Il Metanino 2019 Statistical Data 1  : the mission

Snam is Europe’s leading gas utility. Founded in 1941 as “Società Nazionale Metanodotti”, it has been building and managing sustainable and technologically advanced infrastructure guaranteeing energy security for over 75 years. Snam operates in and, through subsidiaries, in Albania (AGSCo), Austria (TAG and GCA), France (Terēga), Greece (DESFA) and the United Kingdom (Interconnector UK). It is one of the main shareholders of TAP () and is the company most involved in projects for the creation of the Energy Union. First in Europe by transport network size (about 32,600 km in Italy, more than 41,000 with international subsidiaries) and natural gas storage capacity (16.9 billion cubic meters in Italy, more than 20 billion with international subsidiaries), Snam manages the first (LNG) plant built in Italy and is a shareholder of Adriatic LNG, the country’s main terminal and one of the most strategic in the Mediterranean, and - via DESFA - the Greek terminal in Revithoussa, with a total pro rata regasification capacity of around 6 billion cubic metres per year. Snam’s business model is based on sustainable growth, transparency, nurturing talent, and development of local areas by constantly listening to and exchanging dialogues with local communities, also thanks to the social initiatives of the Snam Foundation. Through the “Snamtec” project, launched under the scope of the 2018-2022 business plan, Snam has given a great boost to investments for energy transition, focused on technology initiatives, innovation and R&D supporting large national and international networks and green economy businesses, like sustainable mobility, renewable gas, hydrogen and energy efficiency. 3   2 Index

5 The Energy Environment 6 Natural gas reserves in the world (2018) 8 Natural gas production in the world (2018) 9 Natural gas consumption in the world (2018) 10 Natural gas: Trade movements 2018 by pipeline and as LNG 12 The main LNG streams in 2018 14 LNG worldwide in 2018 16 LNG in Europe: plants 18 Storage capacities in the world at the end of 2018 20 Gas prices in the world Europe 22 Natural gas supply in 2018 and changes vs 2017 23 Energy consumption by source in the main countries 24 Natural gas consumption by country (2016-2018) Italy 25 Natural gas supply in 2018 and changes vs 2017 26 Natural gas consumption by sector 27 Snam in the gas system 28 Snam, the company profile 30 The journey of natural gas in Italy through Snam infrastructures 33 Regulatory framework: businesses tariff scheme 34 International development, overview 36 Snam, the European scenario 38 Gas as a forever fuel 40 Biomethane and hydrogen: Gas for Climate’s study 42 Biomethane and hydrogen: the role of Snam 44 Main economic-financial data 45 Snam in the bond market: the credit rating 47 Appendix 48 Glossary 50 Reference heat capacity 51 Units of measurement 52 Transported natural gas composition 53 References The Energy Environment |  5

The Energy Environment The Energy Environment The Energy Environment |  7 | 6 Natural gas reserves in the world (2018) Total: 196.9 OECD countries: 9.9% Non OECD countries: 90.1% Trillion m3

66.7*

13.9

18.1

75.5

14.4

8.2

Source: BP statistical review *Of which 58.4 in Russia of world energy 2019. and Turkmenistan.

4.2% 7.1% 7.2% 9.2% 33.9% 38.4% S. & Cent. America North America Africa Asia Pacific Europe & Eurasia Middle East The Energy Environment The Energy Environment |  9 | 8 Natural gas production in the world Natural gas consumption in the (2018) world (2018)

3,867.9 billion m3 3,848.9 billion m3

Asia Pacific: North America: Asia Pacific: 631.7; 16% 1,053.9; 27% 825.3; 21% North America: 1,022.3; 27%

Africa: 236.6; 6% Africa: 150; 4% Middle East: South and South and 687.3; 18% Central America Middle East: Central America 176.7; 5% 553.1; 14% 168.4; 5% Europe: Europe: 250.7; 7% CIS: CIS: 549; 14% 831.1; 21% 580.8; 15%

2016 2017 2018 2016 2017 2018

Usa 727.4 745.8 831.8 Usa 749.1 739.4 817.1

Russia 589.3 635.6 669.5 Russia 420.6 431.1 454.5

Iran 199.3 220.2 239.5 China 209.4 240.4 283.0

Canada 171.8 177.6 184.7 Iran 196.3 209.9 225.6

Qatar 173.8 172.4 175.5 Japan 116.4 117.0 115.7

China 137.9 149.2 161.5 Canada 105.9 109.7 115.7

Australia 96.4 112.8 130.1 Saudi Arabia 105.3 109.3 112.1

Norway 115.9 123.2 120.6 Mexico 83.0 86.4 89.5

Saudi Arabia 105.3 109.3 112.1 Germany 84.9 89.7 88.3

Algeria 91.4 93.0 92.3 UK 81.2 78.8 78,9

Billion m3 Billion m3 Source: BP Statistical review of world energy, 2019. Source: BP Statistical review of world energy, 2019. The Energy Environment The Energy Environment |  11 | 10 Natural gas: trade movements 2018 by pipeline and as LNG FROM FROM UK Iran USA Total Qatar Bolivia Others Nigeria Algeria Canada Russian Russian Norway imports Malaysia Australia Azerbaijan Federation Uzbekistan Kazakhstan Netherlands To Turkmenistan Other Europe

