Summary data and information
Transport 4years January2014 December2017
Regasification 4years January2014 December2017
Storage 4years January2015 December2018
FOURTH REGULATORY PERIOD
APPLICABLE RATE FRAMEWORK AND PRINCIPAL DEVELOPMENTS
BymeansofResolutions514/2013/R/gas,438/2013/R/gasand531/2014/R/gas,theAuthoritydefined
thetariffcriteriaforthefourthregulatoryperiod,inforcefrom1January2014,fortransportationand
regasificationactivities,andfrom1January2015forstorageactivities.
Thefollowinggraphicshowsthemaintariffcomponentsforeachoftheregulatedactivitiescarriedout
bySnam,basedontheregulatoryframeworkinforceasat31December2016.Furtherinformation
regardingmajornewratedevelopmentsthatoccurredin2016,withrespecttoeachbusinesssector,is
providedinthechapter“Businesssegmentoperatingperformance–Tariffregulations”ofthisReport.
TRANSPORT REGASIFICATION STORAGE
31 December 2017 31 December 2017 31 December 2018
2.4% - on operating costs
0% 1.4% - on operating costs (**)
End of Regulatory Period (TARIFFS)
Revalued historical cost Revalued historical cost Revalued historical costDeduction of replacement costs
Computation of Net Invested Capital Recognized for Regulatory Purposes (RAB)
6.0% Year 20156.5% Years 2016-2018 (*)
7.3% Year 20156.6% Years 2016-2017 (*)
6.3% Year 20155.4% Years 2016-2017 (*)
Return on net invested capitalrecognized for regulatorypurposes (pre-tax WACC)
Efficiency Factor (X FACTOR)
+1% for 7 years (regional system expansion investments)+1% for 10 years (national system expansion investments)+2% per 10 years (expansion investments at points of entry)
WACC +1% on new investmentsmade after 31 December 2013 as regulatory time-lag compensation
+2% per 16 years(new terminals or expansion of the capacity of existing terminals >30%)
WACC +1% on new investmentsmade after 31 December 2013 as regulatory time-lag compensation
20% withholding for 8 years on earnings higher than recognized earnings generated by tender procedures
Return on Investmentst-1 as regulatory time-lagcompensation (since 2014)
Incentives on new investments
(*)Therateofreturnonnetinvestedcapital(WACC)inforcefortheyear2016wassetbytheAuthoritybymeansofResolution583/2015/R/comof2December2015,“Rateofreturnoninvestedcapitalforinfrastructuralservicesintheelectricityandgassectors:calculationandupdatingcriteria”.ThedurationoftheWACCregulatoryperiodforinfrastructureregulationsinthegassectorissetatsixyears(2016-2021),andamechanismisprovidedforupdatingtherateatmid-periodaccordingtotheprevailingsituation.(**)ApprovedbyResolution27/2016/R/gas,publishedon29January2016,inwhichtheAuthoritygavefinalapprovaltotheapplicablerevenuefromstorageactivitiesfortheyear2015.
Summarydataandinformation
45
RESULTS
For purposes of the 2016 consolidated financial statements, the separation from Snam of the natural
gas distribution business, as a “separate major line of business of operations”, resulted in a separate
representation, as discontinued operations, of financial results and cash flows in the natural gas
distribution sector for the period 1 January - 6 November 2016, in accordance with IFRS 5 “Non-Current
Assets Held for Sale and Discontinued Operations”. The financial years used for comparison were
reclassified in a consistent manner. Consequently, this Report mainly shows and explains the results from
continuing operations.
The2016financialyearendedwithaGroup net profit,whichincludesthecontributionfrom
discontinuedoperations,of€861million,areductionof€377million,representinga30.5%reduction
fromthe2015financialyear.Inconsiderationofthediscontinuityfactorsthatcharacterisedthe2016
financialyear,Snam’smanagementdecidedthattherepresentationofresultsonanadjustedbasis
enablesabetterassessmentoftheperformanceofcontinuingoperationsandagreatercomparability
ofdataandinformation.
Adjusted results for continuing operations10
Duetothesoundnessofoperationalmanagementandrigorousfinancialdiscipline,
in2016Snamachievedresultsthatwereinlinewithexpectations,giventhe
revisionoftherateofreturnoninvestedcapitalforregulatorypurposes(WACC)
tobeappliedto2016.Adjusted EBIT11totalled€1,336million,areduction
of€145million,representinga9.8%reductionfromthe2015financialyear.
Thereductionmainlyreflectstheimpactsonrevenuefromtherevisionofthe
WACC(-€114millionintotal,-€134millionofwhichwasthereductionposted
inthetransportationsectorthatwaspartlyabsorbedbytheincreasepostedin
thestoragesector)andhigheramortisation,depreciationandimpairmentlosses
(-€75million,representing13.0%)duemainlytotheentryintoserviceofnew
infrastructureandgreaterimpairmentlossesoftangibleassets.
Intheinstanceofbusinesssectors,thereductioninadjustedEBITreflects
transportationsectorresults(-12.4%;-€144million),whichwerepartlyoffsetby
thepositiveperformancepostedbythestoragesector(+8.5%;+€27million).
10 TheEBITandnetprofitonanadjustedbasisarenotresultmeasuresrequiredbytheIFRS.Thoseperformancemeasures(Non-GAAPmeasures)weredeterminedbyexcludingspecialitemsand,inordertoremovethedistortingeffectsgeneratedbytheapplicationofIFRS5,restoringintheresultsfromcontinuingoperationsintercompanytransactionsvis-à-visdiscontinuedoperations,inordertoachievearepresentationoftheresultsfromcontinuingoperationsasifdiscontinuedoperationshadbeenremovedfromtheconsolidationarea.InordertodeterminetheEBITandadjustednetprofitandforreconciliationwiththerespectivereportedresults,seetheChapter“Financialreview-ReconciliationofEBITandnetprofitwithadjustedEBITandadjustednetprofit”onpage95ofthisReport.
