Strategy & Targets

Transcription

1 Strategy & Targets March 13 th, 2013 snam.it

2 Playing a Leading Role in Integrating the European Gas Market Carlo Malacarne Chief Executive Officer 2

3 Key Priorities of a Sustainable Growth Strategy Execute profitable and high quality capex program Leveraging strong track record in delivery Low risk profile... Facilitate European network integration Optimising investments leveraging a supportive European framework Preserve solid capital structure Disciplined investment plan along with sustainable and attractive return policy Deliver efficiency Focused on pursuing operational and financial outperformance Drive value creation for all stakeholders... in the context of strict financial discipline Building the conditions to target superior returns 3

4 Agenda Business Environment Snam Business Development Operational Performance & Financials Final Remarks 4

5 Agenda Business Environment Snam Business Development Operational Performance & Financials Final Remarks 5

6 EU Energy Policy: goals and provisions Unbundling Harmonisation & Cooperation Ownership Unbundling (OU) Independent Transmission Operator (ITO) Independent System Operator (ISO) COMPETITIVENESS ACER and ENTSOG establishment Coordination of network development plans Common rules (EU network codes) SUSTAINABILITY SECURITY OF SUPPLY Market Liquidity Entry-Exit system Market-based balancing regime Gas Exchanges Infrastructure Development Diversification of supply sources Bi-directional flows Interconnection between national markets Infrastructure flexibility (N-1) 6

7 EU Energy Policy: priority corridors Promoting infrastructure development along main routes 1. South - North gas interconnections (South Western Europe) South North gas interconnection (Central Eastern and South Eastern Europe) Southern Gas Corridor (Caspian region) 4 4 Interconnection plan of Baltic energy market Italy situated at the crossroad of energy corridors 7 Source: European Commission, Regulatory Proposal: Strategic guidelines for trans-european energy infrastructure, October 2011

8 Italian Regulation: evolving framework to support market integration Unbundling Harmonisation & Cooperation Implementation of 3 rd Gas Directive (Legislative Decree 93/11) Ruling on Certification procedures (National Authority Resolution 153/11) Ownership Unbundling (Liberalization Decree 1/2012 and implementing regulation) Market Liquidity NBP PEG N ZEE TTF NCG BAU Active participation in ENTSOG for rules harmonization and network code development Coordination of development plans (TYNDP) Infrastructure Development Storage services extended to industrial and power customers New balancing regime (1 st Dec. 2011) Cooperation with Exchange Operators (GME) Entry-Exit system since 2001 PSV Enhancement of storage capacity Incentive for new investments (Dlgs. 93/11): reverse flow and interconnection 8

9 European Gas Market Gas demand in Europe* Main gas reserves supplying Europe* [ bcm ] CAGR ~ 0.5% Netherlands 1.1 Norway 2.1 Russia Net import CAGR ~ 2.0% Domestic production Algeria 4.5 Libya 1.5 Egypt 2.2 Qatar 25.0 (*) Countries: EU 27 Source: OECD/IEA Special Report World Energy Outlook 2012 Nigeria 5.1 (*) Trillion cubic metres Source: BP Statistical Review of World Energy, June

10 Italian Gas Market Gas Flows Net import Gas Demand CAGR ~1.0% Import CAGR ~2.0% Transit [ bcm ] 68 ~20 ~ Domestic production E 2018E 2020E 2025E 2012 Additional import from diversified sources 2025E Source: Italian Ministry of Economic Development and SRG estimates 10

11 Infrustructure Operators in the European Gas Market GAS MARKET Security of supply EU Regulators Harmonization of the European Regulatory Framework Diversification of sources Increased flexibility needs INFRASTRUCTURE OPERATORS Technical know how Partnerships Solid capital structure Countries & Institutions Energy Policy Objectives to foster cross border network projects 11

12 Agenda Business Environment Snam Business Development Investments International Growth New Potential Services Operational Performance & Financials Final Remarks 12

13 Investment Priorities Strengthen security, flexibility and service quality of the Italian gas system Increase liquidity of the gas market Create conditions for developing a Southern European gas hub TRANSPORT & LNG STORAGE Selected projects to meet capacity requirements and supply source diversification Facilitate technical and commercial swap among different supply sources Development of reverse flow capacity to create conditions for the gas transit to European markets Focus on international strategic assets which will help further gas infrastructure integration across Europe Increase capacity for: Modulation services and peak demand control New services for industrial customers Optimize utilization of regasification plant offering integrated services Develop new balancing services to enhance flexibility Develop infrastructure supporting gas swaps in Europe 13

