Snam Spa Unsp/Adr

Good morning. This is the Karlsruhe Conference Operator. Welcome and thank you for joining the SNAM 9-month 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 the telephone. At this time, I would like to turn the conference over to Francesca Pezzoli, Investment Relator of SNAM. Please, go ahead.

Good morning, ladies and gentlemen, and welcome to SNAM 9 Months 2024 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 financial and strategic highlights of the period, and on the progress to deliver our ambition to become a multi-molecules infrastructure operator. Then, it will focus on the updated long-term scenarios, providing a summary of the key takeaways from our transition plan recently presented, a complementary integrated pillar of our strategy and action plan. I encourage you to take a look at the dedicated webinar on our website and the document which outlines NAMM's strategy, targets, actions, and resources to sustain the transition towards net zero and contribute to a lower carbon economy. Luca will then walk you through the financial performance, cash flow analysis and financial structure. Then back to Stefano for closing remarks and finally the Q&A session. Let me remind you that the next appointment on the agenda is the Capital Market Day in the second half of January with the updated strategic plan presentation covering the period 25 to 29. I will now hand over to Stefano.

Thank you, Francesca, and good morning also from me. Starting the presentation on page two, I deem in this nine months we delivered sound growth with adjusted EBITDA up more than 12% year-on-year at 2,089 million, mainly thanks to the weighted average cost of capital uplift, the Ross effect, and the RAB growth. Adjusted net income at 996 is up 6% year-on-year, Investments reached 1.8 billion euros, up 46% with respect to the nine months 2023, and the net debt is at 15.9 billion with 2.5 average net cost of debt. We have approved the distribution of an interim dividend for 2024 set at 0.1162 euro per share, reflecting a 3% increase compared to 2023. That is in line with our dividend policy. The key updates of the period are, of course, the agreement with Edison for the acquisition of Edison Stoccaggio for an amount of approximately 560 million euros, with closing expected by the first quarter of 2025. We have already obtained the golden power approval and we will file to antitrust shortly, I think already next week. The deal will further strengthen our industrial and strategic position while being a creative net profit. With regard to Adriatic LNG, we have received on Tuesday the EU Commission DG competition green light. It's a key milestone toward a successful closing of the transaction, which is expected by the beginning of December. We have successfully issued our 1 billion euro inaugural hybrid instrument to finance the above-mentioned acquisition and relevant CapEx plan while keeping sound financial flexibility. We have presented our first transition plan, and I will provide more details in the following slides. Now, looking at the gas market, global demand is up 3% driven by industrial recovery in Asia. In Italy, instead, it declined by 2.7% in the nine months due to the historically low-term electric production in H1 and the mild weather, while in Q3, it was 2% up thanks to thermoelectric and domestic demand. All in all, average gas prices were 20% below last year, but in Q3, they reached the highest level year-to-date, supported by tighter fundamentals and rising geopolitical tension. Now, moving to regulation. We have submitted our comments on the weighted average cost of capital and inflation consenting documents at the end of September. Before year-end, the regulator will define the parameters and publish the updated work for 2025, while the decision on RAB indexation will be taken by April 25. We have published updated long-term scenarios on which I will touch base later, and the document prepared by the Ministry of Environment and Energy Security to guide The carbon capture regulation is expected to be published soon. Whilst the Italian H2 strategy will be launched by end of November, while the German Federal Network Agency approved the National Core Hydrogen Network proposed by the gas transmission system operators entailing more than 9,000 kilometers of pipes due to go into operation step by step up to 2032, for a total investment of about 20 billion. Now moving to page three, we can say we are progressing on our strategy to become a pan-European multi-molecular infrastructure operator. Starting from gas infrastructure, the first phase works of the Adriatic corridor, the backbone to strengthen south to north capacity have started in Sulmona for a compression station and in the segment of Sestino and Minerva. All the contracts have been awarded and they're working on the other two pieces of this network are going on in parallel. On storage, the storage facilities are fulfilled by 98.5% with 14 BCM of working gas available. The withdrawal season just started 1st of November. We are progressing with the Ravenna FSRU terminal works, which are completed at 80% on average. The asset is expected to be operational, and we can confirm that by the first quarter of 2025 with the floating unit expected to reach Italy by year end. In the first nine months, approximately 120 LNG cargoes arrived in Italy, covering 25% of gas demand and providing large diversification as one-third of those volumes came from United States, one-third from Qatar, and one-fourth from Algeria, with the rest from the rest of the world. Now moving to energy transition. In August, the CO2 injection activity started in the reservoir for phase one of the Ravenna CCS project. The project that we are bringing on jointly with ENI that is designed to support industrial decarbonization and will be the largest project for the capture, transport, and permanent storage of CO2 in the med area. Performance are doing very well, and we are capturing more than 90% of the CO2 in the final emissions. Sonatrac, Sonalgas, V&G, Znam, Sea Corridor and Furbund recently signed a memorandum of understanding to conduct jointly necessary studies throughout the hydrogen value chain to assess the viability and profitability of an integrated project for the production of green hydrogen in Algeria in order to supply the European market via the South H2 corridor. At the same time, the Tunisian government announced a sixth memorandum of understanding for the production of green nitrogen in Tunisia, which referred to the South H2 corridor as a platform to get access to the same