Hello, everyone. Welcome to the Q1 2026 results presentation conference call. My name is Gawa, and I will be operator for today's event. Please note, this conference is being recorded, and for the duration of the call, your lines will be on listen-only mode. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing pound key, then five on your telephone keypad. I will now hand you over to Francesca Pezzoli, Executive Director, Investor Relations, Sustainability, P&C, and Ratings. To begin the conference, please go ahead.
Good afternoon, ladies and gentlemen. Welcome to the presentation of Snam's consolidated results for the first quarter of 2026, which were approved by the board earlier today. I am here with Luca Passa, Snam's Chief of Financial Sustainability and International Asset Management Officer. Luca will walk you through the most recent market trends and updates, the latest regulatory developments, and the main industrial and financial achievements over the period. He will then provide a detailed review of our financial results, and then we will open the floor for your questions. With that, I'm pleased to hand over to Luca.
Thank you, Francesca, good afternoon, everyone. I'm on page number two. Italian gas demand was up around 0.5% in the first quarter 2026, with exports stable at 0.5 bcm. Physical flows were unaffected by Hormuz developments, while geopolitical uncertainty drove price volatility. 2026 WACC is stable across all our businesses, providing visibility on returns. In parallel, the recent Energy Law Decree has mandated ARERA, our regulator, to define the regulatory framework and key principle for CCS, representing an important step towards greater clarity on the development of this segment. We deliver sound first quarter 2026 results. Adjusted EBITDA of EUR 775 million is up 9% year-on-year when adjusted for first quarter 2025 one-off related to the 2024 deflator update recovery, driven by organic growth and larger perimeter.
Adjusted net income at EUR 375 million is up 2% year- on- year, net of the above-mentioned one-off, thanks to higher EBITDA, partially counterbalanced by depreciation and financial charges. Investment at approximately EUR 1 billion includes the acquisition control over OLT. The transaction is strategic to expand our LNG footprint, which is essential for national security of supply. Net debt stood at EUR 18.5 billion versus EUR 17.5 billion at the end of 2025 after the investment activity carry out during the period, the payment of the interim dividend, OLT control acquisition, and the cash out for the Italgas exchangeable refinancing. The average cost of debt remained broadly stable at 2.6%.
Moving to M&A and financing, in March, we completed the acquisition of the control of OLT and promptly refinanced its existing debt, achieving more favorable terms and optimizing the capital structure. In addition, we have extended an increase to EUR 5.1 billion, our sustainability-linked revolving credit facility. Following the presentation of our business plan, Moody's upgraded our rating to Baa1 with stable outlook, while S&P Global Ratings revised its outlook from negative to stable this morning, confirming the A- rating. At the same time, equity analysts have revised upwards their estimates and target prices, confirming the positive market reception of the plan in terms of value creation and strengthening of our credit profile. Moving to slide number three, Adriatic Line Phase 1 is 80% completed.
It was 68% at December 2025, with total grants cash in for around EUR 291 million, including EUR 57 million received in the quarter. Storage levels already reached around 50% at the end of April, and they are at 53% as of today, with 90% filling target before the next winter already secured to the latest auctions. LNG continues to provide significant volumes and flexibility, accounting for around 33% of total gas imports, with 52 cargos delivered to Italy versus 45 last year. We have successfully completed Phase 1 of the competitive auction process for the disposal of our biomethane business, which attracted very significant market interest.
We are now moving into the second phase with the objective of signing by year-end, with the business to be classified as held for sale and the closing at the beginning of next year. We also made important progress on sustainability. Sustainable finance reached 86%, up 1% versus December 2025. We maintain extensive engagement with shareholders, reflecting in an average approval rate of around 98% across all AGM items. On ESG ratings, MSCI AA was confirmed, and we are included also this year in the Dow Jones Best in Class Index. Moving to page number four. In the January-March period, Italian gas demand amounted to 21.8 bcm.
The 0.5% increase year-on-year was mainly driven by the thermal electric sector, 0.1 bcm or +2%, partially offsetting lower hydroelectric generation. Demand from the industrial and civil sectors remain broadly in line with the first quarter 2025 levels. In the early months of the year, residential consumption was primarily influenced by the weather conditions. Export was stable at approximately 0.5 bcm, mainly through Tarvisio. Looking at the supply flows, we have seen a further increase with LNG volumes up 17% versus first quarter 2025, mainly driven by the good availability of the Ravenna FSRU, which has been fully operational since May 2025. The additional LNG capacity is significantly enhancing the country's energy security by diversifying supply sources, which is particularly important in the current geopolitical environment.
