Snam: net profit over 7% up in the first nine months of 2021

Snam: net profit over 7% up in the first nine months of 2021

• Total Revenues: 2,334 million euros (+14.9% compared with the first nine months of 2020), due to increased investments in the regulated core business. Growth in energy efficiency business;
• Adjusted EBITDA: 1,716 million euros (+2.8%), due to regulated core business development;
• Group adjusted Net Profit1: 938 million euros (+7.4%), as a result of positive operating performance, contribution from associate companies and the continuous optimisation in the financial structure with an average cost of debt below 1%;
• Technical Investments: 866 million euros (+13.6%; of which +11.8% related to the core business);
• Net Financial Debt: 13,806 million euros (12,892 million euros as of 31st December 2020; +7.1%), due to the disbursement for the acquisition of the equity investment in De Nora, the increase in the investment plan, the working capital for the energy efficiency business development as well as the seasonal effect relating the balancing activity;
• 2021 interim dividend: 0.1048 euros per share;

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• New target set in methane emission reduction: -55%by 2025 on a 2015 basis (vs - 45% of the previous target), a more ambitious target than the one recommended by the Oil and Gas Methane Partnership (OGMP) 2.0. Snam awarded with the Gold Standard from the UN Environment Programme on methane emissions reporting.

San Donato Milanese (Milan), 4th November 2021 - The Board of Directors of Snam met yesterday under the chairmanship of Nicola Bedin and approved the consolidated results for the first nine months of 2021 (unaudited). The Board also resolved to distribute an interim dividend for 2021 of 0.1048 euros per share, to be paid from 26th January 2022.

1 Excluding non-controlling interests.

This press release is available at	Snam Press Office
www.snam.it	T+ 39 02.37037273 [e-mail]
	Snam Investor Relations
	T+39 02.37037898 [e-mail]

Marco Alverà, CEO of Snam, commented: "Results in the first nine months show the solidity of our core business, the growth in new associate companies such as De Nora and the continuous attention to optimising the company's financial structure. In a moment of high spike and volatility in gas prices and of strain in supplies globally, Snam is increasing its investments to contribute to Italy's energy security which today is in a better shape than other European peers thanks to its storage capacity and the entry into service of TAP.

New businesses development from energy transition continues through investment and projects in hydrogen, biomethane, energy efficiency and in sustainable mobility. Our ESG commitment towards local communities and territory as well as the environment, grows stronger through a new target set in methane emission reduction in view of direct and indirect net zero emissions by 2040".

Summary of results for the first nine months of 2021

Key economic figures

	First nine months
(Million euros)	2020	2021	Change	% Change
Regulated revenues	1,910	2,069	159	8.3
New business revenues	102	245	143
Total Revenues	2,032	2,334	302	14.9
Operating costs (a)	362	618	256	70.7
EBITDA (a)	1,670	1,716	46	2.8
EBIT (a)	1,105	1,115	10	0.9
Net profit (a) (b)	873	938	65	7.4

1. The values are shown in the adjusted configuration, net of the special items represented by: (i) costs related to the continuation of the Covid-19 pandemic, referring to donations of medical supplies and costs for sanitation and cleaning services, totalling 6 million euros (4 million euros, net of related taxation); (ii) the effects of realignment between fiscal and book values of assets (292 million euros in total), carried out under the provisions of Art. 110, paragraph 8 of Law-Decree No. 104 of 14th August 2020; (iii) taxes (9 million euros) related to the recognition, for tax purposes only, of capital gains associated with corporate reorganisation transactions within the Group. For further details, see the section "Non-GAAP measures" at page 15 of this press release.
2. Attributable to the Parent company shareholders.

Key financial figures

	First nine months
				%
(Million euros)	2020	2021	Change	Change
Technical investments	762	866	104	13.6
Net invested capital at the end of the period	19,315	21,079	1,764	9.1
Net Financial Debt	12,805	13,806	1,001	7.8
Shareholders' equity pertaining to Parent company shareholders	6,507	7,247	740	11.4

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Total Revenues

Total Revenues amounted to 2,334 million euros, an increase of 302 million euros (+14.9%) compared with the first nine months of 2020, due to growth in regulated revenues and in the energy transition new businesses, more specifically in respect of energy efficiency. The increase in revenues was also affected by the release of past balance sheet items (+17 million euros).

Regulated revenues amounted to 2,069 million euros, up by 159 million euros (+8.3%). Net of variable charges to cover energy costs (158 million euros; +106 million euros compared with the first nine months of 2020), regulated revenues amounted to 1,911 million euros, up by 53 million euros (+2.9%), mainly as a result of the increase in the transport RAB base (+34 million euros, including the effect of lower input-based incentives) and higher volumes of transported gas (+4 million euros) following the gradual recovery of production activities as well as colder weather conditions recorded in April and May.

Revenues from new businesses amounted to 245 million euros, up 143 million euros compared with the first nine months of 2020 due the strong development of energy efficiency activities (+153 million euros), in the residential sector more specifically, and the contribution from Mieci and Evolve, two companies that entered the scope of consolidation at the end of 2020. Snam Global Solutions posted a slowdown compared with the same period in 2020 due to COVID-19 pandemic.

