Snam S.p.A. (SRG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Snam 2025-2029 Strategic Plan Presentation. We appreciate your presence here in Milan, or remotely. Our speakers today are Stefano Venier, Snam's CEO; and Luca Passa, Snam's CFO. The agenda will be the following: Stefano will discuss updates on the energy landscape, Snam response, key achievements and strategic priorities. Luca will address the strategic levers, capital expenditure plan, financial projection, targets and dividend policy. Stefano will conclude with our 10-year vision and the closing remarks. Following the presentation, there will be a Q&A session. Analysts and investors will have the possibility to post questions live from here via phone or written format via chat. And in the latter case, I will consolidate and address all the remaining questions at the end. At the end of the presentation, you will find a comprehensive annex section covering key financial, governance, and sustainability topics. The image featured on the front page is Future Symphony, the winner of the Art Illustrators Contest we launched. For the artist, it serves as a visual metaphor that embodies Snam mission to transform the energy transport into a sustainable symphony, harmonizing technology and nature for a better world. Following today's presentation, we will spend 2 weeks in Europe and U.S. to meet investors. As a reminder, all of Snam events, including the roadshow, will be sustainable with carbon footprints calculated and emissions offset. In 2025, we have calculated the emissions from the events and compensated through Arbolia with 335 carbon credits. I will now hand over to Stefano.