14 Investment Plan Organic Capex in Italy 4.6 [ bn ] External Growth: M&A in Europe Mainly TIGF 6.2 To complete projects under construction in transport & storage businesses RAB GROWTH: CAGR +3.4% E EBITDA* from associates: +70% vs * Snam pro-quota interests in non consolidated associates 14

15 Consolidated Capex Plan in Italy billion Spending Consolidated RAB* Capex breakdown* [ bn ] 30 CAGR 3.4% 75% 25% 1.3 bn 4.9 bn % 36% [ bn ] Incentivized Not Incentivized E 2013E 2014E 2015E 2016E Transport Storage Distribution RAB incentivized RAB with base remuneration * RAB evolution calculated assuming annual inflation rate in of 2% and on the basis of the current approved regulatory frameworks 15

16 South-North Developments and Reverse Flow Import Export PLANNED PROJECT Length: ~1,150 km Installed power capacity: ~170 MW CAPACITY AT ENTRY POINTS FROM SOUTH +8 Bcm Main Projects Po Valley Infrastructure (~450 km ) Empowerment/construction of compressor stations (~100 MW) Metering point in Masera 16

17 for an Italian Gas Hub, with an Ample Supply Diversification Italian export capacity [ Mscm/d ] Fully Operational by end Passo Gries - Connection with North Europe 18 Tarvisio - Connection with North East Europe Expected export capacity beyond * Passo Gries - Connection with North Europe 18 * Tarvisio - Connection with North East Europe * Maximum daily export capacity is 40 Mscm/d Import transport capacity [ Mscm/d ] 338 ~350 ~380 Existing import transport capacity Import transport capacity under construction Expected capacity development >

18 New Storage Capacity to facilitate Gas System Liquidity SERGNANO BORDOLANO [ Mscm/d ] [ bcm] SETTALA RIPALTA SABBIONCELLO ALFONSINE (I Phase) MINERBIO ~14% ~25% FIUME TRESTE E 0 Peak Capacity Modulation Capacity for industrial users Modulation Capacity for Residential/Regasification CAPEX PLAN CONSISTENT WITH MINISTERIAL DECREES 18

19 Distribution: selected investments to increase profitability in a mature business MAIN PROJECTS ~6.7 SMART METERING: ~1.1 million smart meters IT systems development to support smart metering process ~14% E Redelivery points (millions) NETWORK EXPANSION: New connections (~ 1,300 km) on existing distribution network and development of new distribution network * Considering the current perimeter of consolidation 19

20 Italgas Business Development to unlock Additional Value ITALGAS TODAY New Legislative Framework fostering ITALGAS TOMORROW Concession in municipalities: 1,435 Italgas 148 Associates 7.4 mln clients served (33% of the Italian market) ~6 mln Italgas 1.4 mln Associates Industry concentration process (177 new concession areas) Higher degree of transparency: clear and standard rules to protect invested capital To grow the activities maintaining the current capital employed also leveraging on financial partnership To maximize operational efficiency through: Optimization of concession portfolio Economies of scale To pursue additional revenues through operational services to third-party networks Management of 40% of Italian redelivery points 20

21 Agenda Business Environment Snam Business Development Investments International Growth New Potential Services Operational Performance & Financials Final Remarks 21

22 Snam s International Growth Strategy KEY PILLARS OUR TOOLS Main player in European gas infrastructure Integrated approach Phased expansion programme along with strict financial discipline Risk diversification Leverage leadership in terms of RAB, market cap and on strategic geographical platform Extensive know-how in managing high quality integrated gas infrastructure assets Develop cross-border interconnections Create platforms to foster development of integrated storage, regasification and transport assets in Europe Facilitate the interconnection of gas pools Preserve solid balance sheet Sharing financial commitments with partners JVs and bolt-on acquisitions Increasing risk-adjusted target returns Varied geographical and regulatory risk Complementary investments cycles 22

23 Implementing International Growth in European Gas Infrastructures Strategic alliance with Fluxys Joint Acquisitions (50% - 50%) 31.5% Interconnector UK 51% Interconnector Zeebrugge Terminal 10% Huberator TIGF assets Exclusive acquisition rights Snam 45% shareholding and industrial partner Strategic and geographical fit Similar business model: integrated management of transport and storage activities 23

24 Agenda Business Environment Snam Business Development Investments International Growth New Potential Services Operational Performance & Financials Final Remarks 24

25 Business Context Evolution The changing business environment together with regulatory evolution ASSET OWNER SYSTEM OPERATOR Investments Continuity in capex execution Value drivers Efficiency Assets integration Efficiency gains European external growth New services Foster Market Development may lead to potential new value creation 25

