Snam S p A : 2022 Third quarter results press release

Snam: solid performance in an uncertain environment;

guidance on 2022 net profit unchanged

Main Highlights

• Total revenues: 2,400 million euros1 (+10.3% on the first nine months of 2021)
• Adjusted EBITDA: 1,706 million euros (-0.6%), as a result mainly of the revision of the regulatory cost of the infrastructure business (WACC equal to 95 million euros) partially offset by additional revenues and efficiency measures as well as the contribution from energy transition businesses of 19 million euros
• Group adjusted net profit:2 932 million euros (-0.6%); in line with expectations, reflecting the soundness of the gas infrastructure business and the good performance of associates
• Capital expenditure: 883 million euros (+2% on 2021). The 2022 investment plan has been confirmed
• Net financial debt: 12,945 million euros (14,021 million euros at December 31st, 2021), with the decline mainly reflecting a temporary variation in working capital associated with gas balancing activities
• Guidance on 2022 net profit: still projected to amount to at least 1.13 billion euros
• Regasification vessels: authorisation granted for the installation of the FSRUs at Piombino and Ravenna
• Biomethane: 9 new plants acquisition recently completed, thereby bringing the company's portfolio to a total capacity of 32MW among operational and under construction plants
• 2022 interim dividend: 0.1100 euros per share

San Donato Milanese (Milan), November 10th, 2022 - The Board of Directors of Snam, meeting yesterday under the chairmanship of Monica de Virgiliis, unanimously approved and expressed its own satisfaction on the consolidated accounts for the first nine months of 2022 (not audited). The Board, having received an opinion from the audit firm,3 also approved the distribution of an interim dividend for 2022 of 0.1100 euros per share, with payment as from January 25th, 2023.

Stefano Venier, Snam CEO, commented: "Performance in the first nine months of 2022 confirms the soundness of the Group's action even in an environment clouded by uncertainty. The strong performance of our entire Italian business despite the reduction in regulated rates in the gas

1. Net of fees covering energy costs (cost of gas needed for network operation).
2. Excluding non-controlling interests.
3. On November 9th, 2022 the audit firm Deloitte & Touche S.p.A. issued the favourable opinion referred to Article 2433- bis of the Italian Civil Code. The financial statements and the report on the basis of which the Board of Directors of Snam S.p.A. approved the distribution of the interim dividend and the associated opinion of the audit firm are filed at the company offices.

This press release is available at	Snam Press Office
www.snam.it	T+ 39 02.37037273 [e-mail]
	Snam Investor Relations
	T+39 02.37037898 [e-mail]

segment, the contribution of our foreign associates and the new businesses connected with the energy transition have contributed to the stability of our profits and enable us to confirm the Group's guidance on net profit for 2022 as a whole.

Moreover, with receipt of authorisation to begin operation of our regasification vessels, we take the first step in the remodelling of our national energy security, which will soon have to be accompanied by the expansion of transport and storage infrastructure and an acceleration of initiatives for the transition, in which Snam expects to play a leading role. This is the only way we can transform the current crisis into an opportunity for the construction of our future energy paradigm".

Summary of performance in the first nine months of 2022

Performance highlights

	First nine months
(millions of euros)	2021	2022	Change	% change
Total revenues (a)	2,176	2,400	224	10.3
Gas infrastructure business revenues (a)	1,931	1,936	5	0.3
- of which regulated revenues (a)	1,911	1,871	(40)	(2.1)
Energy transition business revenues	245	464	219	89.4
EBITDA (*)	1,716	1,706	(10)	(0.6)
EBIT (*)	1,115	1,065	(50)	(4.5)
Net profit (*) (b)	938	932	(6)	(0.6)
Special items (c)	279	40	(239)	(85.7)
Reported net profit (b)	1,217	972	(245)	(20.1)

(*) Adjusted values.

1. Net of fees covering energy costs (148 million euros in the first nine months of 2022).
2. Attributable to Snam shareholders.
3. An analysis of special items is given on page 9 of this press release. For a definition, please see "Methodological note - Non-GAAP measures ".

Total revenues

Total revenues net of energy costs amounted to 2,400 million euros, an increase of 224 million euros (+10.3%) on the first nine months of 2021. Revenues from the energy transition businesses increased (+219 million euros; +89.4%), mainly reflecting the development of energy efficiency activities, especially among residential customers. Revenues from the gas infrastructure business increased by 5 million euros, attributable to the positive contribution of the implementation of planned investments and the delivery of output-based services, as well as positive one-off effects, despite the reduction of the WACC (95 million euros, of which -76 million concerning transport).

Regulated revenues net of energy costs amounted to 1,871 million euros, a decrease of 40 million euros (-2.1%) on the first nine months of 2021. The reduction in the WACC noted above was partially offset: (i) by an increase in revenues connected with the RAB (+34 million euros, including the effect of lower input-based incentives); (ii) an increase in volumes of gas transported (+23 million euros) due to the temporary positive performance of redeliveries, the growth in exports and the filling of storage facilities; and (iii) an increase in revenues from output-based services (+14 million euros

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connected with transport and storage, for flexibility services offered in short-term auctions). In addition, the first nine months of 2021 had benefitted from the release of prior-period balance sheet items in the amount of 17 million euros.

Adjusted EBITDA

Adjusted EBITDA for the first nine months of 2022 amounted to 1,706 million euros, substantially in line (-0.6%) with the corresponding aggregate in the first nine months of 2021. The expansion of the energy transition businesses (+19 million euros), connected with the positive contribution of energy efficiency activities (+14 million euros), as well as in biomethane activities (+7 million euros) was offset by the reduction recognised by the gas infrastructure business (-29 million euros), which was associated in part with provisions for risks and charges released in the first nine months of 2021 for disputes that have been resolved and with an increase in costs for utilities.

