Binding commitments signed with major financual institutions for the financing of the beneficiary company of Italgas separation from Snam

San Donato Milanese, 30 June 2016 – As part of the separation of Italgas from Snam, binding financing commitments have been signed with eleven major international and domestic financial institutions, namely: Barclays, BNP Paribas, Crédit Agricole Group, Cassa depositi e prestiti, Citi, ING, Intesa Sanpaolo, J.P. Morgan, Mediobanca, Société Générale and Unicredit.

These binding commitments, for a total amount of 3.9 billion euro, are aimed at meeting the capital requirements of the beneficiary company of the demerger, including the repayment of current debt to Snam, and will provide it with appropriate resources to enhance its leadership position in the Italian distribution market.

The credit lines, differentiated in kind and maturity, include a Bridge to Bond for an amount of 2.3 billion euro with a maturity of up to 2 years, revolving credit lines for an amount of 1.1 billion euro with a maturity of between 3 and 5 years, and bilateral bank lines for an amount of 500 million euro with a maturity of between 3 and 5 years.

The commitments made by the financial institutions are subject to the market’s usual efficacy conditions, as well as to the same conditions as the separation of Italgas, including the issuance of Borsa Italiana’s order admitting the shares of the beneficiary company to trading on the MTA.

Orrick, Herrington & Sutcliffe acted as legal advisor to Snam. Linklaters assisted the financial institutions.

Snam’s Board of Directors approves the separation of the gas distribution business

  • Snam’s Board of Directors, which met yesterday under the chairmanship of Carlo Malacarne, approved the separation of Italgas from Snam.
  • Listing of the shares of the new company by the end of 2016
  • 1 share of the new company for every 5 Snam shares
  • Snam retains a 13.5% stake
  • Proposal of a share buyback program up to 3.5% of the post-demerger share capital of Snam for a maximum amount of 500 million Euro in an 18-month period
  • Call of the shareholder meeting and bondholder meeting

San Donato Milanese, 29 June 2016 – Snam’s Board of Directors, which met yesterday under the chairmanship of Carlo Malacarne, approved the separation of Italgas from Snam by means of a unitary and substantially simultaneous transaction that includes, inter alia, the partial and proportional demerger and, subsequently, the listing of the shares of the newly incorporated beneficiary company of the demerger, which will directly hold the entire share capital of Italgas, on the Mercato Telematico Azionario (MTA) of Milan.

“In a constantly evolving market, local gas distribution activities now have different characteristics and needs than those of gas transportation, storage and LNG. The demerger of Italgas from Snam will significantly enhance the role of both companies in their respective businesses: Snam will be able to consolidate its leadership by contributing to the integration of the gas markets in Europe, and Italgas will seize new development opportunities related to the local tender processes”, Snam CEO Marco Alverà commented.

Through the industrial and corporate reorganization, the entire stake held by Snam in Italgas, equal to 100% of the share capital of Italgas, will be transferred to the beneficiary company in order to separate the Snam Group’s gas distribution activities in Italy, being substantially different from those of the rest of the other Group’s activities (transportation and dispatching, LNG and storage in Italy and abroad) in terms of operational organisation, competitive context, regulation and investment requirements.

  • The unitary transaction, as a whole, will be carried out by means of the following steps, which will occur in a substantially simultaneous manner:
    the transfer in kind by Snam to the beneficiary company of a stake equal to 8.23% of the share capital of Italgas in exchange for the allocation to Snam of 108,957,843 newly issued shares of beneficiary company, in order to enable Snam to hold, post-demerger, a stake of 13.50% in the beneficiary company;
  • the sale by Snam to the beneficiary company of 98,054,833 shares in Italgas, equal to 38.87% of the share capital of Italgas for a price of Euro 1,503 million, the payment of which shall include a Vendor Loan on the part of the beneficiary company, thus generating an adequate level of financial debt for the beneficiary company, taking into account the activity, risk and cash flow generation profile;
  • the partial and proportional demerger of Snam with the allocation to the beneficiary company of a stake equal to 52.90% held by Snam in Italgas and consequent allocation to Snam shareholders of the remaining 86.50% of the beneficiary company’s share capital.

