Snam: increased investments in the 2020-2024 plan and net zero emissions target by 2040
11/25/2020 | 02:51am EST
Snam: increased investments in the 2020-2024 plan
and net zero emissions target by 2040
Net Zero Carbon and new ESG goals
Carbon neutrality target by 2040 ("Scope 1" and "Scope 2")
50% reduction of CO₂ eq. emissions "Scope 1" and "Scope 2" to 2030 vs 2018
New projects with subsidiaries and suppliers to reduce "Scope 3" emissions
More than 600,000 t of CO₂ eq. avoided in 2024 thanks to activities in the energy transition
Launch of a "scorecard" to measure performance across 13 ESG areas
Growing investments for system decarbonisation and long-term development
Total investments: approx. € 7.4 bn (approx. + € 1 bn vs € 6.5 bn of the 2019- 2023 plan)
€ 6.7 bn of investments in regulated energy infrastructure, focused on hydrogen ready replacements, digitalisation, decarbonisation and Sardinia
Investments almost doubled to € 720 mn in the businesses of the energy transition. In particular:
€ 220 mn in biomethane infrastructure to reach a capacity of at least 64 MW
€ 200 mn in energy efficiency to consolidate the national player position
€ 150 mn in hydrogen for the start of projects for the conversion of railway lines and the installation of fuel cells in the Snam network
€ 150 mn in mobility to expand the distribution infrastructure with a focus on LNG, and launch the first hydrogen distributors
Evolution towards portfolio management with a focus on the opportunities deriving from sector coupling, net zero policies and the growing centrality of green gases
Established presence in India following the entry into China
Development of a portfolio of services, leveraging on Snam's distinctive competences in core business, digitalisation, technology and energy transition
International associates: stable contribution over the plan period, expected average annual cash return on the initial investment of 10% (from acquisition to the end of the plan)
TAP completed on schedule, commercial operations started last week
Growth of main indicators
RAB: >2.5% annual average in the period 2020-2024. The need to replace the grid implies a growth at least in line with this trend in the period 2024-2040
EBITDA of energy transition businesses: € 150 mn by 2024
Net profit: +2.5% annual average to 2024 (2019 base)
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Net earnings per share: +3.2% annual average to 2024 (2019 base)
Dividend per share: 5% annual growth confirmed to 2022, with further 2.5% minimum growth in 2023 and 2024
2021 net profit guidance: approximately + 3% compared to the 2020 guidance
Efficiency, flexibility and sustainable finance
Efficiency plan updated: € 70 mn in savings by 2022
Average cost of debt at 1.2% over the plan period (vs 1.4% of the previous plan)
Ambition to increase the weight of sustainable finance from the current 40% to over 60% of funding over the plan period
Debt/RAB ratio including associates below 60% over the plan period
Technological partnerships supporting the hydrogen strategy
Partnership with ITM Power, stake acquired for € 33 mn
Partnership with De Nora, 33% stake acquired
New investment platform on the energy transition launched in 2021
San Donato Milanese (MI), 25 November 2020 - Snam CEO Marco Alverà today presents the2020-2024plan with approx. € 7.4 billion in investments (compared to the € 6.5 billion of the2019-2023plan), approved yesterday by the Board of Directors chaired by Nicola Bedin.
"The 2020-2024 plan - comments Alverà - opens a new phase in the history of Snam, which in the climate challenge is ideally positioned to play an important role in the energy transition, with a long-term vision consistent with its purpose and European objectives. Snam will be one of the first energy companies to reach carbon neutrality in 2040 and provide a wide contribution to the decarbonisation of the system through the development of green gases and, in particular, hydrogen.
The repositioning of the company over recent years and the actions envisaged in the new plan, together with the skills of our people and growing digitalisation, put us in the ideal condition to seize the new opportunities arising from the energy transition. We have visibility on our 'future-proof' infrastructure, we are amongst the pioneers in hydrogen development and we are growing rapidly in other businesses which are strengthening the whole green gas value chain. We are becoming an international operator, with a focus on the most relevant areas for the development of gas use for "fuel switching" and energy transition. Through this strategy, combined with our financial flexibility and cost-competitive access to markets, we offer attractive returns for our shareholders.
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More and more, the notions of economic, environmental and social responsibility are becoming an integral part of Snam's business model, in which ESG factors guide decisions for the benefit of all stakeholders."
