2020-2024 strategic plan: Towards Net Zero

2 Dec 2020

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2020-2024 strategic plan: Towards Net Zero

  1. 2020-2024 strategic plan: Towards Net Zero November 25th, 2020
  2. Commitment to net zero by 2040 and new ESG scorecard Net-zero @2040 Earliest industry commitment to Net zero • Scope 1&2: clear pathway to net zero by 2040 • Scope 3: ongoing planning with suppliers & associates • Enhancing Snam role as an enabler of system decarbonization New ESG scorecard 20302018 2040 CH4 CO2 -50% Net zero Strengthening governance Improving people’s lives Committed to a net zero world 1. Welfare 2. Employee Engagement 3. Safety 4. Gender Diversity 5. Responsible Supply 6. Local Community Engagement 1. Governance Functioning and Structure 2. Infrastructure Reliability 3. Anti-corruption 1. Natural Gas and CO2 Emissions 2. Energy Savings of Operational Management 3. New Business - Green Innovation 4. Land protection & Biodiversity Governance Environment Social 2
  3. Net zero commitments are giving rise to a capex supercycle Net-zero investmentsNet-zero commitments Powergen & batteries $35tn by 2050 Hydrogen supply $12-35tn by 2050 CCS $1tn by 2040 Biomethane $0.4 tn by 2040 Power grid $29tn by 2050 H2 transport $2 - 28tn by 2050 H2 storage $1 - 3tn by 2050 Mobility $13 tn by 2040 Home $9 tn by 2040 Industry $2.5 tn by 2040 Downstream Midstream Upstream 3 2050 Target proposed/In law 2060 Target Target under discussion Sources: World Energy Outlook 2020 (IEA), Snam internal analysis, New Energy Outlook 2020 (BNEF), CCUS in Clean Energy Transitions 2020 (IEA), Outlook for biogas and biomethane: prospects for organic growth (IEA),
  4. Long-term RAB growth with additional opportunities along the green gas value chain Biomethane supply infrastructure, circular economy Snam’s Net Zero Positioning Upstream infrastructure Midstream Downstream Hydrogen Natural gas Biomethane/ renewables/ waste/water Sector coupling/ storage/power to gas Early presence leveraging technological partnerships Evolve from CNG platform to LNG and H2 mobility Promote integrated ecosystems to serve key segments Future-proof our asset base to deliver methane/biomethane volumes while enabling H2 ramp up, also in blending, and providing flexibility to the electricity grid Become a leading national operator in Energy Efficiency services 4
  5. Why Snam will succeed in a net zero environment • Blending tests, H2 asset readiness • Sector coupling/ Dual fuel • Long-term sustainable growth • Insourced skills and competences • Leader in key growth markets • Enhancing core asset • Clear pathway on scope 1 & 2 emissions • Launched programme on associates and suppliers • New scorecard • Committed to current credit metrics • Accretive returns • Consistency with our ESG strategy 5 3. Execution Capabilities and technology edge 5. International footprint 4. Energy transition businesses 2. Long-term RAB growth • Increased and diversified geographical footprint • Asset-light approach in countries with high potential • Snam Global Solution to monetise expertise • Investments track record incl. TAP • Building world leading technology gas TSO • Technology edge in H2 &H20 • Leverage core competences across similar sectors 6. Strong balance sheet and disciplined investment approach 1. Committed to net zero by 2040 and ESG leader
  6. …while growing profitability and returns 845 2016 2020 E 1,100 +30% €m Net income ROAE 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 2016 2017 2018 2019 6 TSR 47%
  7. The green gas supercycle
