Snam Spa

Good morning. This is the Chorus Call Conference Operator. Welcome and thank you for joining the SNAM Full Year 2023 Consolidated 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 full year 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 key highlights and achievements of the period. Luca will walk you through the financial performance, then back to Stefano for closing remarks, and finally the Q&A session. And now I will hand over to Stefano.

Thank you. Thank you, Francesca, and good morning also on my side. On full year 2023, we think we deliver solid results in a complex environment characterized by geopolitical instability, cyclical gas demand, volatile gas prices, and rising interest rates. The acuteness of the energy crisis is in 2023, but energy markets, geopolitical and global economy remain unsettled, highlighting the importance to continue developing an infrastructure to secure reliable, affordable, and in the future, decarbonized energy supply. Over the past 18 months, we have made significant progress along the key pillars of our strategy. strengthening the security of supply while laying the foundations of our long-term growth. These significant progresses were achieved by delivering financial results above guidance and sound and consistent sustainability performance. We continue to offer an attractive and sustainable shareholders remuneration by proposing a dividend of 0.2820 per share that is up 2.5 percent versus previous year in line with the guidance. We already paid 0.1128 interim dividend in January, while the balance of 0.1692 per share will be paid on the 26th of June. Now, let's move on page three. In the full year 2023, we have delivered an adjusted ABDA in excess of 2.4 billion. That is up 8% year-on-year, mainly thanks to the RAP growth, output-based incentives, and the contribution of the energy and transition activities. The adjusted net income at 1168 is above the upgraded guidance of 1140, even during the strategic plan presentation on 25th of January. Investments 2.2 billion euros are accelerating and up by 14% versus 2022, while financial ratios remain well below the threshold set by the credit agencies that already confirmed their view, rating, and outlook. Full year gas demand declined by 10% with average gas prices 40% below full year 2022, characterized by consistent volatility showing the fragility of the energy system. While in the first two months of 2024, we had stable volumes at 14 BCM. The gas flows continued to be impacted by the geopolitical situation. The volumes declined from north was offset by the increase of LNG imports that reached 16 BCM, or 26% of total demand, and the lower demand. Many developments happened on the regulatory front. The annual weighted average cost of capital update triggered an uplift of 80 bps on transport and 60 bps on storage and LNG for 2024. The regulator also approved the introduction of the Bayes-Ross from 2024 on transport, while positive changes such as the recognition of CAPEX and OPEX capitalization rates based on the average of the historical and forecast data up to 2025, an updated deflator recognition, a better work-in-progress remuneration, and a shorter time lag for DNA only from 2025. All in all, it means a faster cash conversion. Let's now move to the associates. We have started an active portfolio management strategy to extract and maximize value by, first, successfully placing, along with the other core shareholders, the 5.7% Denora shares to promote the stock liquidity. Second, issuing an exchangeable bond into ITAGA shares, minimizing our cost of debt while keeping voting rights and expected dividend flows. As far as the international associates, they enjoyed better visibility as Terega and DESFA positively completed the regulatory review. On page four. 2023 has been a year of progress and delivery on our strategy to become a pan-European multi-molecular operator, leveraging on a modular, flexible, and repurposed infrastructure to secure the energy supply. Starting with gas infrastructure. The Adriatic Line, the backbone to strengthen the Southern Nord Input, was fully approved defined strategic and will receive 375 million of repowered EU funds. SiteWorks will start next May. We reached a record storage level at 99% before the winter and offer new services such as the reverse flow. They continue in the first two months of 2024 with more than 24.5 BCM of injection that contribute to keep storage facility quite full. We expect the storage to remain well about 50% full at the end of the winter, thus helping to reduce the gas prices volatility and making the infilling season smoother. We bottle strained the first FSRU in Piombino that so far received 19 ships for a total of 1.7 BCM while we progress the works for the Ravenna that will be completed by the year end. Let's now move on to the energy transition platform. Our energy efficiency B Corp. Enovit has contributed to the group EBDA thanks to the delivery of deep renovation project pipeline while repositioning the business toward long-term performance energy contracts. At the end of 2023, the backlog reached 1.2 billion and the order intake of the year was higher than 500 million. On biomethane, we are progressing on our two-fold role. On one side, optimizing the interconnections of plants to the network with more than 320 requests standing as of the end of 2023. Second, acting as industrial developer with about 41 megawatts of biomethane or biogas plants in operation. During the year, we refocused our portfolio capacity by deconsolidating eight megawatts that were called Initiative Biomethano and acquiring 7.4 megawatts of agri-plants and four megawatts of waste plants as part of the former agreements. While two megawatts of biogas are under upgrade to biomethane and we submitted additional six plants on February, 2024 in the tariff auctions launched by the GSC. The third pillar of the energy transition platform that is based on hydrogen and CCS Both projects, as you know, have been qualified as PCI. We have recently launched, in cooperation with the Italian Industry Association, a market sound to assess the hard-to-abate industry's appetite. The pilot phase on Ravenna CCS project is on track. Injection will start by summer. On page five, on sustainability, Our all-round approach enabled us to make progress along the key KPI included in our sustainability scorecard that you can find in the appendix. In 2023, capex aligned to EU taxonomy and SDGs represent respectively 29% and 61% of the total, and sustainable finance reached the 80% three years ahead of schedule. Let me now highlight some updates and new commitments. SNAM is the first TSO globally to join SBTN corporate engagement program and to commit to positive impact on biodiversity by 2027 and will be neutral by 2024. We have performed a thorough climate change risk assessment confirming the resilience of our assets with reference to physical and transition risks under different scenarios aligned with the IPCC. We established a new document which states our commitment to fulfill our mission in accordance with the Paris Agreement. And finally, we have been first globally to be assessed by Moody's under their net zero assessment for our decarbonization ambition to be well below two degrees and in line with Paris Agreement goals. Our ambitious target, firm commitments, and consistently improving performance are reflected in our leading position across all different ESG ratings. Let me now move for a while to the CO2 emission performance. scope 1 and 2 are down 10% versus 2022, which is our baseline, and down by 17% versus 2018 on regulated activities. This is driven by the remarkable performance on methane leakage detection that are down by more than 20% year-on-year and by 57% versus 2015, that is the baseline assumed by the United Nations. On scope three emissions, we are down 4% using as a reference 2022 regulated perimeter adjusted to include the sea corridor acquisition that was performed from the beginning of 2023. Let's now move on page six on gas flow demands and demand. With regard to the gas market context, Italian full-year 2023 demand posted almost 62 BCM, that is, as I said, down 10% or 8.7% on a weather-adjusted basis. That was due to thermoelectric sector down 13.6% year-on-year, or about 4 BCM, driven by raising hydroelectric production, that is equivalent to 1.9 BCM, strong increase in net imports that is equivalent to 1.5 BCM, and electricity demand decline. The industrial sector was down 0.6 BCM, mainly driven by energy intensive sectors. It's worth mentioning that in Q4 2023, the industrial gas demand experienced a recovery plus 7.3% versus the same period in 2022, mainly driven by chemical industry and transport sector. The third sector, that is the civil sector, was characterized by around 2.1 BCM due to milder weather, that is about 0.8 BCM, demand containment actions for 0.4 BCM, and the increase in the energy efficiency. While, as I said, in the first two months of 2024, we had stable volumes at 14 BCM. That's moving to gas flows in 2023 that were impacted by the geopolitical scenario with a 56% reduction in volume from north that were compensated primarily by an increase of LNG volume by 15%. And finally, we exported 2.6 BCM to Austria and marginally to Switzerland into the full year. Let me now turn to Luca for the financial results.