Full-year 2016 results and plan update

Transcription

1 Full-year 2016 results and plan update London, March 7 th, 2017 snam.it

2 Agenda results plan update 3. Additional opportunities 4. Concluding remarks 2

3 results 3

4 In June we presented a plan with 5 key pillars Solid investment plan in existing portfolio Stable and visible regulation Excellence in project execution and operational efficiency Additional value creation opportunities Sound Financial Policy 4

5 We are delivering on these objectives 2016 key achievements Solid investment plan in existing portfolio Invested 906m of capex in Italy, +3% vs 2015 and in line with 2016 guidance Installed +355 km of network; +46 MW of compression capacity; +500 Mcm storage capacity Invested ~170m in TAP, in line with project schedule Excellence in project execution and efficiency Obtained >8,000 permits; >1,000 construction sites Delivered capex plan on time and on budget for the 10th consecutive year New efficiency plan launched with ~80 identified cost-savings initiatives Additional value creation opportunities Sound financial policy Start-up of new balancing regime services Agreement with FCA, Iveco and API to promote CNG mobility Launched Snam Global Solutions initiative to provide services to third parties Acquisition of 49% Gas Connect Austria in JV with Allianz (Snam investment: 135m) Increased average maturity of M/L debt by 1 year Cost of debt lowered to 2.4% vs 2.8% in 2015, ahead of guidance. Issued first Italian corporate zero coupon bond Debt/RAB including associates ratio at ~52% at YE 2016 * Number of injuries per million hours worked 5

6 Key achievements in our European international associates Leverage of Snam capabilities on project development TAP awarded Snam a ~50M contract 10 operational projects to support international associates in the last 2 years (eg roll-out of Snam custom tools) Debt optimization Refinancing activities in TAG & TIGF reduced cost of debt and improved maturities Efficiency 3 cost reduction projects ongoing following Snam benchmarking studies Secondees from Snam to associates and viceversa Income from associates on a like for like* basis 112mln in % vs 2015 * Adjusted, considering TAG, TIGF and IUK consistently with

7 Strong full-year 2016 results RAB (2016E) 19.4 bn ( 21.3 bn including associates) In line with guidance Revenues 2,560 m >95% from regulated activities Up 1.8% on 2015 excluding WACC impact Down 2.6% on 2015 including WACC impact EBITDA adj. 1,987 m Flat nominal controllable fixed costs Up 2.1% on 2015 excluding WACC impact Down 3.4% on 2015 including WACC impact Pro-forma adj.* Net Profit 845 m +5.5% vs. guidance YE 2016 Net Debt 11,056 m In line with guidance 103m of buyback completed in Q4 * Includes pro-forma net profit contribution from associates net of one off events 7

8 Adjusted and pro-forma results m Reported Net Profit* 2016 Italgas Discontinued Operations One-off financial items Adjusted Net Profit 2016 Proforma Adjustment Proforma Adjusted Net Profit 2016 * Includes net profit form discontinued operations 8

9 2016 results: Ebitda analysis mn 2, , EBITDA 2015 Regulated revenues Controllable fixed costs * Other EBITDA 2016 Strong performance excluding impact of WACC update * At constant perimeter 9

10 2016 results: adjusted net profit analysis mn Adj. Net profit 2015 EBIT Net Interest Income (expenses) Net Income from associates Income taxes Adj. Net profit 2016 Net profit adj. pro-forma* 2016 Net income benefited from reduction in cost of debt, fiscal charges and increased contribution from associates * Pro forma net profit includes adjustments for the contribution of associates on a full year basis, net of one-off events 10

11 2016 cash flow mn , ,223-1, Adj. Net profit Depreciation & Other items Change in working capital Adj. Cash flow from operation One-off financial items Cash flow from operation Net investmets Free cash flow Free cash flow discontinued operations Dividend Buy Back Cash flow 11

12 2016 change in net debt mn 13, ,056-3,511 Net financial debt 2015 Cash flow 2016 Non cash financial items Italgas Demerger Net financial debt

13 Main financial actions in Drivers Total committed credit facilities and bonds by source* Resizing of financial structure following Italgas demerger: Before Italgas demerger (as of 30 Sept: 16.3bn) After Italgas Demerger (as of 31 Dec: 12.7bn) 2.75bn bond buyback cancellation of ca. 1bn bilateral committed banking facilities Debt capital market Banking facilities Institutional lenders financing Reshaping of funding mix: Pool banking and bilateral facilities renegotiation and extension (ca. 4 billion) Further treasury management optimization More efficient balance between: Competitive costs and long tenors (institutional lenders and Debt capital market) Flexibility (banking facilities) Growing weight of fixed rate debt Outstanding debt - Fixed- Floating breakdown Before Italgas demerger (as of 30 Sept: 14bn) Fixed rate Debt Floating rate debt After Italgas demerger (as of 31 Dec: 11.1bn) * Nominal value 13