  8. Net zero commitments Essential role of gas & green gas Role of the grid fully recognised Fuel switching to maximise CO2 reduction • By 2040 around 400 bcm of switching to natural gas (2) Green gases to play a central role • Cost effective solution to decarbonize hard to abate sectors European commitments to: • 55% CO2 by 2030 • Net zero by 2050 China commitment to net zero by 2060 US set to re-enter Paris Agreement Policy support Policy support focusing on reducing supply costs through scale • EU policy targeting 40 GW of electrolyzer capacity by 2030 • National strategies already point to ca 30 GW • Italian strategic guidance calls for 5 GW by 2030 • Ca. 50GW of projects announced worldwide Next Generation EU funds IPCEI support Net zero sparks new capex supercycle H2 to account for ca. 25% of the global energy mix by 2050 €750bn Next Generation EU funds Repurposing EU backbone € 30-60bn by 2040 (3) Gas grids essential to net zero; need to repurpose and replace infrastructure where necessary • European grids require limited retrofit • Retrofit costs 10-25% of newbuild • Pipeline transport cost $0.10-0.20 per kg per 1000km Green gas will account for more than 25% of the energy mix by 2050 (1) Source: (1) BNEF, (2) WEO 2020 (IEA), (3) European Hydrogen Backbone – Gas for Climate 8
  9. Fuel switching to drive cost-effective CO2 reduction Continuing competitiveness of coal-to-gas switch Growing gas demand for transport over the next 20Y Source: Snam internal analysis, Global Gas Report 2020, IEA • LNG truck already cost competitive with diesel truck, and far more environmental friendly • UK diesel and petrol car ban from 2030 • Coal to gas switch in power generation is an easy and viable opportunity for decarbonization • Worldwide more than one third of power generation is coal-fired 48 48 48 108 116 124 0 20 40 60 80 100 120 140 2020 2025 2030 LNG Diesel 0 10 20 30 40 50 China United States India Europe • Signficant increase of global gas use in transport over the next 20 years in a Sustainable Development scenario • Additional 130bcm of gas demand from transport uses by 2040 20 40 60 80 Ott-18 Apr-19 Ott-19 Apr-20 Ott-20 GAS η=55,1% COAL η=34,5% Thermoelectric generation cost LNG vs Diesel pump price Biomethane Natural Gas Growth in gas consumption for transport 18-40 Gas already competitive compared to diesel in transport €/MWh €/MWh bcm 9
  10. H2 production costs are falling even faster than expected 2020 2030 2040 2050 60 140 20 0 40 160 80 Levelized production cost of hydrogen evolution 48 50 Announced by 2030 Tipping point by 2030 Announced H2 projects already reach demand tipping point • 25GW of electrolyzes capacity worldwide required for H2 costs around $2/kg in favorable areas for renewable production • Ca. 50GW by 2030 «tipping point» Source Snam internal analysis, Hy challenge, CO2 assumptions: 24.5 €/ton (2020), 38.0 €/ton (2030), 58.4 €/ton (2040) Value-chain cooperation to create scale Electrolyser Capex (large scale) €/kW Solar cost (large scale - south Italy) €/MWh 243 24 157 11 890 44 … large-scale adoption … large-scale adoption Green H2 South Italy (new) Green H2 North Africa Green H2 South Italy (old) Grey H2 Blue H2 (€/MWh) ($/Kg)Abu Dhabi solar LCOH Electricity – PUN Gasoil (with CO2) (GW) 4 7 3 2 1 0 10 15% lower than last year 25
  11. Pipelines essential to deliver large volumes at lowest-cost H2 European decarbonization will rely on: • Access to large, competitive renewable resources, • Connection via affordable transport routes Italy well positioned to be a H2 hub *Cost projections for large scale production and transport, excluding local distribution Sources: BNEF analysis for the Global Gas Report 2020 Imports from Nord Africa (pipeline) 1 Offshore wind in Germany Blue Hydrogen (pipeline) 2.41.7 1.4 Imports from Middle East (LH2 ship) 0.16 3.2 0.8 0.2 1.5 0.85 0.3 0.8 Transport Renewable production Gas production with CCS ($/kg, 2050) 11 Delivery cost of hydrogen in Germany by 2050*
  12. Hydrogen to become competitive quickly in a number of sectors (data assumes at scale costs along the value chain) 20402030Today Source: Snam elaboration on IEA, Hy Challenge, Hydrogen Europe, Lazard 12 Refinery Green H2 Steel (DRI) < 4 $/kg Feedstock and industrial applications Industrial uses Chemicals <2 $/kg Growing role in industrial applications Trains <7-5$/kg Long-haul trucks Mobility Break-even Break-even Break-even