Nord America 72.5 77.2 - - 0.1 - 0.2 - 1.5 - - 0.1 ------3.0 154.6

• USA - 77.2 - - - - 0.2 - - - - 0.1 ------2.0 79.4

• Canada 21.9 - - - 0.1 - - - 0.1 ------0.4 22.5

• Messico 50.6 ------1.4 ------0.6 52.7

S. e C. America 3.0 - 13.4 - 0.2 - 0.4 - 0.9 - - 0.2 - - - 1.6 0.1 - 8.6 28.5

Europa 4.0 - - 32.5 118.9 7.8 76.1 9.2 12.5 - - 200.8 - - 7.6 22.6 46.6 - 12.3 550.4

• Belgio - - - 7.0 5.1 7.8 0.1 - - - - 0.8 - - - 2.7 - - 0.1 23.6

• Francia 0.5 - - 5.3 21.1 - 3.0 - 3.6 - - 10.4 - - - 1.1 4.0 - 0.9 49.9

• Germania - - - 15.8 24.7 - 4.9 - - - - 55.3 ------100.8

• Italia 0.5 - - 1.1 2.4 - 6.8 - 0.1 - - 25.4 - - - 6.3 17.0 - 4.6 64.2

• Olanda - - - - 20.7 - 7.5 - - - - 7.4 ------35.6

• Spagna 0.3 - - - 3.2 - 1.1 - 4.1 - - 0.9 - - - 3.4 18.1 - 4.1 35.2

• Turchia 0.4 - - - 0.1 - 0.3 7.2 2.2 - - 22.8 - - 7.6 3.1 4.7 - 0.8 49.1

• Ucraina - - - 0.2 - - 9.6 ------9.8

• UK 1.2 - - 2.7 32.8 - 3.2 - - - - 6.1 - - - 2.9 0.3 - 1.2 50.1

• Altri Europa 1.1 - - 0.3 8.8 - 39.5 2.0 2.5 - - 71.7 v- - - 3.1 2.5 - 0.8 132.2

CIS ------20.1 29.2 - 7.7 0.5 - - - - 57.5

Medio Oriente 0.4 - - - 0.2 - 0.2 - 0.7 - - - 1.9 - 4.1 21.8 0.4 0.2 1.7 31.9

Africa 1.3 - - - 0.8 - 0.4 - 1.1 - - 0.6 - - - 1.8 4.8 - 5.9 16.6

Asia Pacifico 14.9 - - - 0.8 - 3.1 - 11.2 33.0 5.4 17.2 33.3 6.3 - 77.3 0.6 91.6 101.9 396.8

Tot. esport. 96.0 77.2 13.4 32.5 120.9 7.8 80.4 9.2 27.8 33.0 25.6 247.9 35.2 14.0 12.1 125.0 52.4 91.8 133.8 1,236.4

Source: BP statistical review of world energy 2019. Billion m3 The Energy Environment The Energy Environment |  13 | 12

The main LNG streams in 2018 Import 70% of the gas is consumed in the production countries, the residual • 42 import countries. +2 compared 2017: Bangladesh 30% is traded: 431 (393 in 2017) billion m3 by LNG (Liquified Natural Gas) and Panama (ten years ago were only 18.) and 805 (741 in 2017) billion m3 by pipeline. • Asia: 76% of total LNG imports.

Export LNG regasification plants across the world • 10 new terminals in 2018, two of these are based on • 20 export countries (+1 compared floating solutions (in Bangladesh and Turkey) and 3 2017: Cameroon). Qatar, Australia, expansions completed in Greece, Japan and Thailand. Malaysia, Usa, Nigeria and Russia: • 8 new floating terminals and 14 new onshore terminals 73.5% of total LNG exports. under construction.

Gas liquefaction plants across the world • Global utilisation: 85% (from 83% in 2017), the highest rate since Europe 71.5* 2013. Japan 113.0 • The liquefaction capacity increase China 73.5 Europe in 2018 also thanks to eight new Japan onshore liquefaction trains: 3 in USA Europe South Korea 60.2 Europe South Korea Australia, 3 in the United States Algeria 16,6 Qatar 104.8 Taiwan and 2 in Russia. India Taiwan 22.8 • First LNG exports from Cameroon Trinidad with the Kribi facility, the world’s Tobago 16.8

South America Japan first floating liquefaction unit India 25.7 Europe (FLNG) converted from an LNG Japan South Korea Taiwan

Nigeria 27.8 China carrier. • Several plants under construction Indonesia 20.8 Malaysia 33.0 in North America (where there is China located more than 75% of global capacity under construction) and Japan Australia. Australia 91.8

* Of which: Spain: 15.0 5th consecutive year of LNG supply growth: global LNG imports reached France: 13.1 an increase of 8.3% compared with 2017. New LNG supply volumes were mostly driven by new production from Australia, the United States and Turkey: 11.5 billion m3 Italy: 8.0 Russia. Spot and short-term LNG imports jumped from 27% in 2017 UK: 7.3 to 32% in 2018, thanks to the ramp-up of flexible volumes from the Belgium: 3.7 United States and from Russia and by the rise of LNG volumes handled by aggregators and traders who are able to optimize their portfolios by Source: BP statistical review of world energy 2019; GIIGNL annual report 2019; IGU World LNG purchasing and selling LNG on different contract durations. Report 2019. The Energy Environment The Energy Environment |  15 | 14

LNG worlwide in 2018 Asia Firmed up its position of leading importing region with a 76% share of global LNG imports, up from 73% in 2017. Asian LNG imports grew by 13%. Japan remained the leading importing country, with a 26.3% market share, followed by China. As was the case in 2017, global LNG import growth in 2018 was led by China and South Korea, the world’s second and third largest LNG importers. Europe China’s policy of substituting coal by gas to reduce air pollution in major cities and to complement domestic gas production, meant that LNG imports increased (+6.4%). Imports into Belgium and the it consolidated its position as second largest LNG importer globally and Netherlands where rose strongly due to the decline in domestic increased LNG demand by +38.4% compared with 2017. In two years production and to the narrowing of price differentials between (2016-2018), Chinese imports have doubled. Northwest Europe and Asia. On the contrary, LNG volumes imported into Spain decreased partly due to stronger pipeline imports. South Korea also recorded a sharp increase in LNG imports (+16.2%) as a result of nuclear power plants being off-line for maintenance and of Turkey is now Europe’s second largest LNG importer behind Spain. restrictions on the use of older coal-fired plants to improve air quality.

