Snam Spa

Good morning. This is the Chorus Call Conference Operator. Welcome and thank you for joining this NAMM 9 months 2023 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Ms. Francesca Pezzoli, Head of Investor Relations of SNAM. Please go ahead, Madam.

Good morning, ladies and gentlemen, and welcome to SNAM 9 Months 2023 Consolidated Results. Today's 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, the key highlights and achievements of the period, and an update of the most recently published outlook on energy market. Luca will walk you through the financial performance, then back to Stefano for closing remarks, and finally the Q&A session. And now let me hand over to Stefano.

Thank you. Thank you, Francesca, and good morning also by myself. I'm on slide two with a few key highlights on the first nine months. Gas demand declined by approximately 14% in the nine months. Gas prices were on average 70% below the first nine months of 2022 that were characterized by consistent volatility showing the fragility of the energy system. Domestic gas flows continued to be impacted by the geopolitical situation. In front of the declining volumes from the north, these were offset by 20% increase in the LNG imports that reached 12 BCM. On regulatory front, the observation period for the calculation of the weighted average cost of capital parameters ended in September, and the trigger level was reached. We expect in between 80 to 90 BPS uplift to kick in from January 24. On October 31st, the regulator published the resolution for the introduction of the base ROS from 2024. It provides visibility and continuity with some positives such as the reduction of the time lag of the allowed DNA from 2025, an update of the deflator, improvements in work-in-progress revaluation, and the capitalization rates based on historical and perspective average proposed by the companies. All in all, the document is in line with the expectations. We have recently published the 2023 scenario update, which is the basis for the new 10-year gas transmission network development plan, and incorporate some of the indications from the draft of the new Italian integrated national energy plan, so-called PNIEC, sent to the European Commission before summer. to a range of 59-68 BCM of natural gas demand by 2030, of which from 4 to 6 of biomethene. Carbon capture and storage emerged as a critical decarbonization enabler in the most mitigation pathways. Not mentioning that ENI has recently reached an agreement with the UK government for a first CCS regulated business model for a CCS high net Northwest project. And we are jointly progressing on the Ravenna project. Moving to the results, the nine-month figures are extremely sound. EBITDA adjusted is up by 9%, mainly driven by output-based incentives. Net profit adjusted reached $942 million, up 1% year-on-year, despite rising interest rates and relative cost of debt. Investments are topping 1,200 million euros, we're down 6% year-on-year. The BW Singapore payment will occur in Q4, bringing full-year investment to the guidance of 2.1 billion euros. Technical investments are up 29% year-on-year, supported by the completion of the first floating vessel in Pionvino and the start of onshore and offshore works reaching respectively 24% and 7% completion for the second floating vessel in Ravenna. Net debt reached 14.3 billion as a fact of the already anticipated reversal of regulatory working capital. Looking at our associate portfolio, we successfully placed the first-ever EU taxonomy-aligned transition bond exchangeable into existing ItalGas ordinary shares. We have proactively leveraged on our stake in Etelgas to contain our cost of debt while keeping voting rights and expected dividend flows. Our interconnection points are performing well, benefiting from their strategic position at the crossroad of the key gas corridors. Now moving on to slide three, beyond financial performance, we have made further achievement in terms of security of supply, energy transition, and sustainability. With respect to security of supply, storage facilities are now approximately 99% full at record level. We have obtained the authorization to run over pressure also to storage fields, which added further flexibility to the last infilling phase with additional 0.2 BCM of gas. For the next infilling season, we could further increase gas volumes in those facilities by in between 0.4, 0.5 BCM. From November, we have started to provide again the reverse flow service like we did last year. It consists in the availability of daily injection capacity in the next month associated with the corresponding delivering capacity in the period of January-March 2024, so providing further performance in the peak of the winter season. The Flosting Gola tundra started operation in the beginning of July in Piombino as scheduled Three LNG carriers have already been discharged, and thermal year 2023-2024 slots are fully booked. We will launch by year end, beginning 