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snam.it
Full-year 2016 results and 2017-2021 plan update
London, March 7th, 2017
Agenda
1. 2016 results
2. 2017-2021 plan update
3. Additional opportunities
4. Concluding remarks
2
2016 results 01.
3
4
In June we presented a plan with 5 key pillars
Sound Financial Policy
Excellence
in project
execution
and
operational
efficiency
Additional
value
creation
opportunities
Stable and
visible regulation
Solid
investment
plan in
existing
portfolio
5
We are delivering on these objectives
• Obtained >8,000 permits; >1,000 construction sites
• Delivered capex plan on time and on budget for the 10th consecutive year
• New efficiency plan launched with ~80 identified cost-savings initiatives
2016 key achievements
* Number of injuries per million hours worked
Solid investment plan
in existing portfolio
Excellence in project
execution and
efficiency
Additional value
creation opportunities
Sound financial policy
• Invested €906m of capex in Italy, +3% vs 2015 and in line with 2016 guidance
• Installed +355 km of network; +46 MW of compression capacity; +500 Mcm storage capacity
• Invested € ~170m in TAP, in line with project schedule
• Increased average maturity of M/L debt by 1 year
• Cost of debt lowered to 2.4% vs 2.8% in 2015, ahead of guidance. Issued first Italian
corporate zero coupon bond
• Debt/RAB including associates ratio at ~52% at YE 2016
• Start-up of new balancing regime services
• Agreement with FCA, Iveco and API to promote CNG mobility
• Launched Snam Global Solutions initiative to provide services to third parties
• Acquisition of 49% Gas Connect Austria in JV with Allianz (Snam investment: €135m)
Key achievements in our European international associates
10 operational projects to support international
associates in the last 2 years (eg
roll-out of Snam custom tools)
Leverage of Snam capabilities on
project development
TAP awarded Snam a ~50M€ contract
Secondees from Snam to
associates and viceversa
Debt optimization Refinancing activities in TAG & TIGF
reduced cost of debt and improved
maturities
Income from associates on a like for like* basis € 112mln in 2016 +5% vs 2015
Efficiency
3 cost reduction projects ongoing
following Snam benchmarking
studies
* Adjusted, considering TAG, TIGF and IUK consistently with 2015 6
Strong full-year 2016 results
RAB (2016E) € 19.4 bn (€ 21.3 bn including associates)
In line with guidance
>95% from regulated activities
Up 1.8% on 2015 excluding WACC impact
Down 2.6% on 2015 including WACC impact
Revenues € 2,560 m
Flat nominal controllable fixed costs
Up 2.1% on 2015 excluding WACC impact
Down 3.4% on 2015 including WACC impact
YE 2016 Net Debt € 11,056 m
EBITDA adj. € 1,987 m
+5.5% vs. guidance Pro-forma adj.* Net Profit € 845 m
In line with guidance
€103m of buyback completed in Q4
* Includes pro-forma net profit contribution from associates net of one off events 7
8
Adjusted and pro-forma results
€ m
* Includes net profit form discontinued operations
861
671 671
826 826 845
-190
+155 +19
ReportedNet Profit*
2016
ItalgasDiscontinuedOperations
One-offfinancial
items
AdjustedNet Profit
2016
ProformaAdjustment
ProformaAdjusted
Net Profit 2016
EBITDA2015
Regulatedrevenues
Controllablefixed costs *
Other EBITDA2016
9
2016 results: Ebitda analysis
€ mn
2,057 1,987
-85
+1 +14
Strong performance excluding impact of WACC update
* At constant perimeter
10
2016 results: adjusted net profit analysis
Adj. Net profit2015
EBIT Net InterestIncome
(expenses)
Net Income fromassociates
Income taxes Adj. Net profit2016
Net profit adj.pro-forma*
2016
863 826
-145
+69 +10 +29 845
Net income benefited from reduction in cost of debt, fiscal charges and increased
contribution from associates
* Pro forma net profit includes adjustments for the contribution of associates on a full year basis, net of one-off events
€ mn
11
2016 cash flow
Adj. Netprofit
Depreciation& Otheritems
Change inworkingcapital
Adj. Cashflowfrom
operation
One-offfinancial
items
Cash flowfrom
operation
Netinvestmets
Freecash flow
Freecash flow
discontinuedoperations
Dividend BuyBack
Cashflow
826
