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SNAM ANNOUNCES ITS RESULTS FOR THE FIRST NINE MONTHS AND THE THIRD QUARTER OF 2014

San Donato Milanese, 31 October 2014 – At yesterday's meeting chaired by Lorenzo Bini Smaghi, Snam’s Board of Directors approved the consolidated results for the first nine months and the third quarter of 20141 (unaudited).

Financial highlights • Total revenue: €2,648 million (+0.6%) • EBIT: €1,528 million (+0.8%) • Net profit: €863 million (+28.0%) • Technical investments: €856 million • Free cash flow: €212 million

Operating highlights • Gas injected into the transportation network: 47.19 billion cubic metres (-6.2%) • Number of active meters: 6.4 million (+7.8%) • Available storage capacity: 11.4 billion cubic metres

Significant events • The Extraordinary Shareholders’ Meeting called for 10 December 2014 to resolve the

proposed share capital increase as part of the operation to acquire the equity investment in Trans Austria Gasleitung GmbH (TAG) held by CDP GAS S.r.l., for a consideration of €505 million.

Carlo Malacarne, Snam CEO, made the following comments on the results:

“Our continued focus on operating and financial efficiency enabled us to once again record positive results for the first nine months of this year, as shown by the rise of about 1% in EBIT and the 28% increase in net profit, despite persistently unfavourable economic conditions and lower volumes of gas injected into the network. We continue to pursue investments to strengthen Italy’s gas infrastructure and promote increased integration across European networks.”

1 This press release constitutes the interim directors’ report pursuant to Article 154-ter of the Consolidated Finance Act (TUF).

2

Financial highlights (€ million)

Third quarter First nine months

2013 2014 2013 2014 Change % change

858 866 Total revenue (*) 2,633 2,648 15 0.6

848 855 - of which regulated revenue 2,603 2,603

171 183 Operating costs (*) 550 537 (13) (2.4)

496 484 EBIT 1,516 1,528 12 0.8

212 302 Net profit (**) 674 863 189 28.0

0.147 0.143 EBIT per share (***) (€) 0.449 0.452 0.003 0.7

0.062 0.089 Net profit per share (***) (€) 0.199 0.255 0.056 28.1

285 330 Technical investments 775 856 81 10.5

3,379.7 3,380.5 Number of shares outstanding at the end of the period (millions) 3,379.7 3,380.5 0.8

3,379.7 3,380.5 Average number of shares outstanding during the period (millions) 3,379.3 3,380.4 1.1

(*) From 1 January 2014 and only for the reclassified income statement, revenue from the construction and upgrading of distribution infrastructure entered in accordance with IFRIC 12 and recognised in an amount equal to the costs incurred (€202 and €211 million respectively in the first nine months of 2013 and 2014; €72 and €71 million respectively in the third quarter of 2013 and of 2014), is shown as a direct reduction of the respective cost items. The corresponding amounts for 2013 were reclassified accordingly.

(**) Net profit is attributable to Snam. (***) Calculated based on the average number of shares outstanding during the period.

Total revenue Total revenue for the first nine months of 2014 came to €2,648 million, up €15 million (0.6%), on the first nine months of 2013 (€866 million in the quarter; +0.9%). Total revenue net of components offset in costs2 came to €2,554 million (€839 million in the quarter), up €35 million (1.4%) on the same period of the previous year (+€16 million in the quarter; +1.9%). The increase mainly reflects higher regulated revenue (+€20 million in the first nine months; +€15 million in the quarter) and higher non-regulated revenue (+€15 million in the first nine months; +€1 million in the quarter). With regard to regulated revenue, the increase reflects higher revenue from natural gas transportation (+€18 million in the first nine months (+1.3%); +€5 million in the quarter (+1.0%)) and distribution (+€6 million in the first nine months (+0.8%); +€15 million in the quarter (+6.1%)), partly offset by a downturn in regasification activity (-€3 million the first nine months (-17.6%); -€1 million in the quarter (-20.0%)).

2 These components mainly refer to income from natural gas sales made to balance the gas system (€70 million and €40 million respectively in the first nine months of 2013 and 2014).

3

EBIT EBIT3 came in at €1,528 million in the first nine months of 2014, up €12 million (0.8%), compared with the first nine months of 2013. EBIT was €484 million in the third quarter, down €12 million (-2.4%) compared with the same period of the previous year. The higher revenue (+€35 million in the first nine months; +€16 million in the quarter), was partly absorbed by an increase in operating costs (-€7 million in the first nine months; -€20 million in the quarter) and greater amortisation and depreciation in the period (-€16 million in the first nine months; -€8 million in the quarter), due mainly to the entry into operation of new infrastructure. In terms of the business segments, the positive performance achieved by the storage segment (+€24 million (+10.0%) in the first nine months; -€1 million (-1.5%) in the quarter) was partly absorbed by the decline recorded in the transportation segment (-€8 million (-0.9%) in the first nine months; -€6 million (-2.0%) in the quarter) and by the regasification segment (-€4 million in the first nine months; -€2 million in the quarter).