2024, the capacity option for a second vessel to be operational in Ravenna by the end of next year. Biomethane sector is ramping up. We have received 300 requests of connections for new plants in the first nine months of 2023, which is 50 more than full year 2022. We are waiting for a possible allocation of RepowerU funds to some of our projects, starting with the first phase one of the Adriatic pipeline that is already under construction. Now moving to energy transition. As mentioned, carbon capture is gaining momentum. The carbon capture project in Ravenna, which I referred before, that is jointly developed with ENI, is on track to start a phase one in 2024. Then the ACON project in UK, of which our participated Sturega is the lead developer, has obtained a track two status by the UK government and is going to be one of the cluster that will be supported going forward. And Centrica, through one of his subsidiaries, has joined ESB and DeCarbonix which, by the way, is participated by SNAM, in the development of the Kerstel project aiming at the redevelopment of the decommissioned gas reservoir for a large-scale energy storage in Ireland. Green Tour, the subsidiary on small-scale activities, is starting the construction of the small-scale LNG plant in Pignataro. It will enter in service in 2025 and will be able to liquefy 50,000 tons of biomethane into bio LNG for transportation. We have so far been awarded approximately by 100 million euros of plan for resilience and relaunch grants for several projects such as the H2 Valley, the H2 refilling stations and the Gigafactory we are jointly developing with the NORA. I'm pretty confident that both the South H2 corridor and the CCS project in Ravenna of which we are partners, could be qualified as project of common interest by the end of the month by the European Commission. We are going to launch in Q1 2024 a market test for the transport of H2 and CO2. Let's now have a look at the progress made in terms of sustainability. CAPEX aligned to EU taxonomy and SDGs represent respectively 37% and 53% of the total. Methane emissions, which are part of scope one for SNEM, are down a remarkable 25% vis-a-vis nine months 2022. And we joined SBTN corporate engagement program as a first step for a certified biodiversity plan. Finally, sustainable finance reached roughly 80% three-year add of schedule, and according to a recent shareholder analysis, ESG investors reached 47% of the institutional investors, up from the 43% tracked in January. Now moving to page four, with regard to the gas demand context, Italian nine months demand was down 14%, 12% weather adjusted or 7.1 BCM due to a thermoelectric sector that is down 15.5% year on year or about four BCM driven by electricity demand decline, increase of net imports mainly from France by 0.9 BCM, and rise in hydroelectric production by about 1.2 BCM equivalent. Decline in industrial sector, minus 0.8 BCM, is mainly attributable to economic slowdown with an effect particularly on energy-intensive sector. Worth mentioning that in Q3 2023, the industrial gas demand started to show recovery signals with plus 1% growth. Civil sector contracted by 2.8 BCM due to the milder wind temperature that correspond to 1 BCM, demand containment actions 1.4 BCM, and the increase in energy efficiency. The majority of the decline is therefore not structural. Moving to gas flow, they were impacted by the geopolitical scenario, as I mentioned, with a 58% reduction in volumes from north compensated by an increase in LNG volumes by 20%. And as I said, the lower demand. We exported approximately two BCM to Austria and marginally through Switzerland in the first nine months. On the 13th of August, we have reached the physical export level of 40 million cubic per day, which is the maximum technical capacity on daily basis. Now on slide five, we have summarized two recent reports on energy outlook. What I want to emphasize is that there is an extraordinary high volatility over future energy scenario, as comes out from the two studies. And the energy crisis has somewhat eased, but there is consensus on the fact that the energy market to political and the global economy are unsettled. the risk of future disruption is therefore possible. If we take the word energy outlook published by EA, explores different pathways for the global energy system up to 2050, with solar production as assumed as the key technology to enable and accelerate the global decarbonization. Whilst focusing on gas, From the 2023 Global Gas Report, the key takeaway is that it's important to continue investing in gas infrastructure to secure reliable and affordable supply, also considering its balancing role for intermittent renewables increase in generation. We need to accelerate green low-carbon gas and CCS developments, considering the key role that molecules will play in the energy mix of the near and longer future. Now, I leave the floor to Luca to comment on the results in more detail. Thank you.