Snam seen boosting Italy's gas security with spending on LNG, grid

(Reuters) - Europe's biggest gas grid operator Snam is expected to increase investments to boost its transport, storage and LNG businesses in the next four years, in a move to reinforce Italy's energy security.

The state-controlled group, due to present its strategy on Jan. 19, played a key role in filling Italian gas stocks last year when the country was preparing for the winter with dwindling Russian supplies.

Analysts expect the company to ramp up investments to around 11 billion euros in the 2022-2026 period - from 8.1 billion in the previous plan - focusing on core business while reducing emphasis on green hydrogen.

The new strategy will be the first under CEO Stefano Venier, who took the helm from hydrogen advocate Marco Alvera last spring in the middle of the energy crisis.

"Venier found himself in a dramatic situation regarding the lack of gas in the country, this has made priorities clearer for him," said Davide Tabarelli, head of think-tank Nomisma Energia.

Under the plan, Snam is expected to complete investments in two terminals for liquefied natural gas (LNG) and expand the country's gas storage.

In addition it aims to spend a total of 2.5 billion euros, of which 1 billion by 2026, to build a new pipeline in Italy.

The pipeline is aimed at transporting more fuel to Italy's industrialised north and will allow reverse flows from Italy to northern Europe.

Before 2022, when Russia provided nearly 40% of Italy's gas consumption, fuel imports used to enter northern Italy and travel south.

With the bulk of Russian supplies now replaced with African gas arriving in Sicily and the expectation of more fuel coming to Apulia through the Trans Adriatic Pipeline (TAP), Snam's move to boost the network is an obvious choice, Tabarelli said.

"Investments in LNG, storage and the grid are urgently needed and will increase Snam's regulated revenue," he said.

Nearly 90% of the group's 3.3 billion euro revenue are currently coming from regulated activities.

Despite growing capital spending and a debt worth 12.9 billion euros at end-November, analysts see Snam confirming its payout policy, with a dividend per share rising on average by 2.5% each year from 2023.

"The company might pursue a disposal strategy to ease pressure on its balance sheet this year," analysts at UBS said, adding Snam may sell some of its equity investments other than its 20% stake in TAP. (Reporting by Francesca Landini; editing by David Evans)

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