Net profit Net profit for the first nine months of 2014 came to €863 million, up €189 million (28.0%) in the first nine months of 2013. In the third quarter, net profit came in at €302 million, up €90 million (42.5%), compared with the third quarter of 2013. The increase mainly reflects: (i) higher net income from equity investments (+€91 million in the first nine months; +€77 million in the quarter), due to the revaluation of the shareholding previously held in AES (49%) at the respective fair value at the date of the acquisition of control (+€51 million), and the portion pertaining to the period of the net results for companies valued using the equity method, specifically TIGF Holding S.A.S. (+€50 million); and (ii) lower net financial expense (+€62 million in the first nine months; +€4 million in the quarter), mainly due to the lower average cost of debt, partly as a result of actions taken by Snam to optimise the Group’s financial structure.

Technical investments Technical investments totalled €856 million4 (€775 million in the first nine months of 2013). Around 75% of these investments have returns above the basic rate.

Net financial debt Net financial debt was €13,734 million at 30 September 20145, compared with €13,326 million at 31 December 2013. Positive net cash flow from operations of €1,095 million fully covered financial requirements relating to technical investments, generating free cash flow of €212 million. After payment to shareholders of the balance of the 2013 dividend (€507 million), net financial debt was €13,734 million, up €408 million compared with 31 December 2013. This amount included €112 million resulting from the change in the scope of consolidation due to the acquisition of control of AES Torino S.p.A. (AES) on 1 July 20146. 3 EBIT was analysed by isolating only the elements that determined a change therein. To this end, applying gas segment tariff regulations

generates revenue components that are offset in costs. 4 Notes on technical investments for each business segment are provided in the section “Information by business segment”. 5 Information on net financial debt is given on page 32.

6 The effects of the inclusion of AES in the scope of consolidation are described in the paragraph “AES operation – Acquisition of control” in the

section “Information by business segment – Natural gas distribution”. Changes in the scope of consolidation in the first nine months of 2014 are shown on page 8.

4

Operating highlights (a)

Third quarter First nine months

2013 2014 2013 2014 Change %

change

Natural gas transportation (b)

15.83 14.41 Natural gas injected in the gas transportation network (billions of cubic metres) (c) 50.32 47.19 (3.13) (6.2)

32,277 32,320 Transportation network (kilometres in use) 32,277 32,320 43 0.1 867 871 Installed power in the compression stations (MW) 867 871 4 0.5

Liquefied Natural Gas (LNG) regasification (b)

LNG regasification (billions of cubic metres) 0.049 0.002 (0.047) (95.9)

Natural gas storage (b) 11.4 11.4 Available storage capacity (billions of cubic metres) (d) 11.4 11.4

4.08 3.07 Natural gas moved through the storage system (billions of cubic metres) 15.32 12.58 (2.74) (17.9)

Natural gas distribution 5.915 6.379 Active meters (millions) 5.915 6.379 0.464 7.8 1,435 1,436 Gas distribution concessions (number) 1,435 1,436 1 0.1

52,766 54,717 Distribution network (kilometres) (e) 52,766 54,717 1,951 3.7 6,018 6,194 Employees in service at period-end (number) (f) 6,018 6,194 176 2.9

by business segment: 1,947 1,918 - Transportation 1,947 1,918 (29) (1.5)

77 78 - Regasification 77 78 1 1.3 298 312 - Storage 298 312 14 4.7

2,999 3,174 - Distribution 2,999 3,174 175 5.8 697 712 - Corporate and other activities (g) 697 712 15 2.2

(a) The changes indicated in the table, as well as those below in this press release, must be regarded as changes from the first nine months of

2013 to the first nine months of 2014. Percentage changes, unless otherwise specified, are calculated in relation to the data indicated in the related tables.

(b) With regard to the first nine months of 2014, gas volumes are expressed in standard cubic metres (SCM) with an average higher heating value (HHV) of 38.1 and 39.2 MJ/SCM respectively for the activities of natural gas transportation and regasification and natural gas storage.

(c) Data for the first nine months of 2014 are current as at 2 October 2014. Data for 2013 have been aligned with data from the national transportation network report.

(d) Working gas capacity for modulation, mining and balancing services. Available capacity at 30 September 2014 was that declared to the Electricity, Gas and Water Authority (hereinafter the Authority or the AEEGSI) at the start of thermal year 2014-2015, in accordance with Resolution ARG/gas 119/10.

(e) This figure refers to the kilometres of network operated by Italgas. (f) Fully consolidated companies, with 202 employees relating to AES. (g) After the entry of Gasrule Insurance Ltd to Snam’s scope of consolidation, the Corporate segment was renamed “Corporate and other

activities”.