Africa/Middle East LNG imports into the Middle East declined again AMERICA in 2018 (mainly in Kuwait, Qatar Imports remained overall stable, Jordan and Egypt) with Despite a decline in LNG ending the year slightly higher deliveries falling by 42.5%, exports, as in 2017, it (+2.5%) than in 2017. as increased availability of remains the leading exporter renewables in the UAE and Mexico’s share of the American new production from the with 24.9% of the world region’s imports remained at recently discovered gas liquefaction capacity. around 29% due to constraints fields in . on pipeline imports from the Egypt United States. Argentina’s LNG exports from Algeria imports were well down on 2017 decreased mainly due to an (-22.5%) because of the increase arbitrage in favor of pipeline in domestic production. exports. Pacific 52% of US exports delivered to The Pacific Basin remains the largest source of LNG supplies, with Asia, 28% to the Americas, 13% 43.8% of the global market, followed by the Middle East (29.4%) to Europe and 7% to the Middle and the Atlantic Basin (26.8%). East. Australia: is the country that registered the largest increase in supply in 2018 (in the Pacific basin Australia was the only country to record an increase in exports). Source: GIIGNL, Annual report 2019. The Energy Environment The Energy Environment |  17 | 16

LNG in Europe: plants Snohvit

Liquefaction plants Regasification plants Tornio Manga FSRU plants (Floating storage and regasification unit) Mosjeen

Pori Lysekil

Frederikstad Nysahamn Gate Gothenburg Zeebrugge

Teesside Klaipeda

Dragon LNG Swinoujscie South Hook LNG

Isle of Grain

Dunkerque

Rovigo Revithoussa Montoir

Bilbao Panigaglia - GNL Italia Aliaga

Mugardos Fos Tonkin Marmara Ereglisi Fos Cavaou Barcellona OLT - LNG Toscana Sagunto

Delimara

Sines Etki

Huelva

Cartagena The Energy Environment The Energy Environment |  19 | 18 Storage capacities in the world at the end of 2018 Major European countries 1.1

1.4 3.0 14.1 Billion m3 23.0 3.9 3.2 33.3 8.6 13.0 4.3 17.8 2.5 6.3

2.8 26.9 75.0

137.1

5.8

Sources: IHS Markit european gas storage tracker: June 2019. For USA: EIA, US Energy Information Administration. For Canada: Government of Canada. For Italy: Stogit and Edison. For Turkey: Ministry of Energy and Natural Resources. For Russia: Management Report Pjcs , 2018. For Ucraina and Romania: Gas Infrastructure Europe. The Energy Environment The Energy Environment |  21 | 20 Gas prices in the world

Henry Hub (USA) LNG (Asia) (January 1, 2019 - June 30, 2019) (January 1, 2019 - June 30, 2019)

€/MWh: 9.0 €/MWh: 6.8 €/MWh: 26.0 €/MWh: 13.8 12 30

11 25 10

-24.4% -46.9% 9 20

8 15 7

6 10 01-jan 2019 01-jun 2019 30-jun 2019 01-apr 2019 01-feb 2019 01-jan 2019 01-jun 2019 30-jun 2019 01-apr 2019 01-mar 2019 01-feb 2019 01-may 2019 01-mar 2019 01-may 2019

PSV (Virtual exchange point) Zeebrugge TTF (UE) (January 1, 2019 - June 30, 2019) (January 1, 2019 - June 30, 2019)

€/MWh: 22.7 €/MWh: 13.1 €/MWh: 21.3 €/MWh: 9.1 30 24

22

20 -57.3% -42.3% 18

20 16

14

12

10

10 8 01-jan 2019 01-jan 2019 01-jun 2019 30-jun 2019 01-jun 2019 30-jun 2019 01-apr 2019 01-apr 2019 01-feb 2019 01-feb 2019 01-mar 2019 01-mar 2019 01-may 2019 01-may 2019 The Energy Environment The Energy Environment |  23 | 22 EUROPE* Energy consumption by source Natural gas supply in 2018 and in the main countries changes vs 2017 FRANCE: 261.8 Mtep GERMANY: 308.1 Mtep Coal: GAS DEMAND: 477 billion m3 Other: Other: Nuclear: 3.5% 0.1% 0.4% 6.4% Gas: Coal: Renewable: 14.0% 21.6% 14.0% Nuclear: Norway 41.1% Others EU 118.9 83.1 (+4.3%) Oil: Gas: Oil: 30.1% Renewable: 23.5% 34.1% 11.2% Russia Source: Ministère de la transition Source: Federal Ministry for Economic 177.8 ecologique et solidaire Affairs and Energy Netherlands (+9.9%) 32.5 (-24.9%) SPAIN: 133.8 Mtep ITALY: 172.3 Mtep Other: Other: Coal: Coal: 0.1% 5.6% 7.7% 5.4% Nuclear: 11.2% Renewable: 20.5% Renewable: Gas: 12.9% 21.9%