Thank you. Thank you, Francesca, for the introduction, and good morning also on my side to everyone, and welcome to this third strategic plan presentation of Snam. Firstly, let me address the energy context evolution over the past 12 months with several developments in the line of the expectations we shared with you last year as part of the building blocks of our 2027 strategic plan. In the next few pages, allow me to devote some time to share with you some further consideration and implication of our strategic development and the European energy system in general. The energy system equilibrium is inherently dynamic. The energy markets remain unsettled and not only for geopolitical reasons. This is reflected in the high volatility of power and gas prices that often influence each other, and it's exacerbated by growing global energy demand and tight supply. In response, there is a growing emphasis on building resilient energy system capable of withstanding geopolitical shocks and uncertainties. In fact, energy transition requires substantial investment in new technologies, infrastructure and setup of effective regulatory frameworks, underpinning attractive risk-adjusted returns to navigate the multifaceted landscape of global energy transformation, while maintaining European competitiveness. Achieving net zero requires utilizing all available levers and technologies. There is now broad agreement that about 50% emission reduction will come from energy efficiency measures and decarbonized and green molecules. Specifically, green electrons and decarbonized molecules are both crucial and the energy system must become increasingly interconnected and tailored to each country's feature with growing interdependence among Europe and the neighboring countries. Let me share some thoughts about the recent developments. Renewables are intermittent and not predictable by nature, require more balancing and leading to price volatility. Dunkelflaute is a recurring German term that's gained popularity in the energy industry all across Europe. It describes weather conditions where reduced sunlight and wind and, in some cases, hydro, mean little or no energy can be generated from renewable sources. A dunkelflaute period in Germany last November and December led to extreme price hikes in short-term electricity trading and a peak of gas-fired production more than 50% week-on-week. Moving on gas prices, they remain significantly above precrisis level and exhibit an upward trend due to several factors, including the Russian-Ukrainian transit stoppage, the geopolitical developments in producing countries and the rapid gas withdrawal from storage due to cold winter, the lack of renewable electricity supply, as I mentioned, and of course, the competition with Asian LNG terminals. Power sector is not transitioning linearly, and gas is playing a crucial backup role in a system increasingly exposed to variability of renewable production. Renewable energy represents already more than 40% of European generation mix. Long-term storage and backup solutions are essential for addressing unpredictable shortages. Gas remains the most suitable immediately available option for this purpose. As a result, gas demand in the power sector has become more volatile and not predictable. Previously, peak demand was mostly met by flexibility offered by pipelines, given the spare capacity on the supply side of major EU suppliers like Norway, Algeria. However, since the beginning of the war in Ukraine, this has changed radically. With Russia out of the equation and Algeria and Norway operating at almost full capacity, LNG now covers 30% of EU demand, and it takes days to respond. As a consequence, underground gas storage has gained a more pronounced balancing role. Management of these assets into an integrated and sizable perspective plays a strategic role for the domestic and European energy system security. This situation is prevalent across Europe and even more in Italy, where gas molecules account for more than 40% of the energy mix and are the primary source of dispatchable energy. After a period of decline, gas demand in Europe turned positive year-on-year at the end of 2024, driven by colder weather and flexibility required by the power market. Russian imports gained share in 2024, reaching 58 bcm, while LNG share, excluding the Russian LNG, declined from 39% to 31%. EU gas storage is still relatively full, but 72% at the end of 2024 compared to the 86% of the previous year due to the increased winter demand. Nowadays, it stands at 61% with Italy at about 70%. In 2024, global gas demand increased by 2.8%, with a more than 2% increase expected also for 2025. Given the Russian gas stoppage, delayed liquefaction projects and development of Asian competition, gas market balance is quite tight in short term. Looking at 2030, with global demand, according to Rystad 1.9 degree scenario, could grow at 2% on average per year. Markets will be balanced if LNG liquefaction projects meet their deadlines and we do not run into more disruptions. Future demand beyond 2030 varies significantly in different reference scenarios, not only in connection to coal phaseout, renewable development and macro developments, but also from factors like increasing building cooling needs, data centers, clean tech deployment, and electric vehicle predictability in terms of impact on energy demand and its profile. Therefore, infrastructure redundancy diversification remains a must to guarantee security of supply at affordable cost with appropriate balancing throughout the entire midstream value chain, ready to host the green and decarbonized molecules for getting to net zero. On Page 7, green and decarbonized molecules are rising to meet EU policy ambitions. Biomethane is a mature and sustainable alternative to fossil gas. According to the European Biogas Association, biomethane contributed to a reduction of approximately 15 million tons of CO2 equivalent in the EU in 2023. As outlined in the REPowerEU plan, the production of biomethane needs to accelerate significantly to reach the target of 35 billion cubic meter by the year of 2030. Decarbonizing some industrial processes, specific forms of transport and certain agricultural practices remain complex and expensive. In these cases, technologies that can remove, capture, store and eventually reuse carbon emissions become crucial. As part of the industrial carbon management strategy, Europe has announced a target to capture 280 million tonnes per annum of CO2 by 2040, highlighting the importance of carbon capture and storage technologies for, again, getting to Net Zero. On July 15, 2024, the EU published the hydrogen and decarbonization gas package. This package updates the regulatory framework for the natural gas market. It also introduces new rules, specifically for hydrogen infrastructure, and EU member states have until mid-2026 to transpose these new regulations into the national law. The ENNOH, the European Network of Network Operators for Hydrogen, has been established to promote the cooperation at European level, fulfilling the obligations set out in the new hydrogen regulation. I would say this is even more important because both the Letta and Draghi reports have clearly emphasized the critical role of pan-European hydrogen backbones in developing a competitive market at scale. Finally, the hydrogen derivative market is very ample. Electric natural gas or e-NG is an option that does not require any change in the infrastructure we are building for gas transportation and depends only on competitive production under development. Let's spend a few words on where Italy stands. Italy is in a strong position when it comes to green and decarbonized molecules. The National Climate and Energy Plan outlines an estimated gas demand of about 58 bcm by 2030 in comparison to the 62 we had in 2024, of which 5 bcm coming from biomethane. Hydrogen and carbon capture and storage are also set to play a crucial role in achieving decarbonization targets. Biomethane shows a great momentum, thanks to the support from national policies, which facilitates the conversion of existing biogas plants into biomethane production and encourages new projects. The number of operating biomethane plants is rapidly increasing with approximately 130 plants in the first half of 2024, that is 40% up from the end of 2023. At Snam, we have seen a significant rise in new connection contracts, which were up tenfold in 2024 compared to last year average, guaranteeing the first step to 2 bcm per year. CCS is also gaining traction. A study by the Ministry of Environment and Energy Security about CCS development is expected very soon. Meanwhile, the Ravenna CCS project stands out as one of the most promising and advanced due to the proximity to the concentrated industrial cluster and its large reservoir capable of permanently storing over 500 million tonnes of CO2. As you know, injection activities began in August and is showing an excellent performance by capturing over 90% of the CO2. There is a strong interest from industrial clients with over 60 nonbinding expressions of interest submitted during the market test we ran last spring, mostly from sectors like building materials, steel, waste to energy and power generation. Significant progress has also been made in the hydrogen sector. The South H2 Corridor is not only listed as part of project of common interest, but is also included in the list of the EU flagship projects for 2025 under the Global Gateway initiative, and that was reaffirmed in the meeting we had yesterday morning in Rome under the Pentalateral Coordination. Lastly, the Italian government has published the Italian National Hydrogen strategy. We do represent a road map for hydrogen adoption, emphasizing the key role of infrastructure for a very competitive supply. Driving now to the different scenarios we have adopted for preparing this business plan. Let me refer to, let's say, the long-term scenario that we published the 1st of October and that has been developed in a joint effort with the Italian electricity transmission operator, as shown on Page 9. They outlined the evolution of the national energy system and underpin the 10-year development plans for both electricity and gas. In detail, 2030 is based on the last National Energy Plan. 2040 is based on scenarios developed by the ENTSO-e and ENTSO-g, the European Network of Transmission System Operators. The first distributed energy is marked by significant adoption of electricity all across sectors, whilst the global ambition projects, the development of green gas power technologies, and the wider use of molecules in the mix. Italian natural gas demand, including biomethane, will stay close to current levels throughout 2030. And then some decline might happen by 2040, but still with volumes in the range of 45 bcm to 50 bcm per year, while green gases ramp up. We have also outlined a directional energy mix evolution towards 2050, aligned with 2050 EU Net Zero target. It points to 15 bcm of biomethane production, a CCS capacity of 30-40 million tonnes of CO2 per year, corresponding to 15-20 bcm of abated natural gas and 45-60 bcm of potential H2 volumes. You have all the numbers on the page. It's therefore clear how essential Snam infrastructure is to meet natural gas and decarbonized molecules demand as it evolves over the next 25 years with an intrinsic hedge between different options to achieve carbon neutrality. Consequently, on the back of the scenarios described, we have developed an extensive analysis to assess the usage rate of transport assets throughout 2040 and '50, we have introduced also in our transition plan. The analysis considers a 45 bcm demand in 2040 and 35 bcm demand in 2050, and simulates 3 distinct supply and hydraulic scenarios to assess the usage rate of these assets under peak consumption conditions as defined by European regulation on security of supply. On the back of our experience as well as on other energy assets benchmarking, we consider 25% as a low utilization rate threshold for an infrastructure. The outcome of the analysis, as you can see on Page 10, can be summarized as follows: the sections of transport assets operating at low utilization rate represent today -- in 2040, less than 1% of the regulated asset base we are managing. The average utilization rate for the remaining 99% of RAB is 75% today, and it will be 55% in 2040. Looking at 2050 and assuming the repurposing of only 10% of the infrastructure to hydrogen, the average utilization rate declined to 50%. The RAB referring to low utilization rate will be limited to less than 10% and it doesn't change even in the stress test sensitivity, which assumes no transit usage, no repurposing of north-south backbone. So let me move to the second point in the agenda. And let me position for a while this key feature and achievement over the past 3 years as a platform for the development of the projections of the next 5 years. First, I want to quickly remind of our asset footprint on Page 12. Snam is one of the largest critical midstream energy infrastructure player in Europe. We manage the largest transportation, dispatching, storage and re-gasification natural gas infrastructure and operate the most developed multi-molecule energy transition platform. Italy is unique in Europe, boasting 10 entry points evenly split between pipeline and LNG, 5 different gas sources via pipeline from Northeast through Baumgarten, the Southeast from Azerbaijan, the Northwest through Switzerland and Germany, and the Southwest through Libya and Algeria, plus 5 LNG terminals with the newest one that is expected to be operational from April 2025. But what is key to highlight is that Snam's asset base extends beyond the major pipeline entry point due to our significant equity participation in TAP, in DESFA on the East-West route, TAG and GCA on North-South and vice-versa route, and Seacorridor on the South to North route, with a vast network, including 7,500 kilometers of backbone. We have a storage capacity of 17 bcm and regasification capacity that grew up to 19 bcm per year in Italy. These figures increase by up to 20% when you include the pro quota of our associates. The Italian tariff RAB for 2024 is set at EUR 23.8 billion, which rises to EUR 28 billion when including the associate shares. Snam also boasts an energy transition platform focused on energy efficiency and biomethane with operations in Italy. Additionally, we are part of important European projects related to CCS and hydrogen development, which also involves some of our associates. We own a portfolio of associates through equity participation with a book value equal to approximately EUR 3 billion with an intrinsic value that goes far beyond. On Page 24, we try to summarize major achievement over the last 3 years. As you remember, 2022 was marked by a turning point for global energy system. The structural underinvestment in the sector compounded with the aftermath of the war in Ukraine has reshaped priorities, particularly in Europe, leading to an increased emphasis on security of supply. As Snam, we have evolved our strategy to adapt to this rapidly changing landscape and made consistent progress with short-term responses for gas security, while laying the groundwork for a more resilient energy system. In 2023, we focused on reestablishing a balance among the 3 dimensions of the energy trilemma. We announced a EUR 10 billion 5-year capital expenditure plan, a 23% increase compared to the previous plan, which included a wave of investment aimed at ensuring supply security. In July, we started the floating regasification unit in Piombino with a capacity of 5 bcm and the 20-year capacity fully booked. And the OLT LNG capacity has been increased by 30%. Simultaneously, we continue to develop our energy transition platform, building institutional support around the South H2 corridor and completing the expansion and refocusing of our biomethane portfolio platform. In 2024, the 5-year capital expenditure plan was upgraded to EUR 11.5 billion, primarily due to the Adriatic Line accelerated development, which commenced in May. The South H2 Corridor and Ravenna CCS project were confirmed as PCI. And on regulatory front, 2024 marked the first year of implementation Base ROSS for gas transport, resulting in a more positive cash conversion ratio. By the year-end, the weighted average cost of capital formula was upgraded for the next 3-year period, providing future visibility across all regulated businesses. Finally, significant progress was made on sustainability, highlighted by the presentation of our first transition plan. Since the beginning of the energy crisis, Snam has delivered remarkable results. On the operational front, focusing on national