Reclassified statement of financial position

The reclassified Statement of Financial Position combines the assets and liabilities of the Statutory layout 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.

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Reclassified statement of financial position (*)

(million of €)

31.12.2019

31.12.2020

Change

Fixed capital

19,311

20,260

949

Property, plant and equipment

16,439

16,815

376

- of which right-of-use leased assets

21

21

 

Non-current inventories – Compulsory inventories

363

363

 

Intangible assets and goodwill

990

1,125

135

Equity investments accounted for using the equity method

1,787

1,923

136

Other financial assets

44

421

377

Net payables for investments

(312)

(387)

(75)

Net working capital

(1,094)

(861)

233

Provision for employee benefits

(46)

(40)

6

Non-current assets held for sale

10

 

 

NET INVESTED CAPITAL

18,181

19,359

1,178

Shareholders’ equity

6,258

6,472

214

- Shareholders’ equity pertaining to Parent Company shareholders

6,255

6,469

214

- Minority interests

3

3

 

Net financial debt

11,923

12,887

964

- of which financial payables for leased assets (**)

21

21

 

COVERAGE

18,181

19,359

1,178

(*)

For a reconciliation of the reclassified statement of financial position to the compulsory statement see the paragraph below “Reconciliation of the reclassified financial statement with the legally required statements”.

(**)

Including non-current lease liabilities (15 million euros) and the current portion of non-current lease liabilities (6 million euros).

Fixed capital (20,260 million euros) increased by 949 million euros with respect to 31 December 2019, essentially due to: (i) the rise in tangible and intangible fixed assets (+511 million euros); (ii) the growth in financial assets (+377 million euros), mainly against long-term financial receivables due from OLT, for which Snam took over when the equity investment was acquired and it became part of the ITM Power Plc shareholding structure, an equity investment measured at Fair Value Through OCI – FVTOCI; (iii) the increase in equity investments accounted for using the equity method (+136 million euros), against profits achieved in 2020 financial year from associate companies, net of dividends collected, as well as the acquisition of ADNOC Gas Pipeline (49% in a consortium with 5 international funds) and Iniziative Biometano S.p.A. (50% with joint control). These effects were partially compensated for by the trend in net payables for investments (-75 million euros).

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

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(million of €)

Property, plant and equipment

Intangible assets

Total

Balance at 31 December 2019

16,439

990

17,429

Technical investments

1,024

165

1,189

Amortisation, depreciation and impairment losses

(692)

(81)

(773)

Transfers, write-offs and divestments

(14)

(1)

(15)

Change in scope of consolidation

2

54

56

Other changes

56

(2)

54

Balance at 31 December 2020

16,815

1,125

17,940

In 2020, technical investments amounted to 1,189 million euros34, up with respect to 2019 (+226 million euros; 23.5%), in line with forecasts, despite the impacts deriving from Covid-19. These refer mainly to the transportation (981 million euros) and storage (134 million euros) segments.

The change in the scope of consolidation (+56 million euros, of which 1 million euros is leased assets as right-of-use assets) refers to assets recorded following the acquisition of 70%35 of Mieci S.p.A. (45 million euros) and Evolve S.p.A. (11 million euros).

The other changes (54 million euros) mainly concern: (i) the effects resulting from the adjustment of the current value of outlays compared with the costs of dismantling and restoring sites (+73 million euros)36; (ii) the contributions to third-party interference works (compensation; -20 million euros).

Non-current inventories – Compulsory inventories

Compulsory inventories, standing at 363 million euros (unchanged from 31December 2019) are made up of minimum quantities of natural gas which storage companies are obliged to hold pursuant to Presidential Decree no. 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 Development37.

Equity investments accounted for using the equity method

The equity investments accounted for using the equity method (1,923 million euros) mainly related to the companies Trans Austria Gasleitung GmbH – TAG (521 million euros), Terēga Holding S.A.S. (338 million euros), Trans Adriatic Pipeline AG – TAP (278 million euros), Italgas S.p.A. (235 million euros), Galaxy Pipeline Assets HoldCo Limited (207 million euros), Senfluga (138 million euros) and AS Gasinfrastruktur Beteiligung GmbH (125 million euros). Detailed changes are provided in note no. 16 “Equity investments accounted for using the equity method” in the Notes to the Consolidated Financial Statements.

Other financial assets

Other financial assets (421 million euros) mainly refer to the long-term financial receivables from OLT, originating from the taking over of the residual share of a shareholders’ loan from Iren S.p.A. in favour of OLT, against the acquisition of the 49.07% stake in the share capital of the company completed on 26 February 2020 (332 million euros; 303 million euros net of subsequent reimbursements) and the fair value measurement through OCI of the minority interests in the companies Terminale GNL Adriatico S.r.l. (38 million euros) and ITM Power Plc (74 million euros, against a purchase cost of approximately 34 million euros).

For more details, see note no. 12 “Other current and non-current financial assets” in the Notes to the Consolidated Financial Statements.

