Il Metanino 2016 Statistical Data : the mission

Snam is a European leader in the construction and integrated management of natural gas infrastructure. It favours the right conditions for fair energy costs by managing the gas system efficiently, developing infrastructure and providing integrated services for the market.

It promotes the integration of the European networks, including through strategic partnerships with the biggest operators in the sector, along the main continental energy corridors. Snam follows an ethical and socially responsible business model, capable of generating value for the Company and for the community in which it operates, with acknowledged professionalism and transparent dialogue with all its stakeholders, respecting the environment and the regions.

A clear and sustainable long-term development strategy, based on one of the most substantial investment programmes in Italian industry, has enabled the Company to attract Italian and foreign capital, boosting growth and employment. Snam is active in natural gas transportation, storage, regasification. Snam manages a national transportation network that is more than 32,000 km long, including nine storage facilities, one regasification plant.

2 1 INDEX

The Energy Environment ...... 5 • Natural gas reserves in the world (2015) ...... 6 • Natural gas production in the world (2015) ...... 8 • Natural gas consumption in the world (2015) ...... 9 • Natural gas: Trade movements 2015 by pipeline ...... 10 • Gas prices in the world ...... 12 • The main LNG streams in 2015 ...... 14 • LNG worldwide, areas of interest...... 16 • Focus, LNG in Europe...... 18 • Storage capacities in the world at the end of 2015...... 20 EUROPE • Main gas reserves supplying Europe...... 22 • Energy consumption by source in the main countries...... 23 • Natural gas consumption by country (2012-2015)...... 24 • Natural gas consumption by sector...... 25 • Natural gas supply in Italy in 2015...... 26 Snam in the European scenario...... 27 • The pipelines towards Europe...... 28 • International development, overview...... 30 • Snam, the European strategy...... 32 Snam in the Italian gas system...... 35 • Snam, the company profile...... 36 • The journey of natural gas in Italy through Snam infrastructures...... 37 (Snam Rete Gas, GNL Italia, Stogit) • Regulatory framework: businesses tariff scheme...... 41 • Main economic-financial data ...... 42 • Snam in the bond market ...... 43 • Snam in the bond market: the credit rating...... 44 Appendix ...... 45 • Glossary...... 46 • Reference heat capacity ...... 48 • Units of measurement ...... 49 • Transported natural gas composition...... 50 • References ...... 51

3 The Energy Environment

5 The Energy Environment The Energy Environment Natural gas reserves in the world (2015)

• OECD countries: 10.5% Total: 186.9 Trillion m3 • Non OECD countries: 89.5%

56.8*

12.8

15.6

80.0

14.1

7.6

Source: BP statistical review *Of which 49.8 in Russia of world energy 2016. and Turkmenistan.

4.1% 6.8% 7.5% 8.4% 30.4% 42.8% S. & Cent. America North America Africa Asia Pacific Europe & Eurasia Middle East

6 7 The Energy Environment The Energy Environment Natural gas production in the world (2015) Natural gas consumption in the world (2015)

3,589,508 million m3 (+1.6% compared to 2014) 3,571,230 million m3 (+1.3% compared to 2014)

ASIA (CHINA INCLUDED): ASIA (CHINA AND HONG KONG 458,069; 13% INCLUDED): 494,457; 14% OECD AMERICA*: OECD AMERICA*: 975,487; 27% MIDDLE EAST: 962,464; 27% 461,210; 13% MIDDLE EAST: 573,388; 16% AFRICA: OECD EUROPE: 128,011; 3% 246,357; 7% AFRICA: 208,356; 6% OECD PACIFIC: OECD EUROPE: 82,309; 2% FORMER SOVIET 472,174; 13% FORMER SOVIET LATIN AMERICA: UNION: 177,513; 5% 668,040; 19% UNION: OECD PACIFIC: 868,029; 24% LATIN AMERICA: 219,658; 6% 165,216; 5%

* Included Canada, United States, Cile and Mexico * Included Canada, United States, Cile and Mexico

2000 2012 2013 2014 2015 2000 2012 2013 2014 2015 Usa 544,335 680,796 685,677 728,864 768,975 Usa 661,261 723,098 739,301 754,647 777,970 Russia 572,817 658,061 685,423 629,948 637,875 Russia 391,171 471,064 483,285 454,410 461,481 Iran 58,927 156,365 156,746 174,631 183,886 China 24,627 147,243 167,206 185,161 190,901 Qatar 24,479 144,361 163,253 159,994 163,994 Iran 62,239 151,783 152,892 172,497 182,674 Canada 181,673 155,734 156,081 164,103 163,528 Japan 82,737 131,609 130,686 131,316 123,878 China 27,200 110,608 120,860 130,157 133,932 Canada 91,537 105,261 112,189 116,553 102,463 Norway 53,293 118,980 112,942 112,582 121,646 Saudi Arabia 37,680 81,092 81,954 85,126 89,723 Saudi Arabia 37,680 81,092 81,954 85,126 86,829 Germany 87,751 85,761 87,720 79,212 81,370 Turkmenistan 47,153 69,050 78,440 80,050 83,492 Mexico 41,689 76,207 72,876 74,397 77,560 Algeria 82,132 85,280 81,019 82,556 82,308 UK 101,812 78,191 77,958 70,456 71,770

