Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adjusted EBITDA increased by 16% year-on-year to EUR1,417 million, driven by WACC uplift, ROSS effects, and rapid growth.
- Adjusted net income rose by 11% year-on-year to EUR691 million.
- Investments surged by 60% compared to the first half of 2023, reaching EUR1,159 million.
- The acquisition of Edison Stoccaggio is expected to strengthen Snam's industrial and strategic position.
- Snam issued a EUR1 billion sustainability credit line and obtained EUR100 million from EIB to support energy efficiency projects.
Negative Points
- Net debt increased to EUR16.4 billion with an average net cost of debt at 2.5%.
- Gas demand in Italy declined by 4.3%, despite a 3% global increase.
- The end of the super-ecobonus incentive on energy efficiency led to a slightly negative contribution from energy transition businesses.
- Higher net financial expenses by EUR43 million due to increased interest rates.
- The regulatory environment remains uncertain, with potential changes in inflation indexation and WACC adjustments.
Q & A Highlights
Highlights of Snam SpA (SNMRF, Financial) Earnings Call Transcript
Q: Can you provide the mark-to-market of WACC for the observation period and comment on the write-off of the stake in Gas Connect Austria (GCA)?
A: Currently, the mark-to-market WACC for transport points to 5.5% for the next regulatory period, which is 20 basis points lower than our business plan assumption. Regarding GCA, Verbund, the majority shareholder, took an impairment on GCA. We recorded our share of EUR22 million as special items in our net income adjusted. Our current book value for GCA is EUR112 million, and we will run an impairment test once the business plan is finalized.
Q: Can you elaborate on the synergies expected from the Edison Stoccaggio acquisition and the financing strategy?
A: The strategic role of these assets is significant due to their proximity to our existing facilities, which will enhance operational coordination and security of storage capacity. We expect operational synergies of about EUR1.5 million to EUR2 million per year. Regarding financing, we plan to issue hybrid bonds, which will maintain our financial flexibility and are efficient due to their tax-deductible nature.
Q: Are there any one-off items in the revenues, and how are you managing the increased costs?
A: Yes, we recovered EUR29 million of 2023 LNG extra revenues, which is a one-off. The increase in costs, mainly EUR14 million, is due to inflation-driven labor costs and the extension of employee health insurance. There is no significant increase in capitalized costs.
Q: What is the expected impact of inflation indexation on the regulatory asset base for 2025?
A: We expect the authority to release a consulting document soon to discuss the best indicator for inflation going forward. The current deflator has shown a decoupling from the inflation rate, and we anticipate changes to be applied from 2025 onwards. Even if changes do not occur, we can mitigate the impact through higher OpEx inflation, better fast money effect, and better depreciation allowances.
Q: Are there any organic expansion opportunities within Edison Stoccaggio assets, and what is the expected contribution from Austrian associates?
A: We see opportunities to enhance performance and optimize storage capacity. We are also exploring the possibility of running assets on overpressure conditions. For Austrian assets, TAG is expected to contribute high double-digit net income, while GCA will contribute mid-single-digit net income.
Q: Do you have any M&A or potential divestment plans for non-core assets?
A: We continuously evaluate opportunities for value creation, including M&A and potential divestments. However, specific plans were not detailed during the call.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
