Snam — Investor Presentation 2016

Jun 29, 2016

snam.it

2016-2020 Strategy and Targets

London, June 29th , 2016

Agenda

Demerger Overview

2016-2020 New Snam Business Plan

Introduction

Introduction Strengthening Snam's gas market leadership

Marco Alverà Chief Executive Officer

• Owner, operator and developer of Europe's largest pipeline network (32,534 km), interconnected with highest number of sources • EU largest storage capacity (16.0 bcm)

• High quality relationship and constructive dialogue with Regulatory

• Bodies

• Proven capabilities in project planning, management and construction, transferrable across markets

• Impressive track record in delivering on time and on budget every year • >1,000 active construction sites annually

• Disciplined approach to capital deployment both for organic growth (€ 8 bn invested since 2010) and international development (close to € 1.4 bn invested with low double digit return)

• No growth for growth's sake

• Focus on financial efficiency and prudent balance sheet management

Snam track record: a strong company with a unique proposition

Excellence in project execution

• Industry leading capital deployment

Two businesses with distinct characteristics

All data refers to year end 2015

• Focus on domestic and international organic growth strategy
• Additional flexibility to support investments
• Further strengthening Snam's sound balance sheet preserving current credit rating
• Retention of a strategic minority stake in Italgas to capture future value
• Stable RAB and enhanced financial flexibility
• Sustainable growth of shareholders remuneration

Demerging to unlock greater growth opportunities and enhance shareholder returns

Strengthening European leadership in transport, storage & LNG

Demerger benefits: focus, flexibility and growth

Demerger structure

1. Consolidated RAB, excluding associates

2. Expected BBB+ already assigned by Fitch, provisional Baa1 expected by Moody's

3. Separation of Italgas through a partial and proportional demerger, resulting in the listing of ITG Holding

4. ITG Holding shares assigned to Snam's current shareholders (1 ITG Holding share every 5 Snam shares)
5. Transaction neutral to Snam credit rating
6. High part of the BBB area for Italgas
7. Snam to retain a 13.5% stake to benefit from a compelling investment from both a financial and a strategic perspective, underpinned by a shareholder agreement

Post Demerger (pro-forma figures YE2015)

Demerger key items

Demerger execution timeframe

Italgas listing process

Snam bondholders consent

solicitation Expected Effective Date of the Demerger

Italgas Capital Markets Day & management roadshow

Listing of ITG Holding

Closing of financing commitments with banks

Italgas strategic pillars

From 6,800 municipalities to 177 ATEMs

Disciplined approach to capital deployment in the new tenders

• Presence in the ATEM and market share (we operate in c. 65% of the ATEMs)
• Type and fragmentation of operators in the ATEM (overall players >200)
• Geographical proximity
• Profitability

From 30% to ̴40% market share*

• Maintenance
• Grid development
• Smart metering
• Financial investments for tender process
• Technical investments related to the development of new concessions

Snam strategic pillars

Demerger Overview

Antonio Paccioretti Chief Financial Officer

Demerger perimeter

Italgas and Snam pro-forma financials

1 Net of revenues entered in accordance with IFRIC 12 (€ 321 m)

2 Gross of subsidies

3 Associates at equity RAB

Italgas (post demerger) 2015 pro-forma consolidated key figures

Snam (post demerger) 2015 pro-forma consolidated key figures

1 Does not include associates

2 Gross of subsidies

3 Includes international associates at acquisition cost and pro-quota Equity RAB of Italgas

€m]
RAB(€bn)	5.7
Revenues1	1,095
EBITDA	735
EBIT	462
Income from associates
Net profit	269
Capex2	393
Net debt	3,482
/RAB + associates3 Net debt	59%

[ €m] RAB1 €bn 19.2 Revenues 2,576 EBITDA 2,052 EBIT 1,476 Income from associates 142 Net profit 971 Capex2 879 Net debt 10,317 Net debt /RAB + associates3 49%

Italgas expected debt structure after demerger

• Opportunity to optimize the debt structure in current market scenario
• Securing a very attractive cost of debt

Italgas debt structure

1 debt at market value, including additional debt allocated to Italgas prior to the demerger (ca. €1.5 billion)

Italgas opportunity: the distribution tenders

• 200 distribution companies currently in the market, strong consolidation expected

• Providing efficiency advantages and economies of scale for larger players
• Tenders to start end 2016
• Process expected to last 5 for years
• Financial strength required
• Managerial focus: a key success factor

