Snam Spa

Good morning. This is the Chorus Call Conference Operator. Welcome and thank you for joining the SNAMM First Half 2024 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 Pizzoli, Head of Investor Relations of SNAM. Please go ahead, Madam.

Good afternoon, ladies and gentlemen, and welcome to SNAM H1 2024 Consolidated Results Conference Call. Today's presentation will be hosted by our CEO, Stefano Venier, and by our CFO, Luca Pasta. In the presentation, Stefano will provide an overview of the key highlights 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, Francesca, and good afternoon. I'll start on slide two. In the first half, we delivered strong growth with adjusted EBITDA up 16% year-on-year at $1,417 million, mainly thanks to the weighted average cost of capital uplift, the Ross effects, and the RAP growth. The adjusted net income at $691 million is up 11% year-on-year. Investments reached $1,159 million, up 60% versus first of 2023, and the net debt at $16.4 billion with 2.5 average net cost of debt. Last week, we signed the agreement with Edison for the acquisition of Edison Stochagy. The deal will further strengthen our industrial and strategic position while creating the net profit. I will provide more details on the deal financials and rationale later on. At the same time, we continue to extract value from our existing portfolio of associates and from our financing strategy. First, the new reference price methodology in Austria was approved after long negotiation and embed volume risk sterilization. It will bring back to profitability our Austrian associate TAG from 2025, providing visibility throughout next regulatory period that goes from 2025 to 2027. Second, ENEGAS, GRT-GAS, and our associate Terega, in cooperation with OG, signed an agreement for the development of the Bar-Mar H2 infrastructure that is part of the H2Med corridor. Moreover, we continue to optimize our cost of funding. We have issued 1 billion sustainability credit line in May, replacing more expensive credit facilities. We have obtained 100 million euros from AEDB EAB to support our subsidiary Renovit in the energy efficiency projects. And our Board of Directors today has approved the issuance of up to $1.25 billion hybrid bond to finance Edison's stochastic acquisition and the relevant CAPEX plan while keeping the full financial flexibility. At global level, as you probably know, gas demand is up 3 percent, driven by industrial recovery. while in Italy gas demand declined by 4.3 percent. This, along with a well-supplied market and historically high gas storage level in Europe, contributed to keep average gas prices 34 percent below last year. Italy has filed to Europe the Climate and Energy Plan that envisages about 58 BCM of gas demand by 2030, of which 5 bcm, or 9 percent, biomethene, and a key role of H2NCCS to reach the decarbonization target set for 2030. We are keeping to present updated scenario by September aligned with the climate and energy plan, and we continue to contribute to the working groups set by the Italian Ministry of Energy and Environment, which has the target to release the H2 strategy and to define the carbon capture strategy framework by the next September. Moving now to page three, we can highlight the, let's say, progressive deployment of our strategy. That is, focused on becoming a pan-European multi-molecular operator, leveraging on synergies between gas infrastructure and energy transition businesses. And starting from the gas infrastructure, we can summarize that the 2025 tariffs has been approved for transport, LNG, and recently the storage. The storage level, as I mentioned, is at about 86%. well above the historical levels for this period of the year, and with 100 percent of the 12.4 BCM of storage capacity for the thermal year 2024-2025 already allocated, and we are on track to have the full facilities full by the end of October. For the Adriatic Corridor, the backbone to strengthen the southern ore capacity, the first phase works have started, and we are progressing with the Ravenna floating vessel terminal works expected to be operational by the beginning of 2025. The shorter milestone for the assigning of the RepowerU grants to the Adriatic Line and export were met in time. The two projects have to be completed by the end of 2026. Let's now move on energy transition. The market test results to assess the alphabet industry's appetite were supportive, and we will provide more details in the following pages. The pilot project for CO2 capture and the sequestration in Ravenna is going to start soon. Several progress on South H2 corridor, the Italian, Austrian, and German TSOs met in Rome the last 18 of July. and to define the project governance and the next steps along with the three different