Slides
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April 8th, 2025 Snam enters the capital of Open Grid Europe
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energy to inspire the world 2 Key Highlights Key terms Strategic rationale Financial impact • Signing of a binding agreement to acquire a 24.99% stake in Vier Gas Holding (VGH) which indirectly owns Open Grid Europe (OGE), Germany’s largest gas transmission network operator. • Equity value of € 920 m corresponding to a multiple of ~12 x on 2025E Estimated EBITDA 1. • Closing expected within Q3 2025. • Acquisition consistent with our Pan-European multi-molecule perspective, increasing role on the key European gas and H2 Corridors from Southern to Northern Europe. • Germany is the largest European gas market by volumes and is expected to become the main H2 market, both pivotal for European energy system. • Physical interconnection and strategic coherence with Snam’s national and international assets including the interconnection with GCA and TAG (Snam’s Austrian associates) and then Italy. • Acquisition can be financed through the current financial flexibility or via hybrid financing instrument to maintain current financial standing. • 2-3% Net Income accretion (ca €40m average net income contribution) over the period 2025-29 2. • No impact on Snam’s rating and dividend policy. 1. Calculated on Snam’s reconciliation of VGH EBITDA 2025E gross of regulatory adjustments. 2. Depending on financing: existing financial flexibility or hybrid instrument. Snam is the first Italian energy player to make a sizeable entry into the German energy infrastructure space
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energy to inspire the world energy to inspire the world East-West Med Corridor H2 Interconnection South-North Corridor South H2 Corridor H2 Med 3 OGE will complete Snam’s presence in key current and future energy corridors 1. Project with Enagas, NaTran, OGE, REN. 2. Project with Bulgartransgaz, TRANSGAZ, FGSZ, NET4GAS and OGE. Promoting a Pan-European «end to end» multi-molecules interconnected system Sea Corridor TAPGCATAG Desfa South-North Corridor East-West Corridor Med-EU energy security bridge Hydrogen corridors South-East (SEE Hy) Corridor Teréga1 Desfa2 H2 Med GCA Sea Corridor TAG South H2 Corridor DESFA TAP TAG GCA Teréga Interconnector Seacorridor Storegga dCarbonX
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energy to inspire the world • Share purchase agreement for the acquisition by Snam of the stake held by ADIA in Vier Gas Holding which indirectly owns the entire share capital of OGE • The transaction values the 24.99% equity stake in VGH at € 920 m • Implied EV / EBITDA multiple of the transaction of ~12x on 2025E estimated EBITDA1 • As part of the transaction, ownership stakes will be rebalanced with Fluxys, with Snam thereafter selling them a ~0.5% stake • SNAM will benefit from a balanced governance aligned with other shareholders • Closing expected within Q3 2025 following the satisfaction of certain conditions precedent 2 Transaction overview (HoldCo) (OpCo) 32.15% 24.99% 24.11% 18.75% 44 Transaction perimeter (simplified) 1. Calculated on estimated sustainable EBITDA 2025E gross of regulatory adjustments. 2. (i) the merger control clearance by the German Antitrust Authority, (ii) the Foreign Direct Investment clearance by the German Ministry for Economic Affairs and Climate Action and (iii) the non-exercise by the other shareholders of Vier Gas Holding S.à r.l. of the right of first refusal set forth in the related shareholders’ agreement. 100%
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energy to inspire the world 5 Open Grid Europe overview 1. Snam’s reconciliation on the basis of VGT and OGE’s figures. For more information please refer to Viergas Transport: Link 2. 85% regulated 5 Key 2024A figures1 and Estimated KPIs • Largest German gas transmission network operating ~12,000km of grid • Gas transmission hub in the heart of Europe operating 17 interconnections to 7 bordering countries located in the middle of the key EU corridors and connected to LNG facilities • Highly efficient and available transmission pipeline network and ambitious CO2 emissions reduction targets • Access to capital markets to finance the growth Gas Hydrogen CO2 • Key cornerstone of the approved H2 Core Grid (€1.5bn capex committed) • H2 Core Grid placed at the intersection of EU’s most critical import corridors (Southern European, North Sea and Iberian) • Ideally positioned across industrial regions to become one of the key CO2 transport corridors toward North Sea € 627 m 3 Estimated EBITDA € 3,387 m 4 Net debt € 428 m Capex € 1,136 m 2 Revenue Headquarters OGE transmission pipelines Flow directions OGE geographical footprint Krummhöm Wardenburg Emsbüren Werne Porz Stolberg Würselen St Hubert Essen Velan Scheidt Gernshelm Mittelbrunn Hügelheim Rimpar Herbstein Rothenstadt Waidhaus Wildenranna Bierwang Landshut Compressor station/ further operating locations 4. Including around 100m of estimated debt-like items3. Gross of regulatory adjustments offsetting over and underperformance compared to reference regulated revenues in 2020 and 2024 . 2024 Actual EBITDA net of revenues’ recovery adjustments is equal to EUR 0.43 billion.