Far in Italy, we have not observed any physical disruption to the gas flows with all expected cargoes in March delivered as planned. In April, Qatari volumes affected by the [first major] were effectively replaced by cargoes from alternative geographies. Europe has experienced limited physical tightness so far, supported by weaker weather-driven demand in March and April, as well as reduced competition from Asia. Storage refilling remains as a key European theme looking ahead, in this context, we have proactively accelerated the injection into our storage facilities, securing the volumes required for the next winter season. Moving to the slide number five, through a proactive approach and close coordination with institution and the regulator, Snam has ensured the condition for a timely and efficient storage refill ahead of the winter.
Following the destruction, sufficient capacity has been allocated to achieve the target of filling Italian gas storage facilities to at least 90%. In total, around 17.5 bcm have been allocated out of a domestic storage capacity of just over 19 billion cubic meters, taking into account both the gas already stored and the volumes contractually secured. As a result, by the end of April, storage levels reach around 50% of available capacity, today at 53%, compared with a European average of approximately 33%, which includes also Italy. This represent a critical factor in the current context of supply uncertainty, supporting system security while helping to mitigate price volatility and reduce market speculation. Moving to slide number six on investments. Out of the total investments, around 54% refers to the OLT transaction. Considering only technical investments, over 50% are related to development.
90% of the investment gross of OLT enterprise value acquisitions are European taxonomy aligned and include H2-ready replacement, dual-fuel compressor stations, biomethane plants connection, H2 and CCS investment, and large part of biomethane CapEx and energy efficiency, excluding cogeneration. SDG alignment is calculated only on technical investment, excluding the OLT business combination, and is 56%, of which majority goes towards SDG 9, 13, and 7, respectively, industry innovation and infrastructure, climate action, and affordable and clean energy. Let's now move to the EBITDA analysis on slide number seven. Adjusted EBITDA for the period was EUR 775 million, +2% compared to last year, and +9%, netting the EUR 52 million deflator one-off recognized in the first quarter of 2025. The growth is mainly attributable to regulator revenues increase for about EUR 33 million, mainly related to tariff RAB and output-based growth.
Perimeter effects are related to Stogit Adriatica growth for EUR 8 million that in 2025 enter into perimeter from March, Ravenna FSRU for EUR 10 million that started operating from May 2025, and OLT consolidation from March 2026. The slight increase in regulatory cost is mainly attributable to labor cost and new hires. With regards to the market solution businesses, the +EUR 7 million EBITDA contribution is mainly driven by biomethane following higher business volumes and to energy efficiency and energy performance contracts in public administration segment. As for the full year 2026 guidance, we confirm adjusted EBITDA to reach around EUR 3.1 billion, driven by RAB growth, OLT consolidation, and the full year contribution of Stogit Adriatica and Ravenna FSRU. Moving to slide number eight, during the first quarter, our associate portfolio confirmed its resilience against a backdrop of heightened geopolitical and macroeconomic volatility.
TAP delivered a strong quarter, supported by the capacity expansion by 1.2 bcm a year, reinforcing its strategic role in the diversification of Italy's gas imports. DESFA benefited from lower net financial expenses, although this effect is expected to reverse over the year. SeaCorridor's performance was mainly driven by higher operating costs and depreciation, also reflecting phasing effects related to carryover activities that will partially absorb during the year.
Teréga was impacted by lower cross-border bookings at the Spanish interconnection, an effect expected to be recovered over time through standard regulatory mechanisms. The recent agreement by Enagás to acquire 31.5% stake in Teréga, in which we hold a 40.5% interest, clearly highlights the underlying value of the assets, which benefits from a stable and visible regulator return profile, supported by an integrated gas infrastructure platform made by pipelines and storage with upside potential from the development of H2 and CCS infrastructure. EMG was the only group associate directly affected by the conflict in Iran, with a temporary reduction in gas flows in March, resulting in a limited impact of EUR 2 million on the first quarter results, with flows back at regime from April 3rd. Finally, Italian associate benefited from a one-off effect linked to the OLT transaction closing.
Overall, first quarter performance is in line with our full year expectation of around EUR 360 million contribution. The year-on-year decline is mainly driven by the one-off and perimeter effects, including the ADNOC divestment in the early 2025, and the consolidation of OLT from associates following its full consolidation on a line- by- line basis from March. Let's now move to the first quarter 2026 net income analysis on slide number nine. Adjusted net income for the period was EUR 375 million, -8% compared to the first quarter 2025, and +2% considering the deflator one-off recorded in the first quarter 2025 net of the fiscal effect.