14 Another year of delivery Cost of debt reduction 2.4% cost of debt in bps vs guideline -40bps vs FINANCIAL STRUCTURE ( bn) as of 31 December 2016 Average tenor of M/L term debt: > 5 years or +1 year vs. June 2016 thanks to LM exercise No major refinancing peaks Maturity improvement Strong liquidity profile covering 24 month- maturities BOND AND DRAWN COMMITTED FACILITIES - MATURITY PROFILE ( bn) as of 31 December Net Debt 2016 Debt capital market Bilateral banking facilities Total committed credit facilities and bonds1 Pool banking facilities Institutional lenders financing beyond 2026 Debt capital market Banking facilities and institutional lenders financing 1 Nominal value 14

15 Balance sheet solidity and financial structure efficiency Solid Investment grade profile Firm commitment to current credit rating metrics (Net Debt/RAB <60%; FFO/Net Debt >11%) Snam s metrics well within rating agencies thresholds Fair balance between an adequate liquidity profile and commitment fees thanks to focused management of maturities Fair and stable regulatory framework CREDIT RATING M/L TERM OUTLOOK Moody s Baa1 negative S&P BBB stable Fitch BBB+ stable SNAM KEY CREDIT METRICS 2015PF1 2016PF1 Net Debt/(RAB+associates) 49% 52% Optimized debt structure Fixed-floating breakdown and tenor consistent with regulatory framework Large portion of fixed rate debt to limit interest rates exposure M/L Term debt tenor in the 5 year space Asset & Liability Risk Management approach FFO 2 / Net Debt ca. 15% ca. 14% Available committed funding ca. 4.0bn ca. 3.2bn Fixed-floating rate debt breakdown 64%-36% 64%-36% M/L Term Debt tenor ca. 5 years >5 years 1. Excluding Italgas for the full year 2. Based on reported figures before change in working capital Adjusted Pro-forma Net Income 15

16 What we are doing and what s next in 2017 Cost of debt and debt structure Financial flexibility Expected funding cost reduction from: Latest LM exercise, locking in 2017 benefits Management of future refinancing exercises and funding mix, also leveraging on available market liquidity Further market upside: more than 200bps of coupon delta between expiring bonds and potential new issuances over Enhance fixed rate debt and preserve debt tenor to limit P&L volatility Plan cash flow from operations to essentially cover capex and dividends Ongoing share buyback as a flexible way to manage shareholder remuneration and financial structure efficiency,: As of 2 nd March 2017 ca. 64m shares acquired (1.8% of the share capital) for 233m Avg. purchase price: 3.64 per share (-3% vs. VWAP) Net debt guidance 11.5bn at 2017 YE (incl. ~0.3bn true up on TAP financing), 2.2% cost of debt Fixed rate debt: ~ ¾, M/L term maturity: ~ 5 years 16

17 Plan 17

18 Plan key highlights Increased investment plan 5bn of investments: 4.7bn of Italian capex (+ 400m vs previous plan) and ~270m TAP equity 1bn of Italian capex in 2017 vs 0.9bn in 2016 Improved contribution from new activities Services: 150m of cumulated revenues, thanks to SGS (TAP contract), new regulated service revenues CNG business unit: plan for roll-out of 300 new filling stations Solid contribution from associates ~200m by 2021 Innovation and operational excellence to support higher efficiency > 200m invested in new tech to improve our operational performance Efficiency plan: > 10m savings in 2017; > 25m by 2021 Solid and efficient financial structure Further reduction in cost of debt, 2.2% in 2017 Cashflow from operations to cover capex and dividends 18

19 Increased investment plan to 5bn CAPEX Transport & CNG CAPEX Storage and LNG 19% 9% 4.1 bn 0.6 bn 8% 4% 32% 28% Support to the North West market and bidirectional cross-border flows Development of Fiume Treste storage field Development of a new level (F - level) to the original pressure of the reservoir 21% 57% 22% Development Maintenance Other Replacement Redeliv. Points upgrading CNG Realization of about 300 filling stations to supply CNG Interconnection withtap Development TAP Maintenance Other ~ 270m equity injection * in 2017 * Tap true up for essentially same amount at financial close, currently expected at Year end

20 2017 Italian capex CAPEX 2017 Transport & CNG Storage and LNG 0.9 bn 7% 6% 1% 1% 45% 40% 0.1 bn 18% 30% 52% Support to the North West market and bidirectional cross-border flows Pontremoli Albareto Maintenance Redelivery points upgrading Maintenance activity to preserve high-level service and security of the network Ravenna Chieti Replacements Development Maintenance Other Replacement Redeliv. Points upgrading CNG Further methanization of Calabria 20

