Snam: Net Profit 8.3% up in the first quarter of 2021

  • Total Revenues: 717 million euros (+5.6% compared to the first quarter of 2020 pro- forma, mainly attributable to the growth in the energy transition businesses);
  • EBITDA: 559 million euros (+0.7% compared to the first quarter of 2020 pro-forma);
  • Net Profit: 313 million euros (+8.3% compared to the first quarter of 2020 pro-forma due to higher contributions from associates and to activities carried out to optimise the financial structure);
  • Technical Investments: 231 million euros (+5% compared with 220 million euros in the first quarter of 2020);
  • Net Financial Debt: 13,709 million euros (+822 million euros compared to 31st December 2020, mainly as a result of the acquisition of equity investments made during the period and the payment of the 2020 interim dividend).

San Donato Milanese (Milan), 12th May 2021 - The Board of Directors of Snam met yesterday under the chairmanship of Nicola Bedin and approved the consolidated results for the first quarter of 2021 (unaudited).

Marco Alverà, Snam's CEO, commented: "Results posted in the first quarter of 2021 confirm Snam's growth path, thanks to the soundness of our core business, and the important contribution from new associate companies such as De Nora. Our work to optimise the financial structure continues through the issuance, in February 2021, of transition bonds for further 750 million euros, whereas our commitment towards sustainable finance is further strengthened by its contribution now representing 50% of the total.

We have increased our investments, exceeding 230 million euros in the quarter, thereby contributing to Italy's economic recovery. We are implementing our initiatives in the hydrogen segment - from the certification of the transport network to the launch of new projects - as well as in energy efficiency, biomethane and sustainable mobility to support the ongoing ecological transition and the achievement of domestic and European climate targets. Commitment to the environment and ESG factors, in general, are at the core of our strategies to achieve sustainable success in the interests of all our stakeholders".

This press release is available at

Snam Press Office

www.snam.it

T+ 39 02.37037273 ufficio.stampa@snam.it

Snam Investor Relations

T+39 02.37037898 investor.relations@snam.it

Summary of results for the first quarter of 2021

In order to allow for a better assessment of Group performance and greater comparability of data, the pro-forma income statement of the first quarter of 2020 has been prepared, assuming as from 1st January 2020 the effectiveness of the changes to the Unaccounted-for Gas (UFG) 1 recognition criteria 2for the fifth regulatory period (2020-2023), as defined by the regulatory authority ARERA with Resolution no. 569/2020/R/gas2 of December 2020.

Economic Highlights

First quarter

% change vs

2020

2020 Pro-

2020 Pro-

(Million euros)

Reported

forma (*)

2021

Change

forma

Regulated revenues

656

644

647

3

0.5

New business revenues

30

30

64

34

Total revenues

691

679

717

38

5.6

Operating costs

124

124

158

34

27.4

EBITDA

567

555

559

4

0.7

EBIT

380

368

359

(9)

(2.4)

Net profit (**)

298

289

313

24

8.3

  1. For the reconciliation between reported and pro forma data for the first quarter of 2020, please refer to the table on page 11 of this press release.

(**) Entirely attributable to the Parent company shareholders.

Key financial figures

First quarter

%

(Million euros)

2020

2021

Change

change

Technical investments

220

231

11

5.0

Fixed capital

19,688

20,870

1,182

6.0

Net financial debt

12,256

13,709

1,453

11.9

Snam Shareholders' equity

6,426

6,821

395

6.1

Market capitalisation

13,744

15,462

1,717

12.5

  1. Unaccounted-forgas (UFG) is the result of the network balance equation. This term represents the non- determinable energy due to measurement uncertainties: it is therefore an accounting "adjustment" that can have a positive or negative value in a non-systematic way.
  2. In July 2020, with Resolution no. 291/2020/R/gas, the Authority initiated a procedure aimed at clarifying the criteria for recognising UFG for the fifth regulatory period (2020-2023), which ended with the publication, on 22nd December 2020, of Resolution no. 569/2020/R/gas. This resolution has introduced an incentive mechanism relating to the difference between the UFG recognised in one year and the actual UFG in the same year. In particular, the incentive is calculated by applying a unit amount, equal to 3.3 euros/MWh (3.5 eurocents/standard cubic metres), to the difference between actual and recognised UFG, with a cap equal to the value of the remuneration of the metering service.

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Total Revenues

Total Revenues amounted to 717 million euros, an increase of 38 million euros (+5.6%) compared to the first quarter of 2020 pro-forma.

Regulated revenues amounted to 647 million euros, up 3 million euros (+0.5%). The higher revenues resulting from the increase in the RAB of the transportation segment (+10 million euros), due to the contribution from new investments and the higher amortisation/depreciation recognised, were partly absorbed by a temporary reduction in the RAB of the storage segment (-2 million euros), which is expected to increase due to the investments planned in the year, and the lower input-based incentives (-3 million euros).

Revenues from the new energy transition businesses increased by 34 million euros compared with the first quarter of 2020 due to the strong development of energy efficiency activities, particularly in the residential sector, as well as the contribution from Mieci and Evolve, two companies that have entered the consolidation scope at the end of 2020.