As a result of the above-mentioned steps, Snam will retain a 13.5% stake of the share capital of the beneficiary company.

Following the demerger, Snam’s shareholders will be allocated shares in the beneficiary company in proportion to the number of shares held by each shareholder in Snam at the effective date of the demerger. The allocation will take place based on a ratio of one beneficiary company share for every five Snam shares held.

This ratio may mean that individual shareholders are entitled to a number of new shares that is not a whole number. Therefore, to facilitate the transactions, Snam will engage an authorized intermediary to purchase at market prices the fractional shares of the beneficiary company through the depositary intermediaries enrolled with Monte Titoli S.p.A., within the limits required to enable shareholders to round the number of shares to which they are entitled to. The beneficiary company’s shares will trade separately from Snam’s shares on the Mercato Telematico Azionario (MTA) of Milan and will operate separately as an independent company, having its own management and its own Board of Directors.

The effectiveness of the transaction is therefore subject to the conditions of law, including in particular the favourable vote of Snam’s Shareholders’ Meeting, and to the following:
– the issuance of Borsa Italiana’s order admitting the shares of the beneficiary company to trading on the MTA;
– the issuance of the judgment of equivalence by Consob; and
– the approval by Snam’s bondholders.

The prospective timeframe of the transaction provides that, subject to the above-said conditions, the demerger will likely take effect by December 31, 2016.

The demerger will result in a proportional reduction of Euro 1,569,211,964.76 1 in Snam’s shareholders’ equity, by way of a reduction of Euro 961,181,518.44 in share capital and a reduction of Euro 608,030,446.32 in reserves. Since Snam shares have no par value, the aforementioned share capital reduction will not result in any shares being cancelled.

The demerger will also result in an increase of Euro 1,569,211,964.76 in the beneficiary company’s shareholders’ equity, attributed to share capital in the amount of Euro 961,181,518,44, thereby increasing the share capital from Euro 40,050,000 to Euro 1,001,231,518.44, via the issue of 700,127,659 new ordinary shares; and the share premium reserve by Euro 608,030,446.32.

Snam’s shareholders will not have the right to exercise the withdrawal right as a result of the demerger, also in light of the fact that the beneficiary company’s shares will be admitted to trading at the effective date of the demerger.

As provided for by the memorandum of understanding agreed upon by Snam, CDP Reti and CDP Gas, the transaction also provides for Snam, CDP Reti and CDP Gas to enter into a shareholders’ agreement involving their stakes in the beneficiary company, equal to 13.50%, 25.08% and 0.97%, respectively, in order to ensure a stable and transparent ownership structure for the beneficiary company once the transaction is completed. Specifically, the memorandum of understanding is designed to regulate the main terms of the transaction and the general governance guidelines which, after the transaction, will apply to the beneficiary company and Italgas.

The transaction and the memorandum of understanding have been examined by the Control, Risk and Related-Party Transactions Committee for the purpose of the procedure used to govern transactions with Related Parties, adopted by Snam on 30 November, 2010, in accordance with the CONSOB Regulation.

On June 28, 2016 the Snam Control, Risk and Related-Party Transactions Committee released its unanimous favourable opinion regarding Snam’s interest in carrying on with the transaction as well as on the opportunity and substantial correctness of the relevant conditions. Pursuant to the applicable laws and regulations, the demerger plan, the Snam’s Board of Directors report and the information document will be published on Snam’s website (www.snam.it) and submitted to and made available at the “NIS-Storage”, authorized storage facility managed by Bit Market Services S.p.A. (http://www.emarketstorage.com), as well as at Snam’s registered office at Piazza Santa Barbara 7, San Donato Milanese (MI), in compliance with the time frame provided for by the applicable regulations.

The contents of the information document, which will be published before the shareholders’ meeting which will approve the demerger, is in accordance with the content set forth in Table 2 of Annex 3B of the Issuers’ Regulation and the Annex 4 of the Regulation adopted by Consob by resolution 17221 of March 12, 2010.