11 EBITwasanalysedbyisolatingonlytheelementsthatresultedinachangetothatfigure.Tothisend,applyinggassectortariffregulationsgeneratesrevenuecomponentsthatareoffsetincosts.Thosecomponentsmainlypertainedtonaturalgasinterconnectionsandtransferscarriedoutforpurposesofbalancingthegassystem
ADJUSTEDOPERATINGPROFIT-CONTINUINGOPERATIONS
(millionsof€)
ADJUSTEDOPERATINGPROFIT
(millionsof€)
2014 2015 2016
1,496 1,481-9.8%-1% 1,336
723
863-4.3%+19.4%
826
2014 2015 2016 2014 2015 2016
1,496 1,481-9.8%-1% 1,336
723
863-4.3%+19.4%
826
2014 2015 2016
SnamAnnualReport2016
46
Adjusted net profit from continuing operations was €826 million, a reduction of €37 million
(-4.3%) compared with the 2015 financial year. The reduction in the adjusted EBIT (-€145 million;
-9.8%) was only partly offset by the significant improvement in financial management (+€69 million,
representing 20.8%), which was mainly attributable to the reduction in average debt costs, as well as
lower income taxes (+€29 million; representing 7.4%) due mainly to a lower pre-tax profit.
The pro-forma adjusted net income of the continuing operations, obtained by applying Snam’s
share, amounting to 13.5%, to the estimated net income of Italgas Group for the whole of 2016,
adjusted by excluding the effects resulting from the adjustment to market value of the existing
financial debts towards Snam Group and eliminating the effects of non-recurring items from the
valuation of foreign subsidiaries, amounts to €845 million.
Net financial debt was €11,056 million as at 31 December 2016, compared
with €13,779 million as at 31 December 2015. Cash flow from operating
activities (€1,627 million), together with cash flow from divestments, mainly
attributable to the consideration received for the transfer of the 38.87% equity
investment in Italgas Reti S.p.A. (€1,502 million, net after transferred cash and
cash equivalents), made it possible to fully finance requirements connected to
technical investments, equity investments and financial assets instrumental to
operating activities (€1,426 million in total) and to generate a free cash flow of
€1,707 million. After outlays connected to equity cash flow (€978 million) and
the effects of financial receivables with the Italgas Group, which resulted in a
total reduction of €2,009 million in the financial position, net financial debt was
reduced by €2,723, and was posted in the amount of €11,056.
Dividends
Thanks to its healthy results and solid business fundamentals, the Company will
propose a dividend of €0.21 per share to the Shareholders’ Meeting, to be
paid from 24 May 2017, confirming Snam’s commitment to an attractive and
sustainable remuneration to its shareholders.
Free cash flow
€ +1,707 million
Reduction of net
financial debt
-€2,723 million
2016 dividend
€0.21 per share
861
671
826 845+210 +19-190 -55
ReportedNet Profit
2016
DiscontinuedOperation
ReportedNet Profit 2016
ContinuingOperation
SpecialItem
Special Item Tax effect
Adj. Net Profit Continuing Operation
Adj. Pro-forma
2016
ProformaNet Profit
2016
ADJUSTED AND PRO-FORMA RESULTS (millions of €)
Summary data and information
47
Key financial figures
Toimprovetheeconomicandfinancialreview,inadditiontoconventionalIAS/IFRSindicatorsand
financialstatements,theDirectors’Reportalsocontainsreclassifiedfinancialstatementsandseveral
alternativeperformanceindicatorssuchasEBITDA,EBIT,adjustedEBIT,adjustednetprofitandnet
financialdebt.Thetablesbelow,theirexplanatorynotesandthereclassifiedfinancialstatements
describehowtheseamountsweredetermined.Unlessotherwisespecified,definitionsofthetermsused
canbefoundintheglossary.
(€ million) 2014 2015 2016
Continuing operations (a)
Totalrevenue(b) 2,578 2,627 2,560
-ofwhich from regulated activities 2,480 2,502 2,444
Operatingcosts(b) 524 570 573
AdjustedEBIT(c) 1,496 1,481 1,336
Adjustednetprofit-continuingoperations(c)(d) 723 863 826
Adjustednetprofit-discontinuedoperations(c)(d) 355 346 190
Adjustednetprofit(c)(d) 1,078 1,209 1,016
Netprofit-continuingoperations(d)(e) 692 796 591
Netprofit-discontinuedoperations(d)(e) 506 442 270
Netprofit(d)(e) 1,198 1,238 861
(a)Theresultsofthenaturalgasdistributionsegment,thebusinessseparatedfromSnam,werereportedseparatelyasdiscontinuedoperationsonasinglelineintheincomesta-tementinaccordancewiththeprovisionsofIFRS5“Non-currentAssetsHeldforSaleandDiscontinuedOperations”.Consistently,thecomparisonperiodswererestatedexcludingthecontributionofthediscontinuedoperationssegment.(b)Theitemincludesthereinstatementofeliminationsfromintercompanytransactionsfordiscontinuedoperations.(c)Non-GAAPmeasuresdeterminedexcludingspecialitemsand,forthepurposeofremovingthedistortiveeffectsgeneratedbytheapplicationofIFRS5,allocatingtheelimi-nationofthecostsoriginatingfromdiscontinuedoperationstocontinuingoperations.ForthedefinitionofEBITandadjustednetprofit,aswellasthereconciliationwiththerespectivereportedresults,seethechapter“Financialreview-ReconciliationofEBITandnetreportedprofitwithadjustedEBITandadjustednetprofit”.(d)EntirelyattributabletoSnamshareholders.(e)Fromtheincomestatementinthelegallyrequiredformat.Seethesection“FinancialStatements”intheNotestotheconsolidatedfinancialstatements.
SnamAnnualReport2016
48
KEY BALANCE SHEET AND CASH FLOW FIGURES
(€ million) 2014 2015 2016
Technicalinvestments 1,313 1,272 1,199
- continuing operations 954 879 906
- discontinued operations (*) 359 393 293
Netinvestedcapitalat31December 20,824 21,365 17,553
Shareholders’equityincludingminorityinterestsat31December
7,172 7,586 6,497
Groupshareholders’equityat31December 7,171 7,585 6,497
Netfinancialdebtat31December 13,652 13,779 11,056
Freecashflow 297 771 1,707
(*)Thevaluesrefertotheperiod1January-6November2016.