21 CNG roll-out : environmentally and economically sustainable mobility Snam: 150m investment Network/Fleet operator Gas Connection Compressors / Storage Dispensers / shelters CNG infrastructure management Additional RAB: 60m 90m capex Total c.300 stations Italian legislation implementing the DAFI (Directive for Alternative Fuels Infrastructures) recently passed and confirming a strong role for CNG (and LNG) Identified prime candidate filling stations to host CNG infrastructure Preliminary commercial negotiation already in place with 3 large fuel retailers Snam creates the infrastructure framework: a turnkey solution for fuel retailers or fleet operators Contractual arrangement, aiming at regulating the process of building and operating the CNG stations Fee paid by the fuel retailers or fleet operators (long-term contracts with credit-worthy counterparties) The first stations will start their activities in H Risk-adjusted returns higher than Italian regulated activities 21

22 New asset-light services adding high-margin revenues New regulated services Snam Global Solutions Already launched New balancing regime incentives (Oct 16) Demand forecast TSO actions on spot market System residual balancing Supply of last resort Under development Capacity products (e.g. oversubscription & buy-back) PSV transaction fee New service platform created leveraging on Snam key competences TAP contract award, 50m over three years Services offered to third parties (included associates) Project Management Permitting Services Maintenance and dispatching services IT services and Risk management 150m of cumulated revenues over the plan period 22

23 Solid contribution from associates Net income from associates Key drivers to 2021 results m Contribution from TAP: ~50m Addition of GCA to Snam portfolio 135 ITG ~200 ~200 Enhanced visibility on medium term results from new regulation in transport in France and Austria Contribution from Italgas * Payback by 2021 >90% Payback by 2021 ~70% Payback by 2021 >90% * Net of Italgas and TAP contribution 23

24 Ambitious plan to further strengthen our operational excellence Extensive deployment of new technologies to strengthen our operational performance Real time leak detection Smart gas and augmented reality > 200m of investments of which ~160m in Industry 4.0 initiatives Invest in people and processes to structurally upgrade our capabilities Snam Academy, Lean programme, change management initiatives New organization: from a Group of companies to an integrated player All key initiatives now launched Further enhance our corporate citizenship Snam Foundation First Italian company to join the Global Corporate Supporters Forum by Transparency international Sustainability as a core value 24

25 Higher efficiency target, supported by a comprehensive set of initiatives Saving target Supporting initiatives m >25 Operations and Maintenance: Optimization of operating processes Internalization of processes and review of make-or-buy mix Energy efficiency initiatives Corporate: Renegotiation and optimization of IT infrastructure and application maintenance Reduction of consultancy and advisory services Re-engineering of processes of all key functions > E By end of plan Lean transformation across the Group: Reshaping the way we work: faster & leaner, more effective Creation of a new cross-functional team of internal change agents to ensure sustainability of new solutions and savings 80 initiatives already identified 25

26 Total costs trend Core business costs flat in real terms CNG and SGS (1) 2016 PF New regulated activities and growing business dimension Emerging costs from demerger Efficiency 2021 Core business 2021 Core business costs flat in real terms, offsetting higher costs due to growing activities, infrastructure and complexity: Effective cost reduction initiatives Lean management to pursue operating excellence New businesses and services expected to generate additional margins 1. Net of pass-through and non recurring items 26

27 Regulatory framework in Italy and Europe Italy: inflation & spread linked, risk free floor Europe: good visibility on new regulation in transport in France and Austria TRANSPORT 4 regulatory period 5.4% real pre-tax 5 regulatory period TAG GCA Transport Regulated regime Inflation-linked Equity RAB REGAS. 4 regulatory period 6.6% real pre-tax 5 regulatory period TIGF Transport Regulated regime Fully inflation-linked RAB STORAGE 4 regulatory period 6.5% real pre-tax 5 regulatory period Storage Negotiated regime Potential evolution to a regulated regime IUK Transport Exemption regime Regulated regime after long term contracts expiry Regulatory period WACC Regulatory period Update every three years of WACC parameters TAP Transport Exemption regime Long term contracts 27

28 Robust growth to 2021 Consolidated RAB 1 ( bn) EBIT ( bn) Net income ( m) CAGR % 1% 4% % E 2021E E E Transport & LNG Storage 2016 guidance ( 800m) Sustainable organic growth in the asset base and attractive returns 1. Total RAB evolution calculated assuming an average annual inflation rate of ~1% and according to current regulatory framework 28