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energy to inspire the world 6 1. Excluding export 2. Draft scenario framework for gas and hydrogen NDP 2025 from KO-NEP (German Coordination Office for Gas and Hydrogen Network Development Planning) 3. German new coalition partners CDU/CSU and SPD declared intention of a legislative package for CCS in Germany 4. OGE website German molecules transmission landscape German molecules demand1 prospect (bcm) (natural gas, biomethane, hydrogen) While uncertainties in German decarbonization path remain, molecules are expected to continue playing a crucial role in the energy mix, also considering nuclear and coal phase-out (2023 and 2038 respectively) Germany is the largest European natural gas market and plays a central role as a transit route for supplying Europe Snam internal analysis and KO-NEP scenarios2 point to total molecules demand to remain solid beyond 2050, supported by biomethane growth and H2 core grid development Molecules demand evolution Healthy demand evolution with natural hedge among molecules 78 bcm 120 bcm 2024 2050 Actual Scenarios’ Average Average The development of CO2 grid could enable large scale deployment of CCS3 in Germany, transporting more than 50 million tons of CO24 in future, plus transit volumes from neighboring countries H2 Oriented Natural Gas Oriented
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energy to inspire the world 77 Regulatory environment Transparent and visible gas regulatory framework: regulation in place since 2009, unbundling since 2011. Expected new WACC-RAB based regime from 2028 (RP5) Common framework in terms of general principles across electricity and gas, designed to support and allow for adequate return on investments Incentive-based mechanism favouring efficient operators and allowing to retain potential outperformance within a regulatory period No volume and very limited commodity risk, as well as inflation protection CO2 remuneration scheme expected to incentivize investments through adequate return on the back of institutional push to decarbonise H2 regulatory framework incentivizing investments. Strong institutional push to decarbonization with downside protection through KfW guarantees Pragmatic regulation of new molecules with clear and economically visible framework Well-established, visible and supportive regulatory environment across different molecules
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energy to inspire the world 8 Key elements of the German natural gas regulatory regime Current regulatory framework Cost base “Budget” based on base year costs and RAB Revenue Cap set by BNetzA ꞊ Operating Costs Imputed depreciation Return on Equity + + Regulatory period • 5-year period • Pass-through cost items adjusted annually Efficiency • National benchmarking (individual efficiency factor, Xind) • General productivity factor (Xgen) New Investments • Direct revenue recognition for REPEX & growth investments BNetzA Initiative to Modernise Regulatory Framework from 2028 • Ongoing discussion with industry – geared towards ensuring future-proof, stable regulatory framework • Focus topics inter alia: length of regulatory periods, WACC - approach for capital costs, efficiency measures, optional shortening of depreciation period for natural gas assets
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energy to inspire the world 9 Future H2 regulatory regime in Germany 2021: First principles of regulation for H2 networks established • H2 NEV1 set general framework for calculation of network costs financed via network charges 2024: Legal and regulatory framework for financing of H2 Core Grid • H2 Core Grid to be developed by German Gas-TSOs as initial H2 network • Aims to connect potential H2 sources and import points with future customer segments, e.g. industry locations Cost Regulation for H2 Core Grid Cost-plus based regulation with yearly cost application and approval by BNetzA Tariff is capped in the ramp-up phase of the hydrogen market and set by BNetzA Full financing through a nationwide grid fee Liquidity and returns secured in the ramp-up phase: Delta costs and lower revenues from grid fees temporarily offset via amortisation account Stranded assets risk in case of slower or even failure of H2 ramp up capped to a certain level by subsidiary state cover 1. H2 NEV: Ordinance on charges for access to hydrogen networks
