Analysis of the entries on the adjusted Financial Statement

The segment “Corporate and other activities” includes the newly acquired companies involved in Energy Transition activities.

Regulated revenue (€2,550 million) increased by €65 million or 2.6% compared with 2018. Excluding items that are offset in costs, regulated revenues stood at €2,489 million, up €62 million or 2.6% thanks to the contribution of the transportation segment, which benefits from the increase from the increase of tariffs and investments of past years.

Non-regulated revenue (€115 million) increased by €14 million or 13.9% compared with 2018. The greater revenue from the contribution of the businesses that entered the scope of consolidation (+€28 million) and for services rendered by the Business Unit Global Solution (+€7 million), were, to a great extent, absorbed by the lower proceeds for services rendered, regulated through several contracts concluded at 31 December 2018 ²¹ (-€14 million).

Non-regulated revenues mainly involve: (i) considerations for the construction of biogas and biomethane plants (€27 million); (ii) technical-specialist services to unconsolidated foreign companies (€23 million); (iii) the provision of services relating to energy efficiency projects (€24 million); (iv) income from the rental and maintenance of fibre optic telecommunication cables (€13 million); (v) the sale of CNG compressors for motor transport (€11 million).

Operating costs totalled €496 million (€491 million in 2018). Net of components offset in revenue, operating costs totalled €435 million, essentially in line with the corresponding adjusted value in 2018 (+€2 million or +0.5%).

Regulated business operating costs

Operating costs of regulated activities (€352 million) decreased by €45 million, or 11.3% compared with 2018. Net of components that are offset in revenues, the operating costs of regulated activities were down by €48 million or 14.2% compared with 2018.

The fixed controllable costs (€251 million) composed of the total of the cost of personnel and external costs of a recurrent nature, recorded a fall of €23 million or 8.4% compared with 2018. The reduction is mainly due to the effects of the actions of the Efficiency Plan implemented from 2016, which made it possible tin 2019 to reduce costs by around €15 million (€51 million at a cumulative level for the period 2016-2019).

Other costs (€34 million) decreased by €25 million, or 42.4%, compared with the corresponding adjusted value for 2018. The reduction is mainly due to the lower costs associated with the use of gas; -€20 million ²², and lower capital losses from the elimination of assets (-€4 million).

Non-regulated business operating costs

Operating costs of non-regulated activities (€144 million) increased by €50 million or 53.2% compared with 2018. The increase is essentially attributable to the costs, recorded for the whole of 2019, of businesses that entered the scope of consolidation in 2018, relating mainly to the construction of biomethane plants and compressors for motor transport refuelling stations as well as relating to the implementation of energy efficiency projects, partly offset by lower costs for services rendered, related to contracts ended at 31 December 2018. The increase in operating costs for non-regulated businesses was not impacted by the dynamics of the provision for risks and charges and the provision for impairment losses and the greater costs connected with the development of new businesses and specific projects.

Net of components offset in revenue, operating costs totalled €435 million, essentially in line with the corresponding adjusted value in 2018 (+€2 million or +0.5%).

The number of employees at 31 December 2019 (3,025 resources) is broken down below by professional status:

The increase of 9 people compared with 2018 is mainly due to the resources coming from the acquisition of Renerwaste (47 resources) and TEA Servizi (8 resources) and the new hires from the job market, partly offset by the personnel leaving who took early retirement (77 resources).

Depreciation, amortisation and write-downs (€752 million) increased by €62 million or 9.0% compared with 2018. The increase is mainly due to the greater depreciation and amortisation (+€40 million or +5.9%), essentially following the new infrastructure coming into operation and the businesses that joined the scope of consolidation, as well as the greater write-down of works in progress related to projects in the transportation segment in the past years (+€22 million).

Below is a breakdown of EBIT by business segment:

Net financial charges (€165 million excluding the special items related to the liability management operation implemented in December 2019) showed a reduction of €30 million, or 15.4%, compared with 2018. The reduction is mainly due to the lower costs related to the net financial gross debt (-€35 million or -17.6%) mainly connected to the lower average cost of borrowing, also following the benefits resulting from the actions to optimise the financial structure of the group implemented by Snam in the period 2016-2019, specifically the liability management operations, as well as the positive market conditions.

Capitalised financial costs in 2019 amounted to €11 million, broadly in line with the previous year.

Net income from equity investments (€216 million, +€57 million or 35.8%) essentially involve the contribution of the businesses valued using the equity method (€214 million) main attributable to the companies under joint control joint TAG (€74 million), Terēga (€44 million) and the subsidiaries Italgas (€56 million) and Senfluga (29 million).

The increase of €57 million compared with 2018 is mainly attributable to the contribution for the entire year of Senfluga (+€33 million), a company which, on 20 December 2018, gained control of DESFA with a share of 66% of the share capital, which benefited from extraordinarily favourable gas volumes and to the contribution of Terēga (+€16 million), also following the release of a fund for tax disputes and of non-current effect.

Income taxes totalled €375 million, an increase of €16 million or 4.5% compared with 2018. The increase is mainly attributable to the greater pre-tax profit.