  13. Strong policy support 2030 2050 13-141 2-5 15-20 - 20 4-53 - - - - - 2030 2050 40 (+ 40 outside EU) 500 2 5 6.5 5 - 4 - 3-4 - 2030 320-4582 7 74 949 - 2030 Industry Mobility Blending Industry Mobility- H2 supported by €750bn of funding available from Next Generation EU funds Industry Mobility Industry Mobility 1 Considering hydrogen in energy uses only, in most EU scenarios hydrogen adds up to 23% 2 Of which 220-340 bln EUR to scale up and connect 80-120 GW of renewables (not always included in country figures) 3 Estimates based on 90 - 110 TWh target hydrogen demand 4 Figures on H2 public investment package Source: EU national strategy; National strategies; Italian Ministry of Economic Development Hydrogen share on energy consumption (%) Installed electrolysis capacity (GW) Investments (€Bn) Initial sectors of application 5 10 2 Industry Mobility Blending 13 20 -
  14. Italian policy to support H2 projects 7-8 Mton avoided per year Up to €10bn investments by 2030 Up to €27bn by 2050 Creation of H2 value chain Promote Italian technology 2% of energy mix by 2030, up to 20% by 2050 5 GW of electrolyzers by 2030, also leveraging overgeneration Chemical and refinery Long haul truck and train Blending Additional opportunity in steel, industrial uses and mobility 2030 H2 by sector in 2030 700 ktons Italy as a “hydrogen hub” with import and export potential 14Source: Italian Ministry of Economic Development
  15. Growing share of H2 to support long-term need for infrastructure The 2050 gridEvolution of gas mix and volumes 30 40 50 60 70 80 90 100 0 10 20 30 40 50 60 70 80 90 100 2020 2025 2030 2035 2040 2045 2050 H2 – scenario H2 @ 25% mix CH42 – scenario H2 @ 25% mix Bio CH42 – scenario H2 @ 25% mix Total volume gas (right axis) – scenario H2 @ 25% mix Total volume (right axis) – scenario H2 @ 18% mix Mtoe bcm 15 • Hydrogen is 3.8x less dense than natural gas (1) • Hydrogen travels faster through a pipeline than natural gas, containing additional pipeline capacity requirements • Pipelines offer flexibility for sector coupling, also through linepack Transporting H2: key facts (1) BNEF; (2) CH4 and Bio-CH4 to 2050 also with CCS
  16. Strategic plan 2020-2024, outlook to 2030 and beyond
  17. ITALIAN INFRASTRUCTURE INTERNATIONAL PORTFOLIO € 6.7bn Capex 2020-24 Solid €7.4bn investment plan 2020-2024, with clear long-term trajectory NEW ENERGY TRANSITION BUSINESSES KPIs Our 2020-2024 plan >2.5% RAB growth to 2024 €150m of EBITDA by 2024 10% average cash return € 0.7bn • Net zero investments • Replacement of more than 1,170 km pipelines • Sardinia methanization • Technological innovation and network digitalization • Stable contribution from diversified portfolio • Leveraging opportunities from energy transition and technology rollout and Snam Global Solutions • Biomethane: Develop biomethane capacity • Energy efficiency: Pipeline of projects for public administration, residential and industrial clients • Sustainable mobility: Consolidation of CNG footprint, focus on LNG and H2 supply infrastructure, SSLNG • Hydrogen : H2 for trains, fuel cells H2-ready on Snam network 17 Main assumptions in the plan: WACC flat after 2022, Deflator 0.9%, does not consider De Nora acquisition/Investment platform
  18. 2018-20222017-2021 2019-2023 5,7 2020-2024 4,7 6,5 7,4 Maintenance & Other Replacement Development New businesses (Energy Transition) Contributing to a carbon neutral economy Hydrogen ready investmets on our infrastructure (*) Net Zero Investments New businesses (Energy transition) Digitalization/Technology Maintenance & other € 7.4 bn 50% 10% 6% 24% 10% (*) Replacement, develoment and maintenance done using H2 ready procurement standard Snam’s plan contributes to a carbon neutral economy 18 +57%
  19. Import Russia Import North EU Import Algeria Import Libia LNG LA SPEZIA LNG OLT LIVORNO GORIZIA RAVENNA SAN BENEDETTO DEL TRONTO SAN SALVO BICCARI TERMINI IMERESE CAVARZE RE RECANATI JESI CHIETI GAGLIANO TRIESTE MESTRE SALGAREDA PIEVE DI SOLIGO CAMPODARSEGO SANSEPOLCRO RIMINI 3 3 3 3 3 2 2 2 2 22 2 2 3 Sardinia project: • Realization of the virtual pipeline • First section of the backbone Dual fuel compressions station Storage wells infilling (peak volumes increase) 245 CNG and 50 biomethane connections to the grid 100 other connections to the grid Pipes to be replaced over the plan period 1 About 1.200 km of transport pipelines replaced during the plan period (Ravenna – Chieti; Rimini - San Sepolcro; S.Salvo - Biccari 3 2 Key development activities Replacements New interconnections Italian RAB capex highlights 19 “Virtual Pipeline” with Panigaglia and OLT terminals FSRU Coastal deposit