Adjusted EBITDA

Adjusted EBITDA for the first nine months of 2021 amounted to 1,716 million euros, an increase of 46 million euros (+2.8%) compared to the corresponding figure for the first nine months of 2020, due to the positive performance of the regulated business (+48 million euros; +2.9%). The first nine months of 2021 also register a positive impact on the performance of provisions for risks and charges. By contrast personnel costs increase due to the strengthening of the structure to support new business initiatives and to the costs associated with the gradual return of staff to the offices. New business EBITDA decreased (-2 million euros): the positive contribution from energy efficiency activities was offset by a lower contribution in the biomethane business and Snam Global Solutions both posting a slowdown in growth due to COVID-19 pandemic effects.

Adjusted EBIT

Adjusted EBIT, in the first nine months of 2021, amounted to 1,115 million euros, up by 10 million euros (+0.9%) compared with the corresponding first nine months of the 2020 figure, due to the specified increase in EBITDA, partly absorbed by greater amortisation, depreciation and impairment losses (-36 million euros, 6.4%) resulting primarily from the entry into operation of new assets.

Net financial expenses

Net financial expenses amounted to 76 million euros, down by 24 million euros (-24%) compared with the first nine months of 2020, mainly due to the benefits arising from

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the optimisation of the financial structure, as well as treasury management, partly absorbed by a greater average net debt for the period.

Net Income from equity investments

Net income from equity investments amounted to 212 million euros, up by 49 million euros (+30.1%) compared with the first nine months of 2020, mainly due to the positive contribution of foreign associate companies, in particular TAP (+49 million euros), in operation from 15th November 2020, and ADNOC Gas Pipelines (+17 million euros), which entered the Group's scope of operations from July 2020, as well as Industrie De Nora (+11 million euros), a transaction completed in January 2021. These effects were partly offset by the lower contribution of TAG (-15 million euros), which benefited from non-recurring items in 2020, and DESFA (-7 million euros), mainly due to the expected reduction in WACC.

Adjusted Net Profit

The growth in operating performance and the contribution from associate companies, combined with the continued optimisation of the financial structure, resulted in an increase in Group adjusted net profit for the first nine months of 2021 to 938 million euros (+65 million euros; +7.4%) compared to the corresponding figure posted in the first nine months of 2020 (873 million euros). The higher profit before taxes (+83 million euros, or 7.1%) was partly absorbed by higher income taxes (-16 million euros, or 5.4%), net of special items mainly represented by the effects of tax realignment pursuant to Law-Decree 104 of 14th August 20202.

Technical Investments

Technical investments for the first nine months of 2021 amounted to 866 million euros, up 104 million euros (+13.6%), compared to the first nine months of 2020, which were affected by the slowdowns caused by the COVID-19 pandemic. Investments relate essentially to the sectors of natural gas transportation (697 million euros; 634 million euros in the first nine months of 2020) and storage (104 million euros; 91 million euros in the first nine months of 2020). With reference to the regulated core business, the level of the investment plan announced for 2021 is confirmed.

2 Special items related to the impact on the income statement of the realignment of values assigned for reporting and tax purposes (a total of 292 million euros), carried out in accordance with the provisions of Art. 110, paragraph 8 of Law-Decree no. 104 of 14th August 2020, include, in addition to the values of Snam Rete Gas, those relating to Stogit and GNL (37 million euro in total), following clarifications provided by the Revenue Agency during September 2021, in relation to the concessionary regime under which the aforementioned companies operate.

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Cash Flow

The positive net Cash Flow from operations (1,181 million euros) was impacted by the cash absorption generated by the gas balancing activity as a result of higher gas purchases in April and May following the colder weather conditions recorded in the period. This cash flow allowed the financing of all technical investments for the period (net of payables for investments) for a total of 901 million euros. Further to disbursements related to equity investments and repayments of financial receivables from OLT, free cash flow stood 134 million euros negative. Net financial debt, net of non-cash changes and after payment to shareholders of the 2020 dividend (797 million euros3), stood at 13,806 million euros, an increase of 914 million euros compared to 31st December 2020.

Interim dividend

Based on the results of the first nine months and forecasts for the full year 2021, Snam's Board of Directors has resolved to distribute to shareholders an interim dividend for 2021, equal to 0.1048 euros per share, to be paid from 26th January 2022, with ex- dividend date on 24th January and record date on 25th January.

Outlook

Expectations regarding the management of the COVID-19 pandemic in Italy confirm a progressive easing of restrictive measures linked to the acceleration of the vaccination campaign against the virus, albeit accompanied by concerns about the spread of variants, which could result in slowdowns in the process of normalisation of the domestic and international economic backdrop.

Snam continues to focus on measures that will ensure safety in its control rooms, plants and local offices, so as to guarantee regular operations and energy security in the country.

Based on the information available today, the impact on the economic and financial results is expected to be limited overall at the end of 2021 by the company. Any additional further impacts on the Group's economic/financial performance and on its equity situation, 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 on the assets held by the Snam Group abroad.

The most recent estimates on the evolution of natural gas demand in Italy for the current year show a growth over the previous year, as a result, more specifically, of the

3 The total dividend from 2020 profits amounted to 816 million euros, of which 326 million euros as an interim payment and 490 million euros as the balance. The amounts still to be paid as of 30th September 2021 are attributable to the deferred collection as requested by some shareholders.

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