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energy to inspire the world ~ 40,400 km 10 Impact on Snam 1. Depending on financing: existing financial flexibility or hybrid instrument. Transport network km Snam and associates (pro-quota) Net Income contribution1 (average per year) Adj. EPS 1 ~ +40 m Credit Rating ~ 37,500 km From 2024 To 2025E +2-3% 1 ~ +8% No impact on Snam’s rating and dividend policy Sound Net Income accretion while keeping financial flexibility 2026-2029 ~ 1%
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energy to inspire the world 11 Closing remarks Entry in the largest European gas market Attractive, visible and high-growth market Strengthening European leadership Sound Net Income accretion keeping financial flexibility At the forefront on energy transition A further milestone in the delivery of our strategy to build the leading Pan-European multi- molecules operator
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Annexes
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energy to inspire the world 13 Key figures Snam and VGH € m FY 2023 FY 2024 Revenues 3,941 3,568 Operating expenses (1,524) (815) EBITDA 2,417 2,753 Depreciation & amortisation (940) (1,019) EBIT 1,477 1.734 Net interest income (expenses) (221) (331) Net income from associates 315 326 EBT 1,571 1,729 Income taxes (393) (442) NET PROFIT BEFORE THIRD PARTIES 1,178 1,287 Third Parties Net Profit (10) 2 NET PROFIT 1,168 1,289 Net debt 15,270 16,238 € m FY 2023 FY 2024 Revenues 1,652 1,136 Other operating income 88 117 Operating expenses (792) (820) EBITDA 947 4341 Depreciation & amortisation (225) (227) EBIT 723 207 Net interest income (expenses) (55) (56) EBT 668 151 Income taxes (198) (43) NET PROFIT 470 107 Net debt and debt-like items3 3,096 3,387 (HoldCo) 1 1. Snam’s reconciliation on the basis of VGT and OGE’s figures. For more information, please refer to Viergas Transport: Link 2. 2024 Estimated EBITDA Gross of regulatory adjustments offsetting over and underperformance compared to reference regulated revenues in 2020 and 2024 equal to € 627m, according to Snam’s reconciliation. 3. Snam’s reconciliation.
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energy to inspire the world 14 Involvement in Import Corridors to Support H2 Ramp Up OGE will develop the most relevant corridors to cover German H2 demand • H2production in Germany will not be able to meet the country’s expected demand • Import corridors aimed at filling this gap and thus contribute to an efficient H2ramp up & secure energy supply H2 Core Grid Approved by BNetzA • H2 Core Grid shall enable suppliers and consumers to convert their business to H2 usage • Connects producers, harbours, power plants, consumers and storage facilities by 2032 • ~ 10.000 km, thereof roughly 60% repurposed • ~ €20bn investments, substantial OGE-share expected • Financing concept enables TSOs to earn full revenue cap right from the start (comparable to CH4), expected to end in 2055 • Establishment of amortisation account backed by German state guarantee
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energy to inspire the world 15 Disclaimer 15 This presentation may contain forward-looking statements regarding future events and the future results of Snam that are based o n current expectations, estimates, forecasts, and projections about the industries in which Snam operates and the beliefs and assumptions of the mana gement 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, econo mic 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 a nd Exchange Commission and with the Italian Stock Exchange.