infrastructure, we now have approximately 2,000 kilometers of our network certified as hydrogen-ready according to the ASME B31 methodology, and it represents 25% of the total backbone and provides comprehensive overview of pipe's future in terms of age and operational conditions. LNG capacity, as I mentioned, has grown from 6 bcm to 19 bcm. Storage capacity has increased to 17.3 bcm, mainly due to the overpressure and enhanced performance driven by the new investments. With the integration of Edison Stoccaggi, whose acquisition is expected to close before April '25, we will add another 1.1 bcm of capacity in a very strategic assets. Financial metrics shown strong growth, with EBITDA up 23% and net profit rising 6% despite a significant increase in the cost of debt driven by the higher interest rate cycle. Capital expenditure have increased by 56% compared to 2022, and are 3x the precrisis average of EUR 1 billion per year. Despite the challenging condition, including a reshuffle of gas flows, primarily from South, which are more energy intensive, we have reduced the Scope 1 and 2 emissions by a remarkable 25% in 2024 vis-a-vis 2022. We work with our associates to support their growth and maximize their value. Teréga, Desfa and TAG completed their regulatory reviews. As for Austrian associates, volume risk is removed from 2025 with significant contribution in terms of profitability, as we will see later. And we pursued an inorganic growth opportunity to strengthen our role as a critical infrastructure operator, increasing our stake in the Adriatic LNG to 30% and the acquisition of Edison Stoccaggi that I already mentioned. Thanks to the effective implementation of our strategy, we have strengthened our key distinctive factors. First, a unique geographic position and asset base, which are a bridge between the Mediterranean and EU, strategically located near the energy and natural resource-rich region of North Africa and well connected to Central European demand for the energy security today and the transition of tomorrow. Second, our comprehensive presence across the entire midstream value chain that is a unique feature, featuring resilient, flexible and cost-effective infrastructure. Asset health methodology prioritized the investment on the gas network, while our parallel and repurposable lines support multi-molecule transition, ensuring adaptability and efficiency. Third, over 8 years of experience in building and maintaining critical infrastructure, consistently delivering large projects on time. Additionally, we hold an early mover status, a robust innovation program, and a strong energy transition platform focused on multi-molecule technologies. And now let me enter in our strategy for the forthcoming years on Page 18. Last year, we unveiled our ambition, energy infrastructure for a sustainable future. Our ambition reflects our aspirations and where we envision Snam in the medium to long term. The effective implementation of our strategy aimed at building a pan-European multi-molecule infrastructure. The achievements reached the EU energy context evolution that just RAB recommended led us to evolve our strategic framework to an even more integrated perspective. In the evolved framework, you see, as I said, on Page 18, gas infrastructure and energy transition are increasingly interconnected, leveraging on shared infrastructure as well as the pan-European perspective. The strategic levers of innovation and sustainability remain unchanged and will be presented by Luca later on. How we deliver our ambition. We plan to achieve our ambition by investing EUR 12.4 billion over the period '25-'29, that are EUR 13.4 billion gross of grants with EUR 10.9 billion allocated to gas infrastructure and EUR 1.5 billion to our energy transition businesses. A large portion of investments are directed toward gas infrastructure to complete the projects aimed at achieving a resilient, flexible and sustainable energy system, albeit with a future-proof multi-molecule perspective. The increase in the energy transition CapEx reflects core projects such as South H2 Corridor and Ravenna CCS' further progress. Of the total investment, 41% are aligned with taxonomy and 58% with ESGs. This year, we decided to shift our strategic plan horizon 1 year ahead to correctly reflect our future 5-year investment from '25 to '29. The growth rates we outlined today will be based on the 2024 guidance. Our investments are not only aimed at building a multi-molecule infrastructure for the country, but also at promoting this vision at European level throughout our associates and their investment and projects that I will cover afterwards. On Slide 20, an overview of our investments, 70% of which will be to create the infrastructure to deliver green and decarbonized gas molecules, 45% in H2-ready gas infrastructure and 25% in emission reduction and green molecules. The remaining amount will go on LNG and supporting activities and ICT. We have included in the plan EUR 1 billion of grants in connection with the projects recognized by REPowerEU, PCI, PMI, and therefore, eligible for grants. We already applied for CEF funds for both CCS and H2 projects. This assumption has a very high level of visibility as EUR 0.5 billion or 50% of the total has already been assigned to Snam, of which EUR 0.2 billion cashed in at the end of 2024. Starting with the key projects related to gas infrastructure resilience and flexibility, we highlight several major active initiatives. First, the Adriatic Line represents the largest gas transportation projects in the past decade, I think, also across Europe, with additional 10 bcm per year along the South to North corridor to strengthen the flexibility of these flows. The project includes 400 kilometers of pipelines and 33-megawatt compression station in the center of Italy in a place called Sulmona, just to push the gas northwards. The project is divided in 2 phases. You have Phase 1 is set for completion by 2026, compliant with the REPowerEU deadline, and Phase 2 by the end of 2027, with total investment amounting to EUR 2 billion, net of EUR 375 million in REPowerEU funds already assigned. This expansion will also enable to increase the exports to Austria, reaching the 14 bcm by 2026. Significant investments are also planned for storage, particularly concerning the replacement of aging wells and workover interventions to enhance flexibility and performance in general. The BW Singapore regasification ship will start commissioning in the next months and, as I said, the operations by April, bringing Italian regasification capacity globally to 28 bcm, and with respect to Snam, the 19 bcm. That does represent 45% of the global consumption of the country, in line with the European standards. Regarding small-scale LNG, the construction of 50,000 tons bio-LNG in Pignataro near Naples started and will be completed by year-end. And the 200,000 tons of LNG truckloading facility in Panigaglia will start operations in the next months. Moving to emissions reduction and green molecules on Page 22. Key projects focus on installing electric compressors, also to gain flexibility and responsiveness. The dual-fuel compression station initiative significantly contributed to our decarbonization goals, and we encompass 6 compression stations that will be commissioned during the plan horizon. Starting from June 2024, the authority has attributed us a central role in optimizing the execution of new connections, addressing the potential of the Italian biomethane and minimizing the system cost. Most of the new connections are in the regional transportation network. Investing EUR 2.2 billion to replace approximately 850 kilometers of pipelines, a bit lower than the previous plan, the asset health methodology helped us in optimizing the replacement, increasing our financial flexibility. Finally, our CapEx plan enjoys some flexibility as we can redirect up to EUR 0.5 billion of investments from gas to hydrogen infrastructure or CCS project if returns are visible and allows these kind of decisions. Also, thanks to the investment made and planned, we are proposing a comprehensive new range of additional output-based incentives focused on service quality, asset resilience, sustainability. And furthermore, we will submit the request to extend the asset health methodology also to storage. To prepare for a multi-molecule midstream, it's essential to coordinate efforts for the integration of new technologies and development of technical standards. Snam is actively participating in relevant working groups and collaborating closely with industrial experts as shown on Page 23. First, we are working on hydrogen readiness for infrastructure, including materials, components and storage. Besides midstream, we are collaborating on projects for H2 production and usage like steel production with Tenaris-Tenova. We are building H2 Shift, a testing facility to demonstrate and validate hydrogen production technology from biogas and biomethane. And this is unique worldwide and will serve technology developers from all over the world to test their new technologies. As for CO2 infrastructure, we are contributing to shape European technical standards and putting our expertise available to the Italian public authority with national transportation rules expected in 2025. And jointly with ENI, we are learning from real world of injecting into depleted gas fields. So being on CCS, let me focus on Page 24 on the developments we are projecting. CCS is rapidly progressing. Technical rules for transportation and storage of CO2, as I said, should be out soon, while the legislative regulatory framework will be established by '25-'26. The CCS project in Ravenna aims to develop the largest offshore open access multimodal CO2 hub in the Med area with dedicated onshore transport infrastructure and liquid CO2 receiving unit. Transportation and injection activities are ongoing, as you know, up to approximately 25,000 tonnes of CO2 from ENI natural gas treatment plant in Casalborsetti and piped into the offshore platform and injected and stored in depleted gas fields. Over the coming years, Phase 2 will expand the project to industrial scale with the capacity to store up to 4 million tonnes of CO2 by year '28-'32, in line with the Italian National Energy and Climate Plan. An estimated EUR 200 million of equity injection is envisaged for H2 -- for CO2 injection and storage, long venture with ENI, and approximately EUR 300 million of net investment in the domestic CO2 network, including the 15 kilometers of existing lines repurposed. The final investment decision will be made by the end of 2026, subject to the adequate return and consistent regulatory framework. And the project is expected to start generating revenues toward the end of the plan. Further potential developments are the establishment of a virtual corridor where CO2 could be shipped in liquefied form, expanding the client base not only to south of Italy, but also neighboring countries and firstly, France and Greece, with which we have, of course, some conversations ongoing. Finally, we are considering the participation in the ENI CCUS vehicle to gain exposure to a broader portfolio of projects complementary to Ravenna one to capitalize also our own experience. Snam is leading also the development of Europe hydrogen infrastructure. We are focused on the Italian sections of the South H2 corridor, a 3,300 kilometer hydrogen dedicated pipeline that will connect North Africa to Italy, Austria and Germany, anticipated to be operational by the early 30s. This project involves the collaboration of 3 other transmission system operators, TAG and GCA, in which we have a stake, and bayernets on the north side, and the Seacorridor, where we are in, in the North Africa interconnection. It has received an endorsement from the institution not only yesterday, as well as from companies across the entire value chain. It is one of the key hydrogen corridors to Germany, probably the frontrunner, which is the most advanced European country in terms of hydrogen development and is the most cost efficient due to its extensive repurposing of existing backbones. Our plan includes EUR 400 million of gross investment related to the first phase of the backbone, for which the final investment decision is expected in 2027, subject to the adequate returns considerations and coherent regulatory framework. The investment return extends beyond the planned horizon. In the biomethane, we are promoting an optimization of the integration of plants into the network, as I said on Page 22, and establishing a robust production platform with approximately 40 megawatts of biomethane and biogas plant operational at the end of last year. Over the past 3 years, we have optimized our production portfolio by rationalizing waste assets and focusing on agricultural feedstock plants, reducing, at the same time, the operating costs. Regarding production, the Italian biomethane decree provides an attractive semi-regulated regime that relies on PNRR funds to cover part of the capital expenditure and offer a 15-year feed-in tariff that is adjusted for inflation. We successfully secured 9 new projects in the auctions in 2024, and we have submitted additional 14 projects in the auction that happened mid of January. Our platform holds a leading position with a concentrated presence in the northern part of Italy, and our plan includes EUR 350 million in gross investment to achieve approximately 78 megawatts by 2027, primarily through the upgrade of the biogas plants, in general, 25 of them, with only 2 greenfield projects. We expect about EUR 70 million of EBITDA contribution at the regime by 2027, same year in where we assume the deconsolidation as mandated by the regulator due to unbundling rules. Energy transition. That is the last part of the energy platform. Over the past years, we have developed a significant presence in energy efficiency. Renovit, the name of the company, the B Corp company, in which we hold a 60% stake, has emerged as one of the top 5 players, integrated players in the Italian market, and it retains a market share that is higher than 5%. In the past 3 years, Renovit completed more than 1,000 renovation projects for a total value of EUR 2 billion. And it has and retains EUR 0.8 billion of super eco-bonus credits, which it plans to use through Snam fiscal capacity, primarily in between '25 and '27, over the next 3 years. Looking ahead, the strategy involves shifting the business portfolio toward industrial clients and public administration, taking advantage of Snam extensive national presence and solid balancing. By focusing on energy performance contracts, the objective is to increase the overall backlog, coupled with long-term duration, announcing the total value from EUR 1.4 billion in 2024 to EUR 2.7 billion by 2029, with an average duration of 11 years. Let me finally come back to the pan-European perspective on Page 28, to tell you more about what is going on, on the different associates. Our associates benefit from solid and visible businesses along with the energy transition opportunities. They are instrumental to 85% of gas flows transiting to the domestic entry points and support a multi-molecule evolution along major EU corridors. TAP and DESFA supply gas from East to Italy and Central Eastern Europe, enhancing the energy security post Russian import curtailment. Seacorridor represents the first Italian import route, and through our infrastructure and the export capacity, it contributes to Europe's security of supply. It is also part of the South H2 corridor, as I mentioned, and in September '24, gained the support to Algeria to submit the PMI proposal. Our associate, Teréga, is part of the H2 Med project, linking the Iberian Peninsula's hydrogen network to Northwest Europe. We have a leadership in multi-molecule storage. Teréga and DESFA are working on CCS projects called that goes the names of Pycasso and Prinos, respectively. dCarbonX is originating and building a portfolio of subsurface asset offshore Ireland and U.K. with a focus on energy storage for natural gas and nitrogen, whilst Storegga focuses on CCS mainly in U.K. or in Scotland, to be precise, and U.S. Being involved in this project and corridors has a dual strategic meaning for us. On the one hand, we can leverage our technical, financial and institutional expertise to support our subsidiaries in their development journey and to promote a multi-molecule strategy for and with them. On the other hand, it gives us a broader perspective on the increasingly interconnected energy market and its evolution all across Europe. And now let me turn to Luca for the final part of this, let's say, strategic introduction and the financial projections. Thanks, Luca.

