Snam Reports Q2 Dip, Updates on Italgas Spinoff
Italy’s gas grid and storage operator Snam said July 27 that its net Q2 2016 profit was €260mn, down 9% year-on-year. It also provided an update on its planned spinoff of Italgas, but gave no details over its reported interest in buying into Austria's gas grid.
Overall Italian gas demand was only 1.2% higher in 1H at 36bn m³, although gas burned by power plants rose 10% (by 0.9bn m³) owing to lower rainfall and thus less hydro power generated. Industrial use of gas was up 3%, but mild weather meant residential/office gas use fell 4.3%. Snam CEO Marco Alvera said it was "very good news" that industrial demand had grown, adding that the trend in power sector demand was "encouraging."
Throughput in its 32,500 km gas grid grew 4% to 34bn m³ in 1H 2016. Use of its Panigaglia LNG terminal in northwest Italy however remained negligible, and Alvera told analysts that Snam would not invest in any new LNG projects that involved "project or volume risk".
Snam's planned spinoff of city gas distribution subsidiary Italgas – approved by Snam’s board on June 28 – is on course to be finalised by end-2016. It has proposed that Italgas be 13.5%-retained by Snam itself with the remaining 86.5% assigned to Snam shareholders, and that Italgas be separately listed as ITG Holdings. Alvera told investors that Fitch had given ITG a BBB+ rating, and that its board would be named in August. Any proceeds from the spinoff received by Snam would be used to pay down Snam's debt, said finance chief Antonio Paccioretti.
Italy’s regulator has set 2016 revenues for Snam’s storage business Stogit of €503.5mn, and a regulated asset base (RAB) of €4bn, said Snam.
Snam CEO's since January 2016, Marco Alvera (Photo credit: Snam)
Snam noted that, after the spinoff, it has developed a significant investment plan for 2016-20 of €4.3bn, of which €0.9bn in 2016, to support development of Italian infrastructure. The plan also includes building reverse-flow capabilities to other European countries and capacity to receive new flows from the Caspian Sea area through the TransAdriatic Pipeline – itself 20% owned by Snam.
Alvera told analysts that the target of first gas through TAP in January 2020 was unchanged. He declined to comment on reports that Snam, possibly with Italian bank Unicredit, has been shortlisted as preferred bidder for GasConnect Austria, which was put up for sale by OMV last year.
Snam has also proposed an up-to-€500mn share buyback programme over 18 months covering up to 3.5% of Snam’s share capital; it will be put to the vote at its shareholders’ meeting on August 1.
Snam’s largest shareholder with 28.98% equity remains CDP Reti – itself 59.1%-owned by Italian state bank Cassa Depositi e Prestiti, 35% by China’s State Grid Europe, and 5.9% by others. Snam itself has 40.5% equity in France’s second largest gas grid TIGF, 89% in Austrian transit pipe TAG, and exercises joint control of Interconnector UK with Belgian gas grid Fluxys.
Regarding TIGF, Alvera told analysts he believed the proposed Midcat pipe project to link Spain and southwest France – reported by NGE as unlikely to come to fruition before 2022 – would soon begin a cost-analysis study lasting six to nine months on behalf of gas grids on either side of the border. Alvera though said he believed the benefits of Midcat will outweigh the costs. That's TIGF perspective as the grid operator for southwest France; however adjacent gas grids and the French energy regulator remain far more sceptical.
On TAP meanwhile, European Bank for Reconstruction and Development president Suma Chakrabarti told Albanian PM Edi Rama July 26 that 2016 may be a record year for EBRD's investment in Albania, with €150mn-€170mn expected investment. The EBRD chief said that several projects that were being considered by the EBRD including participation in TAP which, if such financing went ahead, would be EBRD’s largest ever project.
Mark Smedley