8 The Group The Snam Group

Snam 2014 Annual Report The Snam Group 9

HISTORY

1941 - 1999 2012 turns to natural gas and builds import pipelines Snam operates with new ownership structure Snam (Società Nazionale Metanodotti) has provided On 1 January 2012, the Company changed its name integrated natural gas supply, transportation and sale from Snam Rete Gas to Snam and transferred the gas services in Italy since 1941. It gradually put together transportation business to a new company, which an intricate system of methane pipelines, covering inherited the respected Snam Rete Gas name. Snam the whole of Italy, and built important pipelines that now wholly owns the four operating companies today allow the country to import from different (Snam Rete Gas, GNL Italia, Stogit and ). The areas: Russia, the Netherlands, Algeria, the North Sea ownership unbundling from was completed on 15 and Libya. In 1971, Snam designed and built Italy’s October 2012 through the sale of approximately 30% first (LNG) regasification plant at of Snam’s capital to CDP Reti S.r.l. Panigaglia, in the Gulf of La Spezia. 2013 2000 - 2008 Snam expands its scope of activity to cover Europe Snam Rete Gas is born from the unbundling Having acquired 31.5% of Interconnector UK as part of the transportation business of a joint venture with Fluxys, Snam (45%), alongside Snam Rete Gas was incorporated on 15 November Singapore sovereign wealth fund GIC (35%) and EDF 2000 to house all of Snam’s Italian LNG (20%), successfully completed the acquisition of transportation, dispatching and regasification TIFG from Total in July 2013. TIGF is active in the activities. The unbundling of these activities was gas transportation and storage segment in south- decided pursuant to the Letta Decree (164/2000), west France, with a 5,000-km gas transportation which transposed the European Directive on the network and two storage fields. The transaction liberalisation of the European gas market. On represents another step forwards on Snam's pathway 6 December 2001, after the Electricity and Gas of international growth, with the aim of generating Authority issued a resolution establishing the criteria value from its industrial capacity in integrated for defining transportation tariffs, Snam Rete Gas was management of natural gas transportation and floated on the stock exchange. storage infrastructure.

2009 - 2011 2014 Snam enters the storage and distribution business Snam's international development continues In 2009, Snam acquired 100% of Stogit, Italy’s largest On 19 December 2014, the Company acquired from natural gas storage field operator, and 100% of CDP Gas S.r.l. 84.47% (equivalent to 89.22% of the Italgas, the country’s biggest gas distributor. economic rights) of Trans Austria Gasleitung GmbH This added the other two regulated gas activities in (TAG), the company that owns the Austrian section Italy to Snam’s offering: storage and distribution. of the gas pipeline linking Russia and Italy. In line The June 2009 transaction turned Snam into a key with the international development strategy launched integrated regulated gas activities operator, and the in 2012, the transaction strengthens Snam’s role largest by regulatory asset base (RAB) in mainland in Europe’s East-West energy corridor, with a view Europe. to ever deeper integration of the continent’s gas networks.

Snam 2014 Annual Report 10 The Snam Group

SNAM’S ROLE IN THE GAS SYSTEM AND ITS BUSINESS SEGMENTS

Snam conducts activities regulated by the gas segment As an integrated operator providing natural gas and is a significant European operator in terms of transportation, dispatching, storage and distribution regulatory asset base (RAB) in its sector. services as well as LNG regasification services, Snam plays a leading role in the natural gas infrastructure system.

SNAM ACTIVITIES

SALE: SUPPLY: • THERMOELECTRICAL • PRODUCTION PLANTS • IMPORT • MANUFACTURING REGASIFICATION TRANSPORTATION STORAGE DISTRIBUTION PLANTS AND DISPATCHING • RESIDENTIAL AND INDUSTRIAL CLIENTS