Gas: 34.5% Algeria Libya Oil: Oil: 4.3 46.2% 34.0% 46.6 Qatar (-1.1%) (-2.3%) 22.6 Source: Rivalry, European Energy Source: MSE, Situazione energetica (-4.6%) Scenarios IHS July ‘18 nazionale 2018

UK: 191.4 Mtep NETHERLANDS: 74 Mtep

Other: Other: Nuclear: Nigeria Coal: Nuclear: 0.9% 7.3% 2.4% 1.2% 12.5 4.4% Coal: Renewable: 11.1% (+2.5%) Renewable: 6.4% 12.4%

Bcm

Gas: Oil: 35.8% 39.2% Gas: Oil: 41.3% 37.6% Source: BP Statistical Review of World Energy, 2019; Eurostat. * Europe 28. Source: UK Government Source: StatLine Statistic Netherlands The Energy Environment The Energy Environment |  25 | 24 Natural gas consumption by ITALY country (2016-2018) Natural gas supply in 2018 and changes vs 2017 2016 2017 2018 Italy* 70.9 75.2 72.7 GAS DEMAND: 72.7 billion m3

France 46.8 47.0 44.9 • Domestic production: 5.4 • Storage balance, export and other: -0.7 UK 85.0 82.6 84.1 • Import: 67.9 of which 8.7 by LNG Germany 90.4 93.9 86.7 Origin details (billion m3) Spain 30.6 33.3 33.1

Netherlands 34.5 37.9 37.8 Other 2.2* Bcm (-65.6%) Norway Data has been standardized using a GCV of 38.1 MJ/m3 3.2 (+28%) Russia 32.4* 100 Billion m3 (+18.2%) 90 Netherlands 1.2 80 (+33.3%) 70

60

50

40

30

20

10

0 2016 2017 2018 Libya Qatar Algeria 4.5 6.5 18 Italy France UK Germany Spain Netherlands (-8.2%) (-7.1%) (-12.2%)

*The Russian data 2018 also includes the quantities in transit from Germany and Austria Source: EUROSTAT, Supply natural gas, short term monthly data. (counted in 2017 in “Other”). *Source: Ministero dello Sviluppo economico. Source: MSE, Situazione energetica nazionale 2018. The Energy Environment Snam in the gas system |  27 | 26 Natural gas consumption by sector

Demand by sector 2016 2017 2018 Residential 28.86 29.48 29.17

Thermoelectric 23.43 25.36 23.28

Industrial* 16.58 17.80 17.87

Other 2.04 2.51 2.34

Gas Demand 70.91 75.15 72.66

Bcm

Billion m3

160

140

120

100 Snam in the gas 80 system 60

40

20

0 2016 2017 2018

Residential Thermoelectric Industrial* Other

* Includes the consumption of the Industrial, Agriculture and Fishing, Chemical Synthesis and Automotive sectors.

Source: Snam annual reports. Snam in the gas system Snam in the gas system |  29 | 28 Snam, the company profile

Scope of consolidation Italian investments

Overseas investments

Consolidation Area

GASRULE ADRIATIC LNG 100% 7.3%

Corporate & other activities

SNAM SNAM ASSET SNAM ASSET GNL STOGIT INTERNATIONAL RETE GAS COMPANY 2 4 MOBILITY COMPANY 4 100% 100% 100% 100% 100% 100% 100% 13,5%

Corporate Corporate Corporate Transportation Transportation Regasification Storage & other activities & other activities & other activities May 2018

INFRA- STRUTTURE AS TRASPORTO TEP ENERGY GASINFRA- IES BIOGAS ALBANIAN GAS SOLUTION TERĒGA STRUKTUR TAG TAP SENFLUGA GAS SERVICE HOLDING BETEILIGUNG 100% 70% 82% GMBH COMPANY 40.5% 84.47% 20% 40% 60% 25% Energy Transportation Biomethane efficiency July 2018 May 2018 February 2018 December 2018

ENERSI PRISMA AS SICILIA GASINFRA- TERĒGA STRUKTUR 14.66% 100% DESFA SAS GMBH

Biomethane 100% 100% 66% November 2018

December 2018

INTERCONNECTOR IZT CUBOGAS UK 23.54% 25% 100% TERĒGA GCA Sustainable SA Mobility July 2018 100% 49%

Snam, shareholders at April 2019 Shareholding Geographical Break Down at April 2019 6.8% 2.8% 5.3% 8.9% 31.0% Italy- Strategic holders* 17.1% 31.6% CDP Reti Italy-Retails**

Bank of Italy Italy-Institutional

Treasury Shares Continental Europe 8.9% Institutional Investors UK and Ireland 0.5% USA and Canada Retail Investor 2.8% Rest of the world Minozzi 50.0% 14.6% 15.6% Treasury shares 4.1%

* Italy-Strategic holders includes Bank of Italy and CDP Reti. ** Italy-Retails includes the participation of Romano Minozzi equal to 6.8% Snam in the gas system Snam in the gas system |  31 | 30

National (9,697 km) and regional (22,928 km): 32,625 km The journey of natural gas in Italy • Gas injected into the grid: 77.82 bcm through Snam infrastructures • Gas imported: 67.70 bcm • Gas production: 5.12 bcm