The Board of Directors has called an extraordinary and ordinary shareholders’ meeting on August 1st, 2016, in order to approve, respectively, the transaction and the share capital changes following the demerger and to resolve on the proposal of a share buyback program up to 3.5% of the share capital of Snam post-demerger.

It should be noted that the number of treasury shares already held as at the date of this press release is 1,127,250, representing 0.03% of the share capital of Snam.

The authorisation to acquire the treasury shares is requested for a duration of 18 (eighteen) months starting from the effective date of the partial and proportional demerger of the company submitted for the approval of the extraordinary Shareholders’ Meeting called on 1st August 2016.

The explanatory report of the Board of Directors to the Shareholders’ meeting pursuant to Article 73 of the Issuers’ Regulation, will establish the criteria for determining the purchase price of the treasury shares.

The purchases will be carried out in accordance with the provisions of Article 132 of the TUF, Article 144-bis of the Issuers’ Regulation and any other applicable legislation, including, where appropriate, the accepted market practices recognised by CONSOB. It should also be noted that the purchases will be carried out by the Board of Directors or by authorized parties in compliance with the provisions of Article 2357, paragraph 1 of the Civil Code and, therefore, within the limits of the duly ascertained distributable profits and available reserves resulting from the last duly approved financial statements.

The notice convening the ordinary and extraordinary shareholders’ meeting of the company and the Explanatory Report of the Board of Directors to the shareholders pursuant to Article 73 of the Issuers’ Regulation will be made available to the public in compliance with applicable law.

The Board of Directors has also resolved to call a bondholders’ meeting to request the authorization to carry out the transaction, delegating the CEO to set the date of such meeting.

The Board of Directors has also confirmed Georgeson as representative appointed by the company – pursuant to Article 135-undecies TUF – to whom the shareholders and the bondholders may confer, free of charge, a proxy to take part in the shareholders’ meeting.

Goldman Sachs acted as financial advisor in the transaction; Cleary Gottlieb Steen & Hamilton and Orrick, Herrington & Sutcliffe acted as legal advisors.

The undersigned Antonio Paccioretti, in his capacity as the officer responsible for preparing the corporate and accounting documents, hereby certifies, pursuant to Article 154-bis, paragraph 2 of the TUF, that the accounting information contained in this Information Document corresponds to information contained in accounting documents, registers and entries.
1 The demerger will be executed on a continuity of value basis, as the transaction is a business combination involving entities or businesses under common control, thus excluded from the scope of IFRS 3 “Business Combinations” and of IFRIC 17 “Distributions of Non-cash Assets to Owners”.

Snam presents its 2016-2020 Strategic Plan

CEO Marco Alverà today presents Snam’s 2016-2020 Strategic Plan, approved yesterday by the Company’s Board of Directors chaired by Carlo Malacarne.
 