5

Natural gas transportation The first nine months of 2014 saw 47.19 billion cubic metres of natural gas injected into the national transportation network, down by 3.13 billion cubic metres (6.2%) compared with the first nine months of 2013 (-1.42 billion cubic metres in the quarter; -9.0%). The decrease was mainly due to lower demand for natural gas in Italy (-5.87 billion cubic metres compared with the first nine months of 2013), most of which reflected lower consumption in the residential and tertiary sectors (-17.5%) and the thermoelectric sector (-14.8%). This was partially offset by lower withdrawals from storage (+2.63 billion cubic metres).

Liquefied Natural Gas (LNG) regasification In the first nine months of 2014, the Panigaglia LNG terminal regasified 0.002 billion cubic metres of natural gas (0.049 billion cubic metres in the first nine months of 2013). The reduction in volumes regasified was due mainly to the global trend in demand for LNG, which resulted in particularly strong demand in the markets of the Far East, penalising the European market.

Natural gas storage The gas volumes moved through the storage system in the first nine months of 2014 amounted to 12.58 billion cubic metres, down by 2.74 billion cubic metres (17.9%) compared with the first nine months of 2013. The decrease was due to lower withdrawals from storage (-2.59 billion cubic metres; -35.2%). In the third quarter the amount of gas moved through the storage system was 3.07 billion cubic metres, down 1.01 billion cubic metres (-24.8%) compared with the corresponding period of 2013. This decrease was mainly due to the lower volumes injected into storage.

Natural gas distribution At 30 September 2014, Snam had concessions for gas distribution services in 1,436 municipalities (1,435 at 31 December 2013), 1,349 of which were in operation and 87 of which had to complete and/or create the networks. It had 6.379 million active meters at gas redelivery points for end users (households, businesses, etc.), compared with 5.915 million at 30 September 2013 (+7.8%).

Significant events International growth

TAG GmbH operation

The framework agreement for this operation was signed on 19 September 2014, and approved by Snam's Board of Directors on 12 September 2014, with the aim of acquiring, for a consideration of €505 million, the equity investment in Trans Austria Gasleitung GmbH (TAG) held by CDP GAS S.r.l., a company wholly owned by Cassa Depositi e Prestiti S.p.A. TAG now owns the gas pipeline that links the Slovakian-Austrian border with the Tarvisio entry point via a system of three pipelines of 380 km each, five compression stations and auxiliary plants, with a total length of around 1,140 km. The equity investment subject to acquisition by Snam corresponds to 84.47% of TAG’s share capital and 89.22% of the economic rights.

6

The consideration of €505 million7 will be paid by Snam through a capital increase excluding option rights, in accordance with Article 2441, paragraph 4 of the Italian Civil Code, reserved for CDP GAS, to be paid up via the transfer by the latter of the equity investment in TAG. At the closing date, Snam will provide TAG with the necessary funds to enable TAG to reimburse CDP GAS the outstanding amount of the shareholders' loan granted by CDP GAS to TAG. At 31 August 2014, the outstanding loan amounted to around €270 million.

On 23 October 2014, Snam obtained confirmation from the European Commission that the operation is not subject to obligatory notification pursuant to Regulation (EC) No 139/2004 on the control of concentrations between undertakings (Clearance).

At its meeting on 30 October 2014, Snam’s Board of Directors called the Extraordinary Shareholders’ Meeting for 10 December 2014 to resolve the proposed share capital increase under the following terms: • the issue of up to 119 million ordinary Snam shares for a total of €505 million, including the

premium; • an issue price per share that will be fixed no earlier than five working days before the operation is

closed and which will equal the weighted average of Snam share prices recorded in the 180 days prior to the date on which the share issue price is fixed;

• a minimum issue price of €3.60 per share. If the above-mentioned average is less than the minimum threshold of €3.60, the capital increase will not be executed and the entire consideration will be settled in cash.

If the issue price per share multiplied by the maximum number of shares is less than the agreed consideration, the relative difference will be settled in cash.

Optimisation of the Group’s financial structure

Work to optimise the Group’s financial structure has continued, with a view to making it more aligned with business requirements in terms of loan duration and exposure to interest rates, simultaneously reducing the overall cost of borrowing. As part of this process and the implementation of the EMTN (Euro Medium Term Notes) programme resolved by the Board of Directors on 23 June 2014, Snam carried out a new 8.5-year bond issue on 22 October 2014 for a total amount of €500 million, maturing on 21 April 2023, with an annual fixed-rate coupon of 1.5%. The bond loan was changed, via an Interest Rate Swap contract, into a floating-rate loan at a 12-month Euribor benchmark rate. On 25 July 2014, Snam also signed agreements with its creditor banks to renegotiate new and better conditions, in terms of pricing and extended duration, for the syndicated loan taken out in July 2012 for a renegotiated total amount of €3.2 billion. The new loan does not contain financial covenants.