+651 -99 -155
1,223 1,378
-1,133
90 115 -875
-103
-773
€ mn
12
2016 change in net debt
€ mn
Net financialdebt 2015
Cash flow2016
Non cashfinancial
items
ItalgasDemerger
Net financialdebt 2016
13,779 +773 +15
-3,511
11,056
Main financial actions in 2016
Resizing of financial structure
following Italgas demerger:
• €2.75bn bond buyback
• cancellation of ca. €1bn bilateral committed
banking facilities
Reshaping of funding mix:
• Pool banking and bilateral facilities renegotiation and
extension (ca. €4 billion)
• Further treasury management optimization
• More efficient balance between:
• Competitive costs and long tenors (institutional
lenders and Debt capital market)
• Flexibility (banking facilities)
• Growing weight of fixed rate debt
2016 Drivers
* Nominal value
Total committed credit facilities and bonds by source*
Banking facilities
Debt capital market
Institutional
lenders financing
Outstanding debt - Fixed- Floating breakdown
Floating rate debt
Fixed rate Debt
13
54 36
10
Before Italgas demerger
(as of 30 Sept: €16.3bn)
60
31
9
After Italgas Demerger
(as of 31 Dec: €12.7bn)
58
42
Before Italgas demerger
(as of 30 Sept: €14bn)
64
36
After Italgas demerger
(as of 31 Dec: €11.1bn)
Another year of delivery
• 2.4% cost of debt in 2016
• -10bps vs. 2016 guideline
• -40bps vs. 2015
• Average tenor of M/L term debt: > 5 years or +1 year vs. June 2016
thanks to LM exercise
• No major refinancing peaks
• Strong liquidity profile covering 24 month- maturities
14
Cost of debt reduction Maturity improvement
Debt capital market Pool banking facilities
Bilateral banking facilities Institutional lenders financing
1 Nominal value
BOND AND DRAWN COMMITTED FACILITIES - MATURITY PROFILE
(€ bn) as of 31 December 2016
FINANCIAL STRUCTURE (€ bn)
as of 31 December 2016
7.5
3.2
0.8 1.2 11.1
12.7
Net Debt 2016 Total committed creditfacilities and bonds1
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 beyond2026
Debt capital market Banking facilities and institutional lenders financing
Balance sheet solidity and financial structure efficiency
Solid Investment grade profile
• Firm commitment to current credit rating metrics (Net Debt/RAB <60%;
FFO/Net Debt >11%)
• Snam’s metrics well within rating agencies thresholds
• Fair balance between an adequate liquidity profile and commitment fees
thanks to focused management of maturities
• Fair and stable regulatory framework
Optimized debt structure
• Fixed-floating breakdown and tenor consistent with regulatory framework
• Large portion of fixed rate debt to limit interest rates exposure
• M/L Term debt tenor in the 5 year space
• Asset & Liability Risk Management approach
SNAM KEY CREDIT METRICS 2015PF1 2016PF1
Net Debt/(RAB+associates) 49% 52%
FFO2 / Net Debt ca. 15% ca. 14%
1. Excluding Italgas for the full year
2. Based on reported figures before change in working capital. 2016 Adjusted Pro-forma Net Income
2015 2016
Available committed funding ca. € 4.0bn ca. €3.2bn
Fixed-floating rate debt breakdown 64%-36% 64%-36%
M/L Term Debt tenor ca. 5 years >5 years
CREDIT RATING M/L TERM OUTLOOK
Moody’s Baa1 negative
S&P BBB stable
Fitch BBB+ stable
15
What we are doing and what’s next in 2017
Financial flexibility
Plan cash flow from operations to essentially cover capex and
dividends
Ongoing share buyback as a flexible way to manage
shareholder remuneration and financial structure efficiency,:
• As of 2nd March 2017 ca. 64m shares acquired (1.8% of
the share capital) for €233m
• Avg. purchase price: €3.64 per share (-3% vs. VWAP)
Cost of debt and debt structure
Expected funding cost reduction from:
• Latest LM exercise, locking in 2017 benefits
• Management of future refinancing exercises and funding
mix, also leveraging on available market liquidity
Further market upside: more than 200bps of coupon delta
between expiring bonds and potential new issuances over
2017-2021
Enhance fixed rate debt and preserve debt tenor to limit P&L
volatility
Net debt guidance €11.5bn at 2017 YE (incl. € ~0.3bn true up on TAP financing),
2.2% cost of debt
Fixed rate debt: ~ ¾, M/L term maturity: ~ 5 years
16
2017-2021 Plan 02.