Transport Import by entry points (bcm/year) Thanks to investments to develop and upgrade infrastructure, the 2016 2017 2018 network transportation capacity has always grown in the past years. In line with the provisions of the EU Third Energy Package, the Company is Tarvisio 28.27 30.18 26.69 committed, through specific investments, to facilitating trans-European Mazara del Vallo 18.87 18.88 17.09 flows, thanks to the development of reverse-flow transport infrastructure. Passo Gries 6.70 7.25 7.76 The gas from abroad is injected into the national network via eight Gela 4.81 4.64 4.47 entry points where the network joins up with the import pipelines (Tarvisio, Gorizia, Gries Pass, Mazara del Vallo and Gela) and with the Gorizia - 0.02 0.03 LNG regasification terminals (Panigaglia, Cavarzere and Livorno). Once it has been imported or regasified, the gas is transported to the local Cavarzere (LNG) 5.72 6.85 6.71 distribution networks, the regional network redelivery points or large end Livorno (LNG) 0.48 0.91 1.07 users such as thermoelectric power stations or manufacturing plants. Panigaglia (LNG) 0.22 0.62 0.88 Snam Rete Gas allocates transportation capacity to the shippers upon their request. Then they gain the right – as Users – to inject and withdraw Panigaglia LNG terminal at any time during the thermal year, a quantity of gas not greater than the • Gas liquefied: 0.90 bcm daily capacity allocated. Terms to access the transportation service are • Tankers loads: 21 3 set out in the Network Code. The shippers have the possibility to make • Daily regasification capacity: 17,500 m of LNG sales and gas exchanges at a Virtual Trading Point (PSV) of the National • Yearly maximum capacity of injection into the grid: 3.5 bcm Network, thanks to the dedicated IT platform. LNG regasification Through the Panigaglia regasification plant, Snam provides the Italian gas system with the proper diversification of sources, while ensuring a high NATURAL GAS TRANSPORTATION degree of flexibility in terms of supply. ENTRY POINTS REVERSE FLOW

The process for the extraction of natural gas from the fields, its COMPRESSION STATIONS liquefaction for transportation by ship and subsequent regasification for PIPELINES UNDER OPERATIONS use by the users, forms the ‘LNG chain’. The process begins in the country of the exporter, where the natural gas is brought to a liquid state by LNG REGASIFICATION cooling it to -160°C and subsequently loaded onto tankers for shipping to REGASIFICATION PLANT the LNG regasification terminal. At the regasification terminal, the LNG is unloaded, then heated and returned to a gaseous state before being injected into the natural gas Transportation network.

2018 data Snam in the gas system Snam in the gas system |  33 | 32 Storage Regulatory framework: businesses Snam storage capacity has sizeably increased over the last decade, thanks to relevant investments both to increase capacity of existing fields and to tariff scheme develop new sites. Transportation Regasification Storage

The gas storage system fulfils different requirements between supply Calculation of net Revalued historical Revalued historical Revalued historical invested capital cost cost cost and consumption that are derived from the seasonality of demand. The recognised for regulatory purposes Deduction of injection phase into the National Network is generally concentrated (RAB) restoration costs between April and October, while the withdrawal phase from fields, recognised treatment and delivery to users via the Transportation Network is usually Return of net 5.7% 6.8% 6,7% concentrated between November and the following March. Storage invested capital year 2019- 2021 year 2019 year 2019 recognised for also ensures that strategic quantities of gas are available to compensate regulatory purposes for any lack of or reduction in non-EU supply or crises in the gas system. (real WACC pre-tax) Through its subsidiary company Stogit, Snam is the major Italian operator Incentives on new Transitional period Transitional period Transitional period and one of the leading European natural gas storage operators, via eight investments (investments in (investments in 2018-2019): 2018-2019): With holding for storage fields in (four), Emilia-Romagna (three) and Abruzzo +1% for 12 years +1.5% for 12 years 8 years of 20% (investments in (investments in of revenues in (one). The storage business makes use of integrated infrastructure new transportation new regasification excess of revenue comprising deposits, wells, gas treatment plants, compression stations capacity and with capacity) recognised resulting positive cost-benefit from insolvency and the operational dispatching system. analysis) Return on procedures investments Return on t-1 (from 2017 Return on investments investments) to investments t-1 to t-1 (from 2017 offset regulatory offset the regulatory investments) to time-lag time-lag (from 2014) • Gas moved into the system: 21.07 bcm offset regulatory • Gas injected: 10.64 bcm time-lag • Gas withdrawn: 10.45 bcm Efficiency factor Transitional period Transitional period Current period • Strategic storage capacity: 4.5 bcm (XFACTOR) +1.3% - operating 0% 1.4% on operating costs costs • Availability storage Transitional period capacity: 12.4 bcm To be defined with • Concessions: 10 (9 active) 2019 tariffs

ARERA has definined the criteria for setting the tariffs of each business in different regulatory periods. The rate of return on regulatory invested capital (WACC) has been in force since 1 January 2016. Regulation for the 2020-2023 period for transport confirms the method of revalued historic cost and includes work-inprogress in RAB calculation. NATURAL GAS STORAGE The update of opex on the basis of pricecap has also been confirmed. For 2019,

OPERATING CONCESSIONS transport WACC has been set at 5.7%. Investments entering into operation in the 2020-2022 period, with a benefitsto- costs ratio higher than 1.5, will have 1.5% extra return rate on WACC.

