2013 – 2016 Strategy & Targets...2013 – 2016 Strategy & Targets March 13th, 2013 2 Playing a Leading Role in Integrating the European Gas Market Carlo Malacarne Chief Executive

snam.it

2013 – 2016 Strategy & Targets March 13th, 2013

2

Playing a Leading Role in Integrating the European Gas Market

Carlo Malacarne Chief Executive Officer

Key Priorities of a Sustainable Growth Strategy

3

Low

risk

pro

file.

..

... in the context of strict financial discipline

Execute profitable and high quality capex program Leveraging strong track record in delivery

Facilitate European network integration

Optimising investments leveraging a supportive European framework

Preserve solid capital structure

Disciplined investment plan along with sustainable and attractive return policy

Deliver efficiency

Focused on pursuing operational and financial outperformance

Drive value creation for all stakeholders

Building the conditions to target superior returns

Agenda

4

Business Environment

Operational Performance & Financials

Snam Business Development

Final Remarks




Final Remarks

Agenda

5

EU Energy Policy: goals and provisions

• Ownership Unbundling (OU)

• Independent Transmission Operator (ITO)

• Independent System Operator (ISO)

• Entry-Exit system • Market-based balancing regime • Gas Exchanges

• ACER and ENTSOG establishment • Coordination of network development

plans • Common rules (EU network codes)

• Diversification of supply sources • Bi-directional flows • Interconnection between national markets • Infrastructure flexibility (N-1) 6

Unbundling

Market Liquidity

Harmonisation & Cooperation

Infrastructure Development

COMPETITIVENESS

SUSTAINABILITY SECURITY OF SUPPLY

Source: European Commission, Regulatory Proposal: ‘Strategic guidelines for trans-European energy infrastructure’, October 2011

Interconnection plan of Baltic energy market

Southern Gas Corridor (Caspian region)

South – North gas interconnection (Central Eastern and South Eastern Europe)

South - North gas interconnections (South Western Europe)

…Italy situated at the crossroad of energy corridors

1.

2.

3.

Promoting infrastructure development along main routes…

1

4

3

2

1

2

3

EU Energy Policy: priority corridors

4

7

PSV

NBP TTF

BAU

NCG ZEE

PEG N

Italian Regulation: evolving framework to support market integration

8

• Implementation of 3rd Gas Directive (Legislative Decree 93/11)

• Ruling on “Certification procedures” (National Authority Resolution 153/11)

• Ownership Unbundling (Liberalization Decree 1/2012 and implementing regulation)

• Active participation in ENTSOG for rules harmonization and network code development

• Coordination of development plans (TYNDP)

• Storage services extended to industrial and power customers

• New balancing regime (1st Dec. 2011)

• Cooperation with Exchange Operators (GME)

• Entry-Exit system since 2001

• Enhancement of storage capacity • Incentive for new investments

(Dlgs. 93/11): reverse flow and interconnection

Unbundling

Market Liquidity

Harmonisation & Cooperation

Infrastructure Development

50

150

250

350

450

550

650

European Gas Market

Domestic production

Net import

(*) Countries: EU 27

Source: OECD/IEA – Special Report World Energy Outlook 2012

[ bcm ] CAGR 10 – 30 ~ 0.5%

CAGR 10 – 30 ~ 2.0%

Nigeria 5.1

Algeria 4.5 Libya

1.5 Qatar 25.0

Netherlands 1.1

Norway 2.1 Russia

44.6

(*) Trillion cubic metres Source: BP Statistical Review of World Energy, June 2012

Main gas reserves supplying Europe* Gas demand in Europe*

Egypt 2.2

9

0

20

40

60

80

100

120

2012 2015E 2018E 2020E 2025E

Gas Demand CAGR 12 – 25

~1.0%

Domestic production 2025E Additional

import from diversified sources

2012

~90

~20 68

Source: Italian Ministry of Economic Development and SRG estimates

[ bcm ] Import CAGR 12 – 25

~2.0%

Italian Gas Market

10

Net import Gas Flows

Transit

Infrustructure Operators in the European Gas Market

Countries & Institutions Energy Policy Objectives to foster cross border network projects