Million m3 Million m3

Source: IEA, Report ‘Natural gas information’, 2016 edition. Source: IEA, Report ‘Natural gas information’, 2016 edition. 8 9 The Energy Environment The Energy Environment Natural gas: Trade movements 2015 by pipeline FROM FROM US UK Iran Total Libya Qatar Others Bolivia Algeria Canada imports Russian Norway Azerbaijan Federation Uzbekistan To Kazakhstan Netherlands Other Europe Turkmenistan North America 49.7 74.3 ------124.21 • USA - 74.3 ------• Canada 19.8 ------• Messico 29.9 ------S. & C. America - - 16.2 ------2.3 18.5 Europe - - - 40.6 109.5 13.4 35.7 7.4 - 159.8 - - 7.8 - 20.7 6.5 - 401.4 • Austria - - - - 1.7 - - - - 4.3 ------6.0 • Belgium - - - 2.9 2.1 7.3 0.6 - - 10.9 ------23.7 • France - - - 4.7 17.2 - 4.5 - - 9.5 ------35.9

• Germany - - - 23.0 34.9 - 0.9 - - 45.2 ------104.0

• Italy - - - 6.0 7.0 - 0.2 - - 24.0 - - - - 6.6 6.5 - 50.2

• Netherlands - - - - 17.9 1.8 8.1 - - 2.3 ------30.2

• Spain - - - - 2.1 - 1.1 ------12.0 - - 15.2 • Turkey ------5.3 - 26.6 - - 7.8 - - - - 39.7 • UK - - - 3.1 25.7 - 0.2 ------29.0 • Other Europe - - - 0.9 1.1 4.3 20.1 2.1 - 36.8 v- - - - 2.0 - - - CIS ------9.2 - 11.0 33.2 3.1 5.9 0.5 - - - - 62.9 Middle East ------0.2 - - 7.2 - - 19.8 - - - 27.3 Africa ------4.3 - 4.6 8.9 Asia Pacific ------0.4 - 27.7 1.5 - - - - 31.6 61.2 Total exports 49.7 74.3 16.2 40.6 109.5 13.4 45.0 7.6 11.3 193.0 38.1 7.5 8.4 19.8 25.0 6.5 38.5 704.1 Source: BP statistical review of world energy 2016. Million m3 10 11 The Energy Environment The Energy Environment Gas prices in the world

Henry Hub (USA) GNL (Asia) (January 1, 2016 - November 30, 2016) (January 1, 2016 - November 30, 2016)

€/MWh: 7.26 €/MWh: 10.61 €/MWh: 20.29 €/MWh: 22.89 12 24

10 20 +46.1% +12.8% 8 16

6 12

4 8 01-jul 2016 01-jul 2016 01-jan 2016 01-jan 2016 01-feb 2016 01-feb 01-jun 2016 01-oct 2016 01-apr 2016 01-feb 2016 01-feb 01-jun 2016 01-oct 2016 01-apr 2016 01-sep 2016 01-sep 2016 01-aug 2016 30-nov 2016 30-nov 01-nov 2016 01-nov 01-aug 2016 01-nov 2016 01-nov 2016 30-nov 01-mar 2016 01-mar 2016 01-may 2016 01-may 01-may 2016 01-may

PSV (Virtual exchange point) (January 1, 2016 - November 30, 2016) Zeebrugge TTF (EU) (January 1, 2016 - November 30, 2016)

€/MWh: 16.50 €/MWh: 19.58 €/MWh: 14.50 €/MWh: 18.20 24 24

20 20 +18.7% +26.0% 16 16

12 12

8 8 01-jul 2016 01-jul 2016 01-jan 2016 01-jan 2016 01-feb 2016 01-feb 2016 01-feb 01-jun 2016 01-jun 2016 01-oct 2016 01-oct 2016 01-apr 2016 01-apr 2016 01-sep 2016 01-sep 2016 01-aug 2016 01-aug 2016 30-nov 2016 30-nov 01-nov 2016 01-nov 01-nov 2016 01-nov 2016 30-nov 01-mar 2016 01-mar 2016 01-may 2016 01-may 2016 01-may

12 13 The Energy Environment The Energy Environment The main LNG streams in 2015 70% of the gas is consumed in the production countries, the residual 30% is Import traded: 338 (333 in 2014) billion m3 by LNG () and 704 (677 in 2014) billion m3 by pipeline. • 34 import countries (+4 compared to 2014: Egypt, Jordan, Pakistan and Poland). • Asia: 71.7% of total LNG imports (60% in 2010). Export • Europe: 10% (30% in 2010). • 19 export countries. LNG regassification plants across the world Qatar, Australia, Malaysia, Nigeria and • 1,010 billion m3 of regasification capacity (+3.5% Indonesia: 68.9% of total LNG exports. compared to 2014). • 7 new plants completed in 2015: 2 in Japan, 1 in Gas liquefaction plants across the world Indonesia, 2 in Egypt, 1 in Jordan and 1 in Pakistan. • 400 billion m3 of liquefaction capacity. Global utilization 33%. European utilization 25% Global utilization 84%. (+3% compared to 2014). • 3 new plants completed in 2015 (2 in • 15 new plants under construction (of which 8 in Australia and 1 in Indonesia). China) and 5 under development. • Several plants under construction in USA and Australia. Europe 55* China 26.2 Japan 118.0 Europe USA Japan South Korea 43.7 Europe Europe South Korea Algeria 16.2 Qatar 106.4 Taiwan Trinidad India Taiwan 18.7 Tobago 17