Transport 2018-2019 transitional period 2020-2023 5° regulatory period

Regasification 2018-2019 transitional period 2020-2023 5° regulatory period

Storage 2019 transitional period 2020-2023 5° regulatory period 2018 data Snam in the gas system Snam in the gas system |  35 | 34 International development, GCA overview • With its strategic positioning in Central Europe, it plays a key role in Snam holding the transport of gas toward many indirectly markets adjacent to the Austrian 19.6% market. In joint venture con Allianz (Snam 40%)

TAG • A strategic infrastructure for Italy, it transports flows coming from East. Snam holding • With the reverse-flow being fully 84.47%* operational, in synergy with GCA, TAG can export gas toward Southern *Equal to 89.22% of economic rights Germany and Eastern Europe. National Networks International Assets LNG terminal

TERÉGA TAP • Manages the gas infrastructures in the South-East of France and helps • It will complete the South corridor the energy security of the country towards Europe. through its storage fields. Snam holding • It allow for diversification of supply, Snam holding 20% 40.5% • With its strategic position, between through the importation of gas from the French and the Spanish markets, Azerbaijan. will succeed in playing a key role in achieving greater integration at a European level. DESFA Interconnector • With the acquisition of DESFA, Snam strengthens its presence in a strategic • Contributes to the security of supply area of the Mediterranean Sea. in North-West Europe. Following the • Greece, an important crossways for closure of the Rough storage field, it the diversification of supply and the plays a key role for UK market. Snam holding Snam holding 66% opening of new natural gas routes in 23.68% • With its bi-directional flows, also Europe, has considerable potential makes it possible to boost the development as a hub for South-East flexibility and diversification of the Europe. system. Snam in the gas system Snam in the gas system |  37 | 36 Snam, the European scenario

Within the european energetic policy, Italy holds an important role, as it is placed in the middle of the main European gas routes. In line with FEBRUARY/SEPTEMBER 2012 the principles of the European Third Energy Package, which promotes Acquisition of a 31.5% stake of Interconnector UK (16.41% from the integrated development of infrastructures and common rules for and 15.09% from E-on), of a 51% stake of Interconnector Zeebrugge network access in different countries, and in order to take advantage and of a 10% stake of Huberator through a joint ventury with Fluxys. of the privileged position it enjoys in Europe’s gas corridors, Snam, This joint acquisition is a first important milestone in pursuing the aim from 2012, has increased its focus on strategic partnership and M&A of an integrated European gas network. operations. With the positioning of its domestic and international assets, Snam will have a leading role in the investment projects that will be needed in the next 20-30 years in Europe.

DECEMBER 2018 FEBRUARY/JULY 2013 The consortium consisting of Snam (60%), Enagás (20%) Acquisition of a 45% stake of TIGF (Teréga from march 2018), and Fluxys (20%) completed the acquisition of a 66% stake heading a consortium in which GIC holds a 35% stake and EDF in Desfa, the Greek national operator in the natural gas the remaining 20%. infrastructure sector. Desfa owns and operates, under a regulated regime, a high pressure transport network of about 1,500 km, as well as a regasification terminal at Revithoussa.

DECEMBER 2014 MARCH 2018 Completion of the acquisition of the stake (84.47%) held by CDP Acquisition by Snam and Fluxys of the 33.5% stake GAS in Trans Austria Gasleitung GmbH (TAG), approved by the owned by CDPQ in Interconnector UK. Fluxys and Board of Directors on 12 September 2014. Snam, with a 76.32% and a 23.68% stake respectively, are the sole ultimate shareholders in Interconnector UK.

DECEMBER 2015

DECEMBER 2016 In 2015 Snam’s international development continued with the acquisition of a 20% stake in Trans Adriatic It was completed in December the sale of 49% of Pipeline AG (TAP), the company responsible for Gas Connect Austria from OMV, the international developing the pipeline that will run from the Turkey- integrated oil and gas company based in Vienna, to the Greece border to Italy along the Southern Corridor, Consortium composed of Allianz and Snam. enabling gas produced in Azerbaijan to reach European markets, through the italian infrastructure. Snam in the gas system Snam in the gas system |  39 | 38 Gas as a forever fuel

Production Transport & Storage Distribution Consumption

Final users and distribution networks

Methane

CNG/LNG stations

Thermal Agricultural and gasification organic waste

Biomethane

Small Scale LNG Power to gas

Hydrogen/syngas

Biomethane Hydrogen Is a renewable and programmable source of energy that can answer A gas that has been used in industry for decades, is the most abundant to emission reduction goals by exploiting existing gas networks and element in the universe and can play a key role in ensuring the contributing to increasing domestic methane production. achievement of European and global decarbonisation targets by 2050: the This perspective would also have a positive impact on the agri-food sector hydrogen molecule does not contain carbon atoms and its use does not by promoting an economic model based on sustainability and resource- generate emissions of climate-changing gases, which would be harmful to friendliness. humans and environment. Snam in the gas system Snam in the gas system |  41 | 40 Biomethane and hydrogen: Gas for Climate’s study

A potential of renewable gas, mainly biomethane and hydrogen, of 270 billion cubic metres through existing gas infrastructures will help Europe to eliminate CO2 emissions, saving about €217 billion annually by 2050. The report, commissioned to Navigant, illustrates the potential of hydrogen and biomethane, alongside electricity produced from renewable sources, to ensure the continent a less expensive energy transition possible, playing a key role in in the heating of buildings, in industrial processes, in the production of electricity and heavy transport. The existing gas infrastructures in Europe can transport and store both hydrogen and biomethane and will be indispensable for supplying these growing quantities of renewable gas to end users.