7 The consideration, determined according to an estimated reference balance sheet at 30 November 2014, may be adjusted for cash according to

market practice.

7

Outlook The main management guidelines provide for business growth through the creation of major new gas infrastructure in Italy and the assessment of strategically important opportunities for foreign expansion, to increase infrastructure interconnection and the flexibility of gas flows in Europe.

Gas demand On the basis of information currently available, natural gas demand in the Italian market at the end of 2014 will be down compared to 2013, when adjusted to take account of temperature, due mainly to reduced consumption in the thermoelectric sector.

Investments The technical investments programme to develop infrastructure has been continuing on schedule.

Efficiency Snam confirms its commitment to maximising the creation of value through both operating efficiency and an efficient capital structure.

***

This press release on the consolidated figures for the first nine months and third quarter of 2014 (unaudited) represents the interim directors’ report pursuant to Article 154-ter of the Consolidated Finance Act (TUF).

The financial statements were compiled in accordance with the recognition and measurement criteria established by the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission under Article 6 of Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002.

The measurement and recognition criteria adopted for the preparation of the interim directors’ report at 30 September 2014 are the same as those used to prepare the 2013 annual report, and are described in the 2013 annual report, to which reference should be made, except for the international reporting standards effective as of 1 January 20148. The application of these accounting standards and the adoption of amendments to existing standards had no effect on the interim director's report at 30 September 2014. With regard to IFRS 11 “Joint Arrangements”, in view of the analysis performed on Snam’s joint arrangements, these are classed as joint ventures. Therefore, Snam’s related investments continue to be valued using the equity method.

The income statement information provided relates to the first nine months and the third quarter of 2013, and the first nine months and the third quarter of 2014. Information on cash flows is presented for the same periods. The balance sheet information refers to 31 December 2013 and 30 September 2014. The financial statements take the same form as those presented in the interim directors’ report in the half-year report and in the directors’ report in the annual report.

8 The standards are described in the section “Accounting standards and interpretations in force since 1 January 2014” in the half-year report at 30

June 2014.

8

The scope of consolidation at 30 September 2014 changed by comparison with 30 September 2013 and 31 December 2013, due to the inclusion, as of July 2014, of Gasrule Insurance Limited9, a captive insurance company with its registered office in Dublin, and AES Torino S.p.A., a company operating in the natural gas distribution segment, both wholly owned by Snam.

In the context of the legal administration’s preventive measure on assets, which was served by Palermo Law Court upon its subsidiary company Italgas on 11 July 2014 and taking into account the updates which have so far emerged on the status of matters concerning that same subsidiary company, Snam has examined the effects resulting from this measure for the purposes of accounting its holding in Italgas and in the companies headed by it (hereinafter, the “natural gas distribution sector”) on the Group’s consolidated balance sheet.

Based on what has been examined, taking into account the Action taken by the appointed judge on 2 October 201410, at present there is no evidence against going ahead with the consolidation of Italgas on Snam’s consolidated balance sheet. Therefore, the data and figures shown in this Interim Report refer to a consolidation demarcation which is in line with previous Financial Reports/Interim Reports, including, therefore, the natural gas distribution sector. The Company has continued to keep Consob informed of developments in these matters, including the content of the appointed judge’s Action.

Given their size, amounts are expressed in millions of euro. Pursuant to Article 154-bis, paragraph 2 of the TUF, the CFO, Antonio Paccioretti, declares that the accounting information included in this press release corresponds to documents, accounting ledgers and other records. Disclaimer This press release includes forward-looking statements, especially in the “Outlook” section, relating to: natural gas demand, investment plans, future operating performance and project execution. Such statements are, by their very nature, subject to risk and uncertainty as they depend on whether future events and developments take place. The actual results may therefore differ from those forecast as a result of several factors: foreseeable trends in natural gas demand, supply and price, actual operating performance, general macroeconomic conditions, geopolitical factors such as international conflicts, the effect of new energy and environmental legislation, the successful development and implementation of new technologies, changes in stakeholders' expectations and other changes in business conditions. A conference call will take place at 14:30 today, 31 October 2014, to present the results of the first nine months and the third quarter of 2014 to investors and financial analysts. An audio webcast of the presentation will be available on the Company’s website (www.snam.it). In conjunction with the start of the conference call, the presentation support material will also be made available in the “Investor Relations/Presentations” section of the website.

9 Gasrule Insurance Limited is fully consolidated in the “Corporate and other activities” business segment. In accordance with IFRS 8 “Operating segments”, the “Corporate and other activities” segment does not represent an operating segment. Therefore, the operating segments subject to separate reporting are the same as in 2013 (natural gas transportation, regasification, storage and distribution). 10

Information on the Action is provided in “Other information – Legal administration of the subsidiary company Italgas – Palermo Law Court” on page 24 of this Press release.