governments. The RENOVID backlog is stable at 1.2 billion, and on biomethane, eight plants won the tariff options equivalent to about 18 megawatts, and we have been successful for 100 percent of the plants submitted. We will submit a further couple of projects at the end of August. and the rest by the end of the year. On the sustainability side, the capex aligned to EU taxonomy and SDGs represent respectively the 32% and 52% of the total H1 capex 2024. We continue then to reduce the scope one and two emissions and the full year 2024 is foreseen being down 17% with respect to the 2022 levels. MSCI has confirmed our AA rating, and we are engaging with current and potential shareholders on our first transition plan that will be published before the year end with the objective to align in a single document this NAM climate and biodiversity strategy, key achievements, further targets, and key metrics including physical and transition risk assessment, finally explaining how our assets will contribute in securing affordable energy along and beyond the transition to net zero. Let's now spend a few words on the Edison Stock Adquisition on page four. As you know, after the submission in June of a binding offer, last week we have reached an agreement for the acquisition of the 100% stake of Edison Stoccaggio from Edison. As known, the perimeter comprises three storage sites located nearby our facilities with a total capacity of about 1.1 BCM operating under a fully regulated regime. The enterprise value for the acquisition is equal to $560 million, subject to adjustment at closing. The last update is until Q1 2025, following regulatory approval. In details, it refers to antitrust and golden power authorizations. The agreement also provides for an earn-out mechanism based on the outcome of the administrative dispute with ARERA relating to the past remuneration of the San Potito and Cotignola assets for an amount up to $45 million, which is a full pass-through. The deal implies a premium on the 2024 RAB of about 12% that is close to the one at which SNAM is trading at the moment and below recent comparable M&A transactions. Since the acquisition was not envisaged in our strategic plan to maintain the current financial flexibility, we have decided to finance the deal by issuing an hybrid bond, thus maximizing the net income accretion that is foreseen in between 1.5 to 2 percent already from the closing, while EPS contribution will be neutral to positive. The strategy rationale is sound, as now we'll consolidate a strategic role in securing Italian gas supply, increasing exposure to Italian regulated activity consistently with investment strategy outlined last January, and exploiting operating efficiencies leveraging on stock JIT scale, asset proximity, and expertise and know-how. The fit is strong, also looking at the asset carbon footprint as Edison's stockage of plants are already equipped with electric compressors. We have included about 1.5 million of revenues and cost synergies equal to about 3 percent of the BDA. in the evaluation that we deem conservative and we will work to extract further value from the deal. Let's now move on page five to have a snapshot on H2 and carbon capture market test results. In the past months, we carried out a market test to assess the appetite for both H2 hydrogen and carbon capture in Italy and neighboring countries. More than 120 companies submitted the questionnaire. We have analyzed the data gathered, and the results are very supportive, pointing to about 37 million of avoided emissions per year in Italy and 11 million in Austria and Germany by 2040, thanks to the use of hydrogen and the carbon capture. With regard to hydrogen, about 80% of expected consumption will come from hard-to-abate sectors and power generation. By 2040, production hubs will emerge in south of Italy, but not enough to fully meet the projected demand. Therefore, Italy will play an important role as transit country from North Africa to north of Italy and central Europe as the south H2 corridor encompassed. As far as CCS is concerned, more than 60 non-binding expressions of interest were submitted from 172 industrial sites in Italy, mostly concentrated in the Po Valley clusters and from some industrial districts in the southern part of Italy. Strong interest came from building materials, refining, steel, waste to energy, and power generation. The results of the market test, along with the ongoing progress on regulatory front and the strong institutional backing, are very supportive to our strategy and the PCI projects, just mentioned the South H2 corridor and the so-called Calisto for CC for carbon capture project in Ravenna that is developed jointly with ENI. Now I'll turn to Luca for more details on the financial results.