Tenders process

Source: Company reports, AEEGSI 2015 Note: Italgas data as of 2015, overall market data as of 2014

Italgas to actively participate in the tender process to pursue growth and optimize the concession portfolio

Strongly positioned for ATEM tenders

Italgas owns 6.5 m redelivery points and is present in 113 ATEMs (out of 177) 30,3%

• Leader (>50% ATEM market share)
• Relevant position (25%< ATEM market share <50%)
• Minor position (ATEM market share <25%)

Italgas 2016-2020 main trends

16

Redelivery points and RAB growth opportunities

Italgas financial themes post demerger

• Significant investment opportunities driven by the tender process calendar

• Leverage expected to increase as a result of new concession awards while maintaining a solid credit profile

• Committed financing package to secure funding needs and maintain a safe liquidity profile over medium term

• Solid Investment Grade rating (expected BBB+ already assigned by Fitch, provisional Baa1 expected by Moody's)

• At demerger 100% of existing debt based on current market conditions

• Opportunity to fully exploit current market conditions to secure a very

• competitive cost of debt

• Debt structure evolution (tenor and fixed/floating rates) consistent with the mechanics of the tariff framework while protecting financial outperformance

Debt structure

2016-2020 New Snam Business Plan

Marco Alverà Chief Executive Officer

Positive market context

• Stable European primary energy demand • Gas most efficient source to reach COP21 decarbonisation target • EU production decreasing and gas imports rising
• Push to diversify gas sources for energy security • New southern corridor
• LNG regaining role in Europe
• Integration of European hubs
• Enhance the flexibility of storage & transport system
• Increase market liquidity
• Additional import infrastructure required
• European projects for market integration & debottlenecking
• Need for oldest pipelines' replacement in Italy

European gas demand & supply trends

20

With increasing dependence on imports, infrastructure operators are key to ensuring stability, security of supply and diversification

Source: World Oil & Gas Review 2015. North Sea includes Norway, NL, DK and UK, North Africa includes Libya and Algeria, Caspian Sea includes Azerbaijan and Turkmenistan

Gas Demand and Production in EU (bcm)

Data for EU28 and Turkey

Present flows

Europe trending towards a single energy market

Expected flows

Snam ideally positioned to capture new capex potential in Europe

• Excellent fit with gas corridors and new supply sources and routes
• Connected to the 4 main European gas hubs
• Investments for reverse flow near to completion
• Integration of storage, transmission and LNG services
• New flows to further enhance strategic value of Snam infrastructure

Potential infrastructure requirements* over € 70 bn

* Source: ENTSOG TYNDP, EC CEF Energy

Transforming Italy in a gas hub

Significant capex opportunities in Italy

• Ongoing storage and network development
• Network replacement (~7,000 km built 50 years ago)

Existing gas infrastructure

Strategic pillars: enhancing performance from a strong base

Corporate governance and sustainability

Data referring to FY2015, variations referring to the period 2009-2015 * Released by the Italian branch

Additional focus on operational efficiency

Regulatory framework in Italy

A fair and visible framework supports long term capex development

Outcome of the new Regulation

• WACC period extended to 6 years
• Clear rules
• Predictable evolution of the remuneration

New WACC formula

• Real pre tax remuneration
• Direct reference to real historical returns
• Floor for risk-free rate at 0.5%
• Introduction of the Country risk premium
• Interim review after 3 years

Domestic investment plan: capex* and RAB evolution

28 * Gross of subsides

¹ Total RAB evolution calculated assuming an average annual inflation rate of ~ 1% in 2016 − 2020 and according to current regulatory framework

Disciplined programme to fuel sustainable growth in the asset base

Domestic Investment plan: main projects in Italy

Enhance the value of international existing participations

Growing net profit contribution from international subsidiaries

• Total acquisition costs: €1.37 billion
• Assets performing better than expected
• Return on equity investment: 10% over the plan period

• TAP expected entering into operation in 2020

3

Additional growth: new regulated services

Opportunities from new sources of profitability

Additional growth: value accretive opportunities

Strict financial discipline to pursue only profitable growth with risk profile in line with current portfolio. No growth for growth's sake

European projects

Sound financial strategy

Solid and efficient financial structure preserves Snam's low risk profile while capturing new value creation opportunities

Debt structure post demerger and further costs optimization

* Assuming a tenor in line with expiring bonds. Based on current Snam yield curve