9

Summary of results for the first nine months and the third quarter of 2014 RECLASSIFIED INCOME STATEMENT (€ million)

Third quarter First nine months

2013 2014 2013 2014 Change % change

848 855 Revenue from regulated activities

2,603 2,603

10 11 Revenue from non-regulated activities

30 45 15 50.0

858 866 Total revenue (*)

2,633 2,648 15 0.6

(171) (183) Operating costs (*)

(550) (537) 13 (2.4)

687 683 EBITDA

2,083 2,111 28 1.3

(191) (199) Amortisation, depreciation and impairment losses

(567) (583) (16) 2.8

496 484 EBIT

1,516 1,528 12 0.8

(101) (97) Net financial expense

(363) (301) 62 (17.1)

(7) 70 Net income from equity investments

28 119 91

388 457 Pre-tax profit

1,181 1,346 165 14.0

(176) (155) Income taxes

(507) (483) 24 (4.7)

212 302 Net profit (**)

674 863 189 28.0

(*) From 1 January 2014 and only for the reclassified income statement, revenue from the construction and upgrading of distribution infrastructure entered in accordance with IFRIC 12 and recognised in an amount equal to the costs incurred (€202 and €211 million respectively in the first nine months of 2013 and 2014; €72 and €71 million respectively in the third quarter of 2013 and of 2014), is shown as a direct reduction of the respective cost items. The corresponding amounts for 2013 were reclassified accordingly.

(**) Net profit is attributable to Snam.

EBIT EBIT11 totalled €1,528 million in the first nine months of 2014, up by €12 million (0.8%) on the first nine months of 2013. EBIT in the third quarter was €484 million, down €12 million (-2.4%) on the same period of the previous year. The higher revenue (+€35 million in the first nine months; +€16 million in the quarter) was partly absorbed by increased operating costs (-€7 million in the first nine months; -€20 million in the quarter) and greater amortisation and depreciation in the period (-€16 million in the first nine months; -€8 million in the quarter), mainly reflecting the entry into operation of new infrastructure. In terms of business segments, the positive performance recorded by the storage segment (+€24 million in the first nine months (+10.0%); -€1 million in the quarter (-1.5%)) was partly absorbed by the downturn in the transportation segment (-€8 million in the first nine months (-0.9%); -€6 million in the quarter (-2.0%)) and the regasification segment (-€4 million in the first nine months; -€2 million in the quarter). EBIT in the distribution segment in the first nine months of 2014 was unchanged in comparison with the first nine months of 2013 (-€5 million in the quarter; -3.9%).

11

EBIT was analysed by isolating only the elements that determined a change therein. To this end, applying gas segment tariff regulations generates revenue components that are offset in costs.

10

Net profit totalled €863 million in the first nine months of 2014, up €189 million (28.0%) on the first nine months of 2013. In the third quarter, net profit was €302 million, up €90 million (42.5%) on the third quarter of 2013. The increase was mainly attributable to: (i) higher net income from equity investments (+€91 million in the first nine months; +€77 million in the quarter) due to the revaluation (+€51 million) of the shareholding previously held in AES (49%) at the respective fair value on the date of the acquisition of control12 and the portion pertaining to the period of the net results of companies valued using the equity method, specifically TIGF Holding S.A.S. (+€50 million)13; (ii) lower net financial expense (+€62 million in the first nine months; +€4 million in the quarter) mainly due to the lower average cost of debt, partly as a result of action taken by Snam to optimise the Group’s financial structure; and (iii) reduced income tax (+€24 million in the first nine months; +€21 million in the quarter), despite the increase in profit before taxes, mainly owing to the reduction as of 1 January 2014 from 10.5% to 6.5% in the additional IRES rate applied to the natural gas transportation and distribution segments (the “Robin Hood Tax”14). The tax rate was 35.9% (42.9% in the first nine months of 2013). The change was mainly due to the above-mentioned reduction in the additional IRES rate, as well as higher net income from equity investments.

The following information concerns the operating and financial performance of Snam's business segments in the first nine months and the third quarter of 2014.

12

The revaluation was carried out in accordance with IFRS 3 “Business Combinations”. 13

The valuation of TIGF Holding S.A.S. in the first nine months of 2013 includes the costs, mainly associated with the registration tax, incurred by TIGF Investissement to acquire TIGF S.A. 14

Application of additional IRES (“Robin Hood Tax”) to companies operating in the natural gas transportation and distribution segments at a rate of 10.5% in 2011, 2012 and 2013 and 6.5% in 2014 follows the entry into force of Decree-Law 138 of 13 August 2011 governing “Further emergency measures for financial stability and for development”, transposed into Law 148 of 14 September 2011.