  20. Sector collaboration Ensuring “H2-readiness” along the infrastructure value chain H2 Gas Asset Readiness (H2GAR) cooperation between EU TSOs. 6 working groups on pipelines, compressor stations, separation systems, metering, safety and underground storage European H2 Backbone plan – done in collaboration with 11 EU gas infrastructure companies - for a dedicated hydrogen transport infrastructure Working for a «Hy-ready» network Pipelines • 70% of pipes hydrogen ready) • Procurement standards for H2 ready pipelines DNV “Renewable Gases Metering” project with European TSOs and gas meters producers Compression stations: • Definition of standards for H2NG mix to fuel compressors and turbines • New “hybrid” compressor turbine tested with Baker Hughes, suitable for up to 10% H2 blend to be installed at Snam’s gas compressor station in Istrana in 2021 Development of the first H2 network for a cluster of industrial users supplied with mixtures of up to 10% green H2 in NG Storage • Up to 2% blending feasible • Ongoing assessement for higher percentage • CO2 storage potential Project to assess the feasibility of using high % of hydrogen in steel mill industrial furnaces (RINA) Feasibility study on natural gas/hydrogen blending in steel thermal treatment, to be developed through European/national funding 20
  21. Digitalisation: building world’s most technological gas TSO 21 PIMOS & smart cathodic protection: real time, geo- referenced leakage and potential corrosion detection through ~1.000 new devices Predictive maintenance on 2.700 valves, impacts on 12.000 h/y of maintenance activities Near real time measure of 1.100 delivery points for better operational management Satellites (radar & optics) for interference management and early landslides detection Drones for asset monitoring in extreme conditions • Launch H1 2021 of key applications to support operations in Bologna district (~4.300 km network) • Measurement of results in terms of operational effectiveness, safety, asset integrity and reliability • Rollout to other districts • Improve asset integrity and reliability • Increase safety of workers • Faster and more accurate pipeline leakage detection • Optimize and prioritize maintenance First release in H1 2021: Bologna “Flagship” District 1. Extract value from technology rollout by improving safety and effectiveness of operations 2. Develop a world class “data driven” infrastructure, leveraging top partnerships to have access to best technology roadmaps • IOT: 100x data gathered and used through diffused sensorization of assets • Cloud and edge computing to optimize scalability, latency and reliability: 10x data availability • Digital twin, wearables, robotization and drones & sat for operational excellence 3. Offer solutions developed through Global Solution Technology strategy Targets ~ €500m of investments in digitalization 2020-24 to transform operations delivering security, reliability and sustainability
  22. 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 0 200 400 600 800 1,000 1,200 1,400 1943 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 Replacements driven by ageing of the network Large share of the network fully amortised • Large part of pipelines built in the 70s due due to rising import from Russia • Fully amortized in 50 years • Green gas development gives long-term visiblity to future network requirements • Italy has a distinctive morphology: pipelines in hills/mountainous landscapes (46% of total vs not significant EU average) have additional maintenance requirements • Discussions ongoing with the regulator on appropriate replacement framework Pipelines by year of construction Km cumulated km put in operation by year 22