S outh America Japan

Europe India 21.7 Japan Taiwan Nigeria 27.5 South Korea Billion m3 Indonesia 21.9 Malaysia 34.2

China * Of which: Belgium 3.8 Japan France 6.6 Italy 6.0 Australia 39.8 Spain 13.1 Turkey 7.5 UK 12.8 +2.5% of LNG trade flow, compared to 2014, due to new volumes from Australia and Indonesia. 28% of LNG trading is spot/short -term Source: BP statistical review of world energy 2016, GIIGNL, The LNG (5% in 2005). Most of the demand comes from Asia (72%), most of Industry 2015 and IGU World LNG Report 2016. the offer comes from Asia-Pacific Area (41%) and Qatar (32%). 14 15 The Energy Environment The Energy Environment LNG worldwide, areas of interest

Asia LNG demand in Asia was down by 1.7% compared to 2014, mainly due to lower imports in Japan and in South Korea (these decreases can be attributed to energy conservation, mild weather conditions and lower gas usage rate in the energy mix of the two countries). In China, LNG imports instead continued to grow by more than 5% compared to 2014.

Europe (see focus) Net imports grew by 15.8% in 2015, due also to higher deliveries from Qatar into the UK. Asia-Pacific The two main importers in Europe are the UK Australia, Malaysia, Indonesia: 29% (3.9% of the world’s total) and Spain (3.5% of of total LNG exports (26% in 2014) the world’s total), but the utilization rate remains Australia became the second largest low: UK (26%), Spain (18%). Italy’s level is 38%. exporter ahead of Malaysia. 2 liquefaction plants started in 2015, 3 new plants expected by 2017. LNG supply from the Pacific Basin increased in 2015, boosted by additional volumes from Indonesia and Papua New Guinea, which operated for the first year at full USA capacity. The USA are on track to challenge Qatar as the world’s leading supplier, with the first LNG loadings from Sabine Pass (Louisiana) in Africa February 2016. The mains exporter countries are Nigeria and Algeria. Egypt Qatar became an LNG Qatar is the main exporter, putting exporter: 32% of the in operation a worldwide liquefaction regasification plant in capacity. 2015.

Source: GIIGNL, The LNG Industry 2015 and IGU, World LNG Report 2016. 16 17 The Energy Environment The Energy Environment Focus, LNG in Europe

Three new countries began to re-export LNG cargoes in 2015: India, Singapore and UK. Despite the addition of these new markets, total re-export is, however, declined significantly in 2015, for the first time in six years (-37% compared to 2014). Europe still continues to dominate the re-export activities (78%), although it should be noted the biggest fall in 2015 of Spain (-65%). This decline was primarily a result of the increase in new Pacific supply, rather than the increase in gas demand in Europe.

Snohvit - Statoil 10 reloading countries

4% Spain 4% Milford Haven - South Hook LNG Netherlands 4% 5% Milford Haven - Dragon LNG Belgium 26% France 5% Teesside - Excelerate Energy Portugal 6% Isle of Grain - National Grid Grain LNG, Ltd India Klaipeda - Klaipeda LNG UK 8% Gate - Gate Terminal 19% Singapore Zeebrugge - Fluxys South Korea Fos Cavaou - Fosmax LNG Fos Tonkin - Elengy USA 19% Panigaglia - GNL Italia Montoir - Elengy Porto Levante - Adriatic LNG Bilbao - BBG OLT - Offshore LNG Toscana Mugardos - Reganosa Marmara Ereglisi - Botas Barcellona - Enagas Huelva - Enagas Sagunto - Saggas Alliaga - Egegaz

Revithoussa - DESFA Skikda -

Arzew - Sonatrach Marsa-el-Brega - Sirte oil Co.

Cartagena - Enagas Sines - REN Atlantico Liquefaction plants Regasification plants 18 19 The Energy Environment The Energy Environment

Storage capacities in the world at the end MAJOR EUROPEAN COUNTRIES of 2015 1.0 4.6 14.4 2.8 24.6 3.5 billion m3 3.2 31 12.1 8.3 6.3 2.8 2.6 16.6*

3.0

*of which 15.9 of Snam. Source: GSE Map (May 2016). 20.1 70

136

6.1

Source: IEA, Report ‘Natural gas information’, 2016 edition and IHS Energy strategic report, december 2016. 20 21 The Energy Environment The Energy Environment EUROPE Energy consumption by source Main gas reserves in the main countries supplying Europe* FRANCE: 251 Mtoe GERMANY: 316 Mtoe Nuclear: Oil: 7.6% Hydro: 28.1% Nuclear: 0.5% 45.5% Other: Oil: 13.2% 32.0% Norway Coal: 3.5% Natural Gas: 1.9 21.5% Natural Gas: Russia Coal: 13.9% Other: Hydro: 25.2% 32.3 7.1% 1.9%

