Key events
Core business development
Snam and Iren sign: acquisition of a stake in the OLT – Livorno regasifier
Completed on 26 February 2020, Snam’ acquisition of 49.07% stake in the share capital of OLT (Offshore LNG Toscana), the company that built and manages the offshore regasification terminal (FSRU – Floating Storage and Regasification Unit) located offshore of the Tuscan coast between Livorno and Pisa.
The consideration paid by Snam to the Iren Group for the acquisition of the entire equity investment in OLT owned by Iren Mercato S.p.A., as well as the remaining share of a shareholders’ loan from Iren S.p.A. in favour of OLT stands at around 332 million euros in total. The amount, paid by Snam with its equity, may be subject to possible contractually-required price adjustment mechanisms.
Following the transaction, Snam took control of the regasification terminal in conjunction with First State Investments International Ltd. which, via the subsidiary FS SP S.à r.l., owns 48.24%.
International Business Development
Snam – in consortium with five international funds – signs agreement with ADNOC to join the networks of the Arab Emirates
On 15 July 2020, the consortium consisting of Snam and the investment funds Global Infrastructure Partners (GIP), Brookfield Asset Management, GIC (the Singapore sovereign fund), Ontario Teachers’ Pension Plan and NH Investment & Securities, following the fulfilment of all conditions precedent, completed the acquisition of 49% of ADNOC Gas Pipeline Assets LLC (ADNOC Gas Pipelines) from The Abu Dhabi National Oil Company (ADNOC), as had been announced on 23 June.
The transaction values 49% of ADNOC Gas Pipelines, a company that holds for 20 years the management rights to 38 pipelines in the United Arab Emirates, at about 10.1 billion dollars.
The consortium has obtained approximately 8 billion dollars in funding from a pool of international banks. The equity contribution is distributed proportionally among the consortium members, all of whom hold equal shares with the exception of the GIP leader. For Snam, in particular, the disbursement from own resources amounted to approximately 250 million dollars. As at the date of this document, the bank debt obtained upon entry was entirely refinanced on the market through five bond issues which took place in October 2020 and February 2021, respectively, for around Usd 8 billion at a weighted average cost of around 2.6% and an average effective duration of more than 10 years.
The transaction represents for Snam, the consortium’s only industrial operator, an important investment opportunity in a strategic infrastructure, also in the framework of possible future collaborations in the energy transition in the Gulf area.
Biomethane
Entry into the agricultural biomethane sector: agreement signed for the acquisition of a 50% stake in Iniziative Biometano
On 30 September 2020, through its subsidiary Snam 4 Environment, Snam completed its acquisition, from Femogas S.p.A., of a 50% stake, with joint control rights, in the share capital of Iniziative Biometano S.p.A., a company operating in Italy in the management of biogas and biomethane plants fed with biomass of agricultural origin.
The equivalent value of the transaction, announced 7 May last upon the presentation of results for the first quarter of 2020, following the signing of a binding letter of a binding letter of intent reported on 21 November 2019, is around 10 million euros.
The acquisition allows Snam to enter into the agricultural biomethane sector, the development of which is expected to give rise to the largest contribution as biomethane establishes itself as a strategic source for the purposes of the energy transition and circular economy in Italy.
Iniziative Biometano, through its subsidiaries, currently owns six operational biogas plants, which will be converted into biomethane plants thanks to IES Biogas (controlled by Snam), with an overall production potential of around 39 megawatts when fully operational. It is also one of the principal shareholders of an additional biomethane plant which entered into operation in October.
Iniziative Biometano will be the platform with which Snam and Femogas will develop further projects in the national territory to give a decisive boost to the availability of biomethane in increasingly significant quantities within the national energy mix.
Energy efficiency
Crédit Agricole Italia and TEP Energy Solution for energy reclassification in Italy
In January 2020, Crédit Agricole Italia and TEP Energy Solution, a subsidiary of Snam, signed an agreement to encourage energy reclassification work on residential and tertiary-sector buildings in Italy, with a particular focus on condominiums, in order to make these solutions accessible to the largest possible number of users.