European biomethane European hydrogen potential to 2050 potential to 2050 The scenarios envisaged by Navigant

95 bcm of which : Green hydrogen

62 bcm from anaerobic digestion Produced by electrolysis 33 bcm from gasification. from renewable sources, Minimal gas scenario Optimised gas scenario such as wind and solar Of the 95 bcm: 19 bcm of natural gas equivalent 76 bcm are the expected volumes from over generation placed on the gas network. (electricity sector). 19 bcm are those expected 162 bcm from power to gas. available in the form of bio-LNG Variable Variable renewable Hydropower renewable Hydropower Biomethane from tank wagons. Blue hydrogen electricity electricity Production of existing Extra potential of 13 bcm 1 1 1 hydrogen with CCS from importing non-EU countries H H H 18 bcm from retrofitting HYDROGEN HYDROGEN HYDROGEN (eg Ukraine and Belarus) for the 1.00794 1.00794 1.00794 European market. 142 bcm NG equivalent

Future energy categories energy Future Biomass Green Power Green Blue estimated production potential power hydrogen to methane hydrogen hydrogen Snam in the gas system Snam in the gas system |  43 | 42 Biomethane and hydrogen: the role Hydrogen Currently many countries, including Italy, are studying the possibility of Snam of introducing hydrogen into existing natural gas networks. In April 2019, Snam has officially launched itsexperiment of introducing a 5% Biomethane hydrogen and natural gas blend into the Italian gas transmission Snam offers a point of reference in the integration into the Italian energy network. The experiment, the first of its kind in Europe, took place in mix of biomethane. In particular, it is directly involved in the development Contursi Terme, in the province of Salerno, in Southern Italy, through the of an integrated logistics supply chain for the development of biomethane supply of H2NG (a blend of hydrogen and gas) to two industrial companies injected into the network and for the transport sector. Snam is developing in the area. infrastructures to promote road-based gas mobility (new fuel stations) for private traffic (CNG) and commercial / heavy traffic purposes, including Testing of the H2NG supply continued for around one month. Applying the development of small liquefaction plants to met the demand for LNG a proportion of 5% of hydrogen to the total gas transported annually by expected on the main commercial routes (Small Scale LNG), as well as Snam, 3.5 billion cubic meters could be injected into the network each investing in the development and construction of biomethane plants. year, equivalent to the annual consumption of 1.5 million households. This would enable the reduction of carbon dioxide emissions by 2.5 million tons, equivalent to the total emissions of all cars in a city the size of Rome Snam announced an investment of 200€ million in the entire sustainable or half of the cars in a region the size of Campania mobility supply chain by 2022, including at least 100€ million to develop biomethane plants. In July 2018 Snam acquired a 70% stake in IES Hydrogen testing will continue: series of studies to verify compatibility Biogas, a leading company in the design and construction of biogas and with the turbochargers of the plants, with storage fields and user biomethane plants in Europe with over 200 plants already built. The first appliances, such as gas boilers, an indispensable step to evaluate the direct investment in biomethane plant was announced in November 2018, adjustments necessary to transport hydrogen are currently being through the acquisition of Enersi Sicilia Srl, a company legally authorized conducted. The company is committed to verifying the full compatibility to build a biomethane plant with a capacity of 36.000 tons per year of of its infrastructure with increasing quantities of hydrogen blended with organic waste in Caltanissetta town in Sicily. natural gas as well as in the study of hydrogen production from renewable electricity.

Plants built/under construction and 42 connected to the Snam network in Italy (as of 31/05/2019): 5 bar for a total capacity of 0.4 bcm / year when fully operational of which: 5% Hydrogen Pasta factory 9 plants already built and connected to the network (total capacity Salerno 0.105 bcm / year); + 30 plants in the process of connection (overall capacity by the end of 2020 of 0.28 bcm / year); Total volumes (capacity requested accepted) at full capacity: 0.385 Natural gas bcm/year; Bottling company of natural 3 plants connected to the distribution networks for a total capacity waters of 0.015 bcm / year. Snam in the gas system Snam in the gas system |  45 | 44 Snam: Snam nel mercato obbligazionario: main economic-financial data i credit rating As at 31 December 2018, the Group’s respectively, with an extension of (million) 2017 2018 net financial position was 11,548 one year with respect to the previous Total revenue* 2,441 2,528 million euro, resulting from a gross duration. In addition, at the end financial debt of 13,420 million euro of 2018, Snam has a Euro Medium Adjusted EBIT 1,363 1,405 and liquid funds and equivalents Term Notes (EMTN) programme for of 1,872 million euro. As at 31 a total maximum nominal value of Adjusted Net profit 940 1,010 December 2018, Snam has unused 10 bn €, of which around 8.0 bn € Capex 1,034 882 committed long-term credit facilities are being used. Snam also has a Euro for an amount of approximately 3.2 Commercial Paper (ECP) Programme Net debt 11,550 11,548 billion euro.During the year, as part of for a maximum total nominal value the process to optimise the financial of 1 bn €. As at 31 December 2018, *Net of pass-through items. structure of group, their duration the ECP Programme was used for was extended, without increasing a total nominal value of 225 million margins, and the transformation into euro, as part of the company’s short/ a sustainable loan was completed. medium term funding strategy. Following the renegotiation, the Snam long-term rating according to Transport, 2018 two syndicated lines, amounting Moody’s, Standard & Poor’s and Fitch • Regulated Revenues: 1,907 € million to 2.0 bn € and 1.2 bn €, will expire exceeds by one notch the rating of in July 2022 and December 2023, the Republic of Italy. Regasification, 2018 • Regulated Revenues: 17 € million