  23. Superior long term RAB growth underpinned by replacement needs 23 Visible RAB growth with a clear long-term trajectory • Strategic role of gas infrastructure for energy transition supports the longevity of the network • RAB growth to 2040 to be at least in line with 2020-24 • Acceleration potential depending on the pace of future-proof replacements TARIFF RAB evolution >2.5% CAGR 2040 RAB At least in line with 2020-24 RAB 2020 RAB 2024 20,6 0.9% average inflation €bn <11000km fully amortised 9000km fully amortised
  24. New energy transition business with system integrator potential > €700m capex in new businesses; plan does not include investment upside from policy support, recovery fund Created platform to serve key segments: Residential (c. 10% of Capex) • Pipeline supported by long term fiscal incentive scheme • Long-term contracts in energy management and renovation of residential systems Industrial (c. 40% of Capex) • Ca 70MW installations of distributed energy systems Public Administration (c. 50% of Capex) • Deep and energy system renovation via public tender (c. 7yrs) and private public partnerships (c. 15yrs PPP) Created platform in urban and agricultural feedstock • 64MW of installed capacity target (+22 vs previous plan) of which c. 20MW already authorized • Industrialization of agricultural production • Develop a platform for growth in the circular economy • Low risk business model with low double digit return • Long term incentives • Contracts or partnership with waste management operators Created platform to deliver sustainable mobility fuels • Complete CNG footprint: • 110 stations contractualised • Expand LCNG stations (> 40 LCNG stations @24) • LNG supply for mobility • Snam to build & operate 1 liquefaction plants (50 ktpa) • Truck loading facility upgrade in Panigaglia • Establish flagship H2 stations • 5 planned c. €200 of investments c. €220 m of investments c. €150 m of investments Biomethane Energy Efficiency Sustainable mobility 24 Hydrogen New business unit launched to get ahead of the curve • Initial focus on in-the money applications, including rail • Upstream exposure conditional on long-term contracts • Focus on consolidating technological leadership & proof of concept • Hy-ready fuel cells to generate electricity for Snam consumption c. €150 m of investments
  25. H2 new ventures : getting ahead of the curve Technological leadership & proof of concept Competitive applications Strategic positioning for later-stage developments Uniquely positioned in rail services thanks to agreements with FS and Alston • 13 routes included in the plan (~700 km) • ~45 MW of capacity Roll-out of H2-ready stationary fuel cells for Snam group (5,2 MW) Acquired stakes in De Nora and ITM, for key technological edge in H2 value chain MoU with Rina & Tenaris to promote H2 use in industrial processes Grant awarded for 3 FCHJU calls on pre-industrial development of key tech Agreement with CNHi for technological and commercial cooperation Establishing partnerships with key downstream operators for “first of a kind” project developments Upside from policy supported integrated projects IPCEI Green Crane project proposal for the deployment of a large scale European integrated green H2 ecosystem 25 Hydrogen is provided to the train operator
  26. Partnership with De Nora and ITM to get technological edge on electrolyzers Gain exposure to key technology for the development of H2 market De Nora’s are superior De Nora is at the heart of the electrolyzer process and supplies global top licensors of Alkaline water electrolyzers • Approx. € 0.4bn investment (33% stake), appoint 3 Board Members, and representation on Strategic and Technical Committees • De Nora enjoys exceptional business profile being a leading company in Chlor-Alkali, electronics and surface finishing and in water and waste water treatment segment • … with strong hydrogen upside • Fast-growing H2 electrodes business (key component of electrolyzers) • 34% of the JV with Thyssenkrupp co-develops, assembles and installs electrolyzers and plants • Joint Development Agreement with fuel cell specialist AFC Energy to develop alkaline electrodes for alkaline fuel cells Courtesy of tkUCE Courtesy of McPhy • €30m GBP investments in ITM Power capital increase • Presence in key technical and strategic committees (Strategic Advisory Committee and Technology Management Committee) and secondment of resources • Soft commitment for up to 100MW of electrolyzers of "membrane" technology (PEM - Proton Exchange Membrane) to be used in Snam pipeline of projects Partnership with ITM Power, leader in PEM technology 26