GAS MARKET

Security of supply

Diversification of sources

Increased flexibility needs EU Regulators Harmonization of the European Regulatory Framework

INFRASTRUCTURE OPERATORS

Technical know how Partnerships

Solid capital structure

11




Final Remarks

Agenda

12

• Investments • International Growth • New Potential Services

• Increase capacity for:

– Modulation services and peak demand control

– New services for industrial customers

• Optimize utilization of regasification plant offering integrated services

• Develop new balancing services to enhance flexibility

• Develop infrastructure supporting gas swaps in Europe

• Selected projects to meet capacity requirements and supply source diversification

• Facilitate technical and commercial swap among different supply sources

• Development of reverse flow capacity to create conditions for the gas transit to European markets

• Focus on international strategic assets which will help further gas infrastructure integration across Europe

Investment Priorities

13

Strengthen security, flexibility and service quality

of the Italian gas system

Create conditions for developing a Southern

European gas hub

Increase liquidity of the gas

market

TRANSPORT & LNG STORAGE

2013

Investment Plan 2013-2016

14

Mainly TIGF

2012-2016 RAB GROWTH: CAGR +3.4%

2016E EBITDA* from associates: +70% vs 2012

* Snam pro-quota interests in non consolidated associates

4.6

6.2

Organic Capex in Italy External Growth: M&A in Europe

0.7

2013-2016 2013-2016 2017-2020

[ €bn ]

To complete projects under construction in transport & storage

businesses

Consolidated Capex Plan in Italy 2013-2016

15 * RAB evolution calculated assuming annual inflation rate in 2013-2016 of 2% and on the basis of the current approved regulatory frameworks

2013 2014 - 2016

€ 4.9 bn € 1.3 bn

0

5

10

15

20

25

30

2012E 2013E 2014E 2015E 2016E

CAGR 3.4%

RAB with base remuneration

RAB incentivized

30% 36%

[ €bn ]

3.7 1.0 1.5

Not Incentivized Incentivized

[ €bn ]

Storage Transport Distribution

€ 6.2 billion

Spending

Consolidated RAB* Capex breakdown*

∼75% ∼25%

South-North Developments and Reverse Flow…

16

+8 Bcm

Import Export

Main Projects • Po Valley Infrastructure (~450 km )

• Empowerment/construction of compressor stations (~100 MW)

• Metering point in Masera

Length: ~1,150 km Installed power capacity: ~170 MW

PLANNED PROJECT

CAPACITY AT ENTRY POINTS FROM SOUTH

5

18

Passo Gries - Connectionwith North Europe

Tarvisio - Connection withNorth East Europe

>2016

338 ~350

2012 2016

…for an Italian Gas Hub, with an Ample Supply Diversification

Import transport capacity

Expected export

capacity beyond

2016

40

18

Passo Gries - Connectionwith North Europe

Tarvisio - Connection withNorth East Europe

Fully Operational by end 2015

Italian export capacity

[ Mscm/d ]

Existing import transport capacity Import transport capacity under construction

Expected capacity

development

[ Mscm/d ]

* Maximum daily export capacity is 40 Mscm/d

*

*

17

~380

0

5

10

15

20

0

100

200

300

400

New Storage Capacity to facilitate Gas System Liquidity

18

2013 – 2016 CAPEX PLAN CONSISTENT WITH MINISTERIAL DECREES

4.0 10.7

13.5 275 314

2012 2016E

Modulation Capacity for Residential/Regasification

Peak Capacity Modulation Capacity for industrial users

9.5

2.4

8.3

MINERBIO

FIUME TRESTE

SETTALA SABBIONCELLO

RIPALTA

[ Mscm/d ] [ bcm]

SERGNANO

+ ~14%

+ ~25%

ALFONSINE (I Phase)

BORDOLANO

Distribution: selected investments to increase profitability in a mature business

19

2012 2016E

Redelivery points (millions)

5.9 ~6.7

+ ~14%

NETWORK EXPANSION:

• New connections (~ 1,300 km) on existing distribution network and development of new distribution network