EBITDA

EBITDA for the first quarter of 2021 amounted to 559 million euros, an increase of 4 million euros (+ 0.7%), compared to the first quarter 2020 pro-forma, as a result of higher revenues from the core business against operating costs in line with the same period of 2020. As regards the new businesses, the positive contribution from energy efficiency activities was offset by the continuous investments in hydrogen and mobility platforms, a reduction in the contribution from Snam Global Solutions compared to strong results achieved in 2020, a year recording a high concentration of projects, and slower rump up in biomethane.

EBIT

Operating income, in the first quarter of 2021, amounted to 359 million euros, down by 9 million euros (-2.4%) compared with the corresponding pro-forma 2020 figure, due to greater depreciation/amortisation (-13 million euros, 7.0%) resulting primarily from the entry into operation of new assets.

Net financial expenses

Net financial expenses amounted to 25 million euros, down 10 million euros (-28.6%) compared to the first quarter of 2020 pro-forma. The reduction was mainly due to activities carried out to optimise the financial structure and to the positive market conditions, at the cost of a gross debt of 0.8%, despite the greater average debt for the period due to continuous investments as well as De Nora acquisition.

Net Income from equity investments

Net Income from equity investments amounted to 69 million euros, up by 17 million euros (+32.7%), compared with the first quarter of 2020, mainly as a result of the positive contribution from Group's foreign associate companies attributable, in particular, to TAP (+16 million euros), which started operations on 15th November 2020, and, from July 2020, to the entry of ADNOC Gas Pipelines into the Group's perimeter, as well as of

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Industrie De Nora, finalised in January 2021. These effects were partly offset by the expected lower contribution from Desfa as a result of lower tariffs related to the reduction in the recognised WACC and other regulatory parameters, and TAG.

Net Profit

Net Profit for the first quarter of 2021 amounted to 313 million euros, an increase of 24 million euros (+8.3%), compared to the pro-forma net profit achieved in the first quarter of 2020, as a result of the positive contribution from the associate companies and the optimisation of the financial structure, as well as the benefit from ACE - Aid to Economic Growth3.

Technical Investments

Technical Investments in the first quarter of 2021 amounted to 231 million euros (220 million euros in the first quarter of 2020), up by 11 million euros (5%). Investments mainly relate to the natural gas transportation (184 million euros) and storage (31 million euros) segments.

Cash Flow

The positive net cash flow from operating activities (243 million euros) financed a large part of the technical investments for the period (net of payables for investments) for a total of 303 million euros. Taking into account disbursements related to equity investments and repayments concerning financial receivables from OLT, the free cash flow was negative by 528 million euros.

Net Financial Debt, after the Shareholders' equity cash flow (291 million euros), arising from the payment to the shareholders of the 2020 interim dividend (323 million euros)4 in January 2021, increased by 822 million euros compared to 31st December 2020.

In the first quarter of 2021, Snam confirmed its commitment to sustainable finance as a key element of its strategy, through the issuance in February of a dual tranche Transition Bond for a total of 750 million euros, the third Transition issuance in less than a year. These proceeds are intended to finance energy transition projects, the so-called Eligible Projects, as defined in the Transition Bond Framework published on 9th June 2020. In addition, the Euro Commercial Paper programme is fully utilised as of 31st March 2021 for

2.5 billion issuance. As of the date of this press release, all Commercial Papers issued by Snam are ESG rated.

3

4

The ACE - Aiuto alla Crescita Economica (Aid to Economic Growth) benefit, repealed in 2019 and then reintroduced by the 2020 Budget Law, was recognised starting from the second quarter of 2020.

The total interim dividend from 2020 profits amounted to 326 million euros, of which 323 million euros was paid on 31st March 2021 and 3 million euros is still outstanding due to the deferral of the collection as requested by some shareholders.

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Finally, in March 2021, as part of the Environmental Finance Bond Awards, Snam's Transition Bond Framework published in June 2020 received the "Award for Innovation - use of proceeds (green bond)", demonstrating the market's recognition of the company's commitment to sustainable finance.

Outlook

The most recent estimates on the evolution of demand for natural gas in Italy for the current year show an increase over 2020, as a result, in particular, of the expected recovery of the industrial production index and to the coldest temperature recorded in the 2021 winter.

The level of the announced investment plan is confirmed, in particular, as regards the core business aimed at supporting Snam's industrial growth.

The activity to optimise the financial structure implemented over the last five years led to a reduction in the average cost of the gross debt from 2.4% in 2016 to an average of 1.2% over the time horizon, as a result of actions implemented to take full advantage of current favourable market conditions and improve the interest rate and credit spread scenario with respect to the previous plan. Further possible savings could result from treasury optimisation, as well as from the additional diversification of the sources and a greater use of sustainable finance instruments.

Regarding the management of the Covid-19 pandemic, Snam continues to focus on measures that will ensure the safety of the personnel working in the control rooms, plants and local offices, and to guarantee regular operations and energy security for the country. While at present the company cannot reliably determine the effects on its targets for 2021 and subsequent years, based on the information available, it anticipates a limited impact with respect to its 2021 objectives, thus confirming the guidance on net profit of 1.170 million euros, including the contribution from De Nora. Any additional further impact on the Group's economic/financial performance, as well as on business development plans, will be evaluated in light of the evolution and duration of the pandemic both in Italy and abroad. The same remarks also apply to possible impacts on development initiatives and on suppliers and clients, as well as for the activities carried out abroad by the Snam Group.

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SNAM S.p.A. published this content on 12 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 May 2021 06:25:04 UTC.