  27. Energy Transition Investment Platform Incremental disciplined exposure to financially attractive energy innovation opportunities • Growing market focus on opportunities with exposure to energy transition and decarbonization; lack of focused investment platforms • Energy Transition Investment Platform to fill this niche, with focus on projects and companies operating in the Energy Transition • Managed by Independent investment professionals with significant track record • Leverage our technical and industrial expertise, to support an independent investment platform • Scope for Snam to gain indirect exposure to investment themes, projects and technologies, in a financially disciplined and selective manner • De Nora potential seed asset for the investment platform • Snam to be an anchor investor • Identified management • Interest expected from a number of potential partecipants • Launch in 2021 Background Snam Rationale Where we are and timing 27
  28. Our international footprint Solid contribution from associates; 10% average cash return (1) Increasing flexibility and efficiency in mature businesses Exposure to new gas consumption Leveraging opportunities from the energy transition TAP: stable €50m contribution from 2021 Adnoc: 20-years ship or pay contracts with volume floor Desfa new investments from stronger demand; strategic position along the southern gas corridor, LNG for re- export in Balkan region Austrian associates: • Mature assets • Expiry of long-term contracts in 2022-23, replaced by short term/more flexible products. • Stable transit flows Terega: entering biomethane sector. Ideally positioned for H2 transition, connecting resource rich Iberian Pensinula with Europe & availability of aquiferous storages Desfa:, Greece exit from lignite, LNG/bunkering for maritime sector Positioning in areas with attractive growth potential Dedicated presence in China, India SGS to act as technical partner and international growth enabler whilst contributing to EBITDA 28 (*) On investments to date
  29. Snam’s successful integrated approach on TAP project Large project delivered on schedule under challenging conditions Snam contribution to TAP success • Head of Snam assets appointed as CEO of TAP • Snam provided support for TAP institutional relations • Technical support to TAP on a contract basis 878-km 10 bcm/y • Massive use of trenchless technology • up to -50% working strip’s width vs. traditional methods Double digging production rate • Minimized excavation material Italian connection built with most advanced technologies 29
  30. Financial structure, capital allocation and plan targets
  31. 45% 50% 55% 60% 2019 2020E 2024E Strong financial structure and credit metrics • Strong liquidity profile with undrawn committed lines covering more than three years of bond maturities • Financial structure defined via an Asset and Liability Management model: • ~¾ fix rate • >5Y M/LT maturity with lower than sector-average gearing • Cost of debt expected flat over plan horizon at 1.2% or 20bps lower than last year guidance • Fully committed to current credit rating metrics Gross cost of debt Average 2020 – 24 cost of debt @ 1.2% (not including short term uncommitted lines and commercial papers) Bond maturities Adj. FFO2/Net Debt3 10% 12% 14% 16% 2019 2020E 2024E Expected value end of Plan Net Debt/RAB3 Expected value end of Plan ( ) Baa2 stable ( ) BBB+ stable ( ) BBB+ stable Rating from Grid /SACP1 A2 a- n.a. Assigned Rating outlook( ) 1. Rating from the Grid for Moody’s , Stand alone credit profile for S&P. 2. Before change in working capital. 3. Considering rating adjustments and affiliates, excluding the acquisition of a stake in De Nora (closing expected in the next months) Thresholds consistent with rating of Baa1 for Moody’s and a- for S&P, one notch higher than Snam’s official ratings 0 500 1.000 1.500 2.000 2021 2022 2023 2024 2025 2026 2027 and beyond Maturities well spread over time 31