SMART METERING: • ~1.1 million smart meters • IT systems development to support smart

metering process

MAIN PROJECTS

* Considering the current perimeter of consolidation

• To grow the activities maintaining the current capital employed also leveraging on financial partnership

• To maximize operational efficiency through: ‾ Optimization of concession portfolio ‾ Economies of scale

• To pursue additional revenues through operational services to third-party networks

Italgas Business Development to unlock Additional Value

• Industry concentration process (177 new concession areas)

• Higher degree of transparency: clear and standard rules to protect invested capital

ITALGAS TOMORROW

• Concession in municipalities: • 1,435 Italgas • 148 Associates

• 7.4 mln clients served

(33% of the Italian market) • ~6 mln Italgas • 1.4 mln Associates

New Legislative Framework fostering

ITALGAS TODAY

Management of 40% of Italian redelivery points

20




Final Remarks

Agenda

21

• Investments • International Growth

• New Potential Services

Snam’s International Growth Strategy

• Main player in European gas

infrastructure

KEY PILLARS OUR TOOLS

• Integrated approach

• Phased expansion programme along

with strict financial discipline

• Risk diversification

• Leverage leadership in terms of RAB, market cap and on

strategic geographical platform • Extensive know-how in managing high quality integrated gas

infrastructure assets

• Develop cross-border interconnections • Create platforms to foster development of integrated storage,

regasification and transport assets in Europe • Facilitate the interconnection of gas pools

• Preserve solid balance sheet • Sharing financial commitments with partners • JVs and bolt-on acquisitions • Increasing risk-adjusted target returns

• Varied geographical and regulatory risk • Complementary investments cycles

22

Implementing International Growth in European Gas Infrastructures

23

Strategic alliance with Fluxys

TIGF assets

Joint Acquisitions (50% - 50%)

• 31.5% Interconnector UK

• 51% Interconnector Zeebrugge Terminal

• 10% Huberator

Exclusive acquisition rights

• Snam 45% shareholding and industrial partner • Strategic and geographical fit

• Similar business model: integrated management

of transport and storage activities




Final Remarks

Agenda

24

• Investments • International Growth

• New Potential Services

Business Context Evolution

2000 2010 2020

Investments

Efficiency

New services

Assets integration

Efficiency gains

Foster Market Development

Continuity in capex execution

ASSET OWNER SYSTEM OPERATOR

The changing business environment together with regulatory evolution …

… may lead to potential new value creation

European external growth

Valu

e dr

iver

s

25

Potential New Services

• Incentive mechanisms for TSOs to support the market • Additional informative services to network users • Demand forecast incentive mechanisms

• Short term (“day-ahead”) capacity services facilitating trading and arbitrage between hubs • Short cycle (“flexibility”) storage services • Peak transmission & storage capacity services

• Establishment of trading platforms • Development of spot and futures markets • Physical and financial gas products

Infrastructure system operator as provider of new services …

… to boost the liquidity and dynamics of the internal gas market

Transmission & Storage

Market functioning

Cooperation with gas pool

26

Operational Performance and Financials



Final Remarks

Agenda

27

Continuing Focus on Operating Performance

2012 consolidated EBITDA margin

77%*

2016 consolidated EBITDA margin

~80%

• Operating efficiency throughout the period, absorbing growth of business activity

• Capex execution

• Extra remuneration on capex supporting increase in blended return of our asset base

Leveraging on

* Not considering the positive tariff adjustment for € 143 mln recorded in the distribution activity 28

Growth from Associates

29 29

2016 EBITDA 2012 EBITDA

140 €mln +70%

* Equity RAB and district heating evaluated on 7x EBITDA ** Purchase price

SNAM INTERESTS IN NON CONSOLIDATED

ASSOCIATES

2012 Italian Distribution Europe TOTAL

EBITDA 118 22 140

EQUITY 625* 135** 760

... to support Snam’s low

risk profile

A solid Capital Structure to sustain a Low-Risk Growth Profile

30

Soun

dnes

s of

bal

ance

she

et...