market. So things are moving on. Renovate backlog is stable at 1.2 billion euros, and on biomethane, nine plants out of 30 won the tariff options, that are equivalent to 20 megawatts and with a success rate that is 100%, of which two plants will enter in operation before year end. Requests for new connections to the grid continue to rise and are up 23% year-on-year, getting to 320 so far, with 50% already accepted by clients. We have submitted more than 250 million euros of grant request to connecting Europe facilities for our PCI projects that are South H2 corridor and Ravenna CCS project. We also are working to submit a request of project of mutual interest funds for the piece of the sea corridor covering Tunisia and connection between Tunisia and Sicily since they are outside Europe. Finally, moving to sustainability, we can say that CAPEX is aligned to EU taxonomy and SDGs requests, respectively by 30% and 50% of the total CAPEX in the first nine months of 2024. While we continue to reduce our scope one and two emissions and for the full year 2024, we foreseen a reduction by 20% versus 2022, after having reduced them by 10% in 2023, since so doubling the percentage. And we are confident to obtain the gold standard for the United Nations for the fourth year in a row with respect to the methane leakages reduction. Sustainable finance, by the way, reached 84% of the total. And I will provide more details in the next slides. Just moving on page four, on October the 1st, we published the updated long-term energy scenario developed in a joint effort with the Italian electricity transmission operator. They outlined the evolution of the national energy system and underpinned the 10-year development plans for both electricity and gas. These scenarios are based on the most recent national and European policy references scenario. aligned with the Paris Agreement objectives. In details, 2030 is based on last national and climate plan, so-called PNIEC. 2040 is based on scenarios developed by the European Network of Transmission System Operators for Gas and Electricity, so-called ENSO-E and ENSO-G. Distributed energy is marked by a significant adoption of electricity across all sectors, whilst global ambition projects the development of green gas powered technologies and the wider use of molecules in the final mix. On the same slide, you can see the projected evolution of gas demand segmented natural gas with unabated or abated emission through CCS. Bio-Asynthetic Methane and Low Carbon Hydrogen. Natural gas demand, including bio-methane, will stay close to current level approximately 60 BCM per year throughout 2030. Then some decline is expected to 2040, but still with volumes will be in the range of 45 to 50 BCM per year and flexibility will be required while green gases demand ramp up. For the first time, we have also presented a directional energy mix evolution toward 2050, aligned with the 2050 EU net zero target. It points to 15 BCM of maximum potential of biomethane production, a carbon capture capacity of 30% to 40 million tons of CO2 per year, corresponding to 15 to 20 BCM of abated natural gas, and 45 to 60 BCM of potential hydrogen volumes. On the back of this scenario just described, we have developed an extensive analysis to assess the usage rate of transport asset over time that you can find on page five. The analysis consider a 45 BCM gas demand, including biomethane in 2014, and 35 BCM in 2015, according to the scenarios just commented, with a peak daily demand of 370 a million cubic meters in 2014 and 275 million cubic meters in 2015. Three distinct supply and hydraulic scenarios have been simulated to assess the usage rate of these assets under peak consumption conditions for each scenario as defined by European regulation on security of supply. On the back of our experience, as well as on other energy asset benchmarking, we consider 25% as low utilization rate threshold for an infrastructure. Worth mentioning that a decarbonized electricity system is based on a relatively low utilization rate with intermittent renewables. The outcome of the analysis can be summarized as follows. The sections of transport asset operating at low utilization rate represent today and in 2040 less than 1% of this NAMM RAB. Average utilization rate for the remaining 99% of the RAB is 75% today and will be 55% in 2040. Looking more longer time at 2050 and assuming the repurposing of only 10% of the infrastructure to hydrogen to cover the core backbone, the average utilization rate will stay above 50%. The RAB referring to the low utilization rate will be limited to less than 10% and it doesn't change even in a stress test sensitivity which assumes no transit usage and no repurposing of the south-north-south backbone. Now on page six. As mentioned two weeks ago, we presented our first transition plan whose key highlights are the following. With two businesses, gas infrastructure and energy transition that are synergistic and progressively interconnected, Our ambition is to become, as I said, a multi-molecular infrastructure operator. Our latest business plan envisages up to 26 billion cumulative capex in the period of 2032 to pursue our ambition. We will provide an update of our strategy and capex plan, as Francesca said, in the next January. Our assets, investments, and business model comes out as resilient in the face of climate change. Physical risks are negligible thanks to the effective safeguards and asset structural characteristics as 80% is underground. Whilst transition risks are limited in the short to mid-term to reputational risks, such as those related to the achievement of sustainability targets, Over the long term, they intensify primarily due to gas volume decline, but at the same time, opportunities related to repurposing of infrastructure for CCS, hydrogen, as well as the expansion of energy transition businesses arise. In the document, you will find a detailed, actionable roadmap on how we plan to reduce our cutbook footprint across our operations and value chain in line with the Paris Agreement and to have a positive impact on nature. This is underpinned by a robust implementation strategy and a clear action plan based on existing technologies. Now, not only we plan to reduce our footprint, but through our infrastructure and projects to enable the energy system decarbonization. We are involved in two large projects, as you know. on CCS and H2 transport that will materially contribute to decarbonization of alphabet and power generation sectors. And now let me hand over to Luca to drive you into the financial results of the period.