Adjusted EBIT

Adjusted EBIT in in the first nine months of 2022 amounted to 1,065 million euros, a decrease of 50 million euros (-4.5%) on the first nine months of 2021. This reflected the developments in EBITDA discussed above and an increase in amortisation, depreciation and impairment losses (-40 million euros, or 6.7%), mainly attributable to the entry of new assets into service.

Net financial expense

Net financial expense in the first nine months of 2022 amounted to 89 million euros, an increase of 13 million euros on the first nine months of 2021. The increase in the average cost of gross debt, which went to about 1.1% in the first nine months of 2022, from about 0.8% in the first nine months of 2021 was partially offset by one-off income from the partial repayment of the Shareholders Loan by OLT (a repayment of about 197 million euros in nominal value), which involved the redetermination of future cash flows.

Net income from equity investments

Net income from equity investments amounted to 250 million euros, an increase of 38 million euros (+17.9%) compared with the first nine months of 2021, as already posted in the first half of 2022. Among the associates, Interconnector Limited (+19 million euros) benefitted from an increase in available export capacity fostered by current market conditions and, in particular, the abundant supply of liquefied natural gas in the United Kingdom, with a consequent increase in price competitiveness. The rise in income from equity investments also reflected the increase registered by the associates Terèga (+6 million euros), mainly attributable to an increase in exported gas volumes, and De Nora, owing to the strong performance of the electrolysis business.

Adjusted net profit

The Group's adjusted net profit for the first nine months of 2022 amounted to 932 million euros, broadly in line (-0.6%) with the same period of 2021 (938 million euros), reflecting the good performance of associates.

Capital expenditure

Capital expenditure amounted to 883 million euros in the first nine months of 2022, up 17 million euros (+2.0%). Investments essentially regarded natural gas transport (682 million euros; 697 million euros in the first nine months of 2021) and natural gas storage (114 million euros; 104 million euros

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in the first nine months of 2021); investments in energy transition business registered 59 million euros. The 2022 investment plan has been confirmed.

Cash flow

The positive net cash flow from operating activities mainly attributable to gas balancing operations (2,547 million euros), together with receipts deriving from the repayment of the financial receivable by OLT, and from the disposal of an interest in Industrie De Nora, made it possible to generate free cash flow of 1,627 million euros. Net financial debt, including the equity cash flow (845 million euros) connected with the distribution of the 2021 dividend4 to shareholders and non-monetary changes mainly relating to the extinguishment of the convertible bond through the assignment of Snam treasury shares, decreased by 1,076 million euros compared with December 31st, 2021 to 12,945 million euros (14,021 million euros at December 31st, 2021).

Interim dividend

Based on results for the first nine months and the forecasts for 2022 as a whole, the Board of Directors of Snam approved the distribution to the shareholders of an interim dividend for 2022 of 0.1100 euros per share, with payment starting from January 25th, 2023, with an ex-dividend date of January 23rd and a record date of January 24th.

Outlook

The most recent projections for the evolution of natural gas demand in Italy this year point to a decline compared with 2021, due in particular to the effect of the increase in energy prices in the industrial sector and forecasts for warmer temperatures so far, as well as the measures envisaged in the "National Natural Gas Consumption Containment Plan."

TAG (joint control) and GCA (associate) are the foreign investees with the greatest exposure to Russian gas supplies through transport contracts. However, despite the reduction in imported Russian gas flows to Italy experienced in particular in the third quarter of 2022, the overall performance of these companies is not expected to be impacted significantly this year.

The current European gas market is affected by uncertainty on the supply side, this has engendered substantial volatility at the European hubs in past months, with sharp price differentials in markets with greater regasification capacity. Although prices are currently subsiding after the records posted in August in reflection of the high level of gas in storage facilities and the European demand containment plan, forward prices for the coming winter months remain strong and above 100 euros MWh pending the arrival of colder weather.

With regard to the agreement announced on November 27th, 2021 concerning the sale to Snam of 49.9% of the investments held by Eni in the companies that manage the two groups of international gas pipelines connecting Algeria to Italy, TTPC and TMPC, the closing of the transaction has been postponed to the end of the year, pending the completion of the authorisation process.

4 The total dividend from 2021 net profit amounts to 872 million euros, of which 345 million paid as an interim dividend and 527 million as the balance. Amounts still to be paid at September 30th, 2022 are attributable to a request from a number of shareholders to defer payment.

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With regard to the operational management of ordinary activities and the implementation of the 2022 investment programme, we can confirm that the announced level of expenditure will continue, with particular regard to regulated businesses. In the energy transition businesses, a positive contribution is expected from a biomethane activities decree published on October 26th which, in any case, will unveil most of its benefits starting with 2023. Incentive programmes in energy efficiency will continue to implement according to expectations.

Current market conditions and the scenario for interest rates and credit spreads, while having significantly deteriorated, is expected to have a limited impact in the remainder of the year, thanks to our funding activities on the capital market and the liability management exercise completed at the beginning of 2022, as well as revolving credit lines obtained in the second and third quarters of 2022. These actions have made it possible to complete the funding envisaged in the 2022 plan, about 3 billion euros in the first half of 2022, and to raise some 2 billion euros in pre-funding activities for 2023, through flexible instruments to manage market volatility as well as optimize the recourse to capital market.

The guidance for 2022 net profit, is confirmed at least 1.13 billion euros.

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At 2:30 p.m. CET today, November 10th, 2022, a conference call will be held to present the consolidated results for the first nine months of 2022 to financial analysts and investors. It will be possible to follow the event via conference call and all supporting documentation will be available at www.snam.itin the Investor Relations section from the beginning of the call. The presentation can also be followed through a video webcast in the same section.

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