Thank you, Stefano. You can now take a breath. And just to set expectation, my part is less than half of Stefano, so it will be shorter. Good morning to everyone. Let's now focus on the 2 key strategic levers of our framework, innovation and sustainability as shown on Page 29. When it comes to innovation, we are taking a dual-track approach, focusing on proven and explorative innovation. Over the plan horizon, we will invest EUR 338 million in proven innovation. Our goal with this investment is to drive operational excellence and sustainability by increasing digitalization, IoT, and leveraging the use of AI. We also want to implement AI-enriched digital twin to redesign industrial process throughout AI and further develop AI application to optimize network operations and reduce emissions. EUR 62 million of CapEx will go to explorative innovation, where we plan to apply AI also to promote the multi-molecule setups to integrate new clean technologies along the value chain and to incubate and accelerate selected solution. As for sustainability, we are adopting a comprehensive approach reflected in the transition plan we last published in October. We believe that innovation is a key strategic driver and transformative force for us, and I'm now on Slide 30. Firstly, since 2018, we are applying new technologies and tools to our core business to enhance asset performance and resilience, which boosts their efficiency and improves operational safety, which remains our top priority. Furthermore, we deploy both existing and emerging technologies to integrate different types of molecules into our infrastructure and in the energy system, thereby enabling our vision. As mentioned, we actively support system decarbonization by implementing and testing zero or low carbon technologies that are functional across industrial, energy and transport sectors. Our goal is to create value and explore new opportunities for Snam and its ecosystem. We do this also by promoting new ventures and fostering collaboration with suppliers and the entire value chain. I'm pleased to announce that in the first half of this year, we plan to unveil our first innovation plan. Just like the transition, the evolution between technologies and digitalization means that we need a concrete long-term vision that aligns with our strategy and includes a 10-year technology road map. Let me explain more in detail the dual-track approach on Slide 31. Proven innovation, which involves scalable and reliable solution with established partners to improve our performance. The cornerstone is our asset control room, which serves as the central hub for operating activities, digitalization, providing a comprehensive view of processes across all systems. Some flagship initiatives include optimizing compressor station through AI, installing over 10,000 new field sensors to collect data for PMOS, which is our leak detection system and satellite monitoring. These efforts have increased the leak detection accuracy by 20x and led to a 15% reduction in fuel gas usage per unit of transported gas, thereby contributing to the reduction of CO2 emissions. Managing data through AI has improved the accuracy of gas forecast, enabling us to deliver 25% more accuracy on demand forecast services, thus gaining more output-based incentives. Explorative innovation refers to the full suite of new ideas and clean technologies. We rely on our internal decarbonization technology solution unit and leverage a global network of university and research centers to exploit cutting-edge research and development in hydrogen, carbon capture, utilization and storage, and long-duration energy storage. We have 2 significant programs, Snaminnova and HyAccelerator, through which we have engaged with a large number of start-ups. A few successful examples. We have developed a pilot plant that use membranes to test blending separation of hydrogen, which has received grants from the regulator ARERA. Additionally, we are supporting the development of CO2 vault, which aims to remove CO2 by capturing and permanently storing CO2 generated by biomethane plants, thereby generating compensation certificates. On Slide 32, at the forefront and beyond sustainability, we can rely on a sound track record in reducing our methane emissions, down 62% versus 2015, ahead of the target set by UNEP protocol. As a result, we have been awarded the Gold Standard by the Oil and Gas Methane Partnership for the fourth consecutive year. We saw a strong acceleration in the reduction of Scope 1 and 2 emissions, and the 2024 full year is foreseen down about 25% versus 2022, therefore, reaching 2027 target 3 years in advance. Such a strong reduction is also due to contingent market conditions, i.e., higher imports from North Russia, low export and peculiar optimization of the network. Our emission road map was deemed credible by a third party, as we've been first corporate globally to undergo the Net Zero assessment by Moody's last February. Priorities for the next years are, first of all, related to our emission reduction and sustainability scorecard ambition targets, execution and delivery. We also aim to keep a leading position across key ESG rating and to pursue SBTi and SBTN certification once it will be possible to do so. We will leverage on CSRD to further strengthen our disclosure and reporting. Biodiversity will be integrated into the climate change risk assessment. On the back of our achievements and targets, we have submitted to the authority, our regulator, a proposal for new outcome-based incentive based on ESG KPIs. As mentioned, on October 16, we presented our first transition plan, and I'm now on Slide #33. A few key messages since we spent a couple of hours presenting it. Our assets, investment and business model are resilient in the face of climate change. Physical risks are negligible, thanks to the effective safeguards and the structural characteristic of our assets with more than 80% being underground. Transition risks are limited in the short to medium term and related to reputational risk, such as those related to achieving sustainability targets. Over the long term, this risk intensifies, primarily due to the declining gas volumes, but at the same time, opportunities arise related to repurposing of our infrastructure for CCS and hydrogen as well as expanding our energy transition businesses. We set a detailed and actual road map outlining how we plan to reduce our carbon footprint across our operations and value chain in line with the Paris Agreement and to have a positive impact on nature. Not only we do plan to reduce our footprint, but through our infrastructure and projects, we aim to enable the decarbonization of the energy system through the H2 backbone and the CCS project described before. Moving to the business plan projection finally on Slide 35, we can see a sound and improved growth. Our CapEx for the period 2025-2029 will increase by around 8% versus the previous business plan to EUR 12.4 billion net of grants, which amount to approximately EUR 1 billion, mainly driven by the Adriatic Line and the acceleration of the energy transition projects. This will translate into around 6.4% RAB CAGR 2024-2029, increasing versus last year plan, thanks to the higher investments. EBITDA CAGR of around 5% is driven by the RAB growth, the Edison Storage contribution, the Ravenna FSRU entering into operation, and the energy transition EBITDA contribution partially counterbalanced by the WACC downward revision. Net profit CAGR in the plan horizon is a remarkable 4.5%, increasing versus last year plan, reflecting a sound EBITDA growth and an improved contribution from our associates portfolio. We will be able to deliver a solid growth while keeping the financial strength and flexibility. Net debt will increase to around EUR 21.2 billion in 2029, with credit rating metrics to remain with ample flexibility within the thresholds of our credit rating positioning. In the annex, you will find the underlying macro scenario assumption that underpin those projections. For the sake of clarity, there is no material new M&A included in the plan. Let's now look in more detail at the CapEx plan by business, and I'm on Slide #36. Our total 2025-2029 CapEx plan amount, as I said before, to EUR 12.4 billion net of grants, which are EUR 1 billion. This plan enjoys a high level of visibility as around 70% of the gas infrastructure CapEx are already authorized. Total investment in our multi-molecule infrastructure amounts to EUR 10.9 billion, of which EUR 8 billion on transport, increasing by around 8% compared to the previous plan, mainly related to replacement, dual-fuel compression station deployment, and the Adriatic Line. EUR 2 billion on storage increasing by more than 40% compared to the previous plan, mainly attributable to the performance upgrading of existing fields, installation of dual-fuel compressor station, and the investment on Edison Storage fields, and EUR 0.9 billion on LNG related to the Ravenna breakwater, the potential Italis LNG facility relocation and small-scale LNG infrastructure and mobility investments. The total LNG investments decreased versus last year plan due to the inclusion in the previous plan for the Ravenna FSRU acquisition. Investment in the energy transition businesses account for EUR 1.5 billion, plus 25% versus the previous plan, and are related to the acceleration of our CCS project in H2 backbone, the development of our biomethane platform, and the refocus of our energy-efficient business on long-term contracts with public administration. More than 40% of our CapEx plan is taxonomy aligned and almost 60% SDG aligned. Let's now look more in detail at the RAB evolution on Slide 37. Our RAB regulated asset base significantly increased in the last years with an approximately 5.5% annual growth from 2022 to 2024 guidance. Over the plan horizon, we project a 6.4% CAGR. This growth will be mainly driven by CapEx increase, the inflation impact, the inclusion in our perimeter of the Ravenna FSRU and Edison Storage fields. In addition, considering that the Italian Ministry of Energy and Environment formally stated that the CCS transport and storage will be regulated, we started to include, towards the end of the plan, the CO2 network start-up, which accounts for EUR 500 million in the bridge. Moving to the EBITDA evolution analysis on Slide 38. EBITDA annual growth will be around 5% in the plan horizon. The increase will be mainly driven by the contribution of gas infrastructure, which will benefit from organic growth driven by the investments and the deflationary impact. Over the plan horizon, we assume, on average, EUR 100 million of output-based incentives per year. Change of perimeter related to Ravenna FSRU and Edison Storage fields, counterbalanced by regulatory items that are mainly related to the WACC decline following the update of the new regulatory period, which is down vis-a-vis the past, the capitalization rates for the fastest low money are equal to 86%, 14% in 2024-2025, 88%, 12% in 2026, 2027, and finally, 84%, 16% in 2028, 2029. In terms of energy transition businesses, the contribution will increase to around EUR 80 million by 2029. The increase will come from the energy efficiency businesses contribution and the decarbonization projects that will start contributing from 2029, while biomethane will reach a peak in 2027 with no contribution from 2028 onwards due to the deconsolidation of the business in line with the bundling rules. Let's now look in more detail at the net income evolution on Slide 39. We project a remarkable 4.5% CAGR over the plan horizon, starting from our 2024 guidance of around EUR 1.230 billion. This will be mainly the result of a sound EBITDA performance, as previously explained, partially counterbalanced by D&A increase due to the new asset entering into operation, the interest expense rise with the net cost of debt increasing to 3% at the end of the plan from 2.5% today. In terms of contribution from our associates, we project an increase over the plan horizon that will be mainly driven by TAP, the Italian associate performance, and the TAG recovery in Austria. The net income 4.5% CAGR will drive a solid EPS growth to 4.6%, which can be seen as sector-leading for regulated peers. Let's now move to our portfolio of associates on Slide 40, where our main goal is maximizing the value creation and their contribution. The overall associates contribution will increase by 40% in the plan horizon to around EUR 420 million by 2029, mainly driven by TAG recovery following the volume risk removal in 2025, the TAP contribution increase driven by the limited expansion in 2026, and the Italian associate contribution growth. In 2025, we forecast already over EUR 370 million contribution, thus securing the contribution growth to 2029. We confirm the clusters already presented, where we indicated as value enhancer, industrial assets with direct or visual connection to the Italian infrastructure or with an involvement in the strategic European corridors, enablers of business optionalities associates with no connection to our assets, providing reinforcing market intelligence and business development potential, and in the last cluster, companies with a more opportunistic angle. We have moved Teréga from enablers to value enhancers considering its involvement in the H2 Med project. On the financial structure side, Slide 41, we remain committed to keeping our balance sheet financially solid. Over the plan period, we will generate approximately EUR 13.6 billion of cumulated cash flow with a very sound EBITDA cash conversion over 80% on average. This will cover EUR 12.9 billion net of investments, including CapEx, the Edison Storage acquisition, the cash in from the biomethane disposal, which is forecasted at book value, leaving EUR 0.7 billion of cash flow available to partially cover dividend distribution. This excess cash flow is roughly 2x the amount of last year plan. Credit rating metrics are expected to remain with a sound flexibility within the threshold of our current ratings by Moody's, Standard & Poor's and Fitch over the plan horizon. In particular, leverage will remain well below the 75% Moody's threshold of net debt to fixed asset plus book value of associates, and FFO to net debt will be on average around 11.7% over the plan horizon, well above the 9%, 10% threshold corresponding to our existing credit rating. For illustrative purposes, we have also indicated the evolution in the plan horizon of the net debt less book value of associates over EBITDA that will be on average 5.3x, which is consistent with the financial profile of a fully regulated player. Average net cost of debt is approximately 2.8% over the plan, 20 basis points higher compared to the previous plan. We will continue to focus on sustainable finance with a commitment to rely on 90% of sustainable finance by 2029, which is currently 85% of total funding by 2027, one of the highest in the sector. Moving to dividends, which I guess is of interest to you, Slide 42. As already announced, 2024 DPS will increase by 3% to EUR 0.2905 from the 2.5% the year before. We have just paid the interim dividend of EUR 0.1162 per share. The solidity of this business plan and the higher EPS growth profile allow us to improve our dividend policy going forward. We commit to a 4% annual DPS growth from 2024 to 2029 from the previous minimum 3%. We introduced a cap of maximum 80% payout calculated as dividend paid over adjusted net income in order to maintain a solid financial structure. According to our calculation, with a 4% annual growth in EPS over the plan horizon, the average payout will be in the region of 76%, so we have significant headroom to the cap. This dividend policy, sustainability is supported by the regulated nature of our core business, the higher level of visibility over the plan, very sound cash generation and accelerated EPS growth. Such policy reflects our commitment to the compelling shareholder remuneration while keeping financial solidity and flexibility with a disciplined approach. And now moving to our financial targets on Slide 43. Our full year guidance for 2024 is confirmed. And when it comes to 2025 outlook, CapEx will stay at around EUR 2.9 billion, mainly driven by gas infrastructure investment, which includes, among others, the Adriatic Line, the Ravenna breakwater and biomethane connections. Tariff RAB expected to increase around 8% year-on-year to EUR 25.8 billion. We expect EBITDA of around EUR 2.850 billion, mainly driven by the RAB growth, the Ravenna FSRU and Edison Storage sites entering into the perimeter, partially counterbalanced by the WACC decline, as mentioned before. In terms of net income, we expect around EUR 1.350 billion, driven by the EBITDA positive performance and the higher contribution from associates, which exceeds already EUR 370 million in 2025, partially counterbalanced by higher D&A. The net income growth will drive EPS to EUR 0.40. DPS will increase to around EUR 0.30, in line with our improved dividend policy. Net debt is expected at EUR 18.6 billion with an average net cost stable at 2.5%. Finally, over the plan horizons in 2029, as commented before, we see a RAB growth of around 6.4%, EBITDA adjusted growth of around 5%, net income adjusted CAGR of 4.5%, and a solid EPS CAGR of 4.6%, with a net debt exit at EUR 21.2 billion, underpinning the financial strength of this business plan update. Now let me hand over to Stefano for the vision to 2034 and beyond and the closing remarks.