In the agreement, TEP will offer clients the energy efficiency solutions included in the Casa Mia programme, while Crédit Agricole Italia will offer them “Flexcondominio” financing and other financial services to support the technical offer from TEP.
The actions provided for in the Casa Mia programme, from the construction of thermal walls to insulate buildings to the reclassification of boilers and structural consolidation, provide the means to reduce the energy costs of properties by as much as half, while also providing concrete improvements to habitability and increasing market value by up to 10-15%.
The proposed formula finances the works through the saving achieved from lower consumption and the assignment of the tax credit linked to the Ecobonus and Sismabonus mechanisms.
Snam strengthens itself in energy efficiency: acquisition of 70% of Mieci and Evolve
On 5 October 2020 Snam, through its subsidiary Snam 4 Efficiency, acquired, in cash, 70% of two companies active in the energy efficiency sector in Italy, Mieci S.p.A. and Evolve S.r.l. (renamed Evolve S.p.A., at the same time as the operation), for a total value of approximately 50 million euros, in execution of agreements signed on 10 June 2020.
The transaction enables Snam to achieve structural development of its portfolio of activities and a consequent substantial improvement in its competitive positioning in this business by acquiring, through its partnership with Gemma and Fen Energia, one of the leading national operators in energy and technology services for public bodies and private customers, new skills in energy efficiency in the public and residential sectors. In particular, in the residential sector, the synergies between Evolve and the ESCo (Energy Service Company) TEP Energy Solution, already controlled, will allow Snam to increase its market position and play a leading role in the spread of energy efficiency in Italian condominiums, also in the context of the new “ecobonus”.
As part of the transaction, options are envisaged to allow Snam 4 Efficiency to acquire 100% of both companies in the long term and, for the seller, to invest in Snam 4 Efficiency.
Sustainable mobility
Awarded third order for public transportation in Paris
Cubogas, controlled by Snam 4 Mobility and specialized in technological solutions for CNG (compressed natural gas) refuelling stations, was awarded the tender for the construction of a new natural gas distributor for buses launched by RATP, the Parisian public transportation company active in the entire Île-de-France region.
The order, worth approximately 1.4 million euros, provides for the supply of three compressors, two additional storages of 45 cylinders each and further accessories for the new Nanterre refuelling station, which will be able to supply CNG to about 200 buses that run in the Paris metropolitan area. The Nanterre site, which is already set to supply an increasing number of buses in the future, follows the orders assigned by RATP to Cubogas over the past months for two other locations close to the French capital.
These tenders will allow Snam to contribute to the decarbonisation of Paris’ public transportation through a greater diffusion of natural gas to replace traditional fuels; as well as helping to demonstrate the international breadth of Cubogas’ activities.
The Indian market and opportunities for sustainable mobility
In November 2020, Snam officially entered India, concluding a number of cooperation agreements relating to the sustainable mobility sector.
The company involved is Adani Gas Limited (a joint venture between the Adani Group and Total SE), with which it will create an equitable joint venture aimed at promoting the production of compressors that will support the adoption and diffusion of sustainable mobility in India, favouring the use of natural gas. The objective will be to create a compressor factory using technology developed by Cubogas, a Snam 4 Mobility company, for the provision of natural gas for motor vehicles, to be installed at existing refuelling stations, as well as those in development.
Hydrogen
Snam enters “The Hydrogen Council”
On 15 January 2020, Snam officially became part of The Hydrogen Council, a global coalition of leading companies in the energy, industrial and transportation sectors committed to promoting the use of hydrogen to encourage the energy transition.
Snam and ITM Power, a partnership for green hydrogen
The agreement between Snam and ITM, signed on 22 October 2020, concluded with a 33 million euros investment in ITM Power Plc. Following its subscription of the capital increase, Snam possesses a 2.318% shareholding.
Snam will acquire technical competence for the development of green hydrogen, and at the same time ITM Power can take advantage of Snam’s position in the value chain in order to develop its own business and joint projects.
