Snam: Investing Big for a Sustainable Future
Snam, a leading Italian energy infrastructure company, has recently unveiled its ambitious industrial plan for the period between 2025 and 2029. This comprehensive plan outlines a notable investment strategy focused on accelerating the energy transition and bolstering the company’s leading position in the market.The plan signals a strong commitment to sustainability with a remarkable 8% surge in investments compared to the previous 2023-2027 period, reaching a total of approximately €12.4 billion. This injection of capital is earmarked for various crucial areas, with €10.9 billion allocated to the sustainable development of infrastructure – a testament to Snam’s dedication to modernizing and expanding its network to support the growing demand for renewable energy sources.
Furthermore, an additional €1.5 billion will be channeled towards energy transition businesses, showcasing Snam’s proactive approach in embracing innovative solutions and technologies.
This substantial investment will be deployed across key projects such as:
* Completing the Adriatica Line, a vital gas transportation route.
* Upgrading approximately 850 kilometers of pipelines to be hydrogen-ready, paving the way for a future powered by cleaner fuels.* Constructing three dual-fuel compression stations, enhancing the flexibility and efficiency of the gas network.
* Developing biomethane plant connection projects, further integrating renewable sources into the energy mix.
* Expanding and renovating storage sites, ensuring reliable and secure energy supply.
* Commissioning the Ravenna FSRU and building small-scale infrastructures in Panigaglia and Pignataro, strengthening Italy’s energy security.
Snam’s President, stated that, “Over the plan horizon, management expects an average annual growth (CAGR) of approximately 5% in adjusted EBITDA (compared to the previous 7.4% of the previous plan) thanks above all to the growth of the RAB, greater cost efficiency, the reduction of the WACC (weighted average cost of capital), the deconsolidation of the biomethane business and the first contributions from the network CCS. According to Snam, these factors will contribute to the expected growth of EBITDA to approximately 3.51 billion euros in 2029, net of the biomethane business, with 80 million euros coming from energy transition activities.”
The plan also emphasizes financial stability and growth, projecting an average annual growth of 4.5% in adjusted net profit over the plan period, fueled by increased EBITDA and contributions from subsidiaries. Snam anticipates a 6.4% average annual growth in the value of regulated assets (RAB), surpassing previous projections thanks to new investments, inflation, and asset integration.
While the company acknowledges that net debt is expected to rise to approximately €21.2 billion in 2029,reflecting the substantial investment commitments and dividend payouts,Snam remains confident in its ability to manage this aspect effectively. The average cost of debt is anticipated to reach 2.8%, 20 basis points higher than the previous plan, considering current and projected financing conditions.
Snam’s 2025-2029 plan is a powerful testament to its visionary leadership and commitment to shaping a sustainable energy future. By strategically investing in crucial infrastructure, fostering innovation, and prioritizing financial prudence, Snam is positioning itself as a key player in the global transition to a cleaner and more responsible energy ecosystem.
Snam Sets Ambitious Financial Targets and Plans for Growth
Italian energy infrastructure giant Snam recently unveiled its financial outlook for the next several years, signaling a period of significant investment and growth. The company provided details about its financial performance expectations, dividend policy, and vision for the future.
Snam anticipates closing the 2023 financial year with an adjusted net profit of approximately 1.23 billion euros,while adjusted EBITDA is projected to exceed 2.75 billion euros. The tariff RAB stands at 23.8 billion euros,and investments are expected to reach 3 billion euros,with 2.8 billion dedicated to gas infrastructure development.
Looking ahead to the current financial year (2024), Snam’s management expects a net profit of approximately 1.35 billion euros and an adjusted EBITDA of 2.85 billion euros. The tariff RAB is projected to rise to 25.8 billion euros,and investments will continue at a strong pace,reaching 2.9 billion euros, including 2.5 billion euros allocated to gas infrastructure.
This commitment to growth is reflected in Snam’s revised dividend policy, which promises a minimum annual growth of 4% until 2029 (up from the previous 3% minimum target).”With reference to the 2024 financial year, a total dividend of 0.2905 euros per share can be distributed,” the company stated. This will consist of a 40% interim payment of 0.1162 euros on January 20, 2025, with the remaining 60% (0.1743 euros) payable on June 23, 2025, following shareholder approval of the 2024 financial statements.
based on the closing price of 4.627 euros on January 21, 2025, Snam’s 2025 dividend translates to a compelling 6.7% yield.