11

Information by business segment

Natural gas transportation

(€ million) Third quarter First nine months Change % change

2013 2014 2013 2014

517 510 Total revenue (*) 1,558 1,556 (2) (0.1)

513 504 - of which regulated revenue 1,547 1,540 (7) (0.5)

94 91 Operating costs (*) 307 305 (2) (0.7)

305 299 EBIT 898 890 (8) (0.9)

156 191 Technical investments 395 442 47 11.9

15.83 14.41 Natural gas injected into the national transportation

network (billions of cubic metres) 50.32 47.19 (3.13) (6.2)

32,277 32,320 Transportation network (kilometres in use) 32,277 32,320 43 0.1

9,474 9,475 - of which national network 9,474 9,475 1

22,803 22,845 - of which regional network 22,803 22,845 42 0.2

(*) Before consolidation adjustments.

Results Total revenue in the first nine months of 2014 came to €1,556 million, down slightly (-€2 million; -0.1%) on the first nine months of 2013 (-€7 million in the quarter; -1.4%). Total revenue, net of components offset in costs, amounted to €1,423 million (€474 million in the quarter), up €15 million (1.1%) on the same period of the previous year (+€3 million in the quarter; +0.6%). Regulated revenue in the first nine months of 2014, which came in at €1,540 million (€504 million in the quarter) refers to natural gas transportation service (€1,500 million in the first nine months; €499 million in the quarter) and to natural gas sales made to balance the gas system (€40 million in the first nine months; €5 million in the quarter). Revenue from transportation, net of components offset in costs, came to €1,407 million (€468 million in the quarter), up €10 million (0.7%) on the first nine months of 2013 (+€1 million in the quarter; +0.2%). The contribution of investments made in 2012 (+€64 million) was partly absorbed by the tariff update15 (-€45 million) and by the decrease in volumes of gas transported (-3.13 billion cubic metres in the first nine months; -€9 million).

EBIT16 in the first nine months of 2014 was €890 million (€299 million in the quarter), down €8 million (0.9%) compared with the first nine months of 2013 (-€6 million in the quarter; -2.0%). The increase in revenue (+€15 million in the first nine months; +€3 million in the quarter) was offset by higher operating costs (-€15 million in the first nine months; -€7 million in the quarter), due mainly to the trend

15

The Authority defined new criteria to determine transportation tariffs for the fourth regulatory period (1 January 2014 - 31 December 2017) by means of Resolution 514/2013/R/gas. For more information, see the section “Business segment operating performance – Natural gas transportation – Regulation” in the 2013 annual report. 16

EBIT is analysed by considering only those components that have changed it, since the application of the gas segment tariff rules generates revenue and cost items that offset each other: modulation, interconnection and sales of gas in order to balance the system.

12

in provisions for risks and charges and increased amortisation and depreciation (-€8 million in the first nine months; -€2 million in the quarter), largely owing to the entry into operation of new infrastructure.

Operating review

Natural gas injected into the national gas transportation network 17

(billion m3)

Third quarter First nine months

Change % change 2013 (*) 2014 2013 (*) 2014

1.88 1.79 Domestic output 5.61 5.24 (0.37) (6.6)

13.95 12.62 Imports (entry points) (**) 44.71 41.95 (2.76) (6.2)

6.96 4.84 Tarvisio 22.07 20.88 (1.19) (5.4)

2.71 3.73 Gries Pass 4.86 7.48 2.62 53.9

1.47 1.34 Mazara del Vallo 8.96 5.73 (3.23) (36.0)

1.60 1.85 Gela 4.65 4.69 0.04 0.9

1.20 0.86 Cavarzere (LNG) 4.11 3.16 (0.95) (23.1)

Panigaglia (LNG) 0.05 0.01 (0.04) (80.0)

0.01 Gorizia 0.01 (0.01) (100.0)

15.83 14.41 50.32 47.19 (3.13) (6.2) (*) The data for 2013 have been aligned with those published in the national transportation network report.

(**) Entry points interconnected with foreign countries or LNG regasification terminals.

The natural gas injected into the national gas transportation network in the first nine months of 2014 amounted to 47.19 billion cubic metres, down 3.13 billion cubic metres (6.2%) compared with the same period in 2013. The decrease was mainly due to lower natural gas demand in Italy (-5.87 billion cubic metres (-11.8%) compared with the first nine months of 2013), reflecting lower consumption in the residential and tertiary sectors (-3.68 billion cubic metres; -17.5%), mainly resulting from weather trends and the thermoelectric sector (-2.31 billion cubic metres; -14.8%). This was due to contracting demand for electricity and the simultaneous generation of energy from renewable sources (particularly hydroelectric and photovoltaic power). The lower reduction in gas volumes injected into the network compared with the reduction in demand was due to lower withdrawals from storage (+2.63 billion cubic metres). In the third quarter of 2014, the natural gas injected into the national gas transportation network amounted to 14.41 billion cubic metres, down 1.42 billion cubic metres (9.0%) on the same period in 2013.

Demand for natural gas adjusted to take account of temperature was down -2.18 billion cubic metres (-4.4%) on the first nine months of 2013.