ITM Power Plc is engaged in the production of electrolysers, essential components for obtaining hydrogen from renewable sources through the electrolysis of water. Therefore, Snam will involve ITM Power in the development of green hydrogen with “membrane” technology (PEM – Proton Exchange Membrane) hydrolysers of up to 100 MW power.
Partnership with De Nora
On 18 November, Snam’s arrival as a significant minority shareholder in Industrie De Nora was announced (a transaction finalised on 8 January 2021), replacing Blackstone’s 33% share in the company, based on an enterprise value of 100% of its value of approximately 1.2 billion.
This highly strategic partnership allows Snam to increase its exposure to the mega-trends of the energy transition, particularly with regard to the production of green hydrogen and water treatment, taking advantage of De Nora’s leadership and technical competence in the field of alkaline electrodes – essential components for the production of alkaline electrolysers.
Moreover, De Nora possesses a 34% shareholding in ThyssenKrupp Uhde Chlorine Engineers (TKUCE), one of the global leaders in the development, assembly and installation of alkaline electrolysers and the production of chlorine and caustic soda, whose alkaline electrolyser technology is used in several major global hydrogen-based projects.
The Indian market for the hydrogen business
In November 2020, in addition to the agreement for sustainable mobility with Adani Gas Limited, Snam signed another agreement for the hydrogen business with Greenko. Snam will start a collaborative project to support the development of the hydrogen supply chain in India, specifically studying methods for producing hydrogen from renewable sources, designing hydrogen-ready infrastructure and applying those solutions to both industry and transportation, including fuel cell mobility.
Alstom and Snam: agreement for the development of hydrogen trains in Italy
Snam and Alstom, a global leader in integrated solutions for sustainable mobility, have signed a five-year agreement to develop hydrogen trains in Italy.
The aim of the agreement is to implement, including in 2021, rail mobility projects including both hydrogen-powered trains and the technological infrastructure necessary for the supply, as well as vehicle management and maintenance services.
Under the agreement, Alstom will be responsible for the supply and maintenance of hydrogen trains, whether newly built or converted, while Snam will work on developing the infrastructure for production, transportation and refuelling.
The collaborative project arose from the two companies’ common commitment to hydrogen: Alstom launched the Coradia iLint in Germany, the world’s first fuel cell train, already in service for a year and a half on a regional route, while Snam was among the first companies in the world to experiment with the injection of 10% hydrogen into the natural gas transportation network.
Snam for the Energy Transition: agreements and collaboration
Snam and Milan Polytechnic University for the energy transition
In October 2020, Snam and Milan Polytechnic University started a collaborative project to develop joint research activities into the role of the gas system in the energy transition, with a particular focus on hydrogen and other green gases as the principal assets in the fight against climate change.
The agreement envisages joint studies on hydrogen, sustainable mobility, biomethane, liquefication and SSLNG, as well as the development of projects for the capture, transportation, storage and reuse of carbon dioxide. Other research activities will concern the digital transformation applied to the gas transportation networks, sustainable finance, staff training and talent attraction.
Lastly, in collaboration with Fondazione Snam, Snam will contribute to Milan Polytechnic University’s Equal Polytechnic Opportunities (Pari Opportunità Politecniche / POP) programme with the “Girls@Polimi” initiative, with the donation of three three-year study bursaries to encourage girls to study STEM subjects (science, technology, engineering, mathematics).
Snam and Indian Oil, collaboration to implement the energy transition in India
In November 2020, Snam signed a Memorandum of Understanding with Indian Oil, a government-owned company and one of the country’s largest integrated energy operators, aimed at possible joint projects for the energy transition and the gas infrastructure supply chain, with a particular focus on initiatives in the natural gas storage and liquefication sectors.
CDP, Eni and Snam for the decarbonisation of the energy system
In December 2020, Casa Depositi e Prestiti, Eni and Snam signed a letter of intent to initiate strategic collaboration in energy transition that will lead to the joint creation of integrated projects in key sectors for the energy transition, such as the hydrogen supply chain, the circular economy and sustainable mobility.