17
2017-2021 Plan – key highlights
• Increased investment plan
€5bn of investments: €4.7bn of Italian capex (+€400m vs previous plan) and € ~270m TAP equity
€1bn of Italian capex in 2017 vs €0.9bn in 2016
• Improved contribution from new activities
Services: €150m of cumulated revenues, thanks to SGS (TAP contract), new regulated service revenues
CNG business unit: plan for roll-out of 300 new filling stations
• Solid contribution from associates
€ ~200m by 2021
• Innovation and operational excellence to support higher efficiency
>€200m invested in new tech to improve our operational performance
Efficiency plan: >€10m savings in 2017; >€25m by 2021
• Solid and efficient financial structure
Further reduction in cost of debt, 2.2% in 2017
Cashflow from operations to cover capex and dividends
18
19
Increased investment plan to €5bn
CAPEX 2017-2021
Transport & CNG
CAPEX 2017-2021
Storage and LNG
Interconnection
withTAP
Support to the
North West
market and
bidirectional
cross-border
flows
Realization
of about
300 filling
stations to
supply
CNG
Development of
Fiume Treste
storage field
Development of a
new level (F - level)
to the original
pressure of the
reservoir
* Tap true up for essentially same amount at financial close, currently expected at Year end 2017
28%
32%
9%
19%
8% 4%
Other
Development
Maintenance
CNG
Replacement
Redeliv. Points upgrading
€ 4.1 bn € 0.6 bn
TAP
€ ~ 270m equity injection* in 2017
22%
57%
21%
Other Development Maintenance
20
2017 Italian capex
€ 0.9 bn
CAPEX 2017
Transport & CNG
€ 0.1 bn
Storage and LNG
Further
methanization
of Calabria
Support to the
North West
market and
bidirectional
cross-border
flows
Redelivery points upgrading
Maintenance activity to
preserve high-level service
and security of the network
40%
45%
6%
1%
7%
1%
18%
52%
30%
Other
Development
Maintenance
CNG
Replacement
Redeliv. Points upgrading
Ravenna – Chieti
Replacements Pontremoli –
Albareto
Maintenance
21
CNG roll-out 2017-2021: environmentally and economically sustainable mobility
• Snam creates the infrastructure framework: a turnkey solution for fuel retailers or fleet operators
• Contractual arrangement, aiming at regulating the process of building and operating the CNG stations
• Fee paid by the fuel retailers or fleet operators (long-term contracts with credit-worthy counterparties)
• The first stations will start their activities in H1 2018
• Identified prime candidate filling stations to host CNG infrastructure
• Preliminary commercial negotiation already in place with 3 large fuel retailers
• Italian legislation implementing the DAFI (Directive for Alternative Fuels Infrastructures)
recently passed and confirming a strong role for CNG (and LNG)
Gas Connection Compressors /
Storage
Dispensers /
shelters
CNG infrastructure
management
Network/Fleet
operator
Additional RAB: €60m €90m capex Total c.300 stations
Snam: €150m investment
Risk-adjusted
returns higher than
Italian regulated
activities
22
New asset-light services adding high-margin revenues
• New service platform created leveraging on
Snam key competences
• TAP contract award, €50m over three years
• Services offered to third parties
(included associates)
• Project Management
• Permitting Services
• Maintenance and dispatching services
• IT services and Risk management
Snam Global Solutions
€150m of cumulated revenues over the plan period
New regulated services
Already launched
• New balancing regime incentives (Oct 16)
• Demand forecast
• TSO actions on spot market
• System residual balancing
• Supply of last resort
Under development
• Capacity products (e.g. oversubscription & buy-back)
• PSV transaction fee
* Net of Italgas and TAP contribution
• Contribution from TAP: ~50m€
• Addition of GCA to Snam portfolio
• Enhanced visibility on medium term results from new regulation
in transport in France and Austria
• Contribution from Italgas
Payback by 2021 >90% Payback by 2021 ~70% Payback by 2021 >90%
23
Solid contribution from associates
Key drivers to 2021 results Net income from associates
€ m
~200
135
106 112*
~200
2015 2016 2021
ITG
24
Ambitious plan to further strengthen our operational excellence
Extensive deployment of new technologies to strengthen our