Snam’s ambition extends far beyond the immediate future. the company envisions substantial investment opportunities between 2030 and 2034,with an estimated potential of up to 14.7 billion euros. This, combined with the 12.4 billion euros expected over the previously announced plan period, brings the total projected investments over the 2025-2034 horizon to approximately 27 billion euros.
How will the Adriatica Line contribute to the energy transition, and why is completing this gas transportation route so crucial?
Archyde: A Conversation with Snam’s President – Paving the Way to a Sustainable Future
Archyde (AD): Today, we’re thrilled to welcomeFausto Servidio, the President of Snam, Italy’s leading energy infrastructure company. Mr. Servidio, thank you for joining us and shedding light on Snam’s ambitious plan for the upcoming years.
Fausto Servidio (FS): Thank you for having me. I’m delighted to discuss Snam’s commitment to driving the energy transition and our exciting plans for the future.
AD: Let’s dive right in. Snam has unveiled a €12.4 billion investment plan for 2025-2029,an 8% increase from the previous period. Can you tell us more about the strategic vision behind this significant commitment?
FS: Indeed, this investment plan is a testament to Snam’s unwavering commitment to sustainability and our role in facilitating Italy’s energy transition. The €12.4 billion will be allocated to modernize and expand our infrastructure, fostering the growth of renewable energy sources. Our strategic focus is to maintain our leading market position while ensuring a reliable, secure, and cleaner energy supply.
AD: That’s commendable. Let’s discuss some of the key projects outlined in this plan. First, the Adriatica Line – why is completing this gas transportation route so crucial, and how will it support the energy transition?
FS: The Adriatica Line is a strategic gas transportation route that connects Italy with other European countries. By completing this route, we aim to enhance Italy’s energy security and facilitate the integration of renewable gases, such as biomethane and hydrogen, into the energy mix. This will contribute to diversifying our energy sources and reducing greenhouse gas emissions.
AD: Speaking of hydrogen, Snam plans to upgrade approximately 850 kilometers of pipelines to be hydrogen-ready. Can you explain how this will pave the way for a future powered by cleaner fuels?
FS: Absolutely. Hydrogen is a critical component of the energy transition, offering a low-carbon alternative to fossil fuels. By upgrading our pipelines to be hydrogen-ready, we’re investing in the future and preparing our infrastructure for a gradual shift towards a hydrogen-based economy. This will allow us to decarbonize various sectors, including industry and transportation.
AD: that’s inspiring. Another fascinating aspect of this plan is the development of biomethane plant connection projects. How will these help integrate renewable sources into the energy mix?
FS: Biomass is a valuable source of renewable energy that can be upgraded to biomethane,providing a sustainable alternative to natural gas. By developing connection projects for biomethane plants, we’re enabling the integration of this clean resource into our gas network. This will not only help reduce emissions but also promote the development of the circular economy by transforming organic waste into a valuable energy source.
AD: That’s a win-win situation. Now, let’s talk about Snam’s expected financial performance. Despite the significant investments, the company expects an average annual growth of 5% in adjusted EBITDA.Can you walk us through how this is projected?
FS: Our expected EBITDA growth is driven by several factors.First, we anticipate an increase in the value of regulated assets (RAB) due to new investments. Additionally, we’re targeting greater cost efficiency, a reduction in the weighted average cost of capital (WACC), and contributions from energy transition activities. The deconsolidation of the biomethane business will also contribute to this growth,as it will be reported as a net income in our financial statements.
AD: That sounds promising. Moreover, Snam projects an average annual growth of 4.5% in adjusted net profit over the plan period. How do you plan to achieve this growth while investing heavily in sustainability?
FS: our growth in net profit will be fueled by increased EBITDA and contributions from our subsidiaries. The significant investments we’re making in sustainability will not only drive the energy transition but also create new growth opportunities. By expanding our business into energy transition segments and hydrogen, we’re diversifying our revenue streams and further solidifying our market position. In fact, energy transition activities are expected to contribute approximately €80 million to our EBITDA by 2029.
AD: Mr. Servidio, thank you for providing such insightful details about Snam’s ambitious plan. It’s clear that the company is not only committed to driving Italy’s energy transition but also to ensuring financial stability and growth. We look forward to seeing the positive impact of these investments in the coming years.
FS: Thank you for this prospect to discuss our plans.We’re excited to lead the way towards a more sustainable future, and we’re committed to keeping our stakeholders informed about our progress.