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Net working capital

(million of €)

31.12.2019

31.12.2020

Change

Trade receivables

1,217

1,551

334

Inventories

112

98

(14)

Tax assets

35

93

58

Other assets

185

187

2

Provisions for risks and charges

(713)

(798)

(85)

- of which: Provision for site dismantlement and restoration

647

710

63

Trade payables

(487)

(639)

(152)

Accruals and deferrals from regulated activities

(145)

(111)

34

Net liabilities for income taxes

(106)

(90)

16

Derivative liabilities/(assets)

(63)

(38)

25

Tax liabilities

(35)

(10)

25

Other liabilities

(1,094)

(1,104)

(10)

- of which: Payables to the Energy and Environmental Services Fund (CSEA)

597

575

(22)

- of which: Payable for interim dividend 2020

313

326

13

 

(1,094)

(861)

233

The net working capital (861 million euros) increased by 233 million euros in respect to 31 December 2019. The increase is mainly attributable to: (i) the increase in assets related to tariff batches of the transportation segment (+158 million euros) principally following the higher receivables from the CSEA against less imports invoiced in 2020 to users, with respect to the restriction established by the Regulatory Authority (+106 million euros), as well as the greater net assets for additional tariff components invoiced to users (+21 million euros) mainly following the changes to invoicing for payments and the relative collection times; (ii) greater net tax receivables (+83 million euros) due to the changes to payments on account made in relation to the period-end tax burden; (iii) net assets coming from companies that entered the scope of consolidation at the end of 2020 (+33 million euros); (iv) the reduction in liabilities for hedging derivatives (+25 million euros) mainly following the unwinding of forward start contracts after the issuing of the relative debt instruments. These effects were partly offset by: (i) the increase in provisions for risks and charges (-85 million euros) mainly due to the adjustment of the current value of costs for the decommissioning and restoration of sites following a reduction in the discounting rates expected; (ii) the increase in net liabilities for settlement and balancing of the gas transportation system38 (-98 million euros).

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Comprehensive income statement

(million of €)

2019

2020

Net profit for the year

1,090

1,101

OTHER COMPONENTS IN THE COMPREHENSIVE INCOME STATEMENT

 

 

Cash flow hedge – effective portion of fair value change

(44)

(6)

Share of other comprehensive income statement of equity investments accounted for using the equity method (*)

(17)

(38)

Tax effect

10

1

Total items that may be reclassified to profit or loss, net of tax effect

(51)

(43)

Revaluation of employee benefit liabilities (defined-benefit plans)

 

(1)

Share of other comprehensive income statement of equity investments accounted for using the equity method

(1)

1

Equity investments accounted for at FVTOCI (“fair value through other comprehensive income”)

4

43

Tax effect

 

 

Total items that will not be reclassified to profit or loss, net of tax effect

3

43

TOTAL OTHER COMPREHENSIVE INCOME STATEMENT, NET OF TAX

(48)

0

TOTAL COMPREHENSIVE INCOME

1,042

1,101

Total comprehensive income statement attributable to:

 

 

- Parent Company shareholders

1,042

1,101

- Minority interests

 

 

(*)

The values essentially refer to the change in the fair value of derivative financial instruments used to hedge investments in associates.

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Shareholders’ equity

(million of €)

2019

2020

Shareholders’ equity at 31 December 2019

 

6,258

Increases owing to:

 

 

- Comprehensive income

1,101

 

- Other changes

19

 

 

 

1,120

Decreases owing to:

 

 

- 2019 dividend balance

(466)

 

- 2020 Interim Dividend (*)

(326)

 

- Acquisition of treasury shares

(114)

 

 

 

(906)

Shareholders’ equity at 31 December 2020

 

6,472

- Shareholders’ equity pertaining to Parent Company shareholders

 

6,469

- Minority interests

 

3

(*)

Amount paid on 20 January 2021.

Information about the individual equity items and changes therein compared with 31 December 2019 is given in Note 23 to the consolidated financial statements, “Shareholders’ Equity”.

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Reconciliation between Snam S.p.A.’s net profit and the shareholders’ equity and those of the consolidated companies

 

Net profit

Shareholders’ equity

(million of €)

2019

2020

31.12.2019

31.12.2020

Statutory financial statements of Snam S.p.A.

817

1,015

4,396

4,550

Net profit of the Companies included in the scope of consolidation

972

971

 

 

Difference between the carrying value of the equity investments in consolidated companies and the shareholders’ equity in the annual financial statements, inclusive of the profit for the period

 

 

1,815

1,912

Adjustments made upon consolidation for:

 

 

 

 

- Dividends

(777)

(868)

 

 

- Difference between purchase price and corresponding net shareholders’ equity

(3)

(5)

 

 

- Adjustments due to uniformity of accounting principles

(1)

(2)

 

 

- Income from valuation of equity investments accounted for by the equity method and other Income from equity investments

82

(10)

47

10

 

1,090

1,101

6,258

6,472

Minority interests

 

 

(3)

(3)

Consolidated financial statements (*)

1,090

1,101

6,255

6,469

(*)

Shareholders’ equity pertaining to Parent Company shareholders.