  32. Sustainable finance aligned with corporate strategy • Sustainable finance: ambition to reach ca. 60% of total available funding: • ~6bn€ of sustainable financing (~40% of total funding) at end- Sept 2020 • new € 2.5bn ESG labelled Commercial Paper Programme (EE from Standard Ethics) launched today • Further room for debt capital market sustainable instruments 0 4 8 12 ESG compliant Institutional lending Sustainable loan DCM instruments Sustainable finance today ESG labelled ECP New sustainable DCM instruments Sustainable finance expected at 2024 ~60%* *of total available funding €bn ~10% end 2016 ~40% 32
  33. 33 Capital allocation approach • Dividend increased by almost 20% from demerger (€3bn dividends paid 2017-2020) • €0.9bn share buyback executed • New dividend policy extended to 2024 Criteria • Committed to current credit rating metrics and risk profile • Accretive returns (risk adjusted returns at least in line with Italian regulated assets) • Consistent with our ESG strategy a) Industrial opportunities • Enhance existing infrastructure • Leverage industrial capabilities • Unlock additional growth/optionality b) Enhanced returns to shareholders • Dividend policy • Buyback Disciplined approach confirmed • 2020-24 Plan +€ 2.7 bn investments vs first stand alone plan • €4.5bn regulated capex & Italian bolt on in 2016-20 • €0.5bn investments in international regulated/contracted companies (GCA, IUK, Desfa, Adnoc) • C. €0.3 bn already invested to build the platform to grow the energy transition • €0.4bn investment in De Nora as a potential seed asset Capital allocation Industrial opportunities seized Shareholders remuneration
  34. Solid and visible growth 34 Tariff RAB EBITDA Net income €bn €bn €m € cent EPS 20242020E20182017 2019 2.022 2.095 2.169 20,3 2017 2018 2019 19,3 2020 2024 20,4 20,6 c 2.5% 3.4% 940 2017 2019 20242018 2020E 1.010 1.093 1.100 c 4.0% 20192017 2018 20242020E 0,27 0,29 0,32 0,33 5.0% > 2.5% c 2.5% 3.3% 3.2%
  35. 2021 guidance and targets € ~ 21.0 bnTariff RAB >2.5% € ~ 1.4 bnInvestments € 7.4 bn Net income ca +3% vs 2020 guidance 2020-2024 CAGR 2020-2024 Net debt1 € ~ 13.5 bn Debt/RAB well below 60% 2.5% CAGR 2019-2024 1. Excluding change in tariff related items (essentially neutral) Guidance 2021 2020-24 Plan 35
  36. Dividend and closing remarks
  37. Potential upside not included in our plan Increasing visibility as policy, regulation and markets evolve 37 Further expansion, leveraging execution capabilities and technological edge Low-risk hydrogen capex supported by new incentives/policy Upside in biomethane from further national incentives, international growth Increase of RAB capex for green gas
  38. 5% DPS annual growth to 2022 confirmed 2.5% DPS minimum annual growth to 2023-24 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 DPS € cent 24.95 +5% +2.5% NEW New dividend policy to 2024 38
  39. Snam: a unique platform to invest in the energy transition 1. Visible and sustainable long-term RAB growth underpinned by green gas 2. Exposure to net zero supercycle, leader in hydrogen, biomethane, circular economy, energy efficiency, and sustainable mobility 3. Presence in multiple geographies with upside from energy transition 4. Committed to strict financial discipline and compelling shareholder returns 39
  40. Back up
  41. Investment plan 2020-2024 New investment plan: € 7.4 bn Capex Plan 19 - 23 Transport Storage & LNG Energy Transition Capex Plan 20 - 24 0,2 0,4 6,5 0,4 7.4 Transport Storage, LNG Energy Transition (not RAB based) € 5.7 bn € 1.0 bn € 0.7 bn Biomethane L-CNG Hydrogen SSLNG S4E Maintenance & Other Development Replacement Development Maintenance & Other 17% 39% 44% 25% 75% 14% 30% 6% 29% 21% Strong Investment Plan 41