29 2017 guidance and growth targets Guidance 2017 Targets Investments ~1.3* bn 5* bn Consolidated RAB ~19.8 bn 1% CAGR to 2021 Net income 0.9 bn 4% CAGR to 2021 DPS cent % DPS cagr Interim dividend from 2018 Net debt 11.5** bn Debt/RAB*** at 2021 in line with YE 2016 Commitment to current credit rating metrics * Including TAP equity investment ** Including TAP true up of about 0.3 bn *** Including associates 29

30 Investment criteria Financial flexibility H Already invested or earmarked Investment approach Additional capex of 400mln on Italian infrastructure vs prior plan Share buy back activated and 233mln completed to date GCA acquisition Criteria Committed to current credit rating metrics and risk profile Accretive returns (risk adjusted returns at least in line with Italian regulated assets) Industrial Enhance existing infrastructure Leverage industrial capabilities Unlock additional growth/optionality Financial Dividends Buyback (duration to be extended) 30

31 03. Additional opportunities 31

32 Improving context: gas demand recovery in Italy and Europe Italian gas consumption EU gas consumption Weather adjusted, bcm bcm +3.1% +4.7% +4.2% +5.0% Other Sectors Thermoelectric Industrial * Residential & commercial E E Demand peak reached in January 2017 (426 mcm/day, 91% of historical max) * Includes: NGV, Agriculture and Non-Energy Use Source: National Transport Network Balance, Istat, Centro Studi Confindustria 32

33 Demand will be supported by evolution in environmentally-friendly technologies Natural gas advantages Availability Abundance of resources Well developed gas infrastructure Natural gas technology evolutions will support penetration CNG vehicles are an immediately available solution to reduce urban pollution Growth expected in Italy following the adoption of the DAFI (EU directive on alternative fuels). Environmental sustainability The quickest and cheapest route to decarbonisation The quickest and cheapest route to reduce urban pollution Efficiency SSLNG is an efficient and economical solution to reduce emissions in the maritime and heavy-duty transportation sector and to displace more polluting fuels in isolated areas Compliant with DAFI and IMO regulations Biomethane is a CO 2 neutral renewable and programmable gas source, using existing infrastructures Limited additional infrastructure requirements 33

34 New supply sources, interconnections required to meet import requirements Potential sources of gas LNG global oversupply NORTH SEA Bcma High demand 1 RUSSIA 800 Base demand LNG Single market opportunity: Greater Interconnections Higher Flexibility Security of supply Lower prices Low demand 1 CASPIAN SEA & MIDDLE EAST & EAST MED 0 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '27 '29 '31 '33 NORTH AFRICA Global LNG supply - (Load factor: 85%) 1. CAGR : 8.1% in High, 5.3% in Base, 2.5% in Low demand scenario 34

35 Additional potential growth opportunities Main opportunities in Italy New regasification capacity Small scale LNG French Market Area unification Reverse flow TurkStream Building the backbone in Sardinia Maintenance and further replacement of fully depreciated pipelines Additional expansion of CNG network beyond 2021 STEP TAP TANAP Main opportunities abroad Integration of European markets TransMed Green Stream East Mediterranean Production New infrastructure connecting sources to markets Additional national infrastructure requirements 35

36 04. Concluding remarks 36

37 Concluding remarks Growing organic capex plan with fair regulation New stream of asset-light services Operational excellence and efficiency Well positioned to capture additional accretive opportunities Strict financial discipline Superior long-term returns with low risk profile 37

38 Disclaimer Franco Pruzzi, in his position as manager responsible for the preparation of financial reports, certifies pursuant to paragraph 2, article 154-bis of the Legislative Decree n. 58/1998, that data and information disclosures herewith set forth correspond to the company s evidence and accounting books and entries. This presentation contains forward-looking statements regarding future events and the future results of Snam that are based on current expectations, estimates, forecasts, and projections about the industries in which Snam perates and the beliefs and assumptions of the management of Snam. In particular, among other statements, certain statements with regard to management objectives, trends in results of operations, margins, costs, return on equity, risk management are forward-looking in nature. Words such as expects, anticipates, targets, goals, projects, intends, plans, believes, seeks, estimates, variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict because they relate to events and depend on circumstances that will occur in the future. Therefore, Snam s actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, economic conditions globally, political, economic and regulatory developments in Italy and internationally. Any forward-looking statements made by or on behalf of Snam speak only as of the date they are made. Snam does not undertake to update forward-looking statements to reflect any changes in Snam s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any further disclosures Snam may make in documents it files with the Italian Securities and Exchange Commission and with the Italian Stock Exchange. 38

39 Full-year 2016 results and plan update London, March 7 th, 2017 snam.it