Snam SpA

MIL:SRG

Earnings Call Transcript 2020-Q1

[Operator]

Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Snam First Quarter 2020 Financial Results Conference Call. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Marco Alverà, CEO of Snam. Please go ahead, sir.

[Marco Alverà, executive]

Thank you. Good afternoon, ladies and gentlemen, and welcome to our first quarter results presentation. First of all, I hope you're all well and safe in these difficult times. I'm on this call with Alessandra Pasini and Camilla Palladino and Francesca Pezzoli, who recently joined us as a new Head of Investor Relations. Some of you have already met with Francesca.

As you know, Italy lifted some restrictions on Monday, and we're right now in the process of reopening as many of our construction sites as we can. Our operations never really stopped. And thanks to the commitment of our people, we delivered uninterrupted and secure gas flows to our communities throughout the crisis.

We did, however, progressively have had to stop the fieldwork and almost half of our sites at the beginning and all our sites eventually during the month of April were closed. By last night, we had already managed to ramp up around 45% of our sites, and we're expecting to return to full capacity by June. All our guidance going forward is based on the assumption of a gradual normalization and of no further national lockdowns.

Our engineers and technical staff are working with our suppliers to try to recover as much as possible of the lost time, ensuring that more resources are delivered on site and faster delivery of materials.

Thanks to the actions that we've already identified, the expected delay to the full year CapEx program has been reduced from the EUR 200 million guidance we gave at the last update to less than EUR 100 million today. And as I mentioned, we're working to contain that further and also see what projects can be brought forward.

With regards to our full year 2020 results, we are well protected, given the nature of our business and the structure of our regulation. Revenues, as you know, are shielded from gas demand trends, except for the EUR 9 million, which is exposed to volume. That's the only impact on the revenue side.

So whilst we will be carrying less gas or tariffs related to capacity and not to actual transported volumes, and so we won't have any material impact on working capital compared to the working capital guidance we had given. There are some extra costs related to COVID, but we expect these to be offset by the cost containment measures and savings that are a consequence of working from home. This excludes the EUR 20 million one-off contribution to solidarity funds and other social initiatives that we've announced.

The new businesses, of course, have slowed down a little in this period. Energy efficiency projects have stopped during the lockdown as well as the project development of some of the biomethane activities had to stop as well. Our associates will see limited effects, and we see virtually no impact on financial charges.

Overall, the percentage impact on our full year 2020 earnings will be in the low single digits compared to the previous guidance. There will be no impact on our overall dividend policy. And regarding the 2019 dividend, the last tranche will be paid out as expected on the 24th of June.

Meanwhile, we're focusing on the lessons learned from this period and how to apply them to improve going forward. Internally, we're reflecting on the unexpected success of remote working, which has already encouraged us to streamline and digitalize a number of our processes. We're taking the opportunity to rethink and reshape the way we work in terms of physical spaces, organization and culture with the ultimate goal of improving productivity.

We believe that the crisis have shone a spotlight on the importance of ESG and the social role of companies. We have long made this is a key focus of Snam, given the importance of community relations for the roughly 1,000 construction sites that we normally have open around the country. In the current difficult context, as mentioned, we donated EUR 20 million and have been able to purchase precious medical equipment from abroad at a critical time for Italy. On top of this, over 10% of Snam management have volunteered to devolve part of their salary to causes linked to the emergency.

Italy is also reflecting on how to build back better, and Snam is contributing a great deal to this exceptional once-in-a-generation effort. Infrastructure investments are the key lever to restart Italy's economy. And the types of investments that we do have a multiplier effect of 3x as we rely on suppliers that are mainly national SMEs. We're making concrete proposals to policymakers on how permitting times can be shortened simply through a streamlined application of current rules. We're also making bolder proposals involving legislative reform, and we're working in concert with many other energy companies and infrastructure companies.

A key component of the effort to rebuild the economy in Europe and in Italy will be to encourage an acceleration of sustainable investments. The EU has recently restated its commitment to the Green New Deal and consider it a sort of a Marshall Plan for the recovery. There were EUR 1 trillion already earmarked before COVID for the Green New Deal, and this amount could be raised further.