  42. Our pathway to net zero Clear pathway to net zero in our own scope 1&2 emissions Engaged with suppliers & associates to reduce scope 3 emissions Enabler of system decarbonisation • Scope 1&2: clear pathway to net zero by 2040 • Scope 3: ongoing planning with suppliers & associates • Enhancing Snam role as an enabler of system decarbonization Our committment is aligned with Paris agreement to keep temperature increase within 1.5° Celsius Suppliers • Giving higher responsibility to suppliers for a full disclosure through CDP supply chain program • Engaging all suppliers with operatives initiatives on climate change and decarbonization Associates • Working together to improve associates carbon footprint • Engaging the associates through specific working group to improve management capabilities and efficiency Reduce CO2 emissions Energy Efficiency Biomethane&Sustainable Mobility - 50 ktons - 550 ktons H2 - 10 ktons Small-scale LNG -23% - 200 ktons -50% 42 Secure readiness of green gas infrastructure • H2 readiness of our infrastructure • H2 blending tests • Streamlined connection of CNG and biomethane plant
  43. How we reduce our Scope 1 and 2 emissions 20302018 2040 1,529 -50% CH4 CO2 -50% 770 Scope 1 KtCO2eq 727 Scope 1 KtCO2 32 Scope 2 KtCO2 Net-zero -50% @2030 vs 2018Scope 1 & 2 updated targets Net-zero @2040 Indirect CO2 emissions • Increase in green electricity out of total consumption, including new PV plants Direct CO2 emissions • Installation of electro-compressor units in 8 compressor stations • Energy efficiency on our assets Direct CH4 emissions • Leak Detection and Repair (LDAR) applied to transport network, underground storage and LNG terminal • Replacement of pneumatic devices • Recompression of gas instead of venting Updated -50% @2030 Updated -45% @2025 (vs 2015, in line with UNEP) Emission targets (kton of CO2 equivalent) 43
  44. Avoided CO2 emissions of new businesses New businesses CO2 emissions reduction Energy Efficiency Sustainable Mobility & Biomethane ssLNG - 50 ktons - 550 ktons CO2eq avoided through energy savings in 2021-24 CO2eq avoided by replacing CH4 with bio-CH4 in 2024 Avoided by replacing heavy fuel oil with LNG in vessels H2 CO2eq avoided by replacing diesel with H2 in 2024 - 10 ktons - 200 ktons Targets 3 million trees by 2030 New benefit company set up by Snam and CDP -92% SOx -80% NOx -23% CO2 44
  45. Consolidating ESG leadership with scorecard Natural Gas Emissions • Natural gas emissions: -36% reduction of total natural gas emissions (vs 2015) 1,2 • Energy Saving: >40% natural gas recovered from maintenance activities Energy Savings of Operational Management • 860 MWh of electricity production by photovoltaic plants • 61% of retrofit and methane fuelled cars out of total car fleet New Business - Green Innovation • 121 Mscm Production of biomethane • 43 Ktons Reduction of CO2 equivalent from energy efficiency interventions • 167 Cumulated number of CNG and L-CNG stations • 250 ktons available LNG capacity for SSLNG market Land Protection & Biodiversity • >99% vegetation restoration of the natural and semi- natural areas involved in the construction of the pipeline routing 3 Welfare • 54% participation in welfare initiatives Employee engagement • 75% employee engagement index Safety • <average last 5 years- IpFG (Combined Frequency and Severity Index) • <average last 5 years- No. of HS remarks / no. of total Audits conducted (external and internal) Gender Diversity • 25.5 % of women in executive and middle-management roles • 27 % of women in succession planning (first and second reporting line) Responsible Supply • 50% spending to local suppliers (Italy based SMEs) on total non-public procurement • +20% Increase third sector suppliers in Vendor List Local Community Engagement • +10% employees hours devoted to Snam Foundation’s initiatives supporting local communities SDGs ESG Focus Areas Key Performance Indicators by 2023 Governance Functioning and Structure • >40 % of BoD time dedicated to ESG matters in strategy meetings and induction sessions Infrastructure Reliability • 8.1 Average annual customer satisfaction rate in terms of service quality • 99.9 % of reliability levels on gas supply Anti-corruption • 100 % of third party counterparts on which reputational due diligence checks have been performed SDGs ESG Focus Areas Key Performance Indicators by 2023 45
  46. Disclaimer Luca Oglialoro, 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 accounting 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. 46