Dynamic management of debt structure

• Financial markets with favorable interest rates and spreads
• Managing future refinancing exercises exploiting all potential opportunities
• Treasury management optimization
• Resizing of banking lines and bond amount

Snam ex Italgas 2016 guidance and 2020 growth targets

* Considering current business perimeter

Focused on delivering attractive and sustainable returns

	Pro-forma 2016	2020 Targets*
CAPEX	€ ~0.9 bn	€ 4.3 bn 2016-2020
Consolidated RAB	€ ~19.5 bn	~1% CAGR
		Net income increase driven by:
		• EBIT evolution correlated to RAB growth and supported by operating efficiencies
Net income	€ ~0.8 m	• Increase in associates contribution
		• Reduction in cost of debt

Net income € ~0.8 m

Financial flexibility deployed with strict criteria

• Preserve current risk profile
• Accretive returns
• Where Snam's industrial knowhow can be applied
• Involvement as industrial partner

Strict engagement criteria for new investments:

Limit in capital absorption:

• Ratios commensurate to current credit rating

Snam shareholders remuneration

GROWING DIVIDEND

BUYBACK OPTIONALITY

Enhanced shareholders remuneration through demerger

FY2016 : €21 cents FY2017-FY2018: +2.5% yearly

Subject to BoD approval

The company will have an adequate capital structure and financial resources to pay a dividend allowing current Snam shareholders to receive 2016 total dividends at least equal to 2015

Up to 3.5% outstanding shares Max amount € 500m

Timing: 18 months

Execution flexibility based on evolution of financial performance and alternative investment opportunities

SNAM ITALGAS

Value drivers for profitable and sustainable growth

Demerger enables value creation opportunities for both Snam and Italgas

Stable regulation and operational excellence support investments

New opportunities to capitalize on evolving market dynamics

Superior long-term growth of investors' returns with low risk profile

Organic capex delivers steady and attractive returns

Sound financial policy

Excellence in project execution

1 Gross of subsidies

Consistently delivering the budget

Proven track record and distinctive capabilities

Capex plans: first year spending¹

Top-tier competencies

• More than € 8 bn invested in the last six years
• Mastering the whole value chain of complex gas infrastructure projects (from permitting to engineering, from construction to financing)

• 1,000 active construction sites annually

• Rights Away Permits: 18,047 obtained
• Environmental Impact Assessments & Single Authorization: 400 (99% obtained)
• Realization: 1,566 km of pipelines
• Environmental Restoration: 1,050 km executed without claims

2010/2015

TARGETS

• Stable and transparent ownership structure
• ITG Holding governance in line with Snam's and market best practices

Aimed at regulating the main terms for the completion of the Transaction and the general governance provisions which, following completion of the Transaction, shall apply to ITG Holding and Italgas

• Consultation Committee

• Single joint slate for ITG Holding BoD designation
• Snam exit right (CDP Reti approval and pre-emption rights)
• 3-year Shareholders Agreement (can be renewed)

Key Terms

Memorandum of understanding between Snam, CPD Reti e CDP Gas

Disclaimer

Snam's Chief Financial Officer, Antonio Paccioretti, in his position as manager responsible for the preparation of financial reports, certifies pursuant to paragraph 2, article 154-bis of the Legislative Decree n. 58/1998, that data and information disclosures herewith set forth correspond to the company's evidence and accounting books and entries.

This presentation contains forward-looking statements regarding future events and the future results of Snam that are based on current expectations, estimates, forecasts, and projections about the industries in which Snam perates and the beliefs and assumptions of the management of Snam.

In particular, among other statements, certain statements with regard to management objectives, trends in results of operations, margins, costs, return on equity, risk management are forward-looking in nature. Words such as 'expects', 'anticipates', 'targets', 'goals', 'projects', 'intends', 'plans', 'believes', 'seeks', 'estimates', variations of such words, and similar expressions are intended to identify such forward-looking statements.

These forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict because they relate to events and depend on circumstances that will occur in the future.

Therefore, Snam's actual results may differ materially and adversely from those expressed or implied in any forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, economic conditions globally, political, economic and regulatory developments in Italy and internationally.

Any forward-looking statements made by or on behalf of Snam speak only as of the date they are made. Snam does not undertake to update forward-looking statements to reflect any changes in Snam's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.

The reader should, however, consult any further disclosures Snam may make in documents it files with the Italian Securities and Exchange Commission and with the Italian Stock Exchange.

snam.it

2016-2020 Strategy and Targets

London, June 29th , 2016