Sustainability is also at the very core of the Italian post-COVID strategy. Cheap gas continues to take share from coal, providing cost-effective decarbonization of the power sector. Meanwhile, the cost of green hydrogen made from solar is coming down much faster than expected. Recent solar auctions in Abu Dhabi were reported at EUR 12.5 per megawatt hour, and electrolyzer costs are now projected to halve over the next couple of years.

On energy efficiency, a Snam proposal to extend the tax deduction for investments in buildings is now being proactively discussed in government. Further focus on energy efficiency will support an already strong pipeline for TEP, our energy efficiency subsidiary. This is a key area of the European Green Deal, and we intend to grow this business significantly.

Regarding hydrogen, we're continuing to work on 2 fronts. On the hydrogen readiness of our assets, we expect that around 70% of the existing pipeline network could accept up to 100% hydrogen already, and this would significantly contain adoption costs going forward. The second front is the development of technologies along the hydrogen value chain. We're participating in a number of Horizon 2020 calls through which the EU funds the new sustainable technology.

On biomethane, we have signed an agreement last night for the acquisition of a 50% stake in Iniziative Biometano. This will provide a platform for the agricultural waste sector, complementing the acquisition we have already made in the urban waste sphere. This takes our portfolio of development projects to 40 megawatts, which was our target for the plan period. Of this, 1/3 is already authorized.

Overall, the growth of green gas makes our network future-proof and an indispensable pillar of the energy transition. We're very satisfied with the progress of our new green business units, which are positioning Snam to capture the benefits of an accelerated and more pragmatic energy transition.

Let's now look more closely at the gas market context so far this year. Gas demand has declined by 9% in the period January to April compared to the previous year. This partly reflects a warm winter. The overall weather impact is 1 billion cubic meters. It is clearly also a function of the lockdown, which affected thermoelectric and industrial demand down, respectively, 32% and 22% year-on-year, and demand for buildings, which include home, shops and small businesses. Assuming a gradual restart of activities in May with an ongoing path towards normalization, we're currently expecting gas demand for the full year at around 67 billion cubic meters.

The sharp decline of commodities in the last few weeks has made gas extremely cheap and confirm that it is more convenient to make power from gas rather than coal. Notwithstanding the collapse in oil prices, gas is still 3x cheaper than oil. This will further support the key role of gas in the energy transition also in the mobility sector.

Now let's look at the progress Snam has made in the first quarter. Starting with our core business, we completed investments for around EUR 220 million. This number barely includes any COVID-related shutdown, EUR 16 million, as a strict lockdown was only imposed at the end of March.

Moving to our international activities. TAP is around 94% complete at the end of March and is on track to start up in the fourth quarter. We have continued to create value from our financial structure. The confirmation by Fitch of our rating despite the downgrade of the sovereign is further evidence of the solidity of our capital structure. Meanwhile, the 2- and 3-year 0 cost loans we closed in early March, mean we now have liquidity covering refinancing needs for more than the next 24 months, even though the market remains wide open for good credit.

As you may remember, we bought back EUR 110 million of shares in the first 2 months of the year. We're going to ask the upcoming AGM to approve a new EUR 500 million share buyback program in order to have the flexibility to use it if and when we deem it appropriate.

With regards to the energy transition, we've extended the agreement signed last year with Terna. Here, the idea is to jointly innovate in areas where we both have similar needs, like monitoring our networks with drones using satellites, installing additional sensors on the ground and generally investing in the Internet of things together. The concept of sector coupling, for instance, investing to make our compression stations, gas-electricity hybrids, to reduce emissions and provide stability to the electricity grid. This is also a key focus of our industrial collaboration.

Our financial results in the quarter continued to show strong growth. EBITDA was up 5%, thanks to the increase in regulated revenues, mainly linked to the transport business and the further effect of EUR 2 million related to our efficiency program.

Financial charges were down 17%, thanks to the 2019 liability management completed in December, the continuing treasury optimization measures and the natural bond rollover. Net profit was up 5%, thanks to the strong operational results and lower financial charges, while the overall contribution from associates was lower, mainly reflects some one-off items last year. Net of these effects, the underlying performance of associates remained solid.