KEY PROFIT AND FINANCIAL INDICATORS
2014 2015 2016
Netprofitpershare-continuingoperations(a) (€) 0.204 0.227 0.169
Adjustednetprofitpershare-continuingoperations(a) (€) 0.214 0.247 0.236
Netprofitpershare(a) (€) 0.354 0.354 0.246
Adjustednetprofitpershare(a) (€) 0.318 0.345 0.291
Groupshareholders'equitypershare(a) (€) 2.12 2.17 1.86
Pay-out(Dividendsfortheperiod/Groupnetprofit)(b)(c) % 73.0 70.7 83.86
Adjustedpay-out(Dividendsfortheperiod/Groupadjustednetprofit)(b)(c)
% 81.2 72.4 71.06
Dividendyield(Dividendfortheperiod/year-endofficialshareprice)(b)(c)
% 6.1 5.2 5.4
Price/Bookvalue(Averageofficialpricepershare/Groupshareholders’equitypershare)(d)
(€) 2.00 2.08 2.21
(a)Calculatedconsideringtheaveragenumberofsharesoutstandingduringtheyear.(b)The2016amount(relatingtothedividends)isestimatedbasedontheoutstandingnumberofsharesasat2March2017.(c)Thevaluesforyears2014and2015relatetoSnamGroup’sdata,withreferencetothescopeofconsolidationintheeventofaseparationtransactionbyItalgas.(d)Theofficialaveragepricespersharefor2014and2015refertothehistoricalofficialaveragepricesanddonottakeintoaccountthepriceadjustmentmadefollowingthedemergeroperation.
Summarydataandinformation
49
KEY SHARE FIGURES
2014 2015 2016
Number of shares of share capital (million) 3,500.60 3,500.60 3,500.6
Number of shares outstanding at 31 December (million) 3,499.50 3,499.50 3,470.7
Average number of shares outstanding during the year (million) 3,384.70 3,499.50 3,496.8
Year-end official share price (a) (€) 3,396 4,002 3,923
Average official share price during the period (a) (€) 3,488 3.721 4.101
Market capitalisation (b) (million) 14,383 16,973 13,612
Dividend per share (€ per share) 0.25 0.25 0.21
Dividends per period (c) (million) 875 875 722
Dividends paid in the period (d) (million) 507 875 875
(a) According to the definitions in Borsa Italiana S.p.A.’s “Corporate action manual” following the extraordinary transactions, in order to restore the continuity and comparability of stock prices, an appropriate coefficient to adjust the historical series must be applied. Therefore, the official prices of Snam stock for the financial years presented were adjusted using the “K adjustment factor”, established by Borsa Italiana at a value of 0.82538045. (b) The product of the number of shares outstanding (exact number) multiplied by the year-end official share price. The values for the years 2014 and 2015 were calculated on the basis of the historical official prices recorded at the end of the year (€4.11 and €4.85, respectively at the end of 2014 and 2015) and do not take into account the price adjustments made following the demerger operation.(c) The amount for 2016 was estimated on the basis of the number of shares outstanding at 2 March 2017.(d) The dividend paid in 2014 refers to the balance of the 2013 dividend. Snam did not pay out any interim dividends in 2015 or 2016. The dividend paid in 2016 refers to the pre-spin-off Snam Group.
Breakdown of added value
At Snam, sustainability and the creation of value are strongly connected concepts. Sustainability
creates value for the Company and stakeholders, and establishes a connection between the business
and corporate social responsibility. The Company produces wealth by contributing to the economic
growth of the society and environment in which it operates, and it measures this wealth in terms of
added value produced and distributed to its key stakeholders.
Snam calculates the added value taking inspiration from the standard prepared by the Gruppo di Studio
per il Bilancio Sociale (GBS) and the GRI - G4 guidelines.
The table below is useful for understanding the Group’s economic impact and makes it possible to read
the consolidated financial statements from the standpoint of stakeholders.
For this purpose, note that the calculation of the added value in 2016 was made restoring the
eliminations that originated from transactions involving discontinued operations to continuing
operations for each single income statement item. The values for the comparison years have been
recalculated accordingly.
In 2016, the gross global added value produced by Snam was equal to €2,518 million, an increase
of €89 million compared with 2015 (€2,429 million), in spite of the reduction in the net invested
capital remuneration rate - WACC provided by the Authority for 2016 which affected the operational
profitability of natural gas transportation activities.
Snam Annual Report 2016
50
A total of 23.9% of the gross global added value produced by Snam was reinvested within the Group
(in line compared with 2015: -0.7%), and intended essentially for the amortisation and depreciation of
the intangible and tangible fixed assets used in the production process. With regard to the main reference
stakeholders, in 2016 the percentage of added value distributed to employees was stable (10.3%; +0.5%
compared with 2015), through direct remuneration composed of wages, salaries and severance pay and
indirect remuneration composed of social security contributions and staff-related service costs (canteen
services, reimbursement of travel expenses), while there was a reduction in the value destined for the Public
Administration through the payment of direct and indirect taxes (12.8%; -2.4% compared with 2015), due
to the reduction in the pre-tax result in 2016, as well as a reduction in the value distributed to shareholders
through the dividends distributed (28.7%; -7.3% compared with 2015) in consideration of the Italgas
separation transaction and by way of the lower number of outstanding shares following the buyback of
treasury shares by Snam under the share buyback programme launched in November 2016. With reference
to the value distributed to funders, equal to 24.2%, there was an increase of 9.9% compared with 2015 as
a result of the bond buyback operation implemented by Snam in 2016. Lastly, an amount of approximately
€2 million was designated for local communities (0.1% of the value generated) through donations and
sponsorship initiatives (€0.8 million) and environmental compensation pursuant to the law (€1.2 million).
Local comunities0.1%
Shareholders28.7%
Public administration
12.8%Lenders24.2%
Employees10.3%
Snam Group23.9%
DISTRIBUTION OF ADDED VALUE (GRI: G4-EC1)
OPERATING PERFORMANCE
Technical investments
Technical investments for the period totalled €1,199 million (€1,272 million in 2015).