SHIPPER

Snam 2014 Annual Report The Snam Group 11

REGASIFICATION TRANSPORTATION AND DISPATCHING The process for the extraction of natural gas from the Natural gas transportation is an integrated service which fields, its liquefaction for transportation by ship and involves providing transportation capacity and the actual subsequent regasification for use by the users, forms transportation of the gas delivered to Snam Rete Gas the “LNG chain”. The process begins in the country to the entry points of the national gas transportation of the exporter, where the natural gas is brought to a network1 up to the redelivery points of the regional liquid state by cooling it to -160°C and subsequently network, where the gas is redelivered to the users of the loaded onto tankers for shipping to the LNG service. regasification terminal. At the regasification terminal, The natural gas introduced into the national network the LNG is unloaded, then heated and returned to a originates from imports and, to a lesser extent, national gaseous state before being injected into the natural production. The gas from abroad is injected into the gas transportation network. Natural gas is also injected national network via eight entry points where the into the national transportation network by the LNG network joins up with the import methane pipelines terminal at Panigaglia (La Spezia), which is owned by (Tarvisio, Gorizia, Gries Pass, Mazara del Vallo and Gela) the Snam subsidiary GNL Italia and is able to regasify and with the LNG regasification terminals (Panigaglia, 17,500 cubic metres of LNG per day; when operating Cavarzere and Livorno). at maximum capacity, the terminal can therefore inject Snam Rete Gas S.p.A. is the leading Italian natural gas over 3.5 billion cubic metres of natural gas a year transportation and dispatching operator, and owns into the transportation network. The regasification almost all the transportation infrastructures in Italy, service includes unloading the LNG from the vessel with over 32,300 kilometres of high- and medium- and operating storage, i.e. the storage time required for pressure gas pipelines (approximately 94% of the entire vaporising the LNG, regasifying it and injecting it into transportation system). the national network.

2014 HIGHLIGHTS 2014 HIGHLIGHTS entry points to the National Network for gas from abroad, corresponding 8 to the interconnections with importation 17,500 m3 maximum daily regasification capacity pipelines (5 entry points) and LNG regasification of LNG of the Panigaglia plant terminals (3 entry points)

62.28 natural gas injected into the National maximum annual quantity of natural gas 3 Network in 2014 3.5 billion m 3 that can be injected into the transport billion m network

km of pipeline networks in operation 32,339 at end-2014

1 The list of pipelines forming part of the national network and the related definition criteria are reported in the Decree of the Ministry of Industry, Commerce and Trade of 22 December 2000 as amended, based on the provisions of Legislative Decree No. 164 of 23 May 2000 (the “Letta Decree”).

Snam 2014 Annual Report 12 The Snam Group

STORAGE DISTRIBUTION Natural gas storage activities in Italy take place under The natural gas distribution business operates on a a concession regime and serve to offset the various concession regime through the conferral of this service demands of gas provision and consumption. Supply has a by local public entities; it consists of the service of gas basically constant profile throughout the year, while gas distribution through local transportation networks from demand is characterised by high seasonal variability, with delivery points at the metering and reduction stations winter demand significantly higher than summer demand. (city gates) to the gas distribution network redelivery Storage also ensures that strategic quantities of gas are points at the end users (households, businesses, etc.). available to compensate for any lack of or reduction in The gas distribution service is carried out for sales non-EU supply or crises in the gas system. Essentially, companies authorised to market to end users by there are two distinct phases in storage: (i) the injection the transportation of the gas through city networks. phase, generally concentrated between April and October, Italgas undertakes natural gas distribution activities by consisting of injecting into storage the natural gas from making use of an integrated system of infrastructure, the national transportation network; and (ii) the extraction comprising stations for withdrawing gas from the phase, usually concentrated between November and March transportation network, pressure reduction plants, local of the following year, when the natural gas is extracted transportation and distribution network, user derivation from the deposit, treated and redelivered to users by the plants and redelivery points comprising technical transportation network. The storage business makes use of equipment featuring meters at the end users. Italgas is an integrated group of infrastructure comprising deposits, the leading Italian natural gas distributor, with 1,437 wells, gas treatment plants, compression plants and the municipal concessions, 55,278 kilometres of medium- operational dispatching system. Stogit is the major Italian and low-pressure network, and 6.408 million active operator and one of the leading European operators in the meters at redelivery points. natural gas storage sector, via eight storage concessions in (four), Emilia-Romagna (three) and Abruzzo (one). 2014 HIGHLIGHTS

2014 HIGHLIGHTS distribution concessions 1,437 as at 31 December 2014

15.9 total storage capacity (including strategic billion m3 storage) as at 31 December 2014

km of network managed 55,278 as at 31 December 2014

15.70 gas moved in the storage system billion m3 in 2014

6.408 active meters as at 31 December 2014 million

number of operating storage concessions 8 as at 31 December 2014

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SNAM’S PRESENCE IN ITALY

GRIES PASS

GRIES PASS TARVISIO

GORIZIA TARVISIO

CAVARZERE (Regasification) GORIZIA

CAVARZERE (Regasification)