Net debt was up 3%. This is a result of many moving parts on top of organic cash flow generation and the ongoing investment program. In particular, the first quarter saw cash outflows for the OLT acquisition, the floating regasifier offshore volume, the payment of the first tranche of the dividend, the buyback program, only partially compensated by the positive impact of working capital, which is expected to be reabsorbed over the year.

I will now hand over to Alessandra for a closer look at the results. And as always, we'll then be happy to take any questions. Thank you.

[Alessandra Pasini;Chief International & Business Development Officer, executive]

Thank you, Marco. EBIT in the first quarter of 2020 was up to EUR 380 million or 3.8% versus last year. This reflects an increase in regulated revenues due to an additional EUR 10 million of tariff RAB and allowed D&A, a small increase in storage revenues, mainly due to the calculation of allowed revenues on a guaranteed factor of 100% from prior 97% and the recognition of energy costs, which were addressed in kind until 2019 and are now recognized in revenues and cost line and which benefit from some seasonal effects, which we expect to essentially revert in the next quarter. The reduction in controllable fixed cost of EUR 3 million, mainly thanks to the ongoing efficiency program, the program which has a target of EUR 65 million by 2023, has obtained further EUR 2 million on top of the EUR 51 million reported at the end of 2019.

Depreciation and amortization increased by EUR 11 million, reflecting a growing asset base. The other components include a number of items such as: EUR 3 million as part of the COVID-19 donation that Marco has commented before; energy costs which partially compensate the COVID impact in regulated revenues commented earlier; the initial positive contribution from the biomethane business, which has -- including IES Biogas, which has increased construction sites; and the consolidation of Renerwaste, which was not part of the perimeter last year; and lower provisions as opposed to 2019. All in all, in the quarter, we have a positive and negative seasonal and temporary effects, including energy costs, COVID donations, lower material sales and provision, which broadly offset each other.

Net profit in the quarter was EUR 298 million, up EUR 15 million over the same period of the prior year. This number reflects lower financial charges due for more than half to the benefit from bond rollover, last year's liability management exercise and treasury optimization. The remainder is the initial contribution from OLT shareholder loan and other small effects.

The lower performance of our associates is mainly driven by the absence of the positive one-off effect accounted by Teréga in the first quarter '19, connected to the release of a tax provision accrued in 2017. The normalization of the performance of Interconnector U.K. after 2019, which was characterized by an extraordinary volume levels. Italgas lowered contribution by EUR 2 million due to a change in regulation on recognized costs and DESFA, which matched 2019 very strong performance due to higher-than-expected volumes, also thanks to the continuous push by the government on phase out of lignite.

Income taxes are lower versus the same period of '19, mainly because of the higher earning before tax and lower tax rate, which reflects the postponement of dividend payment and therefore has a temporary reduction. We confirm full year tax rate in the range of 27 -- 26% to 27%, similar to last year.

Moving on to our cash flow. The cash flow from operation was EUR 682 million, thanks to the solid net profit and positive working capital for EUR 264 million. Cash movements include EUR 114 million of tariff-related items due to additional tariff component expected to be reabsorbed within the year, EUR 46 million of balancing activities expected to be reabsorbed almost entirely within the year and EUR 106 million due to net tax payable accrued in the period that will be paid in June. Overall, the positive impact of our net working capital, therefore, expected to be reabsorbed -- of the quarter is expected to be reabsorbed within the year.

The operating strong cash flow generation cover net investment of EUR 220 million. Please note that in the quarter, we only had some EUR 15 million of CapEx delay related to COVID, and the net financial investment related to OLT for EUR 332 million as well as the dividend payment of EUR 313 million and the tranche of the share buyback for EUR 111 million commented earlier by Marco, leading to a net debt for the quarter of EUR 12.3 billion.

With regards to full year guidance, which was EUR 12.4 billion, excluding change in tariff-related items expected negative by EUR 0.1 billion. We still expect to close broadly in line with that, considering the effect of liability management carried out at the end of last year, the acquisition of Iniziative Biometano and the expected COVID impact and excluding the potential restart of buyback program.

