Snam Lifts Spending to Boost Profit

Italian gas company Snam expects to grow net profit by 4 percent each year over the next five years, boosted by cost savings and increased investment in its latest plan.

 

Europe's biggest gas pipeline operator said it would spend five billion euros ($5.30 billion) in the period to 2021, nearly all to upgrade its domestic grid and improve connections with Europe, including the Trans Adriatic Pipeline bringing Azeri gas to Italy in 2020.

 

Snam, which makes most of its revenue from gas transport, is looking to play a leading role in integrating Europe's grids and making Italy a European gas hub.

 

"Cash flow generation will substantially cover our capex plan and attractive dividend policy," CEO Marco Alvera said.

 

Snam, which will pay investors 0.21 euros per share on 2016 results, confirmed that its dividend would grow 2.5 percent in the three years to 2018, with 2018 a floor for the following years.

 

Italy broker Banca Akros said the targets looked to be in line with the previous year's plan.

 

"This is a positive message in our view, confirming the company's growth path," it said.

 

Snam, controlled by state lender Cassa Depositi e Prestiti (CDP), said it was also keen to pursue growth through acquisitions.

 

It said it was interested in buying liquefied natural gas (LNG) assets in Italy and using its presence in France to improve connections with Spain.

 

The company, which has a strategic alliance with Belgium's Fluxys, already controls French grid TIGF and Austrian pipeline TAG and recently bought a 20 percent stake in the Trans Adriatic Pipeline.

 

Last year Snam spun off its domestic distribution unit Italgas to lower debt and focus on growth in European gas transport.

 

Proforma net profit last year, adjusted for the Italgas spin off, was 845 million euros, above an analyst consensus provided by the company of 834 million euros.

 

This year it expects profit to be around 900 million euros.