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UPDATE 2-Snam looks to boost European role with $5.4 bln gas grid upgrade
March 12, 2015 / 7:52 AM / 3 years ago

UPDATE 2-Snam looks to boost European role with $5.4 bln gas grid upgrade

(Adds comments by management, analyst)

By Stephen Jewkes

MILAN, March 12 (Reuters) - Italian gas company Snam will spend more than 5 billion euros over the next four years to upgrade its grid as it looks to play a leading role in Europe’s plans to make gas supplies more secure.

Snam, which has a strategic alliance with Belgium’s Fluxys , wants to expand its footprint across Europe and help integrate the area’s patchwork of gas grids.

The company - which has transport, storage and distribution businesses - said in its latest business plan it would spend 5.1 billion euros ($5.42 billion) to 2018.

That is almost 1 billion euros less than the amount it earmarked in a previous 2014-2017 plan but the reduction was expected due to the completion of large investments in storage and the continuing fall in gas demand in Italy.

Gas consumption in Italy has fallen in recent years due to lower demand from recession-hit industry. On Thursday, Snam said it expected gas demand to 2018 to be steady at 2014 levels.

Most of the investments in the company’s new plan will go into the gas transport business, including development of reverse flow capacity that will be able to ship African gas from Algeria and Libya to Britain.

Russia’s annexation of Ukraine’s Crimea region last year underscored the need for the European Union to do more to safeguard energy supplies.

“Security of supply will become the top priority for Europe due to the political instability of a certain exporter,” Snam CEO Carlo Malacarne said in a conference call.

DIVIDEND FLOW

Snam, controlled by Italian state lender CDP and counting China’s State Grid among its leading shareholders, said it would offer a dividend per share of 0.25 euros on 2015 results, the same as the dividend paid for the previous year.

“Interestingly they only gave dividend guidance for one year and not two as usual. That’s because they’re waiting for the new regulatory framework that will kick in next year,” a Milan-based analyst said.

Earlier on Thursday Snam said its net profit in 2014 rose 31 percent, boosted by lower income taxes.

“We continue to believe that Snam is well placed to withstand the expected drop in regulated revenues in 2016... and see the dividend as well supported,” JPMorgan said in a note.

At 1450 GMT Snam shares were down 0.09 percent while the European utility index was down 0.4 percent. ($1 = 0.9412 euros) (Editing by Jane Merriman and David Evans)

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