Separation of Italgas from Snam through a partial and proportional demerger and subsequent listing of Italgas by the end of 2016 confirmed and approved by BoD
Snam post-demerger strategic plan:
– 4.3 billion euro investment in transportation and storage in Italy
– Completion of reverse flow project and connection of Southern Corridor to Europe through the Italian network
– RAB: average annual increase of 1% in the plan period
– Snam 2016 post-demerger dividend of 0.21 euro, +2.5% per year in 2017 and 2018
– Financial flexibility to support investments and remuneration policy
– Authorization requested for a share buyback plan for a maximum of 3.5% of Snam’s share capital and a maximum amount of 500 million euro within an 18 month period
Italgas:
– Enhanced leadership in the distribution business in Italy
– Leverage and debt structure able to support a rating profile of solid investment grade in line with Snam’s rating profile
– Paolo Gallo indicated as CEO of the company which is going to be listed
– Capital markets day in 4Q 2016 to present the company, its strategic plan and equity story
Dividend 2016: Italgas’ capital structure and financial resources appropriate to pay a 2016 dividend that allows Snam’s current shareholders to receive an overall remuneration at least in line with 2015
London, 29 June 2016 – CEO Marco Alverà today presents Snam’s 2016-2020 Strategic Plan, approved yesterday by the Company’s Board of Directors chaired by Carlo Malacarne.
“The separation of Italgas from Snam will significantly enhance the role of both companies in their respective markets. While Italgas will be a major player in the consolidation of the distribution sector in Italy, Snam will focus on its strong growth potential leveraging its leadership in the European market.
Over the next five years we will invest 4.3 billion euro in Italy in strengthening the domestic network and integrating it with the continental markets. Reinforcing Italy’s position in the European gas system will allow us to further enhance the value of our network also to the benefit of consumers and will enable Snam to exploit possible investment opportunities with attractive returns.
The quality of our assets, the soundness of our financial position and the stability of our cash flow will allow us to continue to invest in our growth and to remunerate our shareholders with an increasing dividend over the plan period. The financial flexibility resulting from the demerger may be used for further investments and potentially for the buyback plan”, CEO Marco Alverà commented.
Separation of Italgas from Snam: a driver for value creation for both companies
The separation of Italgas from Snam is aimed at strengthening both companies and bringing upside to all shareholders, taking into consideration the substantial differences between the two businesses and the different development opportunities in the respective market frameworks.
Thanks to the synergic and integrated management of the transportation, LNG and storage businesses, Snam will be able to contribute to the realization of the single energy market and enhance its European leadership. The financial flexibility resulting from the separation of Italgas and the regulatory framework will also enable the company to focus on organic investments and to exploit potential further development opportunities in Europe, thus enhancing its growth profile and shareholder remuneration policy. This will be implemented while maintaining the strict discipline and solid financial structure which have always characterized Snam’s activities. The separation of Italgas is expected to be neutral in respect to Snam’s credit rating. Snam will also retain a 13.5% stake in Italgas – disciplined by a shareholders’ agreement between Snam, CDP Reti and CDP Gas – which will enable Snam to retain value creation from the future growth opportunities for Italgas in the distribution sector.
As a standalone company from a managerial, operational and financial point of view, Italgas will be able to concentrate its efforts and competencies on the best strategy to take part in the upcoming concession tenders, with the aim of significantly growing its market share. This will allow it to benefit from further economies of scale and higher operational efficiency. The company is also expected to have a solid credit rating, in line with Snam’s credit rating, and direct access to capital markets. With a more efficient financial structure and competitive costs, it will exploit the opportunities offered by the current conditions in the financial market.
Development of infrastructure and new services
For the 2016-2020 period, following the demerger, Snam envisages a significant investment plan, amounting to 4.3 billion euro, of which 0.9 billion euro will be invested in 2016. This investment plan will focus on the development of Italian infrastructure and its interconnection with the European infrastructure, thus enhancing the security, flexibility and liquidity of the overall gas system. This target will be achieved through strengthening the transportation network and creating further storage capacity in Italy, also enabling the completion of reverse flow capacity towards other European countries and including new gas flows coming from the Caspian region through the TAP pipeline.
In particular, investments in transportation and LNG, amounting to 3.8 billion euro in the plan period, will be aimed at guaranteeing security and reliability of the network and, moreover, satisfying capacity and supply diversification requirements, for the benefit of shippers and end users. Furthermore, the North-West of Italy will see the completion of infrastructure targeted at enhancing flexibility and security of supply, as well as the creation of exit capacity, part of which is already available.
In the storage business, the investment plan of 0.5 billion euro for the 2016-2020 period is aimed at ensuring further modulation and peak capacity, thus increasing overall liquidity and flexibility in the system and favoring further opportunities for gas trade. These increases are mainly related to the new storage site of Bordolano (Cremona) progressively coming into full operation.
Snam will also leverage its international equity assets to favour increasing interconnection of the European infrastructure and the development of more diversified and flexible gas flows, maximizing the profitability of its assets.
The company will monitor potential new opportunities for investment in infrastructure assets in Europe with a selective approach, maintaining the usual financial discipline and risk profile in line with its current business portfolio.
Finally, Snam also intends to develop new market services in the Italian regulatory framework aimed at increasing the quality of the commercial offer to shippers and generating benefits to consumers in terms of lower costs.
In a medium-to-long term perspective, the company closely follows emerging uses for natural gas, such as the transformation of biogas into bio-methane, power-to-gas facilities and the development of logistics for LNG and CNG use for transportation.