With reference to continuing operations, technical investments for the period totalled €906 million
(€879 million in 2015) referred mainly to the natural gas transportation (€776 million) and storage
(€117 million) business segments.
Infrastructure development and integration
The main investments for the development of new infrastructure mainly involved work for the reversal
of physical transportation flows at interconnection points with northern Europe (€181 million),
the upgrade of the transportation network from entry points in southern Italy (€40 million)
and the upgrade of the network and connection of new regional and national redelivery points (€119
Summary data and information
51
million).Atotalof€73millionwasinvestedin2016forthedevelopment of new storage fieldsand
upgrading capacity.
Asaresultoftheworkcompletedanddisposals,the pipeline network in operationremained
essentiallyunchangedintermsofnetworkkm(-0.1%comparedwith31December2015),while
installed capacity in compression stations increased by 45.7 MW(+5.2%).Availablestorage
capacityroseby0.5billioncubicmetres,madeavailablebythenewBordolanodeposit,toalevelof
12.0billioncubicmetres.
Maintenance of plant security and quality
Investmentsinprojectsaimedatmaintainingplantsecurityandqualitytotalled€336millionfor
transportationand€33millionforstorage.
In2016,pipelineswereregularlyinspectedbyfoot,vehicleandhelicoptertodetecthazardous
situationsthatcouldhavehadanimpactontheintegrityoftheinfrastructure,andaninspectionwas
carriedoutonthepipelineconditionsbyinsertingsmartdevicesinthemtodetectanydefects.
CONTROL AND INSPECTION OF TRANSPORTATION ACTIVITIES
2014 2015 2016
Networkinspectedusingsmartpigs(km) 1,950 1,315 1,660
Networkinspectedbyhelicopter(km) 15,700 16,330 16,218
Intheareaofstorage,specialattentionwaspaidtothesafetyofsystemsandpeople.Inadditiontothe
plantmaintenanceandimprovements,whichareconstantlybeingmadeandareaimedatintroducing
thebesttechnologiesavailable,specificsoftwarehasbeenimplementedfortheoptimumuseof
depositsandwells,whichthankstotheextensiveexperienceanddataacquired,enablethesystem
toachievemaximumperformancewhileincompliancewiththestrictsafetyrulesthecompanyhas
imposedonitself.
Interconnected transportation-storage capacity and network utilisation
Theaveragetransportationcapacityprovidedin2016was367.0millioncubicmetres/dayonaverage,
whichwasinlinewith2015(-1.24%),whiletransferredcapacitytotalled266.4millioncubicmetres/
dayonaverage.Networksaturation12was72.6%,adecreasecomparedwith2015(79.1%).
Thenumberofactivetransportationusersfellfrom139in2015to136(-2.2%).Duringtheyear,45
connectionagreementswereenteredintoforthecreationofnewdelivery/redeliverypoints.
Overallstoragecapacity,includingstrategicstorage,was16.5billioncubicmetresat31December
2016,anincreaseof0.5billioncubicmetresover2015,ofwhich12.0wasavailablecapacitythatwas
fullytransferredforthe2016-2017thermalyear,andtheremaining4.5billioncubicmetreswasfor
strategicstorage.
Therewere91activestoragecustomers(118in2015;-22.9%).
12 Ratioofcapacitytransferredtoavailablecapacity
SnamAnnualReport2016
52
Business volume
Theamountofgasintroducedintothetransportationsystemstoodat70.63
billioncubicmetres,representinganincreaseof3.38billioncubicmetres(+5.0%)
comparedwith2015.Theincreaseismainlyduetotheriseindemandfor
naturalgasinItaly(+3.36billioncubicmetrescomparedwith2015;+5.0%),due
essentiallytothegreaterconsumptioninthethermoelectricsector(+13.1%)
partlyabsorbedbytheslightreductioninconsumptionintheresidentialand
tertiarysector(-0.4%)dueessentiallytoweatherconditions.
Volumesofgasmovedthroughthestoragesystemin2016amountedto20.0
billioncubicmetres,anincreaseof0.42billioncubicmetres,or2.1%,compared
with2015.Theincreasewasmainlyattributabletohigherwithdrawalsfrom
storage(+0.30billioncubicmetres;+3.1%)duetothesubstantialuseof
stocksbytheoperatorsduringthelastmonthsof2016,duemainlytoweather
conditionsandtohigherinjectionstoreplenishstocks(+0.12billioncubic
metres;+1.2%).
In2016,0.21billioncubicmetresofLNGwereregasifiedatthePanigaglia
(SP)LNGterminal(0.03billioncubicmetresin2015entirelyregasifiedunder
thescopeofthepeakshavingservice;+0.18billioncubicmetres),ofwhich
0.043billioncubicmetreswasunderthescopeofthenaturalgasintegrated
regasificationandstorageservice13.
+3.38 billion
cubic metres of
gas injected into
the network
+0.42 billion
cubic metres
of gas moved
through the
storage system
+0.18 billion
cubic metres of
LNG regasified
13 Theintegratedstorageandregasificationservice,introducedbyArticle14,paragraph1ofDecree-Law1of24January2012andlatergovernedbytheMinisterialDecreeof25February2016,makesprovisionthattheleadingstoragecompanymakesdeliveredquantitiesofgasequivalenttoLNGavailabletotheuserfortheuniformstorageservice,minusconsumptionandleaks,bytheendofthemonthafterunloading.Thephysicalmanagementofgasflowsforredeliveryofgasinstoragetakesplacebycoordinatingtheregasificationandstoragecompaniesinvolved.Formoreinformationaboutthisservice,pleaserefertothesection“Operatingperformancebybusinesssegment-RegasificationofLiquefiedNaturalGas(LNG)”ofthisReport.
