Snam S p A : 2030 Vision and 2021-25 Plan (Transcript)

2030 Vision and 2021-2025 Plan Call - Conference call

Monday, November 29, 2021, 14:30 ITA Time

Investor Relations Snam T [phone] [e-mail]

MODERATORS: MARCO ALVERÀ, CHIEF EXECUTIVE OFFICER ALESSANDRA PASINI, CHIEF FINANCIAL OFFICER

MARCO ALVERÀ: Ladies and gentlemen, good afternoon and welcome to our Strategy Presentation. Over the 6 years, we've reshaped Snam in 4 main ways.

We've made Snam simpler, leaner and faster. We've removed organizational layers up to 4 in certain areas, and we've hired or acquired 1,396 new colleagues that bring new excellent skills, particularly in green energy. Great people are going to be a key scarce resource in the race to zero.

Second, we've enhanced the value of our assets and secured their role in the energy transition. Snam has taken the leadership on a hydrogen readiness, designing and carrying out tests for both transport and storage, and future proofing our assets and investment plans.

Third, we have expanded our playing field, launching new ventures in hydrogen, biomethane, energy efficiency and sustainable mobility. Fourth, we've expanded our geographical footprint.

The assets we've acquired have enabled us to establish partnerships with key investors and energy companies that generate superior returns and provide opportunities for additional growth in areas of the world with the best renewable potential, for instance, in the Middle East. And we've done all this, while continuing to cut costs and grow. We have increased investments in our core business and earnings per share by around 50%, and we've returned almost €5 billion to shareholders through dividends and buybacks.

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As a result of this repositioning, Snam today is in a sweet spot. We have solid near term growth in cash flows, and we have the assets and competences required to excel in the energy transition, providing accelerated and superior long term growth. Today, we're announcing some breaking news that will underpin our future.

First, our vision to create a 2,700 kilometer hydrogen backbone before 2030, the first tranche of a national hydrogen infrastructure, which we expect will be regulated at a premium, compared to today's returns.

Second, our acquisition of the TTPC/TMPC pipeline, which carry natural gas from North Africa into Italy. These will be key to unlocking the vast potential of North African green hydrogen production, feeding into our H2 backbone and through Italy into Europe.

Thirdly, the tests that we've carried out to show that our 17 billion cubic meters of gas storage capacity can hold up to 100% of hydrogen. This provides a truly, massive amount of net zero flexibility. I think this is a least understood challenge, and also opportunity of the energy transition, to build the same amount of storage for electrons that is in batteries, would require tens of trillions of euros of CAPEX.

Fourth, we've also made our first international storage acquisition buying a stake in dCarbonX, a company which is set to play a key role in the promising hydrogen market in Ireland.

And finally, our partnership with De Nora has created a lot of value, not least through our support of the De Nora electrolyser Gigafactory project. This value will be crystalized as the company has indicated it will go public in the near future.

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At the same time, thus having an enviable, future proof portfolio of assets, Snam also has unique characteristics. We are a purpose led company, committed to net zero. We are the first in our sector to announce a Scope 3 emissions reduction target on our associates and on our suppliers. We have unique engineering and project management expertise to deliver infrastructure projects on time, and on budget, and our ability to work in partnership, it will become increasingly relevant in the context of accelerating investments in decarbonization.

Our presentation today will provide a vision of a growth to 2030, as well as, our 5 year strategic plan horizon. COP26 was a turning point for net zero. Political commitments, technology, policy and funding are finally all falling into place. What is missing are now bankable, replicable and scalable projects that need to be sanctioned in a hurry, if we were to achieve staying below 1.5 degrees warming. This is the world's challenge, and this is Snam's opportunity.

There are now finally a consensus that green gas will have a very significant role to play. Electricity will only account for about half of the energy mix by 2050, and a fully decarbonized stage, and over a third of the system will be running on biomethane low carbon gas, and especially hydrogen. Hydrogen is no longer the fuel of the future. It is happening today.

Following costs means that in the next few years we will have hydrogen cheaper than fossil fuels cost today. This, coupled with a supportive policy environment, means that real sizable projects will approach FID much sooner than expected. This is the beginning of an investment opportunity, which will account for the lion's share of the $150 trillion of CAPEX required to reach zero.

There is no shortage of investors keen to supply the capital. The Glasgow Financial Alliance for net zero has signed up already a 130 trillion of assets committed to the net zero pathway. Much of the value creation of this

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investment cycle will be focused on mid-stream infrastructure. That's because of the key and central role it will play.

In a traditional energy system, the really hard job was finding and producing oil and gas. It required capital, cutting edge technology, the capacity to manage geo political risk, and that was where the lion's share of the projects returns were. The mid-stream sector traditionally, was mainly a way of getting fuels from A to B, it still makes good returns on some complex projects, but more or less infrastructure returns were half of those in the upstream.

The net zero energy system will make these roles invert. With the advent of modular renewables, upstream energy production will have low barriers for entry, very high competition between different sources, lower risks and lower returns. The sun and the wind, and the capacity to harvest them will scarcely be a problem.

What will be far more complex is turning this intermittent seasonal and often, far away energy produced in the oceans and the deserts, into energy that's available exactly where and when we want it. That's why the energy storage will be the next big thing. There will be value interconnecting molecules and electrons, for example, turning excess renewable into hydrogen transporting, and storing it through the gas grid and then using it to deliver peak winter heating, either directly or by providing flexibility to the power grid. This will be far cheaper than trying to manage intermittency supply and the seasonality of demand through electricity alone.

What happens in a hybrid vehicle which is constantly optimizing between electrons and molecules, will begin to happen in factories and maybe in homes, enabled by the smart integration of infrastructure. This is where people will be able to earn higher returns. A sizable amount of the CAPEX super cycle will be focused on mid-stream green energy infrastructure, along 3 mega trends. The first we need 30 times the solar and wind capacity we

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