Thank you. Thank you, Luca. Very effective. I mean, 3 more slides, not more. On Page 45, let me now discuss our forward-looking investment plan designed to achieve our ambitious goal. We have a total of EUR 27 billion earmarked for the period '25 to '34, along with an additional EUR 5 billion in investments from our foreign associates over the same time frame. In the first phase of our investment plan, '25 to '29, as just described, aims to uphold the reliability and resilience of our assets, while also keeping to reduce their carbon footprint. Over the same period, the international associate plans to invest about EUR 3 billion. Moving to the second phase covering 2030-2034, we foresee considerable investment opportunities amounting to EUR 14.7 billion net of grants. The scale and timing of this investment, particularly in the hydrogen backbone CCS scale-up will be evaluated based on the future regulatory framework, market dynamics and the availability of grants and financial support for those kind of investments. And our H2 backbone and CCS expansion, coupled with the dual fuel compressing station acceleration, will boost the taxonomy aligned CapEx from the 41% we have in the first period of the plan to the 48%. We now share the view that has some thoughts behind and to show that vision and investment are intrinsically linked in the evolution of the mix of gas molecules that will need to be transported over time if we look throughout 2050. The gradual transition from natural gas to alternative molecules such as hydrogen and CO2 will amplify the overall volumes that must be transported through the network due to the energy content that hydrogen has in itself. We foresee a future in which different molecules will coexist within our global infrastructure and dedicated assets, some green and some decarbonized in their end use. We are prepared to accommodate and support this evolution in a cost-effective manner. The rising volumes of different gases will underpin our long-term investment opportunities and drive the strategic decisions we make today. Importantly, the multi-molecule perspective provides an intrinsic edge. In the event of a slower-than-expected ramp-up of green molecules, gas volumes will remain higher. Conversely, should the transition to decarbonized molecule accelerate, we are able to adapt accordingly. Final slides. In conclusion, since the onset of the energy crisis in 2022, we have successfully managed the emergency by leveraging our assets and capabilities, while paving the way for a more resilient future energy system. We have very clear strategic priorities to build a pan-European multi-molecule infrastructure. Our strategic framework has evolved over time with the 2 business levers, gas infrastructure and energy transition, becoming increasingly interconnected. Furthermore, we are promoting a pan-European vision across our portfolio of associates. With this plan, we have further increased investment, accelerated EPS growth with high visibility as regulations are set and policies evolved in line with our expectations and strategy. This enables us to upgrade shareholder return, as Luca said, and we commit to a 4% EPS annual growth from '25 to '29, with a maximum payout of 80% that was mentioned, maintaining a solid balance sheet and financial flexibility that is extremely important in this evolving scenario across Europe. So then, thank you very much for the attention. And now it's time for your questions. Thank you.