Key operating figures
In conformity with IFRS 8 “Operating segments”, the operating segments were
defined on the basis of the internal reporting used by the Company’s management
for allocating resources to the different segments and for analysing the respective
performances. With reference to the natural gas distribution segment, on 7
November 2016 the separation of the natural gas distribution activities from Snam
took place, which involved the transfer of Snam S.p.A.’s entire equity investment
(100%) in Italgas Reti S.p.A. to Italgas S.p.A. (formerly ITG Holding S.p.A.). For the
purpose of Snam’s 2016 consolidated financial statements, the distribution segment
is no longer represented as an operating segment. Therefore, the operating figures
listed below relate to continuing operations (transportation, regasification and
storage, as well as data referring to corporate services).
Summarydataandinformation
53
2014 2015 2016 Change % change
Natural gas transportation (a)
Natural gas injected into the National Gas Transportation Network (billions of cubic metres) (b)
62.25 67.25 70.63 3.38 5.0
Transportation network (kilometres in use) 32,339 32,534 32,508 (26) (0.1)
Installed power in the compression stations (MW) 893.9 876.5 922.2 45.7 5.2
Liquefied natural gas (LNG) regasification (a)
LNG regasification (billions of cubic metres) 0.01 0.03 0.21 0.18
Natural gas storage (a)
Available storage capacity (billions of cubic metres) (c) 11.4 11.5 12.0 0.5 4.3
Natural gas moved through the storage system (billions of cubic metres)
15.70 19.58 20.00 0.42 2.1
Employees in service at period end (number) (d) (e) 2,948 3,005 2,883 (122) (4.1)
by business segment:
- Transportation 1,874 1,918 1,726 (192) (10.0)
- Regasification 77 73 71 (2) (2.7)
- Storage 291 299 301 2 0.7
- Corporate and other activities 706 715 785 70 9.8
(a) With regard to 2016, gas volumes are expressed in standard cubic metres (SCM) with an average higher heating value (HHV) of 38.1 MJ/SCM (10.572 kWh/SCM) and 39.1 MJ/SCM (10.805 kWh/SCM) respectively for natural gas transportation, regasification and storage activities. (b) The data for 2016 was updated at 12 January 2017. The update of 2015 figures has been finalised, and figures are consistent with those published by the Ministry of Economic Development. (c) Working gas capacity for modulation, mining and balancing services, allocated in full as at 31 December 2016. (d) Fully consolidated companies.(e) The figures for 2015 include the staff transferred in 2016 to Italgas Group (207 people) following the separation transaction.
Number of employees
The number of employees in service at 31 December 2016 was 2,883 (3,005 at 31 December 2015), a
decrease of 122 (-4.1%) over the previous year. The average number of payroll employees for entities
included in the scope of consolidation at 31 December 2016 was 2,804 (2,808 in 2015).
On the one side 2016 featured significant organisational changes also related to the demerger of the
distribution business segment and, on the other side, the development of the employment mix, which
recorded the following dynamics over the course of the year:
n 177 employees joining, of which 141 were recruited from the market, and 36 others joining,
including 32 from non-consolidated companies and 4 returning from leave;
n 299 employees left the company, including 37 as a result of the termination of employment, 16
were terminated unilaterally, 241 transfers to non-consolidated companies and 5 other departures.
Snam Annual Report 2016
54
WithrespecttotheGroup’snationaldistribution,2,169peopleareemployedinthenorthernregions
ofItaly,204inthecentralregionsand506inthesouth.Furthermore,4individualsarepermanently
employedabroad.
In2016,notethatfromtheperspectiveofindustrialrelations,continuedrelationswiththeunions,
nationallyandlocally,includedaround105meetingstoanalysethebusinessdevelopmentprojectsand
sharetheeffectsonpeopleresultingfortheorganisationalchangesmadebythegroupandexamine
theminmoredetail.
n Asfarasstorageisconcerned,accordingtotheprovisionsoftheEURegulation,Resolutions
193/2016/R/gasand312/2016/R/gaswereapplied,launchingthenewbalancingregimeasaresult
ofwhichstoragecompaniesalsohadtocontinuouslymanage24-hourrenominationcycles.Snam
ReteGasalsolaunchedthenewbalancingschemeasaresultofwhichitscommercialdispatching
servicewilloperatehourlyrenominationcyclescontinuously24hoursadayknownas“AsteWithin
Day”.
n Asfarasthetransportationbusinesssegmentisconcerned,meetingsoftheSmartGasproject
technicalcommittee,madeupinequalmeasureofcompanyandunionrepresentatives,continued
withtheaimofanalysingthetechnicalaspectsoftheprojectandsolvinganyproblems.
n In2016,GNLandthetradeunions,nationallyandlocally,heldvariousmeetingsaimedatsharing
andcomparingsubjectsintrinsictotheregasificationbusiness
InJanuary2017,therenewaloftheNationalLabourAgreementappliedtothegroupforthethree-year
period2016-2018,wassigned.
Supply chain management (GRI: G4-12)
In2016,throughtheneworganisationalmodel,thesupplychainfunctioncameundertheChief
CorporateServicesOfficer,whohasthetaskofapplyingstrategicsourcingmethods,achievingsavings
targetsinlinewithbusinessactivitiesandmaintaininganadequategroupofsuppliers.
Strategicsourcingplaysakeyroleinidentifyingfuturepurchasingpoliciesandhasadirectimpact
oncuttingcosts.Startingwiththegatheringofprocurementrequirementsoverafive-yearperiod,
anticipatedspendingisanalysedandqualifiedinordertoguidethepurchaseprocessandidentifythe
categoriesof“strategic”goodsonwhichtofocusattention.
In2016Snamdirectlyprovidedworkforaround660companies,388ofwhichbelongtothesmall-
mediumbusinesssector(SME),concludingover1,000procurementcontracts(inlinewith2015),worth
atotalofapproximately€1.36billion(+7.1%comparedwith2015).Amongthegoodspurchasedthe
mostimportantmaterialissteel(piping,connectors,etc.)which,in2016,amountedtoasupplyof
approximately15,200tonnes.
95.6%oftheprocuredconcernsnationalbusinesses,andwasdistributedthroughouttheItalianregions
inlinewiththeCompany’srootsinthecountry.