Moving now to our debt structure. With reference to the gross debt breakdown, at March 2020, the fixed rate portion is approximately 70%, in line with 2019 numbers and maintaining a limited exposure to the interest rate volatility. Our maturity profile is well spread over time. Also, thanks to the last liability management exercise completed in December and characterized by approximately EUR 600 million of buyback of bonds with an average coupon of 1.3% and an average residual maturity of circa 4 years.

Let me remind that this management exercise was the last of 5 transactions executed over the last few years. Despite the recent market worsening following the COVID-19 crisis, 2020 financial charges are expected to keep on the downward path started during the last year. More than 2/3 of the maturities were refunded in 2019, and the recent EUR 740 million of term loans secured in March more than cover refinancing needs of the remaining part of 2020.

Furthermore, the relevant cash on hand and undrawn EUR 3.2 billion of RCF credit line allowed to cover more than 24 months of maturities -- maturing facilities and expected net debt increase. For the remaining part of the year, we will remain ready to capture possible opportunities in the market, which remain open for good credit names, like ours. And we will continue to seek treasury optimization, although we expect for the remaining part to be a less favorable condition given macro environment.

Fitch affirmed Snam's long-term issue of the full rating at BBB+ with a stable outlook. This assessment, despite difficult macro environment caused by COVID-19 emergency, reflects relative insulation from the macroeconomic shock. The solidity of the company is stable cash flow generation and a clear and visible regulatory environment as well as energy -- Snam's commitment to energy transitions through its CapEx plan and a wider implication for our concept.

With reference to share buyback program, in February, we have concluded the repurchase of EUR 111 million, executed under the ordinary Shareholder Meeting authorization. And as mentioned before, we will be seeking the renewal of such authorization at the next AGM valid for a maximum period of 11 -- 18 months.

We'll now be happy to take any questions you may have.

[Operator]

[Operator Instructions] The first group of questions is from Javier Suarez with Mediobanca.

[Javier Suarez Hernandez, analyst]

Three questions. The first one is on the political side, maybe. There has been recent statement by the Minister of Economical Development in favor or giving his view in favor of the -- of a merger with Terna. And I just wanted to ask the management on their view on the potential benefits for the system of that integration, if any? That would be the first question.

The second question is also on the, I guess, on the political and economic side is on the -- as part of this effort on the reconstruction phase, you have been mentioning the possibility of accelerating in CapEx. So can you help us to understand to which extent Snam could accelerate on CapEx and the contribution -- the additional contribution that could keep on the reconstruction phase? And which -- on which areas apart from the obvious maybe the company could accelerate on that CapEx?

And the third question is more on the M&A activity. Just -- I just wanted to have your view on -- in light of the economical deceleration and economic slowdown. The company is looking at their economic -- their M&A activity and their potential firepower to do M&A through different lenses. And specifically in the U.S. market, if the scenario of low commodity prices has given -- is now maybe an opportunity to take a closer look into that market.

[Operator]

The second set of questions is from Stefano Gamberini with Equita SIM.

[Stefano Gamberini, analyst]

Three questions also from my side. First of all, regarding the business plan target 2023, EUR 6.5 billion, excluding the 2019 and '20, that should be in the region of EUR 2 billion, it means that EUR 4.5 billion should arrive in the next 3 years. So you confirm this guidance. So could we expect in 2021, a huge acceleration of CapEx up to EUR 1.5 billion, I don't know, considering to reach this target?

The second question regarding the investments in the energy transition business. You have this target of EUR 400 million by 2023. You said that the situation is going quite well, new acquisitions in this area. So is this target very conservative? And could you elaborate a little bit more about what could be a sort of acceleration in this area?

The third question regarding the buyback. You will have EUR 500 million of additional approval of buyback after the shareholder meeting. So when will you decide to use this buyback? What are the main elements that could push you to go ahead with the new buyback on the market?

[Marco Alverà, executive]

Okay. Thank you, Javier and Stefano for your questions. I will take them in the order they've been asked.