Net Zero Carbon goal and growing commitment to ESG
Snam is committed to achieving carbon neutrality by 2040, in containment target set by the Paris Agreement, thus further (Environmental, Social and Governance) leadership.
line with the 1.5° C consolidating its ESG
Furthermore, Snam raises its reduction target to 50% of Scope 1 and Scope 2 equivalent CO₂ emissions (direct and indirect) by 2030 (vs 2018), compared to the previous target of -40% vs 2016. Almost half of the overall reduction in emissions will derive from the dual fuel compressor stations project, while the remaining share will be achieved thanks to the reduction of methane emissions by 45% by 2025 (vs 2015), in line with UNEP objectives (UN Environment Program), with which a protocol was signed.
Snam's commitment on indirect Scope 3 emissions (emissions outside the direct control of the company, in Snam's case mainly attributable to suppliers and investee companies) is also significant. In this an area the company has strengthened collaboration initiatives with subsidiaries and started the development of additional joint projects with suppliers to achieve a progressive and significant reduction.
The enabling of the infrastructure to transport increasing quantities of renewable gas and the new activities in the energy transition will also make it possible to contribute to the general reduction of emissions in the territories in which Snam operates: in 2024, Snam will allow the system to avoid emissions of over 600,000 tons of CO₂ equivalent, also thanks to the production of biomethane, energy efficiency initiatives and sustainable CNG and LNG mobility projects.
ESG factors are increasingly integrated into the strategies and management of the company. In this regard, Snam has developed and published a "scorecard" on 13 areas with 22 material and quantitative objectives to provide stakeholders with a holistic view of the commitment and growing sensitivity in the ESG field, allowing them to monitor the results.
In terms of the environment, for example, an increase in biomethane production from 18 to 141 million cubic meters is expected from 2021 to 2023 as well as an increase from 16 to 43 thousand tons of CO₂ saved by energy efficiency activities.
In the social sphere, an enhanced focus on employees, supply chain, safety and the community is envisaged: for example, through the increase in the percentage of women in executive and middle management positions from 19.3% in 2019 to 25.5% in 2023, and an increase in social enterprises accredited in the vendor list of 20% by 2023.
In the governance area, in 2023 at least 40% of the Board of Directors' activity will be dedicated to ESG issues and on 100% of third party counterparties, reputational due diligences will be carried out.
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Snam also intends to reflect in the company by laws its corporate purpose ("Energy to inspire the world"), aimed at creating long-term value for shareholders, taking into account the interests of relevant stakeholders and in line with the new recommendations of the Code of Corporate Governance, also in order to institutionalize the company's commitment to favour and promote the energy transition process in line with the new initiatives to be undertaken. The Board of Directors has reserved the right to take any resolution on the topic in a future occasion.
The new trends in the energy transition and Snam's role as enabler
The achievement of the global climate objectives will lead to significant investments in the decarbonisation of the energy sector over the next 30 years. To date, several countries, accounting for over 50% of global emissions, have announced or are elaborating climate neutrality targets. A new "super cycle" of public and private investments of about $ 100-150 trillion for the innovation of energy systems is therefore expected, which will result in new opportunities for creating value for operators along the entire value chain. In this context, green gases - and particularly hydrogen - have significant growth prospects and can potentially reach over 25% of the global energy mix by 2050.
Europe is leading on this front thanks to the Hydrogen Strategy launched last July by the EU Commission and the national plans launched or soon to be launched in countries such as Germany, France, the United Kingdom, Spain and Portugal. The guidelines of the Italian hydrogen strategy, under consultation from November 24th, envisage investments of up to € 10 billion, 5 GW of installed electrolyser capacity and a target of 2% of the energy mix by 2030, with an expected growth up to 20% in 2050.
Green hydrogen, in particular, is expected to become competitive in a few years in various sectors - starting from rail and heavy transport - thanks to the progressive and already evident reduction in the production costs of renewable energy, combined with the reduction in the cost of electrolysers. The most efficient way to transport green hydrogen is through the gas infrastructure. Indeed, at a European level, retrofit costs would be limited, equal to 10-25%1 of those for newly built pipelines.
In recent years, Snam has repositioned itself to capture the new megatrends of the energy transition, thanks to infrastructure assets that will be key to achieve decarbonisation targets, its presence in the energy transition business, its international footprint and thanks to a disciplined approach to capital allocation.
Snam's position in the capex supercycle benefits from infrastructure assets that are 70% hydrogen-ready, and that will enable the energy transition.
1 Guidehouse "European Hydrogen Backbone" July 2020
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