The trend is attributable to higher EBITDA, partially counterbalanced by higher D&A EUR 434 million following new assets entering into operation, and perimeter effects related to Stogit Adriatica, Ravenna FSRU, and the OLT consolidation, all of which waits for about EUR 14 million. Higher net financial expenses due to higher average net debt, with an average net cost of debt stable at approximately 2.6%. Slightly negative contribution from associates for EUR 4 million as a result of higher Italian associate contribution for EUR 7 million, counterbalanced by a decrease of EUR 11 million in the international associates. First quarter 2026 taxes includes the IRAP increase and a benefit on the OLT from the recovery of deductible financial expenses related to the previous years.
As for the full year 2026 guidance, we confirm an adjusted net income above EUR 1.45 billion, which reflect the EBITDA performance, partially counterbalanced by higher D&A and higher net financial expenses. It includes around EUR 40 million of IRAP increase related to the Energy Decree mentioned before. Turning now to the cash flow for slide number 10. Cash flow from operation for the period amount to around EUR 860 million, was the result of EUR 626 million of funds from operation and EUR 234 of positive working capital.
The change in working capital was mainly driven by about EUR 400 million of tariff-related items and EUR 100 million of Superbonus fiscal credit decrease, partially counterbalanced by around minus EUR 180 million of temporary commercial net working capital and - EUR 100 million related to the default service. Net investment for the period amounted to EUR 574 million, including the cash out related to the OLT transaction, net of cash acquired. Other outflows were mainly related to the payment of the interim dividend for EUR 404 million, and to the impact of the Italgas bond exchangeable refinancing for EUR 432 million, while other items are largely attributable to the OLT debt consolidation, resulting in a change in net debt of about EUR 992 million.
Moving to slide number 11, net debt amounted to around EUR 18.5 billion at the end of March 2026, with net cost of debt substantially stable at 2.6%, while the fixed to floating mix stands at 75%/25%. Sustainable finance reached approximately 86% of committed financing, up 1% versus December 2025. During the first part of 2026, we successfully issued an exchangeable bond in Italgas shares for EUR 500 million as refinancing of the existing bond. We secured bilateral banking facilities totaling EUR 600 million, as well as drawn down EUR 140 million from the European Investment Bank signed early in 2025 for the connection of biomethane production plants into national gas network. In addition, we have extended and increased to EUR 5.1 billion our sustainability-linked revolving credit facility.
As for credit agencies, Moody's upgraded Snam to Baa1 stable outlook in April on the back of the 2025 results and stronger forward metrics compliant with the 12% threshold on FFO net debt for the higher position. Fitch affirmed the BBB+ rating with stable outlook, flagging the metrics are very well positioned for the current rating and close to the A- positioning. Finally, today, Standard and Poor's affirmed the A- rating, improving the outlook from negative to stable, confirming the solid investment grade profile of Snam. As for the full year 2026 guidance, we confirmed a net debt at around EUR 19 billion, including the OLT acquisition and its consolidation. To conclude, we are delivering across all fronts: security of supply, strategy execution, and financial performance. I'm on slide number 12. We are supporting security of supply.
The 90% storage filling target ahead of winter has already been contracted, strengthening the resilience and flexibility of the national energy system. At the same time, we are making solid progress in executing our strategy, with key projects advancing as planned. This is translating into a solid financial performance underpinned by the strength and full visibility in our regulated business. Overall, we remain fully on track to deliver our full year 2026 guidance. We are now ready to take your questions.
Thank you very much. If you wish to ask a question, please dial pound key, then five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key, then six on your telephone keypad. The next question comes from the line of James Brand of Deutsche Bank. Please go ahead and ask your question.
Hi. Thank you for the presentation. I had two questions. The first is on the new CCS regulation that you mentioned. In the strategic plan, I think there was EUR 0.8 billion of investment in the plan related to a new CCS pipeline. I was just wondering, you know, is the regulation kind of shaping up in the early discussions around it how you expected? Could that provide kind of upside to the plan, or do you still see that level of investment as being reasonable? That was the first question. The second question is just on the kind of trigger. Obviously, there's been some pretty big movements in bond yields and inflation. There's a kind of debate around whether France gets taken out of the measurement of the risk-free rates.
Where do you see those debates going, and do you think if market parameters stay where they are at the moment, you'd get a trigger later this year? Thank you very much.
Thanks, James. You're right. It's EUR 800 million on CCS of investment during the plan. Regarding, you know, the regulation, what I can say at the moment is that the Decree provides for basically ARERA to start drafting the guideline of the regulation. The Decree has not been translated into law. Once it's done, ARERA will have 120 days to draft these guidelines. We don't have, let me say, further visibility vis-à-vis what we already assume in our business plan. In our business plan for the EUR 800 million of investment, which I remind are divided between EUR 400 on transport and EUR 400 on the equity injection in the JV for the storage part, which is a joint venture with Eni.
