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Letter to shareholders and stakeholders


Dear Shareholders and Stakeholders,

Last year marked a change from – or rather, a profound break with – the eras that came before it. The most serious health emergency since the Second World War completely changed the course of history as we know it, pushing the world’s economies to the brink of a crisis that has spared no fields or sectors. Many established models were broken, most of the paradigms of reference became outmoded from one day to the next and we had to reorganise our daily lives and work, from the most basic activities to the most complex, by trial and error in many cases, given the exceptional natural of the event.

Against this backdrop of great instability¨ Italgas and its affiliates continued to grow¨ taking swift action to ensure the safety of their over 4¨000 employees and guarantee essential services for more than 7.7 million customers in the 1,887 municipalities they serve. We have moreover helped our supply chain by guaranteeing it all our support and the tools needed to resume activities quickly and effectively. All this was possible thanks to an extremely fast-paced organisational structure that was able to act and react with speed, and to the far-sighted strategic decisions that enabled us to transfer the management of most of our activities remotely in just one click.

The main financial and especially non-financial performance indicators clearly reflect the results of our actions. The publication of this year’s reports will enable a concise and comprehensive analysis of performance in just one document. We have in fact decided to open our new reporting season by publishing Italgas’ very first Integrated Annual Report. The aim is to paint an effective and transparent picture of the company’s ability to create value over time, as well as of the underlying link between the strategic priorities, governance decisions, risks management and financial performance, and the social, environmental and economic context in which the company operates.

It is an important integration process that has involved the entire corporate structure with the aim of permeating “sustainability” into the all corporate operating processes to achieve the so called “embedded sustainability”.

Our choices are guided by the situation in which we find ourselves, and Italgas, as the leading gas distribution company in Italy and number three in Europe, intends to use its infrastructures to play a key role in the energy transition pathway towards the decarbonisation of the economy and consumption, in line with the targets set by the European Union as part of the Green Deal. Natural gas, also from a renewable gas point of view, is an affordable solution that is already available to significantly lower greenhouse gas emissions and particulate matter. It is ready to use to replace an extensive range of highly polluting fuels, while supplementing renewable electricity.

Therefore, the greater the share of renewables included in the electrical system, the more need there will be for flexibility and storage. And this is where gas networks come in, which, thanks to their widespread, extensive coverage, play a strategic role both as a means for distributing renewable gases, such as hydrogen, biomethane and synthetic methane, and for storing surplus electricity generated from renewable sources, through Power to Gas technology. With Power to Gas, energy can be stored and handled in the gas networks in the form of green hydrogen or synthetic methane. For this reason, Italgas is working on an important Power to Gas pilot project that will take place in Sardinia, where we are constructing “digital native” networks, the most advanced in Italy, ready to accommodate all type of gases.

“There can be no transition without digitisation”, for us, this is not just an idea, but a compass that guides our actions and investment decisions. Digital transformation of the assets is the technical prerequisite for injecting and distributing renewable gases or their mixtures through our gas networks. The aim of this transformation is to create a new generation of infrastructures equipped for remote management that are continuously and extensively monitored, used to collect big data on their operation, which will be processed using artificial intelligence in order to launch increasingly ambitious operational efficiency programmes.

And the time is now ripe to see gases other than methane running through our networks. In the current decade (2020-2030), we will see a boom in the production and distribution of biomethane, a source which is now available in large quantities. In the decade to follow it will be the turn of green hydrogen, which currently costs five to six times more than natural gas, but studies show that the situation is set to change, especially due to the significant reduction in the generation costs of renewables and the cost of electrolysers.

We endeavour to drive development in our sector and to carry on being viewed as the benchmark around the world. To this end, the Italgas 2020-2026 Strategic Plan envisages investments for € 7.5 billion, divided between four main trajectories: (i) development of the core business through organic growth, M&As, ATEM (minimum territorial area) tenders and opportunities abroad; (ii) digital transformation and technological innovation; (iii) new development opportunities, by leveraging the Group’s expertise in the water and energy efficiency sectors; (iv) a sound and efficient financial structure.

It is only natural that the matrix linking these four drivers should be sustainability, because each one of them is imbued with the concept of corporate social responsibility.

This business model has enabled Italgas to secure a place for the second year running in the prestigious Dow Jones Sustainability Index World, which testifies to the ability of businesses to develop a growth model that respects the environment, maximises the potential of individuals and allows positive interaction with the local areas and communities. Italgas was the only Italian company in the industry to obtain this important recognition, which comes in addition to its recent confirmation in the FTSE4Good Index Series. In 2020, Italgas was also listed by the CDP (Carbon Disclosure Project) among the world’s leading companies for the strategies and measures implemented to combat climate change, for the fourth year running, retaining its place on the “climate change B List”.

With investments of around €778 million (+5.1% on 2019), the Company has shown its capacity to mobilise considerable investments for the development, maintenance and digitisation of the network, as well as for the Sardinia methanisation project, even in a particularly difficult year.

In 2020, Italgas installed 1.2 million smart meters for a total of 7.49 million, which now accounts for approximately 88% of all our meters. The growing number of digital devices and sensors installed on the network will enable us to measure and monitor gas consumption more accurately, prevent faults and leaks and manage maintenance work on a predictive basis, thereby improving the efficiency and quality of the service.

These results achieved, thanks to the contribution of all Italgas people capable of combining change, innovation and improvement, allow us to offer the distribution of a dividend of 0.277, up 8.2% on 2019 for the satisfaction of our Shareholders.