At31December,thevendorlistincluded2,245qualifiedsuppliers,andaround400supplierswereinthe
processofbeingrenewedorobtainingnewqualifications.Thesupplychainwascheckedandmonitored
with15auditsduringthequalificationphaseofcriticalsuppliers,and634feedbackreportscollected
onservicesrenderedby185suppliers.Additionally,1,502suppliersandsub-contractorswerechecked
withregardtotheregularityofcontributions,through3,089inspectionswhichledto87irregularities
intercepted(2.8%).Therewere40provisionsissuedfornon-compliance,includingwarnings,suspensions
andwithdrawalofqualification.
Summarydataandinformation
55
Intheprocurementofwork,whichisthemostimportantcategorybecauseitisrelatedtocoreactivities,
thesuppliersconsideredcritical(criticallevelsAandB)wereallinpossessionofqualityandenvironment
managementsystemscertifiedwithISO9001andISO14001standards.In2016,thetargetofhavingall
(100%)ofthesesuppliersinpossessionofOHSAS18001certification(occupationalhealthandsafety)
improvedcomparedwith2015whenthefigurealreadystoodat90%.
PROCUREMENT BY REGION AND MERCHANDISE CATEGORY
Goods18.3%
Campania2.9%
Transportation73%
Lazio8.5%
Friuli V.G.11.9%
Emilia Romagna17.5%
Labour43%
Regasification1%
Services38.7%
Corporate15%
Piemonte2.6%
Sicily2.2%
Tuscany2.5%
Veneto3.2%
Storage11%
Lombardy33.3%
Marches9.0%
Abruzzo2.1%
Other region4.3%
PROCUREMENT BY BUSINESS SEGMENT
Goods18.3%
Campania2.9%
Transportation73%
Lazio8.5%
Friuli V.G.11.9%
Emilia Romagna17.5%
Labour43%
Regasification1%
Services38.7%
Corporate15%
Piemonte2.6%
Sicily2.2%
Tuscany2.5%
Veneto3.2%
Storage11%
Lombardy33.3%
Marches9.0%
Abruzzo2.1%
Other region4.3%
GEOGRAPHICALBREAKDOWNPROCUREMENTINITALY(*) PROCUREMENTBYPRODUCTCATEGORY
(*)Figuresongeographicalbreakdownarebasedontheadministrativeheadquartersofthesuppliers.
SnamAnnualReport2016
56
Accidents (GRI: G4-LA6)
Snamhasmanaged,overtime,toreduceaccidents,bothasfarasemployeesareconcernedand
contractor’spersonnel,asevidencedbytheaccidentfrequencyandseverityindex.Theentirecompany,
startingfromthetop,isfocusedonworkplacesafety,tothepointofitbeingacorporateobjectivefor
executivesandmanagers,onwhichpartofthevariableremunerationisbased.Therewere9accidents
in2016,noneofthemfatal.
ACCIDENTS AT WORK (No.)
2014 2015 2016
Totalemployeeaccidents(*) 9 3 4
Totalcontractworkeraccidents 15 8 5
ACCIDENT INDICES
2014 2015 2016
Employees and contract workers
Frequencyindex(*) 2.01 0.89 0.75
Severityindex 0.1 0.06 0.05
Employees
Frequencyindex(*) 1.84 0.62 0.81
Severityindex 0.11 0.03 0.04
Contract workers
Frequencyindex 2.13 1.07 0.71
Severityindex 0.1 0.07 0.05
(*)Thefigurefor2015wasrestatedtotakeintoaccountanaccidentthatoccurredduringtheyearlaterdeclassifiedin2016.Frequency index: numberofaccidentsatworkresultinginabsenceofatleastoneday,permillionhoursworked.Severity index:numberofworkingdayslost(calendardays)duetoaccidentsatworkresultinginabsenceofatleastonedayperthousandhoursworked.Datadonotreflectfatalaccidents.
Summarydataandinformation
57
EMPLOYEE AND CONTRACT WORKER ACCIDENT GRAPHS
2.01
0.89(*) 0.75
2014 2015 2016 2014 2015 2016
0.10
0.06 0.05
(*) The figure for 2015 was restated to take into account an accident that occurred during the year later declassified in 2016.
Energy consumption
In 2016, Snam energy consumption totalled around 10,957 Tera joules (TJ), an increase of +20.6%
over 2015.
The increase is partly attributable to the greater quantity of gas transported (+5% compared with
2015), but above all to the different transportation conditions that have seen an increase in quantities
of gas from North Africa (+65% compared with 2015) and a simultaneous reduction in quantities from
Northern Europe (-37%) and Russia (-5.6%).
The most heavily used energy source was natural gas, which covered 96.2% of total energy needs.
Other sources used are electricity (2.9%) and other fuels (diesel fuel, gasoline, LPG and heat), which
together are equivalent to 0.9%.
ENERGY CONSUMPTION DATA (GRI: G4-EN3)
EMPLOYEE AND CONTRACTOR ACCIDENTS
AT WORK - FREQUENCY INDEX
EMPLOYEE AND CONTRACTOR ACCIDENTS
AT WORK - SEVERITY INDEX
ENERGY CONSUMPTION BY ACTIVITY ENERGY CONSUMPTION (TJ)
8,3319,087
10,957
2014 2015 2016
Transportation53.1%
Corporate0.2%
Regasification1.2%
Storage45.5%
Snam Annual Report 2016
58
Greenhouse gas emissions (GRI: G4-EN15)
DIRECT EMISSIONS OF CO2EQ
– SCOPE 1 (103 T) (*)
(*)CO2eq
emissionswerecalculatedbasedonamethaneGWPof28,asindicatedinthescientificstudycarriedoutbytheIntergovernmentalPanelonClimateChange(IPCC),“FifthAssessmentReportIPCC”.
In2016directCO2eq
emissionswereequaltoapproximately1.44milliontonnes.DirectCO2emissions
fromcombustionwereequaltoapproximately0.6milliontonnes,whileCO2eq
emissionsfrommethane
stoodatapproximately0.84milliontonnes.In2016naturalgasemissionsfellby-3%comparedwith
2015,goingfrom49.7Mm3to48.2Mm3.Thisdecreaseispartlyduetotheloweremissionsrecorded
in2016andpartlytotheemissionreductioninitiativesconductedundergastransportationactivities,
inwhichmeasuresthatinvolvetherecoveryofgasthroughrecompressiononlineandincompression
stationswereimplemented(4.5millioncubicmetresofnaturalgasrecovered,equalto77,780tonnes
ofCO2eq
,+25%comparedwiththefigureof3.3millioncubicmetresin2015).