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Net financial debt

(million of €)

31.12.2019

31.12.2020

Change

Financial and bond debt

14,774

15,937

1,163

Short-term financial liabilities (*)

4,125

5,599

1,474

Long-term financial liabilities

10,628

10,317

(311)

Financial payables for leased assets (**)

21

21

 

Financial receivables and cash and cash equivalents

(2,851)

(3,050)

(199)

Cash and cash equivalents

(2,851)

(3,044)

(193)

Short-term financial receivables

 

(5)

(5)

Short-term securities held for sale

 

(1)

(1)

 

11,923

12,887

964

(*)

Includes the current portion of non-current financial liabilities.

(**)

Including non-current lease liabilities (15 million euros) and the current portion of non-current lease liabilities (6 million euros).

Net financial debt was 12,887 million euros at 31 December 2020, compared with 11,923 million euros at 31 December 2019.

Cash flow from operations (1,597 million euros) made it possible to fully cover net technical investment requirements (-1,110 million euros). Taking into account net outflows associated with the acquisition of equity investments (-522 million euros, including the shareholders loan to OLT acquired by Snam with the purchase of the equity investment), free cash flow stood negative at 35 million euros. The net financial debt, after equity cash flow deriving from the payment to shareholders of the 2019 dividend (779 million euros, of which an interim dividend of 313 million euros and 466 million euros for the balance) and the acquisition of treasury shares (114 million euros), recorded an increase of 964 million euros compared with 31 December 2019, including non-monetary components related to financial debt (36 million euros), 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 2020 equal to 15,937 million euros (14,774 million euros at 31 December 2019) comprise the following:

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(million of €)

31.12.2019

31.12.2020

Change

Bond loans

9,048

8,140

(908)

- of which short-term (*)

1,439

308

(1,131)

Bank loans

3,704

5,273

1,569

- of which short-term (*)

685

2,788

2,103

Euro Commercial Paper – ECP (**)

2,001

2,503

502

Financial payables for leased assets

21

21

 

 

14,774

15,937

1,163

(*)

Includes the current portion of non-current financial liabilities.

(**)

Entirely short-term.

Bond loans (8,140 million euros) showed reduction of 908 million euros compared with 31 December 2019, mainly due to: (i) the repayment of a fixed rate bond maturing on 29 January 2020, for a nominal amount of 350 million euros; (ii) the repayment of a fixed rate bond loan maturing on 13 February 2020, of a nominal amount of 526 million euros; (iii) the repayment of a fixed rate bond maturing 25 October 2020, of a nominal amount of 500 million euros; (iv) the repurchase on the market of fixed-rate bonds for a total nominal value of 629 million euros with an average coupon of 0.62% and a residual duration of approximately 2.80 years. The total disbursement resulting from the buy back of securities as part of the Liability Management transaction, concluded in December 2020 stood at 651 million euros39, including the fees paid to intermediaries and accrued interest. These variations were partially offset by the issuing: (i) a Transition Bond, for a nominal amount of 500 million euros, at a fixed rate maturing on 17 June 2030; (ii) a Transition Bond, for a nominal amount of 600 million euros, at a fixed rate maturing on 7 December 2028.

Bank loans (5,273 million euros) increased by 1,569 million euros, due mainly to higher net utilisations of uncommitted credit lines (1,047 million euros) and the subscription of new Term Loans for an incremental nominal value of 590 million euros.

The Euro Commercial Papers (2,503 million euros) involve unsecured short-term securities issued on the money market and placed with institutional investors.

Cash and cash equivalents, of 3,044 million euros (2,851 million euros as at 31 December 2019) refer mainly to current accounts and on-call bank deposits (2,991 million euros) and cash held at the company Gasrule Insurance DAC (23 million euros) and Snam International BV (22 million euros).

At 31 December 2020, Snam had unused committed long-term credit lines worth 3.2 billion euros.

Information on financial covenants is provided in note no. 17 “Current and non-current financial liabilities” in the Notes to the Consolidated Financial Statements.

34 An analysis of the technical investments made by each business segment is provided in the “Business segment operating performance” section of this Report.
35 Greater information with regard to the impact of the business combination is illustrated in Note no. 24 “Business combinations” in the Notes to the consolidated financial statements.
36 Further information is provided in Note 20 “Provision for risks and charges” of the Notes to the consolidated financial statements.
37 By means of the announcement of 17 January 2020, the Ministry of Economic Development confirmed that the strategic gas storage volume for thermal storage year 2020-2021 (1 April 2020-31 March 2021) would remain at 4.62 billion standard cubic metres, 4.5 billion cubic metres of which was allocated to Stogit. By means of the Decree of 12 February 2021, the Ministry confirmed the strategic gas storage volume for the thermal year 2021-2022 (1 April 2021-31 March 2022) as 4.62 billion cubic metres, 4.5 billion cubic metres of which was allocated to Stogit
38 From 2018, the Company, in its capacity as Balancing Manager (BM), has been responsible for the regulation of the physical and economic items of the balancing service related to previous years and deriving from the correction of measurement data. The regulations also stipulate that any imbalance of credit items and debit items in relation to users must be regulated by the CSEA in order to guarantee Snam Rete Gas’s neutrality as a major transportation company.
39 For more information on the operation, see the section titled “2020 Performance – Main events”.

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