So thank you. We will start by taking the questions here in the room. I kindly ask you to raise your hand and say your name and company name before asking the question.

Javier Suarez, Mediobanca. Three questions. The first one is on the big picture. We have seen Europe taking maybe more focus on competitiveness, has been a very important paper by the largest political party in Europe that is asking for more focus on the competitiveness of Europe versus other green targets maybe. Which are the implications for a company like Snam. I'm saying this because during the presentation, I got the impression that you are saying that all the theme of hydrogen expansion is getting an acceleration. It couldn't be the opposite that we are accommodating hydrogen expansion to a period on which maybe traditional molecules are going to be more important, and maybe ambitions to decarbonize our infrastructure are going to be pushed down the road. And if that is the case, which are the implications for a company like Snam. I think that the management team has made the point that they have CapEx flexibility to accommodate what happens. And my question is, what do you think is more likely to happen? And do you see a scenario in which hydrogen ambitions are not going to be fulfilled or completed until a period that goes significantly beyond 2030? That's the big picture question. Then on the company details and the business plan. There are 2 things that I think has called people's attention. One is the assumption on the deflator. The deflator, I think it has an average of 1.8%. The question for you is that are you embedded into that assumption? Is the assumption that the regulator is going to change the reference basket for the calculation of the deflator? Then on the WACC management that probably you are trying to accommodate cost of financing assumption with your assumption on the allowed return on that. So if you can explain the logic that has been utilized to accommodate maybe your assumption to what do you see on the forward curve? Because forward curve moves a lot. And therefore, if you designed a plan to 2029, maybe to rely on that forward curve is a little bit aggressive. And then the final question is on the affiliates. So I think that the big surprise has been the increase in contribution from an affiliate that I think it could be as high as EUR 100 billion, a number like that. So you can elaborate on why in the new business plan, you have identified such a big number of higher contribution from the same existing affiliate?

Thank you. I take the first and you take the second, and the third, probably we share both. I think the big picture, I mean, if you look at the deployment of the CapEx we are projecting is almost EUR 11 billion goes on gas infrastructure. The way we are deploying those investments is in a flexible way. So those are hydrogen ready. So when I say we want to be ready for the developments and the further investments on those kind of, let's say, transition in the sense of hydrogen will be related to the regulatory framework and the development of this project, of course, means that we are focused on security of supply, but we are preparing for it, okay? So if it comes later on, there is a pushback from, let's say, European Commission or, let's say, political decisions, of course, means that we have this intrinsic hedging. So it means we are going to use more gas. okay? And we have the infrastructure that are ready for that. So I think what is important to prepare for is that if those kind of solutions of the decarbonization will come in 5 years' time, 8 years' time, 9 years' time, we need to start now to prepare, okay? Get ready, and then if demand and production meet each other, we are, I mean, the enabler for it, okay? So I think if you ask me what are the implications, I don't see much implications in the sense that we have this plan that is driven by the investments we are doing. Those investments will be dual usable. And in case there is this option, we can get this option. At the same time, if we want to achieve the investments on decarbonization, if we don't use the green molecules, we need to decarbonize the molecules. And then CCS gains more and more momentum, okay? Finally, if we don't want both, on the sense that we postpone both, we will use the gas. And the infrastructure and the investments like the Adriatic Line is aimed at creating the flexibility that will allow us to accommodate both options. And I think it's in line with the recommendation that came up from the Draghi report, for instance. What he said, we need to have a more competitive energy cost. To have more competitive energy cost, you need to work on the sources and on the liquidity of the market. To work on the liquidity of the market, you need to have ample infrastructure to accommodate the different options of sourcing. To that extent, strengthening the corridors from South to North, we are doing that, opening the Med area, and the 5 LNG infrastructures with a total capacity of 29 bcm goes exactly in that direction. So more liquidity, more competitiveness, that contributes to reduce the cost. On the other side, the emphasis we want to put on the role of the associates and the interconnection between the countries exactly goes in the same direction of the recommendation of the Draghi report. It said we need to have a more unified market in the energy, more interconnection between the countries, more flows in one or the other direction. So repowering the capacity to export up to 14 bcm to Austria. Think about that the total consumption of Austria is 6, 7 bcm, okay? If you put together Austria, Slovakia, the third is Hungaria, okay? You get to a total of 15, 16 bcm. Bavaria is more than 20 bcm, okay? And I think strengthening the southern part and the export and the approach east to west from LNG goes exactly in the direction of creating more interconnection and, therefore, more liquid market and more competitive price. I think that is part of the contribution I see. The flexibility in the CapEx plan goes exactly in that direction. I mean we can revert or reconfirm some of the options we have.

