More resources, and more independence in action, to be allocated to growth and dividends. Snam separates from Italgas preparing the return to Piazza Affari. When? Orientatively in November. The new pipeline group strategy, together with the 2016-20 business plan, was presented here in London by the CEO Marco Alvera and from the Cfo Antonio Paccioretti. Nuova Italgas presents itself as a potential public company and is called to lead it Paul Gallo, a manager who gained experience in Acea and Grandi Stazioni.
The atmosphere in the halls of the Andaz that host the Strategy presentation is relatively quiet from the clamor of Brexit which here in the City have seemed partly shelved, at least for a few hours. The partial and proportional demerger operation will lead to birth of a Newco, which Italgas will head and will also mark the company's great return to the Stock Exchange (among the first to be listed, in Turin, in 1851) 13 years after the last delisting. Alverà dubbed it as "the most important operation of 2016", the timing is indicatively November. Given the regulated nature of the business, the summit does not expect negative impacts from the volatility induced by the post-Brexit turbulence which could instead impact, he added, "on European energy policy". “Europe remains connected with the United Kingdom via the Interconnector”, a sort of “gas Eurotunnel” in which Snam holds an approximately 30% stake, strategic in the conception of a North-South corridor. But, Alverà observes, London's exit from the EU "means losing a partner with particularly innovative policies".
The split, approved by the Board, will lead to the creation of a listed Newco by the end of the year, probably by the end of November, which will be controlled by Italgas. Snam will in any case retain 13,5% of the distribution company which is now 100% owned. A shareholder agreement with Cdp Reti and Cdp Gas, which together control 30,1% of Snam, will make it possible to block 39,55% of the capital. However, Snam will be able to exit before the deadline, with Cdp's right of first refusal. “It is a financial stake that we consider strategic, minority but significant – specified Marco Alverà – which allows Cdp Reti to stay just above the mandatory takeover bid threshold of 25%. We have no exit talks on the horizon”. On the dividend policy, the summit wanted to reassure investors: the the 2016 coupon will be overall in line with the 25 cents of 2015. In 2017 and 2018 a increase of 2,5% per year compared to 21 cents post spin-off.
The industrial logic of the entire operation is to enhance the various activities: those of transport and storage remain central to Snam which is increasingly projecting itself into a European business dimension, clarified Marco Alverà, who leverages the Tap (of which Snam holds a 20% stake) and on aggregation potential (Gas Connect Austria, among the most concrete hypotheses) through agreements rather than through costly acquisitions. Distribution passes to Nuova Italgas which will operate above all in a logic of consolidation of the fragmented Italian market in a myriad of over 200 operators. "It is an operation – he added – which is in the interest of the two companies which will be able to move independently". Post demerger Snam will have an Ebitda of 2,1 billion and a Rab (the return on capital invested in regulated activities, the key parameter for regulated infrastructure companies) of 19,2 billion. Pro forma net income is expected at $800 million this year. Nuova Italgas will start with an Ebitda of 700 million and a Rab of 5,7 billion.
Snam renounces 40% of its Ebitda with the exit of Italgas but cuts its debt from 13,8 to 10,3 billion. It is no coincidence that Fitch has confirmed the BBB+ rating for the Snam rating with a stable outlook, Moody's has issued a provisional AA1. The share on the Stock Exchange grew by 4,3% against 22% for the Ftse Mib.
THE DEMERGER OF ITALGAS
The operation is articulated on three rails: the contribution of shares equal to 8,23% of the capital by Snam to the Newco; the sale by Snam to the Newco of 38,87% of Italgas capital for 1,503 billion euro; the partial and proportional demerger of Snam with the assignment of 52,9% of Italgas capital to the Newco. Eventually, the new holding will be controlled by Snam at 13,5%, Cdp Reti and Cdp Gas will have 26%. The free float is around 60%. The assignment to the other shareholders will take place at the rate of one Newco share for every 5 Snam shares held. The shareholders' meeting, which will also have to approve the buyback plan up to 3,5% of the capital, is convened for August 1st. Even the bondholders will have to give their consent, certainly however everything will have to be completed in the coming months to allow the listing of the Newco, as has been said, by the end of the year. A historical name returns to Piazza Affari: Italgas was among the first Italian groups listed, way back in 1851 in Turin and then in 1900 in Milan. The last delisting was in 2003.
BUSINESS PLAN, DEBT AND INVESTMENTS
In the five years 2016-20, Snam intends to invest 4,3 billion in Italy in transport, LNG and storage. In the period, 3,8 billion will go to strengthen network security but also to enhance capacity and therefore the diversification of supplies. 500 million are planned for storage. The issue of reverse flow remains central (ie the possibility of using gas pipelines also with flows from South to North in view of export) in the perspective of a single European energy market. The plan estimates a 1% increase in Rab.
There are around the corner for Italgas and its new CEO tenders for the renewal of concessions in local areas. The company is present in 113 territorial areas out of 177, has an average market share of around 30% and will aim at a "portfolio cleaning" operation by acquiring concessions where it is strongest, selling where it is least. This is where Rab's 1,3 billion growth in 2020 will come from.
Finally, the debt. Italgas will be able to count on 3,9 billion of credit lines from banks and 424 million of EIB loans to repay the 2,3 billion of intragroup debt with Snam and finance 2 billion of investments to improve the network and install digital meters.