• Firm commitment to solid investment grade profile, with strong focus on current credit rating metrics

• Maturities well distributed over time without any major refinancing exercise until 2015 and coherent with business profile

• Adequate liquidity buffer to support a convenient approach in DCM and provide comfortable financial flexibility

• Appropriate source mix between flexibility from bank financing and stability from M/LT bonds and institutional lenders

• Limited exposure to interest rates - 2/3 M/LT and fixed-rate debt at regime - preserving value creation from financial efficiency

• Strict control on cash flow generation via:

• Efficient working capital management • Disciplined investment policy supported by comfortable capex flexibility

A consistent Liquidity and Maturity Profile

Pool banking financing

Bilateral banking facilities

Debt Capital Market

Institutional lenders financing

15.4 BOND

BANKING FACILITIES

Existing debt and financial flexibility (bn€)

2-2.5 bln € an adequate liquidity buffer in the medium term: • To cover bond repayment

schedule • To support a convenient approach

in DCM • To provide comfortable financial

flexibility

12.4

0.7

~3

6.0

3.7

5.0

Financial flexibility

Maturity Profile (bn€): M/L Term Debt as at 31Dec 2012

Total committed credit facilites

& bond

Existing debt as at

31 Dec. 2012

2012

-

200

400

600

800

1.000

1.200

1.400

1.600

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 beyond2022

-

500

1.000

1.500

2.000

2.500

3.000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 beyond2022

31

• 2012 guidelines achieved

• Completion of refinancing exercise and market improvement suggest room for optimisation in terms of cost and maturity via:

• New access to DCM

• Fine tuning of banking financing

• Growing role of institutional lenders offers further potential upside

• 2013 debt cost guidelines could benefit from optimisation exercise

2013: room for further efficiency

32




Final Remarks

Agenda

33

0

5

10

15

20

25

30

Confirming Profitable Growth and Attractive Shareholder Returns

CAGR 3.4%

(*) RAB evolution calculated assuming annual inflation rate for 2013-2016 of 2% and on the basis of the current approved regulatory frameworks

Expected profitability increase

to be aligned to RAB growth

• Robust, visible and sustainable shareholder returns

• Superior yield

[ €bn ]

Consolidated RAB*

• Operating cash flow to finance asset growth

• Leverage (D/RAB+associates) expected to remain around 55%

• Increasing incentivized RAB up to 36% in 2016

• Growing by 70% associates EBITDA

• Exploiting further operating efficiency 2012

0.25

€/share

Expected DPS 2013

2012 LEVEL CONFIRMED

34

35

Q & A S e s s i o n

36

A n n e x e s

2013-2016 Capital Expenditure in Italy and Incentive Scheme*

Regional & national develop. 2% premium for 7 – 10 yrs

Expansion & new entry points 3% premium for 10 – 15 yrs

Safety 1% premium for 5 yrs

Maintenance Base return: 6.4%

Expansion of existing fields 4% premium for 8 yrs

Development of new fields 4% premium for 16 yrs

Maintenance Base return: 6.7%

Metering 8% allowed return

Substitution of cast iron pipes 2% premium for 8 yrs

Other investments Base return: 7.6%

10%

30%60%

50%

15%

19%

16%

46%

39%

15%

37 (*) Gross of subsidies

2013 2014 - 2016

€ ~3.0 bn € ~0.7 bn

Transport and LNG

2013 2014 - 2016

€ ~0.7 bn € ~0.3 bn

Storage

2013 2014 - 2016

€ ~1.2 bn € ~0.3 bn

Distribution

Italgas: the leader in the Italian market*

38

(*) Calculated on the basis of consumers connected to distribution grids

Italgas

Enel F2i

A2A

Hera

IREN

Gas Natural

ASCOPIAVE

Others

33%

2%

3%

5%

5%

19%

27%

2%

6%

31%

ITALGAS & NAPOLETANA GAS ITALGAS ASSOCIATES OTHERS

2012

39

Snam’s Chief Financial Officer, Antonio Paccioretti, 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.

Disclaimer

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2013 – 2016 Strategy & Targets March 13th, 2013

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2013 – 2016 Strategy & Targets...2013 – 2016 Strategy & Targets March 13th, 2013 2 Playing a Leading Role in Integrating the European Gas Market Carlo Malacarne Chief Executive