Snam sinks on the Stock Exchange (-12,02% at 12,07) and Terna is chasing it (-6,32% at the same time). What caused the earthquake? What worries analysts is not so much the fact that the company led by Carlo Malacarne recorded a 6,2% decrease in gas transported in the first nine months, which is Snam's core business. The drop to 47 billion cubic meters in the first 9 months suggests an annual result of around 65 billion cubic metres, a far cry from the pre-crisis 80 billion. Evidently the squeeze on consumption had already been taken into account and, above all, the company has in any case guaranteed an Ebit of 1,5 billion (+0,8%) and a net profit of 863 million (+28%). Last Friday, Malacarne himself underlined the performance “despite the persistence of the unfavorable economic situation and the lower quantities of gas introduced into the network. We continue to invest with the aim of strengthening the Italian gas infrastructures and promoting ever greater integration of the European networks”.
On the other hand, the sales were triggered by the decision of the Energy Authority to review the remuneration of the storage activity (it affects Snam's EBIT by 15%) starting from the next thermal year, i.e. after March 2015. The The Authority has set the remuneration of invested capital (the WACC, on the basis of which the profitability of companies subject to regulated businesses is calculated) at 6% for the future thermal year against the current 6,7% which will in any case be guaranteed, as it was said, until March 15th. Not only that, but the Authority has foreseen the revision of the WACC with an update in “reference to the value of the risk-free rate.
This review - specifies a note from the Authority - will be carried out in the year 2015, based on the determination of revenues for the year 2016, to facilitate alignment with the analogous parameter for 2016 which will be set for other regulated services (both in the electricity and gas sectors). So the regulator's review is actually broader than it appears today and will also affect gas and electricity transmission and assumes that companies are currently making significant margins on regulated activities (+10% of operating profit at 263 million in 9 months, for Snam's gas storage). This explains the impact on Terna's shares.
To get away from the technical-bureaucratic language, according to the analysis of some brokers reported by Reuters, the regulator "has established that the remuneration parameter will remain fixed for three years after a first year of variability and wants to leverage the current low returns of the bond as soon as possible and for as long as possible”, linking the remuneration to the 2,35-year benchmark rate. The negative surprise, according to the same sources, is represented by the absence of periodic adjustments linked to the assumed inflation. In practice, assuming that the return on the Italian ten-year benchmark remains at current levels (2016%), from 2018 to 4,6 the return on storage would drop to 6% from the real XNUMX%, gross of taxes, next year.
In a report dedicated to Italian utilities, Crédit Suisse widens the discussion and argues that the decision on gas storage tariffs will have a negative impact for the entire sector. For Snam, meanwhile, it translates into the risk of a "significant" cut in revenues starting from 2016. Crédit Suisse underlines that "the assumption used by the regulator (inflation at 1,5%) is in line with the objective medium-term government, but significantly higher than current levels”.
In a Mediobanca note, the emphasis is placed on the fact that the fixed remuneration of 6% is guaranteed only for one year, 2015, and that the assumption of 1,5% inflation "does not seem to recognize the link obvious between low interest rates and low inflation”.