On the political statements made regarding Terna. Well, what I can say is that this topic, as you well know and some of you have reported, comes up quite frequently over the years, it's a periodical topic that comes up. What we're doing is working hard, and we've been doing this with current, the previous CEO, and I'm sure we will continue with the new CEO, who I know well and with whom we have been speaking regularly over the years. We work very hard to try to extract the maximum value from an industrial point of view of collaboration. We've done this quite effectively under scenarios for at least 15 years that I've been working in the energy sector or now almost 20. Terna and Snam had always had different approaches to how the Italian energy system should evolve. And last year, for the first time, we were able to work on a joint scenario, which the regulator had asked us to do, but it was quite a remarkable achievement. And I think that's something precious that we delivered to the great benefit and clarity for investors as well as for the regulator and for the politicians.

The second area of work, as I mentioned earlier, is around the network-related technologies. So we both spend money on helicopters, and if we could use drones instead or even satellite images and in general, on the Internet of Things and cybersecurity. There's a lot of work that we can put in place, and we are putting in place, and we have agreements in place.

And the more strategic synergy that we are extracting is around the conversion of our gas-fired compressor stations to electricity, fired/not fired electricity, electric motors. This will essentially physically interconnect our network with that of Terna and will allow us to provide a lot of backup, if needed, provide strength to the electricity grid and reduce emissions. So it's like basically a hybrid car. We can run on gas when Terna needs power and we can absorb power when Terna has excess power and we could not take any power nor gas when needed, because we have a lot of flexibility in the pressure at which we operate our line pack. So I think we're doing quite well. And if you look around the world, with the exception of the U.K., none of the big countries have this -- have decided to integrate these networks. So I think what's important is really to make sure we continue to work and extract what value is there.

On the reconstruction, we will present the new plan in November. So I'm not ready yet to disclose any amount. Here, I'm partially answering Stefano's question as well. Our plans tend to have some back loading -- so -- like the previous plan. So the CapEx for 2021 was slightly less what you talk about. But we are working with government to try to streamline some of the approvals we have, 10-year plan, which is close to EUR 14 billion, 1-4, and this is presented every year on a rolling basis, as you know. So our effort right now is to say, if we have projects that take 5, 6, 7 years to get approved for no political reasons, we're not talking about any complex project, we're just talking about the bureaucracy. Without changing any law, if we simply get the permits fast tracked in parallel. So rather than waiting for one ministry to give approval then the other ministry then the third ministry, if the 3 ministries, which are the Economic Development Ministry, the Environmental Ministry and the Cultural Ministry, if they all started the permitting process at the same time for something that we know we will have to do, we've already saved probably 2.5, 3 years. This could allow us to bring forward into '21 and 2022, some of the projects that we have in the later years of the 10-year plan.

So that's the work we're doing with government. As I mentioned, we're also proposing some bolder legislative measures, for instance, to streamline the procurement process and streamline the actual permitting process itself, but that will require more time. So I'm optimistic there will be upside, and we will be updating you as we firm that up into our plan.

Then, Javier you asked about M&A, the firepower in the U.S. market. So in general, you know we're not big fans of corporate M&A. In fact, we don't like corporate M&A. What we like are projects, projects where we buy assets. And I think the low commodity price will probably make assets available. We will look at those like we always do where we attach, as you know, a lot of value to the creditworthiness of the counterparts. So what we like about TAP is that it's backed by long-term contracts with BP and SOCAR. So these are the types of projects that we like. In the U.S. market, a lot of the offtakers have seen a deterioration of creditworthiness over the last couple of months. And so on the one hand, there may be more opportunities but on the other, the risk-adjusted returns may not meet our very strict investment criteria.

Stefano, you also asked about the new businesses. Again, we're in the process of updating our plan, but I do expect there will be upside to that. On energy efficiency, I mentioned, we have seen a great buildup of the pipeline of TEP, and we have seen the government really looking forward to accelerating and extending the incentives from a fiscal point of view, not only because it helps the environment, but also because it helps the construction sector which is at a total deadlock right now and really needs to get working capital and cash flow going back into the system.

Then we have biomethane, which is a function of the extension and duration of the incentives, and we're optimistic there. And then on hydrogen it is really a function of what Europe and Italy decide to do from a Green Deal perspective. But as I mentioned, the costs compared to our previous outlooks have and continue to fall quite rapidly.