Regarding question number 2 on the assumption for both deflator as well as interest rates, to answer your question, yes, we are using an assumption where the reference rate for inflation will change according to the current proposal. The assumption will be, let me say, formally released when the regulator will come out, but there is an assumption in the plan, and that's why we have an average of inflation of 1.8% over the plan. Second, when it comes to the curves that we use, these are the 4 curves in terms of underlying, which are for the first 2 years, Bloomberg forwards, and for the remaining year, since we are going out, an average between Bloomberg and Oxford, which is the other, let me say, a large provider for long-term interest rates. We do not expect, clearly for the first 3 years, the trigger to basically be activated. That's the first. The second is that from 2028, we are considering the new cost of debt formula accounting for 100% of the cost of debt from the previous 66%, because that's part of the current regulation with the change in 2028. And in line with the forward curve, we are projecting 20 basis points higher WACC. Now the majority of the increase is driven by the country's premium. The assumptions are on Slide 54 of the presentation that you have, where we project the 3 variables into the formula on our assumption. And clearly, the country risk premium moved from 2027 at 1.2% to 1.4%, and that's the majority of the variables. Now if you don't believe this will happen, let me say that if you have lower rates, we will have also lower cost of financing. Therefore, our marginality in terms of net income is insured. When it comes to the associates, yes, there is a big jump in the plan, but the jump is already happening this year. The majority of the jump is driven by the Austrian new regulation. So to give you 2 numbers, TAG was negatively impacting in 2024 -- will be negatively impacting in 2024, more than EUR 30 billion negative, and it will be more than or around EUR 50 billion positive in 2025. So from there, which is EUR 370 million contribution in 2025, clearly, the growth of EUR 50 million over 4 years is very easy between efficiency and the change in regulation in the other geographies.

If I can add one comment, because you said what made us more, let's say, confident with respect to a year ago. When we had the presentation of the business plan in January last year, we just had the release of the new regulatory framework in Greece. We were still studying the operating cost, the mechanism and what was around. And I have to say that the outcome was a bit better than we expected or we understood from the first reading, and that was supported also by the approval of the new 10-year development plan that upgraded further the contribution. And I'd like to remind that we had also the start-up of the Alexandropolis terminal, where DESFA has a 20% stake, okay? That is for DESFA. France, we were just in the middle of the negotiation with the regulator in January last year. And the outcome, I have to say, was a bit better than we were expecting in terms of allowed return on the infrastructure and the mechanism to remunerate the existing assets with respect to the new assets, okay? And that was the second pillar. The third is the one that Luca mentioned. I mean, the negotiation with the Austrian regulator that has been very tough for months and months in 2024. And the outcome at the end of the day was, again, a bit better than expected. Of course, you might say that last year we were too much conservative. But as you know us for a long time, we are pragmatic, fact-based. And then now we can offer you a better return than we were projecting last year.

Bartek Kubicki, Bernstein. I would also stick to 3 questions. One big picture. If we think about the gas flows in the next years under 2 scenarios, much more LNG potentially coming to Europe, because there's more LNG being produced around the world. And second of all, let's assume some kind of a peace agreement in the East and potentially gas flows in the East. I just wonder what is your view on those scenarios and how it could impact the operation of your assets, not the financials, because I guess it will have no impact, but on the operations of your assets. Second of all, if we look at your transport CapEx estimates, last time you were talking about EUR 1.1 billion in '27. Now you are talking about EUR 1.3 billion in '29, so post the peak investments. In the past, it was well below EUR 1 billion. So I wonder what is really the sort of underlying to increase the long-term CapEx or, let's say, the midterm CapEx in gas transport? And what actually should we assume beyond 2029 in terms of gas transport per se? And the last point will be on your nonregulated activities and more specifically on biomethane. You mentioned the disposal assumed a book value. Just if you can give us some indications what the book value is. And second of all, I think you said EUR 70 million on EBITDA from biomethane, EUR 80 million increase in EBITDA, which gives us around EUR 150 million, let's say, if you didn't sell biomethane assets in '29. And previously, I think you were guiding EUR 140 million. And every year, basically, you are kind of decreasing the guidance on the nonregulated assets. So I wonder, I mean, what's the point to sticking to them where they seem to be somehow disappointing every year?

In terms of, let's say, gas flows, yes, scenario with more LNG can be reasonable. I think as far as our assets is concerned, the assumption is to have almost fulfilled the capacity we have. So hovering in between 30% to 40% of the global demand coming from LNG. And I'm saying that simply because, I mean, if you take the Italis LNG has 20 years book capacity. So the flows will come there. And if you look at the Livorno floating vessel, we have 5 years forward looking. And if you look at the Adriatic LNG, we have up to 2034, almost full capacity booked. So therefore -- and I would say the strategic position of these assets in the Med area, of course, offers a very attractive opportunity for the potential developments in the Middle East, okay, that if a piece will stay there, there will be a development after that and all other large gas fields will be developed. And the nearest entry point, if they decide to develop part of that capacity through LNG, will be Italy, okay? Thanks also to the export capacity we are improving. If a piece comes from Ukraine, I think, is a point, is a scenario. I would say, not automatically, that will imply that large volume will start flowing. I think there will be a point with respect to condition of this piece, the leadership in Russia and how, let's say, the Western countries will decide to balance the, let's say, agreements with Russia. So some flows could be restored, but I don't expect significant ones, okay? What does it mean for us in terms of operations means that we can balance a bit better the flows from South and North, okay? Now we have a predominant flow from South to North. It has a cost to ship the molecules for more than 2,000 kilometers. If we have more gas coming from north, in some way, we can have a system that is much more balanced and more optimized in terms of flows. The second for you I think.

When it comes to transport CapEx, you're right. By 2029, it's EUR 1.3 billion for transport. It grows beyond 2029. The reason being clearly, besides the H2 backbone, which is part of, let me say, transport, substitution will continue. We have 1,700 kilometers of substitution beyond 2029 to be done. And the installation of the dual full compressor station is very relevant for transport, but also for storage. We have 6 dual full compressor stations within the plan, 3 in transport and 3 in storage up until 2029. There are missing basically other 12 to 13 up until 2024. So those are where the increase is. Then to the third question...

Let me add a comment, sorry, Luca, because the other part of the question was what we might expect beyond 2030, okay? I think we have done a very detailed work in preparing the projection to 2034 and beyond, in terms of transportation and how to optimize the mechanism of asset health for the substitution. And we have reshaped the curve. We already reduced by 50 kilometers in the first period of time, but we expect more in the second period of time. That means in between 2030 and 2040.

Then for the regulated activities, yes, the target is lower, but we are deconsolidating EUR 70 million of EBITDA in 2027, which we are obliged to. Therefore, it will be higher if these assets were still consolidated. And now let me also add on that, in those numbers, so the EUR 80 million contribution from our energy transition businesses, we have roughly EUR 50 million contribution from our energy efficiency businesses and less than EUR 20 million from the first contribution of the CCS, which is the first year 2029, which will start contributing. The assumption there is that both transport as well as storage will have a remuneration based on a WACC formula, which is more or less, in our assumption, higher 100 basis points vis-a-vis gas. So that's a very marginal increase. And let me say that we use that assumption given the discussion we are having with both the regulator as well as the Energy Ministry.