Netherlands SPAIN: 119 Mtoe ITALY: 147 Mtoe

0.7 Nuclear: Hydro: 12.5% 2.6% Other: Hydro: 16.1% 2.0% Oil: Oil: 35.1% Other: 41.4% 12.6 % Natural Gas: Natural Gas: 37.7% 20.6% Algeria Coal: Libya Egypt Coal: 8.5% 4.5 1.5 1.8 Qatar 10.9% 24.5 UK: 178 Mtoe NETHERLANDS: 71 Mtoe

Nuclear: Nuclear: 10.3% Hydro: 1.4% Other: 6.2% Oil: 0.3% Oil: Trillion m3 Other: Nigeria 33.6% 37.3% 5.1 7.9%

Natural Gas: Natural Gas: 39.6% 34.4% Coal: Coal: Source: BP Statistical Review of World Energy, June 2016 13.5% 15.5%

* Europe 28 Source: IEA, Report ‘Natural gas information’, 2016 edition. 22 23 The Energy Environment The Energy Environment Natural gas consumption by country ITALY (2012-2015) Natural gas consumption by sector

2012 2013 2014 2015 Demand by sector 2011 2012 2013 2014 2015 Italy* 74.9 70.1 61.9 67.4 Residential 30.82 31.00 31.09 25.66 28.61 France 42.1 43.9 36.7 39,1 Thermoelectric 28.21 25.29 20.60 17.88 20.89 UK 78.2 78.0 70.4 71.8 Industrial* 17.04 16.64 16.51 16.32 15.97 Germany 85.8 87.7 79.2 81.4 Spain 32.4 29.6 27.2 27.9 Other 1.85 1.98 1.87 2.05 1.97 Netherlands 45.6 46.1 40.3 40.3 Gas Demand 77.92 74.91 70.07 61.91 67.44 Bcm Bcm

100 3 Billion m 90 Billion m3 90 80 80 70 70 60 60 50 50 40 40

30 30

20 20

10 10

0 0 2012 2013 2014 2015 2011 2012 2013 2014 2015

Italy France UK Germany Spain Netherlands Residential Thermoelectric Industrial* Other

* Includes the consumption of the Industrial, Agriculture and Fishing, Chemical Synthesis and Automotive sectors. Source: IEA, Report ‘Natural gas information’, 2016 edition. * Source: Snam annual reports. Source: Snam annual reports. 24 25 The Energy Environment Il contesto energetico di riferimento Natural gas supply in Italy in 2015

GAS DEMAND: 67.5 billion m3 Snam in the • Domestic production: 6.8 • Storage balance, export and other: -0.4 European scenario • Import: 61.2 of which 6.0 by LNG.

Origin details (billion m3)

Other 5.5* Norway 2.6 Russia 27.7

Netherlands 4.9

Libya Qatar Algeria 5.7 7.6 7.1

Source: Snam estimates on Ministry of Economic Development data. * Of which just 0.1 billion m3 from extra EU countries. 2626 27 Snam in the European scenario Snam in the European scenario The pipelines towards Europe

Available capacity, bcm

Main active pipeline Planned pipeline A r 1 Turkstream: 32 bcm/year (2 lines). o 136 bcm from North Sea* u Offshore way 100% ; Northstream** n d

onshore way 50% Botas and Yamal 2 50% Gazprom. Agreement signed 8 0

between the parties and estimated b start of works on the first line in c 2017. m

c

2 TANAP: 16 bcm/year, shared by Brotherhood o

Socar 58% Botas 30% and BP 12%. m i

Netherlands Belarus n

Estimated start 2019. UK g

Poland f

3 TAP: 10 bcm/year, shared by Snam r o

20%, Socar 20%, BP 20%, Fluxys Germany m

19%, Enagas 16%, Axpo 5%. R

Moldova Trans Balkan u Estimated start 2020. s

s

Ukraine i 4 GALSI: 8 bcm/year, shared by a Sonatrach 41.6%, Edison 20.8%, Italy Romania 15.6%, SFIRS 11.6% and 1 Hera 10.4%. Project postponed Turkstream many times during last years and 5 3 currently not in the agenda. Midcat Bluestream TAP 2 5 MIdcat: 8 bcm/year, is a community Spain TANAP interest project that strengthens 4 Greece the connection between Spain and GALSI Turkey France and allows additional flows from the Mediterranean (Algeria, Medgaz: 8 LNG) towards central Europe. Greenstream: 10 Estimated start 2022. Meg: 14 Transmed:33 6 Eastmed: 16 bcm/year. Shared 6 Eastmed by Edison 50% and Depa 50%. Morocco In phase of the feasibility study. Supply route from the gas fields in Libya the East Mediterranean. Algeria

* 86 towards the Continent, 50 towards UK. Source: Ihs Cera, March 2016, and Entsog Map, May 2016. ** An expansion of about 55 billion m3 is under discussion. 28 29 Snam in the European scenario Snam in the European scenario International development, overview TAG • Integrating the East-West gas corridor • Strategic opportunity to establish reverse flow capability to Southern Germany and Eastern Europe.

TIGF • Key position along the East-West energy corridor. • Interconnects the French and Spanish markets with Central and Northern Europe. • Represents a strategic infrastructure for achieving greater integration at a European level.