PANIGAGLIA LIVORNO OLT (Regasification) PANIGAGLIA LIVORNO OLT (Regasification)

SNAM RETE GAS National Transportation Network SNAM RETE GAS Compression station National Transportation Network Entry points Compression station GNL ITALIA Entry points Regasification terminal GNL ITALIA STOGIT Regasification terminal Storage fields STOGIT ITALGAS Storage fields Municipalities under concession ITALGAS MAZARA DEL VALLO Municipalities under concession GELA MAZARA DEL VALLO

GELA

Snam 2014 Annual Report 14 The Snam Group

SNAM’S PATHWAY OF GROWTH IN EUROPE

The graphic below shows the key stages of the pathway of growth initiated by Snam in 2012 within Europe’s “priority” natural gas transit corridors, as defined by the European Commission.

South-North Corridor (South-west Europe)

South-North Corridor (South-east and central and eastern Europe)

Southern corridor ( area) Corridoio Sud-Nord Europa Sud occidentale) Corridoio Sud-Nord Corridor joining the Baltic and European markets (Europea Sud orientale e centro orientale)

Corridoio meridionale (Regione del Caspio)

Corridoio di integrazione del mercato baltico con il mercato europeo 2012 2013 2014

• Signature of a Memorandum of Acquisition of 45% of TIGF, as the • Signature of a Memorandum of Understanding between Snam and head of a consortium that also Understanding with Fluxys, with Fluxys for the development of includes GIC (35%) and EDF (20%). the aim of further developing the capacity in two-way gas flows in TIGF represents a strategic platform strategic alliance forged in 2012. the south-north corridor between for the integration of the European gas Italy and the UK. markets, for the interconnection of the • Acquisition of 84.47% (89.22% of French and Spanish markets with those the economic rights) of TAG, the • Acquisition of 31.5% of of central and northern Europe, as part company that owns the pipeline Interconnector UK, 51% of of a broader integration of European linking the Slovakian-Austrian Interconnector Zeebrugge and 10% energy infrastructures. border with the Tarvisio entry point. of Huberator, as part of a joint venture with Fluxys.

Snam 2014 Annual Report The Snam Group 15

SCOPE OF CONSOLIDATION AT 31 DECEMBER 2014

As an integrated operator in gas infrastructure incorporation in July 2014 of Gasrule Insurance Limited2, management, the Snam Group is active in transporting a Dublin-based captive insurance company, and Azienda and dispatching natural gas, regasifying LNG and storing Energia e Servizi Torino S.p.A. (A.E.S.), which operates and distributing natural gas, through four operating in the natural gas distribution sector. Both companies companies that are wholly owned by parent company are wholly owned by Snam (the former directly and the Snam S.p.A.: Snam Rete Gas, GNL Italia, Stogit and latter indirectly, through Italgas). Italgas, respectively. The Snam Group’s scope of consolidation at 31 The scope of consolidation at 31 December 2014 December 2014 is shown in the graphic below: differs from that of 31 December 2013 due to the

GROUP INSURANCE SERVICES 100%

GASRULE INSURANCE LIMITED

TRANSPORTATION REGASIFICATION STORAGE DISTRIBUTION 100% 100% 100% 100%

CONSOLIDATING DISTRIBUTION DISTRIBUTION COMPANY SHAREHOLDERS % OWNERSHIP 99.69% 100%

Snam S.p.A. CDP Reti S.p.A.3 28.98

CDP Gas S.r.l.4 3.40

eni S.p.A.5 8.25

Snam S.p.A. 0.03

Other shareholders 59.34

2 Gasrule Insurance Limited is fully consolidated within the business segment “Corporate and other activities”. In accordance with IFRS 8 - “Operating segments”, the “Corporate and other activities” segment does not represent an operating segment. Therefore, the operating segments subject to separate reporting are the same as in 2013 (natural gas transportation, regasification, storage and distribution). 3 CDP S.p.A. owns 59.10% of CDP Reti S.p.A. 4 Company wholly owned by CDP S.p.A. 5 eni is not entitled to vote at Shareholders’ Meetings.

Snam 2014 Annual Report