I think I can add another comment because you said you had much more, let's say, bullish projections in the past vis-a-vis the outcome now. And we have to be frank and transparent in saying that biomethane turned to be more -- less, let's say, profitable than we expected 4, 5 years ago. And that was driven by 2 factors. The first one relates to the production of biomethane from organic waste, okay? The situation in Italy turned to be less profitable because of the tariff for disposing organic waste. And that was due to some oversupply we had in the market -- we have in the market. And that is the reason why, as I pointed out, we went through a sort of, let me say, small restructuring on the portfolio of assets. We have closed -- shut down one asset, and we have rescheduled or, let's say, dropped a couple of projects we had in the portfolio originally, okay? And for the agriculture production, of course, the strong attention we have in the market and the inflation that we had in the last 2, 3 years has caused an increase in the cost, specifically in the sourcing of the agricultural residuals. That has eroded part of the profitability. Of course, it's still attractive in terms of returns, but not as good as probably we expected 4, 5 years ago. So full transparency.

And finally, you asked also the book value at 30th of September was just north of EUR 500 million. Clearly, we are closing 2024 numbers. It will be very similar. We made an assumption on what will be the book value given the investment that we are doing in 2027 when we will deconsolidate. But it's not going to be a major shift vis-a-vis the numbers that we actually closed.

Emanuele Oggioni at Kepler Cheuvreux. The first is a clarification on -- you said before, the CCS could be regulated, could be RAB based in the future. But now the CFO mentioned that in '29, the first year of contribution, if I understood well, is included in the not regulated EBITDA, okay? So a clarification -- and when it could change if it would become RAB based? Then you mentioned, to plan, EUR 400 million on CapEx on innovation, investment for innovation. My question is to what extent this would benefit the cost base? And to what extent the benefit on the cost base is included in the business plan in your targets? And finally, the third question is on TAP. TAP in the business plan is included only the minimum expansion, not the doubling of the capacity. So also in this case, what is the visibility on the update on doubling the capacity on TAP?

Okay. I'll start with the TAP. Again, let's take the same kind of approach we used last year for the associates. TAP, what is secured is the initial expansion for EUR 1.2 billion. For further expansion, we have different scenarios. The open season will happen, if I do recall correctly from October, right, this year for the next months. And therefore, we will see, probably in the next business plan, if something concrete with clear commitment will come up, we will embed it. For the time being, the sole thing we have secured is the one that we have accounted. So it's an upside, but as soon as we have clear commitment from production and clients. The second is on the return on CapEx. Yes, you can see in different ways. I mean, of course -- I'll make an example. The asset control room allows us to have a much more effective order dispatching control of the assets. So it's a micro optimization we do every day in the turbine and the compression stations, in the decision and scheduling of the workloads. That allows us to optimize the number of employees we have per kilometer of network, taking into account that at the same time, we are increasing the length of network, because simply with the new Adriatic Line, we will have 400 kilometers more, plus one more compressing station. So that allows us to optimize the workforce and to optimize the operating costs. And as you know, with respect to the operating costs that are recognized by the authority, if we beat that number, we can retain that saving, and that is included in. Then you have the second of the 3 dimensions that is security. So more reliability, okay, more business continuity, more flexibility in the system. The third, of course, relates to the carbon footprint and the total emissions. I mean, the 25% reduction in the CO2 emissions we achieved in 2024 with respect to 2022 was driven mainly by, let me say, 2 drivers. The first one was the balancing in the flows, okay, and the use of the storages that was much lower than in the past. But the second, we have developed, let's say, an artificial intelligence model to, let's say, forecast the demand and the shaping of the profile of the demand to optimize the choice in the type of stations we will activate for compressing the gas. And that has provided the majority of the reduction of the CO2. That also have, as a consequence -- or I mean, we reduced the fuel used for compressing the gas that allows us to reduce the cost and the CO2 emissions. So these are the types. So it's very fragmented, because this type of innovation is very spread in the operating sites.

And just complementing, in terms of fixed cost in the plan, like-for-like fixed cost increased by 1.8%, which is exactly in line with inflation. Clearly, this excludes the change in perimeter, the Edison Storage acquisition as well as the FSRU, and includes all the leader expansion, so the leak and repair that we need to do according to the new euro regulation, which has an increase in terms of cost. It also includes an increase in labor cost by 4.1%, which is driven by applying basically a national contract. Therefore, we can maintain cost basically flat or in line with inflation, thanks to this innovation that we're putting into the system and keeping clearly staff and operation costs at the minimum, which are basically flat on a nominal terms over the plan. When it comes to the first question, CCS contribution, yes, at the moment, first of all, the CapEx deployment on CCS will be done, clearly earmarked in the plan, and will be done only when we have a clear regulated framework with the assumption in terms of remuneration that I mentioned in our assumption. Second, 2029 is the first year, because we actually start spending in 2028, and currently are in the energy transition business, because clearly, those are in order to decarbonize the mix. Then when we're going to get there, we might change the reporting since it's going to be a regulated business. But 2029 is far away.

It's Marcin Wojtal from Bank of America. Perhaps some questions on capital allocation. Firstly, could you say how much headroom do you believe you have on your balance sheet for any further potential opportunities? I think previously, you were mentioning around EUR 2 billion. So could you maybe update us on that number? Then do you actually see any opportunities for maybe further bolt-on acquisitions in Italy or outside of Italy? Then maybe on Italgas, could you also reconfirm that you are not planning to participate in the potential capital increase, if that's okay? And maybe if I can squeeze in last one question. I believe in your CapEx guidance, you're suggesting that you are going to utilize EUR 1 billion of grants, gross versus net CapEx. So could you just explain what is the rationale for using grants and what is the remuneration?

For headroom, we are running an headroom towards a 70% threshold, where the threshold is actually 75% for our rating of EUR 1.7 billion on average in the plan. Therefore, we have clearly headroom. And the reason of financing the Edison Storage acquisition was to maintain this headroom, as we explained at the time. Now do we see opportunities? Clearly, we are the largest infrastructure operators that is actually, let me say, geographically placed into the 3 main corridors, as Stefano mentioned at the beginning of the presentation. We need to monitor what the situation and how it will develop. Today, we don't see, let me say, imminent opportunities, but this might come, and we need to be vigilant being the largest player. Therefore, there's nothing, as I said, into the business plan in terms of M&A, but things might change as Edison Storage basically was part of our acquisition plan last year without being in the plan.

We have hired a new Head of M&A department. So we need to make her to work, right?

When it comes to the second question, Italgas, what we can reconfirm, which is not what you said, is that we will partially participate into the capital increase, i.e., we want to maintain the same financial exposure, being for us an opportunistic asset, meaning that if they will finance their acquisition through a capital increase, we will partially subscribe the rights. And to do so, we will sell a portion of the rights in order to finance the subscription, in order to be cash neutral. And when it comes to the last question, which is EUR 1 billion of grants, what is the rationale? The rationale is pretty simple. I mean, every, let me say, new technologies, and this in particular, when it comes to hydrogen and CCS, needs public funding support. And it's not just for us, it's for the whole system, and that's why Europe has done the REPowerEU plan first than other plans. Now the visibility that we have this EUR 12 billion (sic) [ EUR 12 billion ] assumption is pretty high, because as Stefano pointed out, EUR 500 million has already been assigned to us, EUR 200 million has already been cashed in at the end of last year. So we are assuming that our application to the Connect European Facility Fund (sic) [ Connecting Europe Facility Fund ], which we did last October, will have a certain rate of success, which will support both the CCS as well as the hydrogen backbone as the main grants. Then we have smaller grants for the biomethane, which is part of the regulation, around EUR 80 million in total. And then for certain projects, even other smaller grants. But to be honest, the large portion are the CCS and then the hydrogen.

I would say what's the meaning of using the grants for gas infrastructure. That was part of your question, the EUR 400 million that we have been granted from the REPowerEU plan. I think it's an amount, EUR 400 million out of EUR 2.5 billion. That, of course, it's negligible with respect to the total amount. It's 15%, but it leaves us some flexibility on the balance sheet given the fact that we have ample of investment in the CapEx plan that supports a growth on the RAB by 6.4%.