Interconnector National Networks LNG terminal International Assets • Represents last section of the South- North corridor connecting to the continental grid one of the major European gas markets. • Bi-directional flow capacity provides flexibility and diversification of supply Snam holding Snam holding Snam holding sources to UK and Continental Europe. 84.47%* 40.5% 20% *Equal to 89.22% of economic rights Tap • Contributes to the full-scale development of the South-North Snam holding Snam holding Snam holding corridor in Italy. indirectly 14.7% indirectly • It allow for diversification of supply, 15.75% 19.6% through the importation of gas from in joint venture with Fluxys In joint venture con Allianz Azerbaijan (50%-50%) (Snam 40%) 30 31 Snam in the European scenario Snam in the European scenario Snam, the European strategy

Within the european energetic policy, Italy holds an important role, as it is increased its focus on the international scene in recent years. placed in the middle of the main Europan gas Corridor. The 2016-2020 Strategic Plan is in line with the last years Company In line with the principles of the European Third Energy Package, which strategy, which from 2012 saw Snam engaged in strategic partnerships promotes the integrated development of infrastructures and common rules and M&A operations, led to the reshaping of its role within the European for network access in different countries, and in order to take advantage infrastructure system: moving from an assets operator, Snam has of the privileged position it enjoys in Europe’s gas corridors, Snam has transformed into a market facilitator.

JANUARY 2012 FEBRUARY/SEPTEMBER 2012 Snam and Fluxys agree to evaluate future joint Acquisition of a 31.5% stake of Interconnector UK (16.41% from strategies, which aim to promote cross-border and 15.09% from E-on), of a 51% stake of Interconnector Zeebrugge flows and to link the most important gas trading and of a 10% stake of Huberator through a joint ventury with Fluxys. infrastructures in the North-West and South of Europe.  This joint acquisition is a first important milestone in pursuing the aim of an integrated European gas network and follows the announcement in January 2012

DECEMBER 2016  It was completed in December the sale of 49% of Gas Connect Austria from OMV, the international integrated oil and gas company based in Vienna, to the Consortium composed of FEBRUARY/JULY 2013 Allianz and Snam. The transaction is a unique opportunity Acquisition of a 45% stake of TIGF, heading a consortium for Allianz and Snam to invest in a well-established gas in which GIC holds a 35% stake and EDF the remaining transportation network and essential infrastructure delivering 20%. TIGF represents a strategic platform with the aim to gas to the Austrian domestic market. Given its strategic Central develop the integration of European gas markets, and can European location GCA also fulfills an important transportation contribute to increase their liquidity and guarantee the function for several other adjacent markets. security of supply in France and Europe.  

DECEMBER 2015 In 2015 Snam’s international development continued with the DECEMBER 2014 acquisition of a 20% stake in AG (TAP), Completion of the acquisition of the stake (84.47%) held the company responsible for developing the pipeline that will by CDP GAS in Trans Austria Gasleitung GmbH (Tag),

run from the Turkey-Greece border to Italy along the Southern approved by the Board of Directors on 12 September 2014. Corridor, enabling gas produced in Azerbaijan to reach  Tag represents a strategic opportunity to realize reverse fl ow European markets, through the italian infrastructure. capacity with South Germany and Eastern Europe.

32 33 Snam in the Italian gas system

34 35 Snam in the Italian gas system Snam in the Italian gas system Snam, the company profile

Consolidation perimeter Group Insurance Services 100% GASRULE INSURANCE LIMITED INTERNATIONAL ASSOCIATES

Transport Regasification Storage 100% 100% 100% TIGF: TAG: IUK: 15.75% TAP: GCA: 19.6% 40.5% 84.47% JV con Fluxys 20% JV con Allianz SNAM RETE GAS GNL ITALIA STOGIT

PRISMA: 14.7%

Snam, shareholders at October 2016 Shareholding Geographical Break Down at October 2016 1.12% 4.37% 5.0% 7.02% 15.3% 30.7% Italy- Strategic holders* Italy-Retails** 28.98% Italy-Institutional CDP Reti Continental Europe Bank of Italy UK and Ireland Treasury Shares 0.53% Institutional Investors USA and Canada Retail Investor 13.8% Rest of the world 0.03% CDP Gas 11.4% 57.95% Minozzi 18.9% 4.9%

* Italy-Strategic holders includes Bank of Italy, CDP Reti and CDP Gas. ** Italy-Retails includes the participation of Romano Minozzi equal to 4.37% 36 37 Snam in the Italian gas system Snam in the Italian gas system