Expected evolution of RAB and results in the plan period
In light of these investments and considering an average annual inflation rate of around 1%, consolidated RAB for transportation, LNG and storage activities is expected to grow with an average annual rate of round 1% over the plan period in respect to 19.2 billion euro estimated at the end of 2015.
As far as transportation, LNG and storage are concerned, Snam intends to maintain the usual attention to operational efficiency. The inertial increase due to superior structure costs following the demerger and the inflative effects will be substantially offset by the results of new efficiency actions. Controllable fixed costs are expected to remain substantially stable over the plan period in real terms and with unvaried business perimeters.
The plan also envisages an increase of net profit thanks to the joint contribution of multiple factors such as the RAB growth, the attainment of operational efficiencies, and the increasing income from equity investments, which is expected to also take advantage of TAP contribution from 2020, and the expected reduction of financial costs.
New shareholder remuneration policy: DPS increase and share buyback plan
The dividend for the 2016 fiscal year is expected to be paid separately by Snam and Italgas. A 2016 DPS of 21 euro cents is expected for Snam, with an annual growth of 2.5% in the two following fiscal years.
Italgas’ remuneration policy will be approved by its Board of Directors following the demerger. The company’s capital structure, financial resources and risk profile will enable it to pay a 2016 dividend that, in conjunction with Snam’s dividend, will allow the current Snam’s shareholders to receive for the 2016 fiscal year an amount of dividends at least in line with the previous year.
In addition, Snam’s Board of Directors agreed to ask the shareholders’ meeting, called for 1st August, the authorization to proceed with a share buyback plan for a maximum number of shares representing 3.5% of the post-demerger share capital, for a maximum amount of 500 million euro over an 18 month period.
This plan provides further flexibility for the optimization of Snam’s capital structure and support to the overall shareholders remuneration. Such plan will be eventually carried out upon evaluation of specific opportunities for growth and value creation, as well as the evolution of the financial structure.
Italgas’ demerger and financial releverage
The effectiveness of the transaction is subject to the conditions of law, including in particular the favourable vote of Snam’s Shareholders’ Meeting, and to the following:
– the issuance of Borsa Italiana’s order admitting the shares of the beneficiary company to trading on the MTA;
– the issuance of the judgment of equivalence by Consob; and
– the approval by Snam’s bondholders.
The prospective timeframe of the transaction provides that, subject to the above-said conditions, the demerger will likely take effect by December 31, 2016.
In the overall operation, in agreement with the upcoming majority shareholder, CDP Reti, the CEO candidate for the company which is going to be listed has been identified as Paolo Gallo.
Italgas’ pro-forma consolidated net financial debt at 31 December 2015 amounts to approximately 3.5 billion euro. Taking into account the distribution of a 2015 ordinary dividend to Snam of around 275 million euro, envisaged before the demerger, and the estimates on the expected cash flow in 2016, Italgas’ net financial debt at the end of 2016 may be estimated at approximately 3.7 billion euro.
As a result of the transaction, Italgas will be required, amongst other things, to repay the intercompany loans currently in place with Snam.
The overall debts will be paid off by Italgas through:
– the use of credit lines on which selected primary banks have already signed binding commitments for a total of 3.9 billion euro including the main terms and conditions of the future financing of Italgas;
– the finalization of a release of debt for Snam, once the support of the European Investment Bank (EIB) has been obtained, concerning two loans previously granted by the EIB for a total amount of 424 million euro, aimed at financing Italgas projects.
Upon completion of the demerger, the possible debt structure of Italgas will be as follows:
– a Bridge to Bond for an amount of approximately 2.3 billion euro with a maturity of up to 2 years,
– revolving credit lines for an amount of approximately 1.1 billion euro with a maturity of between 3 and 5 years,
– bilateral bank lines for an amount of approximately 500 million euro with a maturity of between 3 and 5 years,
– two EIB loans for a total amount of 424 million euro with an average remaining maturity of about 10 years.
The commitments made by the lending institutes will be subject to loan agreements whose effectiveness will be conditioned to the completion of the demerger, the authorization of the regulatory authorities and the admission of Italgas’ shares to trading.
The above-mentioned leverage level and financial package are expected to support a rating profile of solid investment grade in line with Snam’s rating profile.
An overall investment of 2 billion euro over the 2016-2020 period is envisaged for Italgas, 0.4 of which to be spent in 2016 (70% of which for the network and 30% for measuring activities) and the remaining 1.6 billion over the 2017-2020 period (57% of which for the network and 43% for measuring activities). This plan, along with the program of the acquisition of new concessions, envisages a consolidated RAB growth target from 5.7 billion euro at the end of 2015 to over 7 billion euro at the end of the tender process.
The 2016-2020 Strategy Presentation to financial analysts and institutional investors will take place at 3 pm CET (2 pm GMT). The event can be followed in conference call; the support material will be made available online at www.snam.it, in the Investor Relations section, at the beginning of the conference call. The video webcast of the presentation will also be available in the same section of the website.
Pursuant to paragraph 2, article 154-bis of the TUF, the manager in charge of preparing the company’s financial reports, Antonio Paccioretti, states that the accounting information included in this press release corresponds to documents, accounting ledgers and other records.
Disclaimer
This press release includes forward-looking statements, particularly referred to the evolution of natural gas demand, investment plan and future management performances. Such statements by their very nature are subject to risk and uncertainty as they depend on the fact that certain events and developments will take place. The actual results may therefore differ from those communicated due to different reasons, such as foreseeable trends in demand, offer and prices of natural gas, general macro-economic conditions, the effect of new energy and environment legislation, the successful development and implementation of new technologies, changes in the stakeholders’ expectations and other changes in business conditions.

