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 information for investors as it allows identification of the sources of financing (equity and third-party funds) and the investment of financial resources in fixed and working capital.

Fixed capital (€19,311 million) increased by €455 million compared with 31 December 2018 essentially as a result of the increase in Property, plant and machinery (+€286 million), also following the recognising of leased assets as right-of-use assets through the application of the new standard IFRS 16 “Leasing” in force from 1 January 2019 (+€21 million) and equity investments (+€78 million), following the earnings in 2019 partly absorbed by dividends collected for 2018.

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

The technical investments of 2019 total €963 million²⁶ (€882 million in 2018) and mainly refer to the segments of transport (€813 million) and storage (€112 million).

The change in the scope of consolidation (+€108 million, of which €2 million is leased assets as right-of-use assets) refers to assets recorded following the acquisition of 83.63% of the Renerwaste group (€98 million)²⁷ and 100% of TEA Servizi (€10 million).

Other changes (€58 million) relate essentially to: (i) the effects resulting from the adjustment of the current value of outlays compared with the costs of dismantling and restoring sites (+€42 million)²⁸; (ii) the recognition of leased assets as right-of-use assets in accordance with accounting standard IFRS 16 (€25 million); (iii) the contributions third-party interference works (compensation -€14 million).

Compulsory inventories

Compulsory inventories (€363 million, unchanged from 31 December 2018) comprise minimum quantities of natural gas that the storage companies are obliged to hold pursuant to Presidential Decree 22 of 31 January 2001. The quantities of natural gas in stock, equal to around 4.5 billion standard cubic metres, are determined annually by the Ministry of Economic Development²⁹.

Equity investments

The item equity investments (€1,828 million) includes: (i) the valuation of the equity investments through the net equity method which refers mainly to the companies Trans Austria Gasleitung GmbH - TAG (€520 million), Terēga Holding S.A.S. (€482 million), Trans Adriatic Pipeline AG - TAP (€264 million), Italgas S.p.A. (€209 million), AS Gasinfrastruktur Beteiligung GmbH (€125 million) and Senfluga (€125 million); (ii) the fair value measurement through OCI of the minority interests in the company Terminale GNL Adriatico S.r.l. (€39 million).

The net working capital (€1,094 million) increased by €165 million compared with 31 December 2018. This increase was mainly due to: (i) the settlement of the previous tariff entries for the transportation segment relating to the years 2015-2017 (+€180 million)³⁰; (ii) the recording of the receivable from the CSEA following lower amounts invoiced in 2019 compared with the restriction established by the Regulator (+€96 million). These factors were partly offset by: (i) the lower net assets for additional tariff components invoiced to users of the transportation service (-€55 million) mainly following the reduction in the CVOS additional tariff³¹; (ii) the increase in the provision for risks and charges (-€48 million) mainly following the adjustment of the current value of costs for the dismantling and restoration of sites following a reduction in anticipated discounting rates; (iii) from the greater liabilities for hedging instruments (-€34 million).

Assets held for sale

Assets held for sale (€10 million) relate to a 6% share in the associate company Senfluga, reclassified following the agreements signed by the shareholders of Senfluga fr the sale of a 10% stake in it, proportional to the stake held by each shareholder. In conformity with the provisions of IFRS 5 “Non-current Assets Held for Sale and Discontinued Operations”, the above-mentioned stake was recorded under assets held for sale and valued at the lower of the book value and the fair value, excluding any sales costs. The completion of the transaction, subject to the approval of the Greek regulator, took place on 13 January 2020, following a payment of €16 million (€10 million as Snam’s share), pegged at the values of the transaction concluded by Snam in December 2018. Following the above-mentioned sale, the percentage of Snam’s equity investment in the capital of Senfluga is 54%.

Information about the individual equity items and changes therein compared with 31 December 2019 is given in Note 24 to the consolidated financial statements, “Shareholders’ Equity”.

Net financial debt was €11,923 million at 31 December 2019, compared with E 11,548 million at 31 December 2018.

The net cash flow from operations (€1,486 million) allowed us to fully cover the financial requirements associated with net investments (€1,004 million) and to generate a free cash flow of €482 million. The net financial debt, after cash flows from self-owned capital deriving from the payment to shareholders of the 2018 dividend (€746 million, of which an interim dividend of €298 million and €448 million for the balance) and the acquisition of treasury shares (€39 million), recorded an increase of €375 million compared with 31 December 2018, including non-monetary components related to financial debt (€75 million), which refer mainly to the change in the scope of consolidation and the financial debt recorded through the application of IFRS 16 “Leasing”.

Financial and bond debts at 31 December 2019, amounting to €14,774 million (€13,420 million at 31 December 2018), break down as follows:

Bond loans (€9,048 million) rose by €602 million compared with 31 December 2018 following the issuing of: (i) the Climate Action Bond, for a nominal amount of €500 million, fixed rate with a maturity date of 28 August 2025; (ii) a Private Placement of a nominal amount of €250 million, fixed rate with a maturity date of 7 January 2030; (iii) a dual tranche bone with a nominal amount of, respectively, E700 and €600 million, making a total of €1.3 billion, fixed rate with maturity dates, respectively of 12 May 2024 and 12 September 2034. These changes were offset: (i) by the repayment of a fixed rate bond maturing on 18 January 2019, for a nominal amount of €519 million; (ii) the repayment of a fixed rate bond loan maturing on 24 April 2019, of a nominal amount of €225 million; (iii) the repayment of a JPY 10 billion bond maturing on 25 October 2019 of a nominal amount of €83 million; (iv the repurchase on the market of fixed-rate bonds for a total nominal value of €597 million with an average coupon of 1.3% and a residual duration of approximately 3.9 years; (v) the dynamics of accrued interest.

Bank loans (€3,704 million) fell by €1,045 million essentially following the lower net use of uncommitted lines of credit (€1,301 million). This effect was partly offset by the signing with the European Investment Bank - EIB: (i) on 28 January 2019 of a loan for projects promoted by Snam Rete Gas and Stogit, of a nominal amount of €135 million, at a fixed rate, to be repaid through an amortisation plan expiring in 2038; (ii) on 6 June 2019 of a loan supporting investments promoted by the subsidiary Snam4Mobility for the construction of CNG and L-CNG refuelling stations, for a nominal amount of €25 million, at a fixed rate, to be repaid through an amortisation plan expiring in 2031; (iii) on 31 July 2019 a loan for Snam Rete Gas projects, for a nominal amount of €105 million at a fixed rate to be repaid through an amortisation plan expiring in 2039.

The Euro Commercial Papers (€2,001 million) involve unsecured short-term securities issued on the money market and placed with institutional investors.

Cash and cash equivalents (€2,851 million) refer mainly to bank current and deposit accounts that can be collected quickly (€2,054 million) and short-term liquidity use transactions, due in less than three months, with banking institutions with high credit ratings (€750 million) and to cash and cash equivalents at Snam International BV (€20 million) and Gasrule Insurance DAC (€19 million).

At 31 December 2019, Snam had unused committed long-term credit lines worth €3.2 billion.

Information on financial covenants can be found in Note 18 - “Short-term financial liabilities, long-term financial liabilities and short-term portions of long-term liabilities” of the Notes to the consolidated financial statements.