TRANSPORT: Thanks to investments to develop and upgrade infrastructure, National (9,630 km) and regional (22,904 km) gas pipeline grid: 32,534 km the network transportation capacity has always grown in the past years. • Gas injected into the grid: 67.25 bcm In line with the provisions of the EU Third Energy Package, the Company is • Gas imported: 60.82 bcm committed, through specific investments, to facilitating trans-European flows, • Gas production: 6.43 bcm thanks to the development of reverse-flow transport infrastructure. The gas from abroad is injected into the national network via eight entry Import by entry points (bcm/year) points where the network joins up with the import pipelines (Tarvisio, Gorizia, • Tarvisio: 29.92 Gries Pass, Mazara del Vallo and Gela) and with the LNG regasification • Mazara del Vallo: 7.24 terminals (Panigaglia, Cavarzere and Livorno). Once imported or regasified, • Passo Gries: 10.63 gas is transported to local distribution networks, to withdrawal points along • Gela: 7.11 the Regional Network, or to large final clients, either thermoelectric plants or • Cavarzere: 5.80 industrial consumers. • Livorno: 0.04 Snam Rete Gas allocates transportation capacity to the shippers upon their • Panigaglia: 0.05 request. Then they gain the right – as Users – to inject and withdraw at any • Gorizia: 0.03 time during the thermal year, a quantity of gas not greater than the daily Panigaglia terminal capacity allocated. Terms to access the transportation service are set out in the Network Code, which is updated by Snam Rete Gas on the basis of • Gas liquefied: 0.03 bcm the criteria issued by the Authority. Shippers may sell and trade gas injected • Tankers loads: 1 into the National Network, at a Virtual Trading Point, thanks to a supporting • Daily regasification capacity: 17,500 3m of LNG computer platform developed and made available by Snam Rete Gas. • Yearly maximum capacity of injection into the grid: 3.5 bcm

LNG REGASIFICATION: Through the Panigaglia regasification plant, Snam PASSO GRIES TARVISIO provides the Italian gas system with the proper diversification of sources, GORIZIA while ensuring a high degree of flexibility in terms of supply.

CAVARZERE (REGASIFICATION The process for the extraction of natural gas from the fields, its TERMINAL) liquefaction for transportation by ship and subsequent regasification for PANIGAGLIA (LNG) LIVORNO OLT use by the users, forms the ‘LNG chain’. The process begins in the country (REGASIFICATION of the exporter, where the natural gas is brought to a liquid state by TERMINAL) cooling it to -160°C and subsequently loaded onto tankers for shipping to the LNG regasification terminal. At the regasification terminal, the LNG SNAM is unloaded, then heated and returned to a gaseous state before being National pipeline network injected into the natural gas Transportation network. Compression stations Regasification terminal

Import points

MAZARA DEL VALLO

GELA 2015 data 38 39

PASSO GRIES TARVISIO

GORIZIA

CAVARZERE (REGASIFICATION TERMINAL)

PANIGAGLIA (LNG) LIVORNO OLT (REGASIFICATION TERMINAL)

SNAM Storage sites

MAZARA DEL VALLO

GELA Snam in the Italian gas system Snam in the Italian gas system Regulatory framework: businesses tariff scheme

STORAGE: Snam storage capacity has sizeably increased over the last decade, TRANSPORT STORAGE REGASIFICATION thanks to relevant investments both to increase capacity of existing fields and to develop new sites.  Re-valued  Re-valued  Re-valued historical cost historical cost historical cost RAB The gas storage system fulfils different requirements between supply and  Deduction of restoration costs PASSO GRIES consumption that are derived from the seasonality of demand.TARVISIO The injection phase into the National Network is generally concentrated betweenGORIZIA April Real WACC  6.3% 2015  6.0% 2015  7.3% 2015 and October, while the withdrawal phase from fields, treatment and delivery pre-tax  5.4% 2016/17  6.5% 2016/18  6.6% 2016/17 CAVARZERE (REGASIFICATION to users via the Transportation Network is usually concentratedTERMINAL) between November and the following March. Storage also ensures that strategic  +1% for 7 years  20% withholding for  +2% over 16 years PANIGAGLIA (LNG) (regional network 8 years for revenues (new terminals or LIVORNO OLT development in excess of revenue increasing capacity at quantities of gas are available to compensate(REGASIFICATION for any lack of or reduction in TERMINAL) investments) recognised resulting existing terminals non-EU supply or crises in the gas system. Stogit is the major Italian operator from insolvency by more than 30%)  +1% for 10 years procedures and one of the leading European natural gas storage operators, via eight (national network SNAM development storage fields in (four), Emilia-RomagnaNational pipeline network (three) and Abruzzo (one). INCENTIVES investments) on new Stogit, the largest operator in Italy and Compressionone of stations the main operators in Europe,  +2% for 10 years investments (entry point development was incorporated in 2000 as part of theRegasification eni Group terminal and acquired by Snam investments) in 2009. It operates under a concessionImport system. points According to economic and  WACC +1% on new  WACC +1% on new  Return on investments investment technical efficiency criteria, the Company uses an integrated infrastructure investment carried out t-1 to offset the carried out after system made of storage fields, treatment plants, compression stations and an after 31 December regulatory time lag 31 December 2013 to offset the (from 2014) 2013 to offset the operating dispatching system. MAZARA DEL VALLO regulatory lag regulatory lag

GELA EFFICIENZA  2.4%  To be defined by the  0% X-factor on operating costs next provision from • Gas moved into the system: 19.58 bcm Authority • Gas injected: 9.84 bcm PASSO GRIES • Gas withdrawn: 9.74 bcm TARVISIO • Strategic storage GORIZIA

capacity: 4.5 bcm CAVARZERE The AEEGSI has regulated the tariff system in each business, defining the (REGASIFICATION • Available storage TERMINAL) criteria for setting the tariffs in different regulatory periods. The rate of

capacity : 11.5 bcm PANIGAGLIA (LNG) return on regulatory invested capital (WACC) has been in force since 1 LIVORNO OLT (REGASIFICATION • Concessions: 10 (9 active) TERMINAL) January 2016. For the regulations of the infrastructural gas services, the Authority has established a regulatory period lasting six years (2016- 2021); moreover, a mechanism of infra-period WACC update has been 2015 data SNAM Storage sites envisaged, based on the trend of the macroeconomic scenario.

