Snam S p A : 2020 Nine months results (Transcript)

2020 Nine Months Financial Results Conference Call

Thursday, November 05, 2020, 14:00 ITA Time

Investor Relations Snam

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MODERATORS:ALESSANDRA PASINI, CHIEF FINANCIAL OFFICEROPERATOR:Good afternoon. This is the Chorus Call conference operator. Welcome and thank you for joining the SNAM 2020 Nine Months Financial Results Conference Call. As a reminder, all participants are in a 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 "*" and "0" on their telephone.

At this time, I would like to turn the conference over to Ms. Alessandra Pasini, CFO of SNAM. Please go ahead, madam.

ALESSANDRA PASINI: Thank you. Ladies and gentlemen, good afternoon, and welcome to

Snam's 2020 9 months results presentation. In the first quarter of the year, we have continued to make good progress on our plan. Investments in our core business are above previous year level, and we are fully recovering the delays due to COVID. We confirm €1.1 billion of CAPEX on a full year basis,

assuming no COVID-related stoppage of the operating activities.

We continue to deliver on new regulated services to the Italian market, where we have earned €15 million, €1 million more than 2019, also considering the

regulator is raising the bar with more challenging KPIs. We are continuing on our efficiency plan, already achieving in the first 9 months, €60 million of cumulative savings since the program started in 2016, which was our annual target. Our focus on the energy transition remains strong. In addition to the progress already announced on biomethane and its energy efficiency, we've also made progress on our hydrogen strategy.

We've recently signed a partnership agreement with ITM Power plc, one of the major global manufacturer of PEM electrolyzer, aiming at establishing a commercial and technological collaboration and gaining expertise on the market evolution of technology. We also signed a memorandum understanding with Ferrovie dello Stato to promote the use of hydrogen in the railway transport. Please consider that 20% of the national system still runs on diesel.

On the international front, started works to allow the connection with the

Southern corridor have been completed. On the debt management side, financial charges were €26 million lower than the same period of last year,

thanks to the market supportive environment. In September, Snam has launched together with the United Nation Global Compact CFO taskforce, the CFO principles, our integrated SDG investments and finance.

These initiatives has the goal to bring together the investment value chain, including issuers, investors, banks, development finance institutions, credit rating agencies and sustainability assessment firms to create an efficient market for SDG investments and instruments and capital flows and consistently now to measure ESG KPIs and actions.

On the 27th of October, the rating agency S&P has affirmed the company long-term corporate credit rating at BBB+ and revised the outlook from negative to stable. The decision reflects similar action taken on the outlook of Italian government sovereign rating.

During the first 9 months, gas demand closed with 49.8 bcm with a decrease of 4.6% versus 54.4 bcm of last year, combining the effect of mild weather conditions and COVID. The decrease is largely related to the civil sector, mainly due to the milder weather conditions and marginally for the gradual increase due to energy efficiency measures.

The industrial sector lost almost 1 bcm, mainly due to the COVID lockdown effects and the thermoelectric sector reduced mainly due to the drop in electricity demand, again related to the economic slowdown. [Indiscernible] of the restrictive measures, gas demand has shown improvement versus the same period of last year, leading to an increased forecast of 70 bcm at year-end from what we previously announced in July. The recently announced restricted measures may have some impact. Despite the rise of gas prices, mainly in August and September, switching coal-to-gas remains convenient and compared electricity [ph] production stays at minimum levels.

Looking more closely at the results. In the first 9 months of the year, regulated revenues grew by 1.6%, thanks to the IRAP [indiscernible] D&A and the contribution from output-based incentives including energy cost for €52 million. As you may recall, from this year, energy costs, which were previously addressed in kind, contribute to revenues and costs, but with essentially no impact on EBITDA.

On the opposite side, the commodity component of our revenue that is related to volumes declined compared to the same period of last year, and we will comment in more detail in the next slide. EBITDA was up 0.5%, also thanks to the effect of the efficiency program and the initial contribution of new businesses despite a slowdown due to COVID. Financial charges were down 21%, thanks to the continuing treasury optimization measures and the natural bond rollover. As a result of all the above, net income is up 0.7%.

Our full year guidance for net income remains at €1.1 billion, on the same

perimeter, thanks to the solidity of our core business, the growing contribution of new activities in the energy condition, cost containment actions implemented and treasury optimization measures.

Adjusted EBITDA in the first 9 months was €1.670 billion, up €9 million compared to the same period of last year. As explained, during our interim results presentation in July, from this year, the recognition of energy costs,