17

Gas volumes are expressed in standard cubic metres (SCM) with a traditional higher heating value (HHV) of 38.1 MJ/SCM. The basic figure is measured in energy (MJ) and obtained by multiplying the physical cubic metres actually measured by the relative heating value.

13

Natural gas injected into the national network from domestic production fields or their collection and treatment centres was 5.24 billion cubic metres, down by 0.37 billion cubic metres (-6.6%) compared with the first nine months of 2013.

Natural gas injected into the network from entry points interconnected with foreign countries or LNG regasification terminals (41.95 billion cubic metres) was down 2.76 billion cubic metres (6.2%) compared with the first nine months of 2013. This reduction was mainly due to lower volumes injected from the Mazara del Vallo (-3.23 billion; -36.0%) and Tarvisio (-1.19 billion cubic metres; -5.4%) entry points and from the Cavarzere regasification terminal (-0.95 billion cubic metres; -23.1%). These effects were partly offset by higher imports from the Gries Pass entry point (+2.62 billion cubic metres; +53.9%).

Technical investments

2013 2014

Third quarter

First nine months

Third quarter

First nine months

€/millions Type of investment Return (%) €/millions €/millions Type of

investment Return (%) €/millions

60 Development of new import capacity

9.4% 147 96 Development of new import capacity

9.3% 203

1 Development of national network

8.4% 10 Development of national network

8.3% 1

23 Development of regional network

8.4% 53 19 Development of regional network

8.3% 46

32 Safety and quality 7.4% 91

76 Replacement

and other 7.3% 192 40 Replacement

and other 6.4% 94

156 395 191 442

Technical investments in the first nine months of 2014 amounted to €442 million, up €47 million (+11.9%) on the corresponding period of the previous year (€395 million).

The investments were classified in accordance with Resolution 514/2013/R/gas of the Authority, which identified various categories of projects with different rates of return18. The breakdown of investments in 2013 and 2014 by category will be submitted to the Authority when the respective tariff proposals for 2015 and 2016 are approved.

The main development investments for which a return of 9.3% is expected (€203 million) relate to the following:

18

With regard to returns on the net invested capital (NIC) recognised for regulatory purposes (real pre-tax WACC), the main characteristics of Resolution 514/2013/R/gas are as follows: • 6.3% for investments made until 31 December 2013; • 7.3% for investments made since 1 January 2014 (includes the flat-rate increase in the WACC to offset the regulatory lag: +1%).

The following increases to returns are also expected: • 1% every seven years for investments in regional network development; • 1% every ten years for investments in national network development; • 2% every ten years for investments in entry point development.

14

• as part of the initiative to support the market in the north-west of the country as well as permitting the reversal of physical transportation flows at the interconnection points with Northern Europe (€133 million): (i) the continuation of construction work on the Zimella-Cervigagno pipeline from Veneto to Lombardy; (ii) the continuation of construction work relating to the reconnection and removal of the Poggio Renatico-Cremona pipeline in Emilia-Romagna and Lombardy; (iii) the continuation of deliveries of materials and the start of construction work at the Sergnano New Hub; (iv) the creation of the Mortara regulation plant as part of the Cervignano-Mortara pipeline in Lombardy; and (v) deliveries of materials to upgrade the Poggio Renatico station in Emilia-Romagna;

• as part of plans to upgrade the transportation network from the entry points in the south of Italy (€61 million): (i) the delivery of materials and the continuation of work to revamp the Enna station in Sicily; (ii) the delivery of materials and construction work on the Biccari-Campochiaro pipeline between Campania, Puglia and Molise; and (iii) the continuation of delivery of materials to reconnect the Massafra-Biccari pipeline between Puglia and Basilicata.

The main development investments with an 8.3% return (€47 million) relate to a number of works to upgrade the network and connect to new regional and national redelivery points, including:

• construction works on pipelines and associated connections, as part of the natural gas conversion project in Calabria (€11 million);

• the delivery of materials for the Gavi-Pietralavezzara pipeline in Piedmont (€4 million).

Investments with a 7.3% return (€192 million) relate to work to maintain plant safety and quality levels (€135 million), projects relating to the development of new computer systems and the implementation of existing ones (€26 million), the purchase of other goods used in operating activities and property investment (€16 million) and compensation for third parties (€15 million).

Balancing service

Snam Rete Gas S.p.A. – Resolution 145/2013/R/gas – Proceedings to determine the share of costs arising from outstanding receivables owing to the gas balancing supervisor

By means of Resolution 145/2013/R/gas of 5 April 2013, the AEEGSI began “Proceedings to determine the share of costs arising from outstanding receivables owing to the gas balancing supervisor for the period 1 December 2011 - 23 October 2012”.