TRANSPORT AND DISPATCHING January 2014 / December 2017 REGASIFICATION OF LNG January 2014 / December 2017 January 2015 / December 2018 MAZARA DEL VALLO STORAGE

GELA

40 41 Snam in the Italian gas system Snam in the Italian gas system Main economic-financial data Snam in the stock market

Snam (million) 2014 2015 9M 2016 Total revenue 3,566 3,649 2,586 of which regulated 3,506 3,573 2,549 -8.3% Snam EBITDA 2,776 2,799 1,968 EBIT 1,973 1,950 1,296 Euro Stoxx Net profit 1,198 1,238 783 -14.2% Utilities Net debt 13,652 13,779 14,019 Capex 1,313 1,272 842 -21.0% FTSE MIB

-25% -20% -15% -10% -5% 0%

Year to date Snam Rete Gas, 2015 GNL, 2015 (January 1, 2015 / November 30, 2016) (transport) (regasification) • Regulated REVENUES: • Regulated REVENUES: 2,058 € million 18 € million • EBIT: 1,165 € million • EBIT: 1 € million

2015 YIELD*: 5.7% TSR (2001-2016)**: 405.7% Stogit, 2015 (storage) • Regulated REVENUES: 399 € million • EBIT: 319 € million

* Calculated as the ratio between the 2015 dividend and the share price at 30/11/2016 (3.65). ** Considers the reinvestment of the dividends in the Snam share calculated on the share price at 30/11/2016 (3.65). 42 43 Snam in the Italian gas system Snam in the Italian gas system Snam in the bond market: the credit rating

Since 2012 Snam has undertaken a process of financial optimisation aimed to achieve a competitive cost of debt over time as well as to make the Appendix debt structure more consistent with business requirements, both in terms of financing maturity and of exposure to changes in interest rates. Such activity resulted in the EMTN programme continuation (renewed on 27 September 2016 for a maximum total amount of 10 billion euros) and in the terms’ re-negotiation of certain pre-existing bank loans, as well as in • Glossary the significant amount of funding by “Institutional lenders” (EIB). • Reference heat capacity A financial efficiency that allows Snam to enjoy of the positive evaluation by the credit rating agencies. • Units of measurement • Transported natural gas composition • References

LAST LAST PUBLISHING UPDATE UPDATE DATE 19 February 2015 9 December 2014 23 July 2015 > > >

RATING FOR RATING FOR RATING FOR LONG-TERM DEBT LONG-TERM DEBT LONG-TERM DEBT Baa1 BBB BBB+ > > >

RATING FOR RATING FOR RATING FOR SHORT-TERM DEBT SHORT-TERM DEBT SHORT-TERM DEBT Not assigned A-2 F2 > > >

OUTLOOK OUTLOOK OUTLOOK Stable Stable Stable

44 45 Appendix Appendix Glossary

Economic and financial terms Regulatory period: period of time (usually four years) for which criteria are defined for setting tariffs for transport and dispatching, storing, distributing, Economic and financial terms: net investments made for operating reasons, regasifying liquefied natural gas. We are currently in the third regulatory being the sum of net working capital and non-current assets. period for all the four business.naturale e di rigassificazione del gas naturale Weighted Average Cost of Capital (WACC): indicates the remuneration of liquefatto. the invested capital as recognised by the Authority (RAB). Tariff: unit prices applied to the natural gas business. Net debt: Indicator of the ability to meet financial obligations. Represented by gross financial debt minus cash and cash equivalents as well as other financial receivables not held for operations. Incentives on investments: remuneration on the investments to be added to Commercial terms the base return. Thermal year: period of time into which the regulatory period is divided, Capex: costs of long-lasting assets where useful life does not expire over one currently coinciding with the calendar year. reporting period. National Network: set of pipelines, compressor stations and infrastructures Gross Operating Margin (EBITDA): unit of measurement to assess the that, at national level guarantee the transport of natural gas, through group’s operating performance, as a whole and in the individual business interconnection with international transport networks, production sites, to segments, in addition to EBIT. Determined by the difference between revenue the delivery points for the distribution and use of natural gas. and operating costs. Liquified Natural Gas, LNG: Natural gas comprised essentially of methane Leverage: Indicator of financial structure. Measures a company’s level of debt liquefied by cooling at around -160°C, at atmospheric pressure, to make it and is calculated as the percentage ratio of net financial debt to net invested suitable for tanker transportation or reservoir storage. In order to be injected capital. into the transportation network, the liquid must be reconverted into a gas at Regulated revenues: revenues from the regulated activities of the company. regasification plants and brought to the operating pressure of the pipelines. Net profit: EBIT minus result from financial operations and income taxes Upstream: activity of reserch, drilling and coltivation of hydrocarbons. Operative profit (EBIT): difference between revenues and costs in a given Downstream: activities following the reserch and drilling of oil. In more period; therefore the income from operations before costs and revenues from details it regards the refining and processing of the oil to obtain products financial operations and taxes. ready to be used; the storage and transport of oil products; the distribution and commercialization of fuel and lubricant through the distribution network Regulatory terms Gas chain: totality of activities concerning the natural gas market, from the Negotiated access: access system to the network based on individual production/importation to the distribution to the final client. contracts at prices freely negotiated between the parts (producer/suitable Natural Gas: is a gas consisting primarily of methane and, at lower level, client and network operator). ethane, propane and higher hydrocarbons. The natural gas injected into the Regulated access: access system to the network based on individual transportation network must respect a specific quantity to guarantee the contracts (producer/suitable client and network operator) at prices regulated interchangeability of the gas. by a proper agency (Autority for Electricity Energy and natural Gas). Unbundling: ownership, corporate and accounting separation of import, transportation, distribution and storage activities of the vertically integrated companies of the gas, aimed at the beralisation of the market.