Atthestartofthethirdregulatoryperiod(2013-2020),thegreenhousegasemissionauthorisation
system,previouslygovernedbyLegislativeDecree216/2006,wasupdatedandmodifiedbyLegislative
Decree30of13March2013,effectivefrom5April2013.Accordingtothenewprovisions,themain
aimofthedecreewastoupdatelawsongreenhousegasemissionauthorisationsandtocontinually
reducefreeemissionallowances.Theallowanceswillbeassignedtoeachplantonagradually
decreasingbasis,andwillnolongerbeconstant(asinthesecondregulatoryperiod),andwillalso
dependontheactualfunctionalityoftheplants.
In2016,theSnamGroup’stotalCO2emissions,certifiedbyanaccreditedbodyaccordingtothe
provisionsofthecompetentnationalauthority,amountedtoapproximately0.550milliontonnes,out
oftotalannualallowancesofapproximately0.207millionissuedbytheMinistryfortheEnvironment,
LandandSea(negativebalanceof0.343millionallowances).Thisdeficitisoffsetbytheallowances
alreadypresentintheregistersforSnamGroupplants,accumulatedthankstothesurplusfrom
previousyears.
2014 2015 2016
1,350 1,373 1,439
TOTALDIRECTGHGEMISSIONS-SCOPE1(KTCO2EQ
)
Summarydataandinformation
59
PLANTS SUBJECT TO ETS DIRECTIVE
Activities Number of plants Name of plants
Transportation 11 GascompressionstationsinEnna,Gallese,Istrana,Malborghetto,Masera,Melizzano,Messina,Montesano,PoggioRenatico,Tarsia,TerranuovaBracciolini
Storage 8 StoragegascompressionstationsinCortemaggiore,FiumeTreste,Minerbio,Ripalta,Sabbioncello,Sergnano,SettalaandBordolano
Regasification 1 LiquefiednaturalgasplantinPanigaglia
CO2 EMISSIONS FROM ETS PLANTS (GRI: G4-EC2)
0.40
0.33
0.240.21
0.55
0.44
2014
Certified emissions Shares
2015 2016
CO2EMISSIONSETSPLANTS(106t)
SnamAnnualReport2016
60
SNAM AND THE FINANCIAL MARKETS
Europeanstockmarkettrendsweremainlydownwardsin2016.Inthefirst
half-yearasharpfallwasrecorded,penalisedbythedeteriorationofeconomic
prospectsandoilpricesattheirlowestfor10years,aswellasfearsgeneratedby
theresultoftheBrexitreferendum.
Inthesecondpartoftheyearshareindicespartlyrecoveredbothonaccountof
therecoveryinoilprices,supportedbythepossibilityofanagreementbetween
themajorglobalproducersforafreezeonproductionlevels,andtheconfirmation
ofaccommodatingmonetarypoliciesbycentralbanks.Inthelastpartoftheyear
thepoliticaluncertaintiesgeneratedbytheAmericanelectionsincreasedmarket
volatility.
TheSTOXXEurope600indexended2016down1.2%comparedwiththeendof
2015,whilethenationalFTSEMIBindexrecordedoneoftheworstperformances
atEuropeanlevel(-10.2%),burdenedparticularlybytheunder-performanceof
bankstockasaresultofthedifficultiesencounteredinsolvingtheoutstanding
receivablesproblem.TheSTOXXEurope600utilitiesindexended2016down
8.9%,adverselyaffectedbytheprospectofinterestrateincreases;internally,the
performanceofregulatedcompanieswasaboveaverage(-4.6%).
Snam share performance
Snamsharesclosed2016atanofficialpriceof€3.923,down1.97%fromthe
priceof€4.002recordedattheendofthepreviousyear14.
Thestockincreasedinthefirsthalf-year,reachingitshistoricalmaximumon
30March(€4.56,adjustedprice),supportedbyaclearandstableregulatory
framework,theproductoftheregulatoryrevisionwhichconcludedinDecember
2015,solidcompanyfundamentals,confirmedbythe2015annualresultsand
bythepresentationon29June2016oftheItalgasdemergertransactionandthe
2016-2020StrategicPlan,bothwellreceivedbythefinancialcommunity.
Thetrendwasreversedinthesecondhalfoftheyear,causedbythedowngrading
oftheItalianeconomicgrowthestimatesandarecoveryininterestratesfrom
September.Overthecourseoftheyearthestock,however,over-performedboth
initsreferencesectorandontheItalianmarket,asevidenceofthewayinvestors
welcomethesoundbusinessmodeloftheCompanyandastrategythatenvisages
sustainablereturnsinthelongterm.14 Thepricewasadjustedfollowingtheoperation
separatingItalgasfromSnamaccordingtothede-finitioninthe“Corporateactionmanual”ofBorsaItalianaS.p.A.,whichprovidesthat,inthecaseofextraordinarytransactions,inordertorestorethecontinuityandcomparabilityofstockprices,anappropriatecoefficienttoadjustthehistoricalseriesmustbeapplied.Therefore,alltheofficialpricesofSnamstockforthefinancialyearsbeforetheeffectivedateoftheseparationoperation(7November2016)wereadjustedusingthe“Kadjustmentfactor”,establishedbyBorsaItalianaatavalueof0.82538045.
Summarydataandinformation
61
SNAM - COMPARISON OF PRICES OF SNAM, FTSE MIB AND STOXX EUROPE 600 UTILITIES (1 JANUARY 2016 - 31 DECEMBER 2016)
Relations with the financial community and investor relations policy
Snam’s communications policy has always focused on an ongoing dialogue with the entire financial
community. The Company’s goal is to establish a relationship of trust with shareholders, investors,
analysts and all financial market operators, and to provide them with regular, complete and prompt
information to ensure an excellent understanding of the Group’s performance and strategy.