We are assuming an average return, which is 100 basis points higher than the one we are using for gas in transport and gas in storage. Now, we will have more visibility during basically the course of this year, I suppose. To the questions whether with this more visibility, we might decide to accelerate or increase investment, I think we will know, you know, a few months before we take FID, which at the moment is expected to be taken, I would say the beginning, first quarter, next year. That's what we can say at the moment on this topic. Regarding the second questions, the movements, yes, we saw the movements on bond yields, on inflation.
I can tell you that our mark to market for the 2027 trigger taking out France, and I will come back on that, is currently below 30 basis points. Therefore, it doesn't trigger for the three businesses. The assumption is that France will be taken out because, as you probably remember, they've been downgraded before the start of the observation period. Therefore, we will have a discussion with the regulator on this calculation because technically is in within the regulation, the fact that France is still in, notwithstanding they are not anymore a A A country. As far as the other impacts, clearly, what might drive some upside to our numbers is inflation. We are seeing inflation higher than our business plan in the next two years, 2027 and 2028.
That clearly, if that materialize, you will have an higher revaluation of the RAB. Overall, also in the longer year, we can say that the increase in inflation is in the region of 0.1%, 0.2% vis-à-vis an average that was 1.9% across the five years of the plan.
Great. Thank you very much.
The next question comes from the line of Javier Suárez of Mediobanca. Please go ahead and ask your question.
Hello, and many thanks for the presentation. I wanted to focus on the associate contribution. I think that here during the presentation, the company has highlighted limited impact on the Middle East crisis or gas disruption in the gas market, et cetera, et cetera. I just wanted to elaborate with you on the possible disruption in the contribution from associates if the situation in the Middle East continues to stay as a complicated one. Do you perceive that as a risk in any of the subsidiaries? You collaborating that would be helpful.
Also, on the associate, interested on the by the entrance of Enagás in the shareholding structure of [Atergas] that you mentioned during the presentation. Do you see that as an accelerator in the business plan of the company or the strategical relevance of that asset to better integrate different relevant European countries on the gas side as well? The third question is on the taxation. This quarter taxation is relatively low and stable versus last year. I understand that there is one off, so this quarter. Can you elaborate with that, which is your expectation for a normalized taxation by the year-end? Thank you.
Thanks, Javier . Regarding, you know, assets contribution, associate contribution, around this geopolitical context, we do not, let's say, foresee any other impact on our associate. The only impact, and I mentioned that during the presentation, was on the EMG pipeline, which is the pipeline connecting Egypt to Israel, where flows for just one month were lower than usual. They become, I would say normal, back or at the beginning of April. The impact of EMG, being on low flows is in a region of EUR 1 million per month, to give you basically a sensitivity. But, since the April 3rd, is running without basically any problem. Regarding the other subsidiary, we do not see any, you know, potential impact from the current geopolitical tensions.
On the second question on Terega, first of all, what we can comment is clearly the evaluation that Terega assigned for the transaction, which they're currently under, you know, antitrust and Golden Power approval in France, is reevaluating, you know, the sum of the parts of some of the analysts for our stake. According to the evaluation that Terega is paying, basically our stake should be in the region of EUR 750 million, more or less, of value, while the sum of the parts is in the region of EUR 600 million. There is, let me say, a value crystallization there that could be extracted.
Teréga is a very mature asset, very efficient asset, in terms of strategies, very similar to the Snam strategy because they are very much involved in transport as well as in storage, one of the few assets that is involved in storage. They are developing both hydrogen, as you know, through the BarMar project as well as CCS. The Enagás, I would say, acquisition is welcomed by us. They are a partner to us in other assets. We welcome an industrial operator vis-a-vis financial investors in these assets also going forward. Regarding to taxation, yes, you are right. We have a positive impact of EUR 4 million around the OLT acquisition, which is basically lowering our tax rate. Tax rate for the first quarter is 24.5%.
A normalized tax rate we are expecting for the full year guidance is in the region of 26.5%, which assumes a 2% IRAP increase that I have mentioned before.
The next question comes from the line of Bartek Kubicki of Bernstein. Please go ahead and ask your question.
Good afternoon, thank you very much for taking my question and for the presentation. I would like to touch base on two aspects. First of all, on the gas market per se and the regulation, meaning you mentioned first quarter was okay in terms of gas demand, but I would like to know whether you are seeing any gas demand destruction in April and May so far in Italy, but also in neighboring countries where you are exporting gas. Whether you think the government may, or more specifically the Italian government, may do something to limit gas consumption in the country.
