Analysis of the entries on the adjusted Financial Statement

Total revenues for 2020 financial year amounted to 2,770 million euros, up by 164 million euros or 6.3% with respect to 2019 financial year.

Core business revenues (2,578 million euros, net of consolidation eliminations) rose by 57 million euros, up 2.3% compared with 2019), essentially due to higher regulated revenues, thanks in particular to the contribution from the transportation business segment. Net of the effects of the recognition of energy costs, regulated revenues amounted to 2,488 million euros, down slightly with respect to 2019 (-3 million euros or 0.1%). The higher revenues mainly attributable to tariff updating mechanisms, more specifically attributable to the increase in RAB (+16 million euros), were offset by the reduction in volumes transported as a result of the Covid-19 health emergency (-17 million euros). The variation in regulated revenues was also affected by the lower revenues for gas sales linked to the “default” service in the transportation segment.

With reference to energy costs, and particularly costs for the purchase of fuel gas, previously contributed in kind by shippers, and costs for the purchase of CO₂ emission rights, it is noted that, on the basis of what is established by the regulatory framework in force for the fifth regulatory period, as of 1 January 2020, those costs are covered by revenue through the variable fee applied to users.

Non-regulated revenues (30 million euros), essentially in line with that of 2019, principally refers to income from the leasing and maintenance of fibre optic telecommunications cables (14 million euros) and contributions for connections to infrastructure.

Revenues from new businesses (192 million euros, net of consolidation eliminations), increased by 107 million euros compared to 2019, thanks to the growth in biogas and biomethane facility orders from the subsidiary IES Biogas, the start of energy efficiency activities in the residential context, and sales of compressors for sustainable mobility, as well as the development of Snam Global Solutions activities, principally connected to the EPMS contract with TAP. The increase in revenues from new businesses was also affected by the revenues from companies that entered the scope of consolidation at the end of 2019 in the biomethane segment (Renerwaste group) and in 2020 in the energy efficiency segment (Mieci, Evolve).

Operating costs in 2020 stood at 573 million euros, an increase of 136 million euros, up 31.1% compared with 2019.

Core business operating costs (393 million euros, net of consolidation eliminations) rose by 42 million euros, up 12.0% on 2019, principally due to the increase in energy costs, attributable in particular to the costs for fuel gas purchases, previously subject to contribution in kind by shippers. These costs are covered by revenues, based on the current regulatory framework for the fifth regulatory period. Net of this effect, core business operating costs recorded a reduction of 17 million euros, equivalent to 4.8%, principally due to the continuation of actions under the Efficiency Plan (63 million euros of cost efficiencies compared to 2016; +12 million euros compared to 2019), lower costs linked to the development of new business initiatives and specific projects, in addition to the containment of costs following the lockdown measures.

New business operating costs (180 million euros, net of consolidation eliminations) rose by 94 million euros compared with on 2019. The increase is attributable to growth in the volume of activities, as well as the costs arising from the entry and integration of companies active in the biomethane business that entered the scope of consolidation at the end of 2019, and the energy efficiency segment at the end of 2020.

The number of employees as at 31 December 2020 (no. 3,249 resources) is analysed below by professional status:

The increase of 224 people compared with 2019 is mainly due to the resources coming from the acquisition of Mieci and Evolve (137 resources) and the new hires from the job market, net of the relative personnel leaving, mainly to support the development of new businesses (more than 50 people).

Depreciation, amortisation and impairment losses (773 million euros) increased by 21 million euros or 2.8% compared with 2019. The increase is mainly due to the greater depreciation and amortisation (+40 million euros or +5.5%), essentially following the new infrastructure coming into operation and the businesses that joined the scope of consolidation, partially offset by lower write-downs (-19 million euros; -63.3%).

Below is a breakdown of EBIT by business segment:

With reference to the business segments subject to separate reporting pursuant to IFRS 8, an analysis of EBIT is provided in the “Business segment operating performance” section of this Report.

Net financial expense in 2020 stood at 126 million euros, a reduction of 39 million euros or 23.6% compared with 2019. The reduction is principally due to: (i) lower costs related to the net financial gross debt (-19 million euros or -11.6%) 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 2016-2020, specifically the liability management operations, as well as the positive market conditions, notwithstanding the higher average debt for the period, influenced by equity investments, as well as the payment of dividends to shareholders and share buyback activities; (ii) benefits linked to the optimisation of treasury management in particular the use of uncommitted lines and negative-rate Commercial Papers and the use of liquid funds which made it possible to generate financial income for a total of 11 million euros (+22% compared with 2019) and (iii) greater net financial income (+18 million euros) principally in relation to interest receivable on long-term financial receivables related to the pro-rata contribution from the OTL Shareholder Loan (+13 million euros).

Capitalised financial costs in 2020 amounted to 12 million euros, broadly in line with the previous year.

Net income from equity investments (247 million euros; +33 million euros or 15.3%) essentially relates to the portion of profit from equity investments accounted for using the equity method (247 million euros) mainly attributable to the companies under joint control TAG (84 million euros), Terēga (35 million euros) as well as the subsidiaries Italgas (52 million euros), Senfluga (27 million euros), Galaxy²⁹ (20 million euros) and TAP (15 million euros).

Income taxes totalled 383 million euros, an increase of 8 million euros or 2.1% compared with 2019. The increase is mainly due to the greater pre-tax profit, partly offset by the greater ACE – Aid to economic Growth benefit, reintroduced by the 2020 Budget Law, as well as the benefits associated with the tax benefits from super-amortisation.