46 47 Appendix Appendix Reference heat capacity Units of measurement

CONVERSION FACTORS LHV (MJ/kg) HHV LHV (kcal/kg) HHV To convert in multiply for Vapour coal 26.1 / 6,250 / inch in millimeters mm 25.4 feet ft meters m 0.305 Sulcis coal 22.3 / 5,330 / statue mile mi. kilometers km 1.609 Green lumber 10.5 / 2,500 / nautical mile mile kilometers km 1.853 Coke of coal 29.3 / 7,000 / short ton sh. ton ton t 0.907 long ton long ton ton t 1.016 Reference crude oil 41.8 44.4 10,000 10,600 pound lb. kilometers kg 0.454 Dense combustible oil 40.2 42.5 9,600 10,150 kilogram kg newton N 9.81 pound per square inch psi bar bar 68.95x10-3 Fuel oil 42.7 45.2 10,200 10,800 kilogram per square cent. kg/cm³ bar bar 0.981 Virgin Naphta 43.9 47.7 10,500 11,400 atmosphere atm bar bar 1.013 LPG 46.0 50.2 11,000 12,000 cubic feet ft³ m3 m³ 28.32x10-3 gallon U.S. gal liters l 3.785 barrels (42 gal. U.S.) m3 0.159 kilocalories kcal joule J 4,185 kilocalories kcal kilowatt hour kWh 1.163x10-3 british thermal unit Btu joule J 1,055 horse power (meters) CV kilowatt kW 0.735 horse power hp kilowatt kW 0.746 gas m3 m3 kilowatt hour kWh 10.35 gas m3 m3 tons of oil equivalent toe 0.0008

EQUIVALENCES To convert in multiply for oil barrels bbl oil tons t 0.135 daily oil barrels bbl/d yearly oil tons t/a 50 Btu millions MMBtu kilowatt hour kWh 2.93 liquid methane tons t m3 methane gas m3 1,400 daily cubic feet ft3/d yearly m3 m/a 10.34 kilocalories kcal gas m3 m3 0.11x10-3 Btu millions MMBtu gas m3 m3 27.69 megajoule MJ gas m3 m3 0.026 gas m3 m3 megajoule MJ 38.1 48 49 Appendix Appendix Trasported natural gas composition References

Algeria North Russia LNG Nat. Libya Web sites: Europe Prod. • Energy Information Administration: www.eia.gov Helium % Mol. 0.15 0.04 0.01 0.00 0.00 0.08 • International Energy Agency: www.iea.org • BP global: www.bp.com Nitrogen = 3.99 2.31 0.80 0.97 0.58 0.43 • Ministero Sviluppo Economico: www.sviluppoeconomico.gov.it Carbon dioxide = 0.65 1.19 0.09 0.00 0.03 1.42 • Snam: www.snam.it • Gas LNG Europe: www.gie.eu.com Methane = 84.25 90.10 97.83 89.15 99.33 86.89 • Ihs Cera: www.ihs.com Superior hydrocarbons = 10.96 6.37 1.27 9.88 0.06 11.18 Report: High heating value MJ/Smc 40.094 38.891 37.969 40.786 37.573 40.803 • Snam Annual report • Natural Gas information 2016, IEA report Low heating value MJ/Smc 36.233 35.095 34.202 36.834 33.829 36.860 • BP statistical Review of World Energy, June 2015 Wobbe index MJ/Smc 49.824 49.485 50.380 51.901 50.302 51.237 • World LNG Report - 2016 Edition, International Gas Union • The LNG Industry - 2015, International Group of LNG Importers (GIIGNL) Volume mass kg/Smc 0.7936 0.7569 0.6960 0.7568 0.6837 0.7771 • IGU, World LNG Report 2016 • Bloomberg data Z - 0.9974 0.9977 0.9979 0.9975 0.9980 0.9974

50 51 Piazza Santa Barbara, 7 20097 San Donato Milanese (MI) Tel +39.0237031

Limited Company Full paid-up capital: euro 2,735,670,475.56 Company Register - Tax code and VAT No 13271390158 R.E.A. (Economic-Admin. Roll) No 1633443

The network respecting the future.

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This publication, a consulting handbook which collects data on the natural gas sector, is the new edition of a manual issued between 1978 and 2000 that in the course of the years has been named by the people of the business ‘metanino’.

December 2016 www.snam.it