Also on the gas market, I would like to ask you about your kind of first impressions, conversations with the new regulatory body or the regulatory board, and what is your view on their view and opinion on the gas, on the gas market per se? Whether there is something different versus the previous regulator? Just a clarification on the biomethane, if you can just update us on the book value of those assets at the end of first quarter 2026. Thank you very much.
Thanks, Bartek. On first question, gas market, I would say evolution. As I said, first quarter up until the end of March is up basically 0.5%. We are estimating gas consumption for the full year at 64 bcm, which is higher than last year. April is a little bit less in terms of demand. It's -2% vis-a-vis April 2025, and that is mostly linked to weather. Now, the increase in gas demand we are seeing is coming from the thermoelectric sector being, you know, power generation with gas. Therefore, we are not seeing any, I would say effect, from the current crisis, around, you know, gas consumption.
On the second part of your question, whether the government is thinking about measures to limit gas consumption, we are not aware of any of these, basically potential interventions. Clearly what the government is focused on is in lower the energy bills for both industrials as well as residential customers. That is part of the Energy Decree that they have actually approved at the end of February. There are no design or no potential intervention, at least for the moment, around, you know, basically gas consumption. On the second question, what I can tell is we had, as all the other operators, the first public auction with the new, basically board of ARERA, including clearly the chairman.
I think what I can comment there is they're very receptive of our views on the current situation, with regards to gas and in particular infrastructure supporting, you know, basic gas flows. If I can comment, you asked what is the difference between, you know, them and the previous. I think, they've been very pragmatic on, you know, what is the current situation. Realizing that what we have done in terms also the actions we took, through the auctions in order to secure, basically, the yearly storage target 90%, is clearly a sign that this regulator is supportive of an infrastructure that is supporting clearly, the gas as an energy vector in the country.
As far as the book value of our biomethane platform at the end of the first quarter, you can call it at EUR 635 million more or less, which is EUR 20 million more of what we had basically at the end of 2025.
Okay. Thank you very much, Luca.
The next question comes from the line of Mafalda Pombeiro of Goldman Sachs. Please go ahead and ask your question.
Hi, good afternoon, and thanks for taking my questions. I only have one. Luca, is there any update on the progress or maybe even on timing that you could give us on with respect to your asset rotation program announced at your recent CMD? I think there's been a few press news hinting something could happen and just interested to hear any comments you can give. Thank you.
to be honest, Mafalda, you know, we present the asset rotation as a part of a combination of disposals for EUR 1.6 billion, a combination of, you know, potential acquisition for EUR 1.2 billion. We generally do not comment on M&A unless there is a, let's say, a formal process ongoing like the one that we are currently doing for the biomethane platform. I already said on that particular process, we just ended Phase 1. We are entering Phase 2 with expectation to basically receive binding offers basically before the summer and potentially signing before year-end. Regarding the other assets around the asset rotation, again, I cannot comment. Once we have something to comment, we will, we will tell you what we have, you know, signed in terms of disposal or in terms of acquisition.
I cannot comment. I can tell you that there are ongoing discussions on both sides of the asset rotation, both on acquisition as well as on, asset disposals.
As a reminder if you wish to ask a question please dial pound key then five on your telephone keypad. The next question comes from the line of Emanuele Oggioni of Kepler. Please go ahead and ask your question.
Good afternoon. Thank you for the presentation and taking my question as well. The first one is only clarification on the guidance. The net profit guidance, I suppose, is adjusted net profit, so does not include the IRAP, the additional IRAP for EUR 40 million a year in 2026. The second question is on an update on the TAP because the overall capacity is around 10 bcm, or it was in 2025, but in 2026, this capacity should increase by 1.2 bcm. You can update on this considering that the Q1 was basically flat plus 3% flows year-on-year. Thank you.
Thanks, Emanuele. Regarding the guidance, yes, it's adjusted net income for EUR 1,450 million. It includes this guidance, EUR 40 million of additional taxation for the IRAP increase. I repeat, it includes the EUR 40 million of the IRAP increase. Regarding TAP, yes, you are right. 2026, since January, we started to operate the pipe with 11.2 bcm of capacity, which has been through market testing agreed with the shippers that are using this pipe. Therefore, the improvements that you see in the first quarter are derived from that kind of additional contribution. I can tell you that we are foreseeing TAP contributing above EUR 85 million for the full year of 2026.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you very much for listening. We are available for any follow-up question. Good afternoon. Thank you.