fully finance the requirements related to net investments for the period, equal to €1,441 million, including the purchase transactions of investments in Infrastrutture Trasporto Gas and the Adriatic GNL Terminal completed in October 2017, and to generate a free cash flow of €423 million. Net financial debt, after the payment to shareholders of the 2016 dividend (€718 million) and the cash flow deriving from the purchase of treasury shares (€210 million), shows an increase of €494 million compared to 31 December 2016, including non-monetary components related to financial indebtedness (€ 11 million).

Financial and bond debts at 31 December 2017, amounting to €12,619 million (€11,090 million at 31 December 2016), comprised the following:

Financial and bond debts are denominated in euros³¹ and refer mainly to bond loans (€8,672 million, or 68.7%) and bank loans (€3,931 million, or 31.2%, including €1,473 million provided by the European Investment Bank – EIB).

Bond loans recorded an increase of €1,062 million compared to 31 December 2016.The increase is mainly attributable to the issuing of: (i) a fixed-rate bond on 25 January 2017 for a nominal value of €500 million; (ii) a variable rate bond loan³² on 21 February 2017, for a nominal amount of €300 million; (iii) a convertible bond loan³³ without interest accrued on 20 March 2017, for a nominal value of €400 million; (iv) a variable rate bond loan³⁴, on 2 August 2017, for a nominal value of €350 million; (v) a fixed-rate bond loan for a nominal amount of €650 million, issued on 25 October 2017 and maturing on 25 October 2027.These effects were partially offset by the repayment of a bond maturing on 30 June 2017, for a nominal amount of €506 million, and by the repurchase on the market of fixed-rate bonds for a total nominal value of €607 million with an average coupon of 2.5% and a residual duration of approximately 4.4 years. The total outlay resulting from the repurchase of the securities was carried out as part of the Liability Management transaction, completed in October 2017, and totals approximately €656 million.³⁵

Funding for bank loans (€3,931 million) increased by €483 million mainly following the underwriting of a term loan funding for bank loan for the nominal value of €500 million, and of a funding for a bank loan on the provision of the European Investment Bank (EIB) for the nominal value of €310 million. This change was partially offset by the repayment of a Term Loan bank loan for the nominal value of €200 million and the lower net use of uncommitted credit lines for a value of approximately €108 million. Long-term financial debt (€10,176 million) represented around 81% of gross financial debt (around 79% at 31 December 2016).Fixed-rate financial debts amounted to around 78% of gross financial debt. Non-operating financial claims (€350 million) refer entirely to a short-term liquidity loan, with a maturity of less than six months, including a bank with a high credit standing as counterparty.
Cash and cash equivalents (€719 million) mainly refer to a short-term liquidity facility, with a maturity of less than three months, including a bank with a high credit standing (€300 million) as counterparty, a bank deposit (€395 million) and cash and cash equivalents at Gasrule Insurance DAC for the Group’s insurance business (€23 million).
At 31 December 2017, Snam had unused committed long-term credit lines worth €3.2 billion.
Information on financial covenants can be found in Note 16 “Short-term financial liabilities, long-term financial liabilities and short-term portions of long-term liabilities” of the Notes to the consolidated financial statements.