Eni and Snam will offer their own complementary technical and industrial competence, upstream downstream and midstream, respectively, while CDP will leverage its own economic-financial and relationship management competence with the institutions involved in the initiatives.
The letter of intent also envisages collaborative projects in the decarbonisation of those industrial sectors in which the reduction of CO2 emissions is more difficult, both through the development of Carbon Capture and Storage (CCS) to promote the production of blue hydrogen in the transition phase, and progressively through green hydrogen. Moreover, the three companies plan to build infrastructure and carry out research and development activities for the storage and transportation of hydrogen and CO2.
Other
New share buyback and cancellation plan treasury shares without reduction of share capital
On 18 June 2020, the Snam Ordinary Shareholders’ Meeting, after revoking the resolution of the Ordinary Shareholders’ Meeting of 2 April 2019 to authorise the purchase of treasury shares, for the part that remained unexecuted, authorised the purchase of treasury shares, to be carried out on one or more occasions through one or more top-level intermediaries appointed by the Company, for a maximum duration of 18 months from the date of the resolution, with a maximum disbursement of 500 million euros, and in any case up to the maximum limit of shares in portfolio equal to 6.50% of the subscribed and paid-up share capital (taking into account treasury shares already held by the Company).
The shareholders’ resolution also specifies the terms and conditions of the price for the purchase of treasury shares and provides that acts of disposal may be carried out on one or more occasions, without time limits and even before the purchases have been exhausted, in relation to all or part of the Company’s treasury shares purchased on the basis of the same resolution, as well as those already held. The Extraordinary Shareholder’s Meeting held on the same date also approved the cancellation of 33,983,107 treasury shares with no nominal value with no change to the share capital and the resulting amendment of art. 5.1 of the company Bylaws. The shares were cancelled on 6 July 2020 following the deposit with Companies House of the amended company Bylaws.
As a result of this transaction, the share capital consists of 3,360,857,809 shares with no nominal value for a total value of 2,736 million euros (unchanged from 31 December 2019). At the date of this report, Snam has 90,642,115 shares in its portfolio, equal to 2.70% of the share capital.
Renewal of EMTN and ECP programmes
On 12 October 2020, Snam’s Board of Directors approved the annual renewal of the EMTN (Euro Medium Term Notes) Programme launched in 2012, to be executed by 12 October 2021, for a maximum overall equivalent value of 11 billion. In the context of the EMTN Programme, as at the date of this document, around 8.2 billion worth of bond loans have been issued27, net of the bond redeemed on 29 January 2021 and considering the issue of the dual tranche in February 2021 worth 750 million euros.
The same Board also approved the renewal of the Euro Commercial Paper Programme (ECP Programme), which started in 2018, and the issuance of one or more Euro Commercial Papers within a period of 3 years from 12 October 2020, which may be associated with ESG indicators defined as part of the November 2020 Strategic Plan. Moreover, the Board approved the extension of the maximum value of the ECP Programme from 2 billion up to a maximum equivalent value of 2.5 billion, to be places with institutional investors in accordance with the terms and procedures established in the ECP Programme. To date, in the context of the ECP Programme, the value of commercial papers issued stands at 2 billion.
Bond buyback
On 7 December 2020 Snam successfully concluded the buyback on the market of its bonds for a total nominal value of 629 million euros. The effects of this transaction on the 2020 income statement (32 million euros, 24 million euros excluding the tax effect) are essentially represented by the charges deriving from the difference between the outlay deriving from the repurchase of part of the bonds on the market and the amortised cost valuation of the bonds themselves.
Through this operation, Snam proposes to continue the process of optimising its debt structure and continuously improving the cost of capital, in line with its objectives.
The year just ended represents the last of the six years of liability management which, from 2015 to the present day, has contributed to reducing Snam’s cost of borrowing from 2.4% in 2016 to 0.9% in 2020.
27 The convertible bond, for a nominal value of 400 million euros, is not part of the EMTN Programme.