On the buyback, we never give precise targets as to when we enter the market. What we do is get the AGM to give us a new mandate and a new approval and we've been doing this now at the last 3 AGMs, and so we will do this, this time around as well.

[Operator]

The next questions are from Harry Wyburd with Bank of America.

[Harry Wyburd, analyst]

So first one is just on the regulatory review. I guess, probably still around a year away before we get into sort of preliminary views on that. But do you think the crisis might influence how the regulator behaves or even alter the time line of the review? And you sort of mentioned the GDP multiplier effect. So I wonder whether there may be the sort of mood -- music might be more towards a more lenient review, insofar as that could encourage more investment and more GDP multiplier?

And then the second, just a small clarification on the low single-digit percentage impact on 2020 earnings. Could you just remind us a bit of the items that are going to create that low single digit impact? So does that include the EUR 20 million social contribution? And also, do you expect a small impact on 2021 as well? Or is this simply just a one-off?

[Operator]

And the second set of questions is from Enrico Bartoli with MainFirst.

[Enrico Bartoli, analyst]

Two of them. The first one is related, in general, about the value chain in the gas business in Italy. Some commercial companies are experiencing some delay in payments or some disconnection actually being prohibited by the regulator. Do you expect that this could have any impact on Snam? If this could become an issue for the gas system in Italy over the next months? And if there are any discussions with the regulator in case of a deal with this program?

And second one, I would like to go back about the possible simplification of the authorization processes. I guess that you already had some contacts with the government. If you can give us some flavor on, let's say, the attitude on the political side on this matter, if actually the government is actually open to change the bureaucratic system which has been in place in Italy for many, many years?

And really, the last one is on dividends. Actually, in other European countries, there have been some political pressure also in utilities to reduce the dividend payments. If you think that there are any discussions in Italy about this matter?

[Marco Alverà, executive]

Sorry about that. So I said I will try to answer all 5 questions, and then Ale can jump in if I have missed something, especially on the low single-digit guidance.

So Harry, on the regulatory review, I don't expect there's any need to be more lenient, where the mark-to-market of the current forward curve is 0.3% uplift in the WACC, and our working assumption is that the current formats are preserved. Where the regulator can step in to accelerate CapEx is to sit down and fast-track the approval process for some of the replacements and other investments that we have in the outer years of the plan. The relationship continues to be very collaborative both with government and with the regulator.

On the low single digits, so this guidance excludes the EUR 20 million, which we consider a one-off. We have the EUR 9 million hit on the revenues that I talked about, which is the volume component of our revenues. We have some weakening of the new business revenues. That's not big. But on energy efficiency, biomethane, CNG, the activities have had a more significant contraction than on the conventional business.

Operating costs, as I said, there will be positives and negatives, which should offset each other. On the associates, there will be some impact but not much. And funding cost, no real impact.

Now the CapEx, the CapEx will have some impact on 2020. This is not so much the CapEx, but the delay of some projects will mean that they will not be commissioned in 2020. So we cannot generate any revenues from those. And then the greater part of the impact of the CapEx delay will be felt in 2021. If in 2021, we won't be able to accelerate and recover, which we are certainly working very hard to do already now.

On moving to Enrico's question. The value chain, I don't expect any disruption on the working capital arising from lack of payment. There has been no discussion in this regard. There has been some discussion on the distribution side, which has been -- had marginal impact, but we haven't seen any discussion of any of this transferring to the transmission side.

On the simplification, the contacts are -- have been over the years, almost daily with different parts of government, I think there's a consensus that infrastructure investing with the Keynesian approach is the most effective lever.

And so there's 3 parts to the discussion. The first is what to do, and there are areas where everyone is in agreement. By everyone, I mean, all the players and all the political parties and all the bureaucracies, which is, for instance, more energy efficiency. That's an area where everyone agrees. Or the coal phaseout and the switching of coal to gas, everyone agrees. On the need for certain substitutions, everyone agrees. So there's some quick wins. And what we're saying is on those items where everyone agrees, we need to get the permits delivered in 1 year, 2 years, not 5 or 6 years, and we can do that in 2 different ways. The first is to appoint some supervisors within the government that can simply make sure that the time that is allowed to the various offices in government is reduced as much as possible within the current framework. And we think you could already, in some cases, go from 5 or 6 years to 1 year like we have done for certain urgent projects and like the reconstruction of the railway or the highway bridge in Genova demonstrates that we can be very fast when we have to.