operational performance
• Real time leak detection
• Smart gas and augmented reality
>€200m of investments of which € ~160m in Industry 4.0 initiatives
Invest in people and processes to structurally upgrade our
capabilities
• Snam Academy, Lean programme, change management initiatives
• New organization: from a Group of companies to an integrated player
All key initiatives now launched
Further enhance our corporate citizenship
• Snam Foundation
• First Italian company to join the Global Corporate Supporters Forum by
Transparency international
Sustainability as a core value
>10
>25
2017E By end of plan
Operations and Maintenance:
• Optimization of operating processes
• Internalization of processes and review of make-or-buy mix
• Energy efficiency initiatives
Corporate:
• Renegotiation and optimization of IT infrastructure and application
maintenance
• Reduction of consultancy and advisory services
• Re-engineering of processes of all key functions
Lean transformation across the Group:
• Reshaping the way we work: faster & leaner, more effective
• Creation of a new cross-functional team of internal change agents to
ensure sustainability of new solutions and savings
€ m
80 initiatives already identified
Higher efficiency target, supported by a comprehensive set of initiatives
Saving target Supporting initiatives
25
2016 PF New regulatedactivities and
growing businessdimension
Emerging costsfrom demerger
Efficiency 2021 Corebusiness
Core business costs flat in real terms, offsetting higher costs due
to growing activities, infrastructure and complexity:
• Effective cost reduction initiatives
• Lean management to pursue operating excellence
(1)
1. Net of pass-through and non recurring items
Core business costs
flat in real terms
2021
CNG and
SGS
New businesses and services expected
to generate additional margins
Total costs trend
26
27
Regulatory framework in Italy and Europe
Update every three years of WACC parameters
Regulatory period
WACC Regulatory period
STORAGE
TRANSPORT
REGAS.
5° regulatory period
5° regulatory period
2016 2017 2018 2019 2020
4° regulatory period
4° regulatory period
4° regulatory period
2021 2014 2015
5° regulatory period
5.4% real pre-tax
6.6% real pre-tax
6.5% real pre-tax
Italy: inflation & spread linked, risk free floor
Europe: good visibility on new regulation in transport
in France and Austria
IUK
Transport
TIGF
Transport
Storage
Exemption
regime
Regulated
regime
Negotiated
regime
TAP
Transport
Exemption
regime
TAG
GCA
Transport
Regulated
regime
2016 2017 2018 2019 2020 2021
Regulated regime after
long term contracts expiry
Fully inflation-linked RAB
Long term contracts
Inflation-linked Equity RAB
Potential evolution to a
regulated regime
28
Robust growth to 2021
1. Total RAB evolution calculated assuming an average annual inflation rate of ~1% and according to current regulatory framework
1%
Sustainable organic growth in the asset base and attractive returns
Storage Transport & LNG
15.3
4.1
2016E 2021E
19.4
Consolidated RAB1 (€bn) EBIT (€bn)
1%
2016 2021E
1.34
Net income (€m)
4%
2016 2021E
845
CAGR
2016-2021
5%
2016 guidance (€800m)
29
2017 guidance and growth targets
Guidance 2017 Targets
€ ~19.8 bn Consolidated RAB 1%
€ ~1.3* bn Investments €5* bn
Net income € 0.9 bn CAGR to 2021
2017-2021
CAGR to 2021
4%
Net debt € 11.5** bn
* Including TAP equity investment
** Including TAP true –up of about €0.3 bn
Debt/RAB*** at 2021 in line with YE 2016
Commitment to current credit rating metrics
DPS € cent 21.55 DPS cagr 2016-2018
Interim dividend from 2018 +2.5%
*** Including associates
Investment criteria
30
Investment approach
Financial flexibility H1 2016
Already invested or earmarked
Criteria
• Committed to current credit rating metrics and risk profile
• Accretive returns (risk adjusted returns at least in line with
Italian regulated assets)
Industrial
• Enhance existing infrastructure
• Leverage industrial capabilities
• Unlock additional growth/optionality
Financial
• Dividends
• Buyback (duration to be extended)
• Additional capex of € 400mln on
Italian infrastructure vs prior plan
• Share buy back activated
and € 233mln completed to date
• GCA acquisition
Additional opportunities
03.
