Snam S p A : Full year 2022 results (Transcript)

Full Year 2022 Consolidated Results - Conference call

Thursday, March 16, 2023, 10:00 CET

Investor Relations Snam T +39 02 37037272 investor.relations@snam.it

MODERATORS: STEFANO VENIER, CHIEF EXECUTIVE OFFICER LUCA PASSA, CHIEF FINANCIAL OFFICER.

FRANCESCA PEZZOLI, HEAD OF INVESTOR RELATIONS.

FRANCESCA PEZZOLI: So good morning, ladies and gentlemen, and welcome to Snam full year 2022 consolidated results. Today presentation will be hosted by our CEO, Stefano Venier and by our CFO, Luca Passa. In the presentation, Stefano will provide an overview of the results and the key highlights and strategic achievement of the period. Luca will walk you through the financial performance. Then back to Stefano for closing remarks and finally the usual Q&A session.

And now let me handover to Stefano.

STEFANO VENIER: Thank you, Francesca, and good morning also from me. I'm on Slide 2. In 2022, we operated in an extremely volatile environment, both in terms of energy markets and macro situation. However, we managed to deliver another set of solid financial results despite being the year of the weighted

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average cost of capital review applied since January 1st. We made significant progress across several business KPIs in both gas infrastructure, as well as energy transition business while improving ESG metrics, the different alignment and ratings. The key strategic milestones achieved along the energy Trilemma paved the way for our long-term strategy that we updated last January.

Finally, we continue to offer compelling shareholders remuneration with a dividend per share proposal of €0.2751, of which €0.11 already distributed in January as interim and 0.1651 per share to be distributed in June. The resulting DPS is up 5% versus previous year in line with our dividend policy.

So now, if we move to Slide 3, I will start with a brief overview of the key full year 2022 financial results. Adjusted EBITDA closed at €2,237 million as the WACC review impact applied from the beginning of the year, as I said, by €130 million. That was largely offset by higher output based incentives and regulated revenues, as well as energy transition business that contributed €24 million, up €15 million versus 2021. The adjusted net income stands at €1,163 million, above the guidance we gave last year, mostly thanks to stronger than expected operating results.

Total investments, including the Golar Tundra acquisition for €329 million, were up by a remarkable 52% versus the previous year with 1,600 on gas infrastructure. As a result, the 2022 tariff regulated asset base reached €21.4 billion, that is up by 2% vis-à-vis 2021. And finally, the net debt is remarkably down to €11.9 billion, well ahead of our guidance, mainly due to a temporary positive working capital effect related to system balancing activity in Q4 2022 when the market was long because of mild weather and gas savings initiatives.

Now let's move on Slide 4 and where we have some operating KPIs across our gas infrastructure and energy transition businesses. 2022 has been a challenging year from an operational standpoint. We had to cope with an

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unprecedented reversal of flows, injecting more than 4 BCM of gas into storage facilities versus the previous year while managing a lower predictability on gas flows. This led to a more than 20% increase of the compression station working hours for transport and storage of gas.

LNG facility has been run close to full annual capacity, providing the much needed flexibility of sources to compensate for the declining Russian supplies. Moreover, as Italy, we contributed to the EU supply approximately for 4.6 bcm through export, mainly via TAG pipe and just to have a reference number, 4 bcm is basically 50% of the Austrian demand.

Moving on the energy transition business, we reached 40 megawatt of installed biomethane and biogas capacity with 19 million cubic meters of production that is well above the previous year as new plants enter into operation or within our perimeter.

Renovit, our energy efficiency company reached 46 megawatt of installed capacity in solar panels and co-generation. In the last mature business of small scale LNG, sustainable mobility and decarbonization projects, more than $35 million of grants has been earmarked back to Snam and more than 175 grants to the consortium in which Snam is involved in. Additionally, in June, the De Nora IPO was successfully completed, doubling the value of Snam's stake since acquisition.

On emissions, gas transport flows material changes and their management had implication on our Scope 1 and 2 emissions. Nevertheless, regulated activities regarding gas infrastructure, Scope 1 and 2 emissions were down 0.6% versus 2021, mainly driven by a remarkable reduction of 23% year-on- year in methane emissions.

We have completed a thorough analysis of the 2022 investment which points to a 39% alignment to EU taxonomy, and 62% to SDGs and Luca will provide more details later in the presentation and full details can be found in the

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annexes. Finally, we continue to be rated by several ESG agencies with excellent results, and I'm happy to share that we are best performer by Sustainalytics in the gas utility sector. Besides our financial and operational, I'm now on Page 5, let me comment on some key strategic achievements in 2022 along the 3 dimensions of the energy trilemma that we have assumed as a framework also for the strategic guidelines that we presented in January. They represent relevant milestones on the long-term strategy, as I said.

Starting with security of supply. First, we have acquired and authorized in record time two new floating vessels of five bcm annual capacity each. The first one, the Golar Tundra will arrive in the next few days at Piombino and will start operations as planned in May. Storage levels reached 95% at the end of October, 2022, well above the previous year, and at targets at the European level, and now we are hovering around 60% as we will comment later on.

In January, 2023, we have closed the acquisition from Eni of 49.9% equity interest in the companies operating the 2 gas pipelines connecting Algeria to Italy, called TTPC and TMPC that are essential assets in the new environment also in the long-term perspective with respect to the hydrogen backbone.

Moving to sustainability, both the hydrogen backbone as I mentioned, and CCS project has been filed as projects of common interest closed for proposal. And finally, the asset health methodology in connection with the remuneration mechanism of fully amortized assets has been approved by the regulator, thus testifying our proactive approach toward affordability through new services aligned with the forthcoming Totex regulatory evolution.

In 2022, we further progressed on the hydrogen readiness analysis across our infrastructure. A third party appraisal that is RINA has already certified

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