The “Michele Novaro” competition for young composers gets underway

Rome, 1st June 2016 – The Michele Novaro Competition officially kicks off, conceived to pay homage to the author of the notes accompanying the verses of Goffredo Mameli of the Italian national anthem and aimed at young composers, called to write a new original music that reflects the identity, culture and spirit of contemporary Italy. A composition that is not destined to replace “Il Canto degli Italiani”, better known as “Fratelli d’Italia”, but that can inspire new reflections and ideal impulses consistent with the founding and distinctive values of our country.

The Competition, promoted by the Mendelssohn Association in collaboration with the Giuseppe Verdi Conservatory of Turin and with the support of Italgas, is open to composers of any nationality who have not reached the age of 30 September 2016, the deadline for the delivery of manuscripts. The rules are available on the website www.concorsonovaro.it, together with instructions for participation and uploading of compositions and attached documents.

Participants must submit to the jury a composition for Ensemble, lasting between 7 and 10 minutes, which is inspired by the values and themes of the Constitution and in particular by the “Italian landscape”, which is based on Article 9 of the Constitutional Charter. The staff must be made up of at least 7 instruments up to a maximum of 15, including violin, viola, cello, double bass, flute-piccolo, clarinet- bass clarinet, bassoon, horn, trumpet, trombone, saxophone, harp, percussion and piano.

During the preliminary phase, which will end at the end of October, the jury – composed by composers Luca Lombardi (president), Cristian Carrara and Giulio Castagnoli, pianist Roberto Prosseda and Elio from the group Elio e le Storie Tese – will select up to a maximum of 3 scores that will enter the final phase. The final evening – which will see the Hon. Lorenzo Becattini, creator of the Competition presented last November at the Camera dei Deputati – will take place on December 2, 2016 in the Sala Grande of the Conservatorio Giuseppe Verdi in Turin, where the E nsemble di Musica Contemporanea of the Conservatory, conducted by Giuseppe Ratti, will play the finalist compositions in concert. At the end of the event will be proclaimed the winner of the Novaro Prize, which includes the publication of the work by the publisher Sonzogno and its performance in some selected concerts, as well as a financial award.

The project, which aims to remember the figure of Michele Novaro (1818-1885) more than 160 years after the writing of the “Canto degli Italiani”, composed at only 25 years old at the height of the Risorgimento, provides for three editions, each of which focuses on a specific theme. The award ceremony for each of these will take place in three cities that have been capitals of Italy: after Turin it will be the turn of Florence and then Rome.

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