An active policy of engaging investors, supported by clear and transparent communications, contributes
to the enhancement of the Company’s reputation, and Snam considers this a strategic factor in
creating value in terms of shareholder satisfaction, understanding their expectations concerning
corporate governance and enhancing the knowledge of all stakeholders who are called upon to make
decisions that impact the Company.
This communications policy takes the form of many economic and financial publications concerning
business performance and sustainability developments, in addition to ongoing meetings and events,
which throughout 2016 included the following:
n 17 roadshows to meet shareholders and institutional investors in the major financial centres of
Europe and North America;
n 3 industry conferences allowing investors specialising in the utilities and infrastructure sectors to
meet the Company’s senior management;
n 77 one-to-one meetings between management and investors, in addition to numerous group
meetings (20);
n conference calls upon the publication of the Company’s results (annual, semi-annual and quarterly)
and the presentation of the Business Plan.
60
70
80
90
100
110
120
130
140
Jan-16 Feb-16 Mar-16 Apr-16 May-16 June-16 July-16 Aug-16 Sept-16 Oct-16 Nov-16 Dec-16
Snam volume Snam FTSE MIB Stoxx Europe 600 Utilities
0
20
40
60
80
100
Mln
Snam Annual Report 2016
62
Inclusion of Snam stock in sustainability indices
In2016,fortheeighthconsecutiveyear,SnamstockwasagainincludedbyRobecoSAM(oneofthe
mostimportantsustainabilityratingagenciesatgloballevel)intheDow Jones Sustainability World
Index,themaininternationalequityindexformedonthebasisoftheperformanceofcompaniesinthe
areaofeconomic,socialandenvironmentalsustainability.InJanuary2017,forthethirdconsecutive
year,RobecoSAMplacedSnamintheSilver ClassoftheSustainabilityYearbook2017,adistinguished
groupofcompanies,whichintheindustrialsectorconcernedincludescompanieswithahighscorein
termsofsustainability.
ReconfirmationalsotooktheformofinclusionintheprestigiousFTSE4Goodindex,whichthe
Companyhasbeeninsince2002.Snamwasalsoincludedforthefourthconsecutiveyearamongthe
highestscorersofCDP.TheCompanywasalsoincludedintheAList,thehighestscoreoftheCDP
evaluationmodel,whichin2016wasonlyawardedto193companiesglobally.
Lastly,SnamstockisincludedinthetwoMSCI World ESG and MSCI ACWI ESGindices.
Snamstockisalsoincludedinthefollowingsustainabilityindices:
Summarydataandinformation
63
Debt management and credit rating
At31December2016,theGroup’snetfinancialpositionwas€11,056million,resultingfromafinancial
debtof€11,090millionandliquidassetsof€34million.Snam’sgoalistoachieveadebtstructure
consistentwithbusinessrequirementsintermsofloantermandinterestrateexposure.
Onthedebtside,theseparationofItalgas,effectivefrom7November2016,ledtoareductionin
Snam’sdebtofapproximately€3.6billionandacash-infortheCompanyofapproximately€3.2billion,
netofapproximately€0.4billioninEIBfundingrelatingtoItalgasprojectstransferredtothelatter.
Followingthistransaction,Snamrecalibratedandredesigneditsliabilitiesstructure.
Inthiscontext,theCompanysuccessfullyconcludedaliabilitymanagementtransaction,thelargest
todateinEurope,throughthebuybackonthebondmarketforatotalvalueofapproximately€2.75
billion,withanaveragecouponofapproximately3.3%andaremainingtermofaround3years,and
thesimultaneousissueoftwonewbondloansforatotalof€1.75billion,withanaveragecouponof
0.625%andanaveragematurityofaround8.3years.
Additionally,in2016Snamextendedbyoneyearthetermsofthesyndicatedloanof€3.2billionat
thesamecostconditions.Thetwosyndicatedbanklines,amountingto€2.0billionand€1.2billion,
shallexpirein2019and2021,respectively.InadditionSnamreducedtheamountofbilateralbank
loanscomparedwith31December2015byaround€1billion;andrenegotiatedthetermsofexisting
agreementsextendingthetermbytwoyearsandimprovingthecostconditionsapplied.
Thesetransactionsonboththebankingandbondmarketmadeitpossibletooptimisemedium-and
long-termdebtmaturitiesbyextendingtheiraveragetermandcreatingconditionsforareductionin
averageborrowingcosts.
Short term21%
Bonds69%
Floating rate36%
Fix rate64%
Long term79%
Bank Loans20%
EIB Loans11%
SnamAnnualReport2016
64
15 Considering,also,theadditionalbondissuesmadeinJanuaryandFebruary2017,foratotalnominalvalueof€800million,theProgrammeallowsfortheissuanceofbondsforamaximumamountofapproximately€1.7billion.
At31December2016,Snamhadunusedlong-termcommittedcreditlinestotallingaround€3.2
billion.Inaddition,Snamasat31December2016enteredintoaEuroMediumTermNotes(EMTN)
Programmewhichallowsfortheissuance,by30September2017,ofbondsforamaximumamountof
€2.5billion15.
TheseparationofItalgasdidnotchangetheCompany’screditrating,whichremainsatinvestmentgrade,
witharatingofBBBfromStandard&Poor’s,Baa1fromMoody’sandBBB+fromFitch.Snam’slong-term
ratingbyMoody’sandStandard&Poor’sisanotchhigherthanthatofItaliansovereigndebt.
LONG-TERMDEBT RATING
LATEST UPDATE
SHORT-TERMDEBT R ATING
OUTLOOK
Negative
Unassigned
Baa1
19 December 2016
LONG-TERMDEBT RATING
LATEST UPDATE
SHORT-TERMDEBT R ATING
OUTLOOK
Stable
A- 2
BBB
29 November 2016
LONG-TERMDEBT RATING
LATEST UPDATE
SHORT-TERMDEBT R ATING
OUTLOOK
Stable
F2
BBB+
29 July 2016
Summarydataandinformation
65