26 Potential New Services Infrastructure system operator as provider of new services Transmission & Storage Short term ( day-ahead ) capacity services facilitating trading and arbitrage between hubs Short cycle ( flexibility ) storage services Peak transmission & storage capacity services Market functioning Incentive mechanisms for TSOs to support the market Additional informative services to network users Demand forecast incentive mechanisms Cooperation with gas pool Establishment of trading platforms Development of spot and futures markets Physical and financial gas products to boost the liquidity and dynamics of the internal gas market 26

27 Agenda Business Environment Snam Business Development Operational Performance and Financials Final Remarks 27

28 Continuing Focus on Operating Performance 2012 consolidated EBITDA margin 77%* 2016 consolidated EBITDA margin ~80% Leveraging on Operating efficiency throughout the period, absorbing growth of business activity Capex execution Extra remuneration on capex supporting increase in blended return of our asset base * Not considering the positive tariff adjustment for 143 mln recorded in the distribution activity 28

29 Growth from Associates SNAM INTERESTS IN NON CONSOLIDATED ASSOCIATES 2012 EBITDA 140 mln +70% 2016 EBITDA 2012 Italian Distribution Europe TOTAL EBITDA EQUITY 625* 135** 760 * Equity RAB and district heating evaluated on 7x EBITDA ** Purchase price 29

30 A solid Capital Structure to sustain a Low-Risk Growth Profile Soundness of balance sheet... Firm commitment to solid investment grade profile, with strong focus on current credit rating metrics Maturities well distributed over time without any major refinancing exercise until 2015 and coherent with business profile Adequate liquidity buffer to support a convenient approach in DCM and provide comfortable financial flexibility Appropriate source mix between flexibility from bank financing and stability from M/LT bonds and institutional lenders Limited exposure to interest rates - 2/3 M/LT and fixed-rate debt at regime - preserving value creation from financial efficiency Strict control on cash flow generation via: Efficient working capital management Disciplined investment policy supported by comfortable capex flexibility... to support Snam s low risk profile 30

31 A consistent Liquidity and Maturity Profile Existing debt and financial flexibility (bn ) Maturity Profile (bn ): M/L Term Debt as at 31Dec ~ BOND bln an adequate liquidity buffer in the medium term: To cover bond repayment schedule To support a convenient approach in DCM To provide comfortable financial flexibility beyond 2022 BANKING FACILITIES Existing debt as at 31 Dec Financial flexibility Total committed credit facilites & bond Institutional lenders financing Debt Capital Market Bilateral banking facilities Pool banking financing beyond

32 2013: room for further efficiency 2012 guidelines achieved Completion of refinancing exercise and market improvement suggest room for optimisation in terms of cost and maturity via: New access to DCM Fine tuning of banking financing Growing role of institutional lenders offers further potential upside 2013 debt cost guidelines could benefit from optimisation exercise 32

33 Agenda Business Environment Snam Business Development Operational Performance & Financials Final Remarks 33

34 Confirming Profitable Growth and Attractive Shareholder Returns Consolidated RAB* [ bn ] CAGR 3.4% (*) RAB evolution calculated assuming annual inflation rate for of 2% and on the basis of the current approved regulatory frameworks Operating cash flow to finance asset growth Leverage (D/RAB+associates) expected to remain around 55% Increasing incentivized RAB up to 36% in 2016 Growing by 70% associates EBITDA Exploiting further operating efficiency 2012 Expected profitability increase to be aligned to RAB growth Robust, visible and sustainable shareholder returns Superior yield 0.25 /share Expected DPS LEVEL CONFIRMED 34

35 Q & A S e s s i o n 35

36 A n n e x e s 36

37 Capital Expenditure in Italy and Incentive Scheme* Transport and LNG ~0.7 bn ~3.0 bn Storage 16% 19% 15% 15% 50% Expansion & new entry points 3% premium for yrs Regional & national develop. 2% premium for 7 10 yrs Safety 1% premium for 5 yrs Maintenance Base return: 6.4% Development of new fields 4% premium for 16 yrs ~0.3 bn ~0.7 bn % 46% Expansion of existing fields 4% premium for 8 yrs Maintenance Base return: 6.7% Distribution 10% Substitution of cast iron pipes 2% premium for 8 yrs ~0.3 bn ~1.2 bn 60% 30% Metering 8% allowed return Other investments Base return: 7.6% (*) Gross of subsidies 37

38 Italgas: the leader in the Italian market* 2012 Italgas Enel F2i 27% 19% 6% 33% ITALGAS & NAPOLETANA GAS ITALGAS ASSOCIATES OTHERS A2A 5% Hera 5% IREN Gas Natural 3% 2% ASCOPIAVE 2% Others 31% (*) Calculated on the basis of consumers connected to distribution grids 38

39 Disclaimer Snam s Chief Financial Officer, Antonio Paccioretti, 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. 39

40 Strategy & Targets March 13 th, 2013 snam.it