Last 26 April 2019 27 November 2018 12 December 2018 Storage, 2018 update • Regulated Revenues: 503 € million

Rating on long-term Baa2 BBB + BBB + debt

Rating on short-term P2 A-2 F2 debt

Outlook Stable Negative Stable Appendix |  47

Appendix

Glossary Reference heat capacity Units of measurement Transported natural gas composition References Appendix Appendix |  49 | 48 Glossary Economic and financial terms Unbundling: ownership, corporate and accounting separation of import, transportation and storage activities of the vertically integrated Economic and financial terms: net investments made for operating companies of the gas, aimed at the beralisation of the market. reasons, being the sum of net working capital and non-current assets. Regulatory period: period of time (usually four years) for which criteria Weighted Average Cost of Capital (WACC): indicates the remuneration are defined for setting tariffs for transport and dispatching, storing, of the invested capital as recognised by the Authority (RAB). distributing, regasifying liquefied natural gas. Net debt: Indicator of the ability to meet financial obligations. Tariff: unit prices applied to the natural gas business. 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 the base return. Commercial terms Capex: costs of long-lasting assets where useful life does not expire over Thermal year: period of time into which the regulatory period is divided, one reporting period. currently coinciding with the calendar year. Gross Operating Margin (EBITDA): unit of measurement to assess the National Network: set of pipelines, compressor stations and group’s operating performance, as a whole and in the individual business infrastructures that, at national level guarantee the transport of natural segments, in addition to EBIT. Determined by the difference between gas, through interconnection with international transport networks, revenue and operating costs. production sites, to the delivery points for the distribution and use of natural gas. Leverage: Indicator of financial structure. Measures a company’s level of debt and is calculated as the percentage ratio of net financial debt to net Liquified Natural Gas, LNG: Natural gas comprised essentially of methane invested capital. liquefied by cooling at around -160°C, at atmospheric pressure, to make it suitable for tanker transportation or reservoir storage. In order to be Regulated revenues: revenues from the regulated activities of the injected into the transportation network, the liquid must be reconverted company. into a gas at regasification plants and brought to the operating pressure Net profit: EBIT minus result from financial operations and income taxes. of the pipelines. Operative profit (EBIT): difference between revenues and costs in a Upstream: activity of reserch, drilling and coltivation of hydrocarbons. given period; therefore the income from operations before costs and Downstream: activities following the reserch and drilling of oil. In revenues from financial operations and taxes. more details it regards the refining and processing of the oil to obtain products ready to be used; the storage and transport of oil products; the distribution and commercialization of fuel and lubricant through the Regulatory terms distribution network. Negotiated access: access system to the network based on individual Gas chain: totality of activities concerning the natural gas market, from contracts at prices freely negotiated between the parts (producer/suitable the production/importation to the distribution to the final client. client and network operator). Natural Gas: is a gas consisting primarily of methane and, at lower level, Regulated access: access system to the network based on individual ethane, propane and higher hydrocarbons. The natural gas injected into contracts (producer/suitable client and network operator) at prices the transportation network must respect a specific quantity to guarantee regulated by a proper agency ((Authority for Energy, Networks and the interchangeability of the gas. Environment). Appendix Appendix |  51 | 50 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 / pinch in millimeters mm 25.4 Sulcis coal 22.3 / 5,330 / feet ft meters m 0.305 Green lumber 10.5 / 2,500 / statue mile mi. kilometers km 1.609 Coke of coal 29.3 / 7,000 / nautical mile mile kilometers km 1.853 Reference crude oil 41.8 44.4 10,000 10,600 short ton sh. ton ton t 0.907 Dense combustible oil 40.2 42.5 9,600 10,150 long ton long ton ton t 1.016 Fuel oil 42.7 45.2 10,200 10,800 pound lb. kilometers kg 0.454 Virgin Naphta 43.9 47.7 10,500 11,400 kilogram kg newton N 9.81

LPG 46.0 50.2 11,000 12,000 pound per square inch psi bar bar 68.95x10-3 kilogram per square cent. kg/cm³ bar bar 0.981 atmosphere atm bar bar 1.013 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 Appendix Appendix |  53 | 52 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 • BP global: www..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 Methane = 84.25 90.10 97.83 89.15 99.33 86.89 • Ihs: www.ihs.com Superior hydrocarbons = 10.96 6.37 1.27 9.88 0.06 11.18 High heating value MJ/Smc 40.094 38.891 37.969 40.786 37.573 40.803 Report: Low heating value MJ/Smc 36.233 35.095 34.202 36.834 33.829 36.860 • Snam Annual report Wobbe index MJ/Smc 49.824 49.485 50.380 51.901 50.302 51.237 • BP statistical Review of World Energy, 2019 Volume mass kg/Smc 0.7936 0.7569 0.6960 0.7568 0.6837 0.7771 • GIIGNL annual report 2019 Z - 0.9974 0.9977 0.9979 0.9975 0.9980 0.9974 • IGU World LNG report 2019 • Bloomberg data • Supply natural gas, EUROSTAT • Situazione energetica nazionale 2018, MSE Piazza Santa Barbara, 7 20097 San Donato Milanese (MI) Tel. +39 0237031

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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 1973 and 2000 that in the course of the years has been named by the people of the business “metanino”. July 2019