31
32
Improving context: gas demand recovery in Italy and Europe
30.5 30.1 29.9
16.3 16.0 16.7
17.9 20.6 23.3
2.0 2.0 2.0
2014 2015 2016 2017E
Residential
& commercial
Industrial*
Thermoelectric
Other Sectors
Italian gas consumption
+4.7%
71.9 68.6
* Includes: NGV, Agriculture and Non-Energy Use
Source: National Transport Network Balance, Istat, Centro Studi Confindustria
66.7
+3.1%
162.6 173.4 179.8
124.2 121.9 122.8
114.2 121.1 138.2
18.5 20.6
20.6
2014 2015 2016 2017E
461 437
+5.0%
EU gas consumption
420
+4.2%
Demand peak reached in January 2017
(426 mcm/day, 91% of historical max)
bcm Weather adjusted, bcm
33
Demand will be supported by evolution in environmentally-friendly technologies
Availability
• Abundance of resources
• Well developed gas infrastructure
Environmental
sustainability
• The quickest and cheapest route
to decarbonisation
• The quickest and cheapest route
to reduce urban pollution
Efficiency
• Limited additional infrastructure
requirements
• Biomethane is a CO2 neutral renewable and
programmable gas source, using existing
infrastructures
• CNG vehicles are an immediately available
solution to reduce urban pollution
• Growth expected in Italy following the
adoption of the DAFI (EU directive on
alternative fuels).
• SSLNG is an efficient and economical
solution to reduce emissions in the maritime
and heavy-duty transportation sector and to
displace more polluting fuels in isolated areas
• Compliant with DAFI and IMO regulations
Natural gas advantages Natural gas technology evolutions will support penetration
New supply sources, interconnections required to meet import requirements
Global LNG supply - (Load factor: 85%)
High demand1
LNG global oversupply
0
200
400
600
800
'15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 '27 '29 '31 '33
360
1. CAGR 2015-2025: 8.1% in High, 5.3% in Base, 2.5% in Low demand scenario
Base demand1
Low demand1
Potential sources of gas
RUSSIA
NORTH
SEA
NORTH
AFRICA
CASPIAN SEA &
MIDDLE EAST &
EAST MED
Single market opportunity:
• Greater Interconnections
• Higher Flexibility
• Security of supply
• Lower prices
LNG
34
Bcma
Additional potential growth opportunities
• New regasification capacity
• Small scale LNG
• Building the backbone in Sardinia
• Maintenance and further replacement of fully
depreciated pipelines
• Additional expansion of CNG network beyond 2021
Main opportunities in Italy
• Integration of European markets
• New infrastructure connecting sources to markets
• Additional national infrastructure requirements
Main opportunities abroad
East
Mediterranean
Production
TANAP TAP
TransMed
Green Stream
Reverse
flow
STEP
TurkStream
French
Market Area
unification
35
Concluding remarks 04.
36
37
Concluding remarks
Growing organic capex plan with fair regulation
New stream of asset-light services
Well positioned to capture additional accretive opportunities
Superior long-term returns with low risk profile
Operational excellence and efficiency
Strict financial discipline
38
Disclaimer
Franco Pruzzi, in his position as manager responsible for the preparation of financial reports, certifies pursuant to paragraph 2, article 154-bis of the Legislative
Decree n. 58/1998, that data and information disclosures herewith set forth correspond to the company’s evidence and accounting books and entries.
This presentation contains forward-looking statements regarding future events and the future results of Snam that are based on current expectations, estimates,
forecasts, and projections about the industries in which Snam perates and the beliefs and assumptions of the management of Snam.
In particular, among other statements, certain statements with regard to management objectives, trends in results of operations, margins, costs, return on equity, risk
management are forward-looking in nature.
Words such as ‘expects’, ‘anticipates’, ‘targets’, ‘goals’, ‘projects’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’, variations of such words, and similar expressions
are intended to identify such forward-looking statements.
These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict because they relate to
events and depend on circumstances that will occur in the future.
Therefore, Snam’s actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. Factors that might cause or
contribute to such differences include, but are not limited to, economic conditions globally, political, economic and regulatory developments in Italy and internationally.
Any forward-looking statements made by or on behalf of Snam speak only as of the date they are made. Snam does not undertake to update forward-looking
statements to reflect any changes in Snam’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is
based.
The reader should, however, consult any further disclosures Snam may make in documents it files with the Italian Securities and Exchange Commission and with the
Italian Stock Exchange.
snam.it
Full-year 2016 results and 2017-2021 plan update
London, March 7th, 2017
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