The second area is more long term, which is legislative changes. These will require more political debate and discussion. But certainly, we're making our proposals. So we have a 58-page document and a 20-page document and a 2-page executive summary and we're working, as I mentioned, with other companies on this as well.

On the dividend side, we have had no pressure to reduce nor to preserve. But if I were to guess, if any pressure were to arise, it would be to preserve, because our dividend goes to GDP, which is playing, as you know, a big central role in deploying capital, to reject liquidity and support companies and people in the country.

And so I said earlier, we confirm not only our broader dividend policy, but also we confirm our payout for June, keeping in mind that we've been able to significantly reduce the percentage of payout for Snam from over 95% to below 75% over the last 4 years.

[Operator]

The next question is from José Ruiz with Barclays.

[José Ruiz Fernandez, analyst]

Just two questions on M&A. First of all, regarding the Abu Dhabi transmission gas transport company, ADNOC, I would like to know how far are you involved in this according to the headlines replaced already within a consortium? And the second is where we heard again comments from Austria we find that OMV plans to sell their shares in Gas Connect Austria. I would like to know if you would be interested in increasing your stake.

[Operator]

And the next question is a follow-up from Stefano Gamberini with Equita SIM.

[Stefano Gamberini, analyst]

Two questions. The first, if you can elaborate a little bit about this business plan of EUR 14 billion in the next 10 years. What does it refer to? What I mean is mainly still on substitution of existing fully amortized, fully depreciated assets? Or could we expect some novelties regarding Green Deals and so -- efficiencies and so on? Just to understand what are the main targets of such an important business plan.

The second regarding the EastMed project. If I'm not wrong, recently, they are going ahead with all the works. Could you elaborate a little bit about this project? What could be the potential additional investments in the networks, both in Greece and eventually also in Italy that are managed by you? And if you can, even in the future, think of a possible acquisition of a stake in this project?

[Marco Alverà, executive]

Okay. Thank you. So José, on M&A, as you know, we don't comment on specific situations. But I will repeat what I said earlier, the projects that we like are those where we can put a rather prudent stake, like a stake, say, EUR 200 million, EUR 300 million, similar to TAP in a way where you take a stake and you have very creditworthy partners, more around specific assets than around companies. So especially as we've done on TAP, where we see projects, where we may be leading or one of the leading industrial partners, and we can not only make our risk-adjusted equity return higher than on a risk-adjusted basis what we can achieve in Italy but we can also add to that revenues from services, consulting activities, new business development opportunities, the -- this is something that we will always look at.

On Gas Connect Austria, I think the Austrian market is very strategic market for Italy. It's a strategic corridor that connects us to the Ukraine and then to Russia. Most of the imports go through that. And through TAG and GCA, we now have a leading presence in that key market.

The transfer from [ OMV ] to Verbund is not something that would impact us.

Stefano, the 10-year plan is a public document. Last year's was. This year is similar to last year's, and this is for the regulated activities. It's done every year on a rolling basis. There is nothing substantially different this year from the previous years. And it's a combination of the maintenance CapEx that we have to do and some of the substitution CapEx that you know about.

On the EastMed project, we are not involved in the equity of the project right now. We are in active discussions and have been for the last couple of years with most of the players. Of course, having bought DESFA, we become an important stakeholder in the Greek and, of course, already have been on the Italian market. And there's many options for the Israeli gas to flow either to Europe through Greece or to Egypt and then be liquefied at the existing Egyptian gas facilities.

So the ball is not in our court as to when and how it's being developed. But certainly, it's exactly the type of projects that we like if the conditions are right.

[Operator]

[Operator Instructions] There are no more questions registered at this time.

[Marco Alverà, executive]

Okay. Thank you very much, everyone. And if any questions come up, you know where to find the team and Francesca and everyone else. Thank you. Have a nice day.

[Alessandra Pasini;Chief International & Business Development Officer, executive]

Bye-bye.

[Operator]

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.