The proceedings in question arose from the findings of the exploratory investigation, opened by means of Resolution 282/2012/R/gas, into the methods for regulating the economic aspects of balancing and the steps taken to protect the system relating to the period 1 December 2011 - 31 May 2012. By means of Resolution 444/2012/R/gas, the AEEGSI extended the period under review for the exploratory investigation up to 28 October 2012. By means of Resolution 351/2012/R/gas, the Authority also identified measures for managing the costs declared by Snam Rete Gas, determining the share of costs owing to the balancing supervisor on the basis of the outcome of the exploratory investigation.

This exploratory investigation was concluded by means of Resolution 144/2013/E/gas, and the AEEGSI used Resolution 145/2013/R/gas to rule that dedicated proceedings should be opened to

15

determine the share of the costs owing to Snam Rete Gas with regard to “fully outstanding receivables” and to monitor the situation going forward.

On 6 August 2014, the AEEGSI served an order to close the investigation, concluding that grounds for payment of part of the costs did not exist. Pending the issue of the final order, the Company has requested a hearing before the Authority’s Panel.

16

Liquefied Natural Gas (LNG) regasification (€ million)

Third quarter First nine months

Change %

change 2013 2014 2013 2014

7 6 Total revenue (*) 23 20 (3) (13.0)

7 5 - of which regulated revenue 23 18 (5) (21.7)

4 6 Operating costs (*) 15 16 1 6.7

1 (1) EBIT 4 (4) (100.0)

2 1 Technical investments 3 3

Volumes of LNG regasified (billions of cubic metres) 0.049 0.002 (0.047) (95.9)

Tanker loads (number) 1 (1) (100.0)

(*) Before consolidation adjustments.

Results Total revenue in the first nine months of 2014 came to €20 million, down €3 million (13.0%) on the first nine months of 2013 (-€1 million in the quarter; -14.3%). Total revenue, net of components offset in costs, amounted to €14 million (€4 million in the quarter), down €3 million (17.6%) on the same period of the previous year (-€1 million in the quarter; +20.0%). Regulated revenue in the first nine months of 2014, which was €18 million (€5 million in the quarter), refers to regasification service (€14 million in the first nine months (-€3 million); €4 million in the quarter (-€1 million)) and the chargeback to users of costs relating to the natural gas transportation service provided by Snam Rete Gas S.p.A. (€4 million in the first nine months (-€2 million); €1 million in the quarter (-€1 million))19.

EBIT in the first nine months of 2014 decreased by €4 million compared with the first nine months of 2013 (-€2 million in the quarter), mainly due to lower revenue (-€3 million, net of components offset in costs20; -€1 million in the quarter).

Operating review During the first nine months of 2014, the Panigaglia (SP) LNG terminal regasified 0.002 billion cubic metres of natural gas (0.049 billion cubic metres in the first nine months of 2013). Regasified volumes were affected by the continuing crisis in European gas consumption and the global trend in demand for LNG, which resulted in particularly strong demand in the markets of the Far East, penalising the European market.

19

For the purposes of the consolidated financial statements, this revenue is eliminated, together with transportation costs, within GNL Italia S.p.A. in order to represent the substance of the operation. 20

Revenue offset in costs refers to revenue for the transportation service provided by Snam Rete Gas that GNL charges back to its customers.

17

Natural gas storage (€ million)

Third quarter First nine months Change

% change 2013 2014 2013 2014

112 117 Total revenue (a) (b) 364 404 40 11.0

111 117 - of which regulated 361 390 29 8.0

30 37 Operating costs (a) (b) 76 97 21 27.6

66 65 EBIT 239 263 24 10.0

50 56 Technical investments 155 175 20 12.9

42 48 - of which with a greater return 134 152 18 13.4

8 8 - of which with a basic rate of return 21 23 2 9.5

10 10 Concessions (number) 10 10

8 8 - of which operational (c) 8 8

4.08 3.07 Natural gas moved through the storage system (billions of cubic metres) (d) 15.32 12.58 (2.74) (17.9)

4.08 3.06 - of which injected 7.96 7.81 (0.15) (1.9)

0.01 - of which withdrawn 7.36 4.77 (2.59) (35.2)

15.9 15.9 Total storage capacity (billions of cubic metres) 15.9 15.9

(a) As of 1 April 2013, pursuant to Resolution 297/2012/R/gas, regulated revenue includes the chargeback to storage users of the costs relating to the natural gas transportation service provided by Snam Rete Gas S.p.A. For the purposes of the consolidated financial statements, this revenue is eliminated, together with transportation costs, within Stogit S.p.A. in order to represent the substance of the operation.

(b) Before consolidation adjustments. (c) Working gas capacity for modulation services. (d) Gas volumes are expressed in standard cubic metres (SCM) with an average higher heating value (HHV) of 39.2 and 39.3 MJ/SCM

respectively for the first nine months of 2014 and 2013.

Results Total revenue for the first nine months of 2014 came to €404 million (€117 million in the quarter), up €40 million (11.0%) on the first nine months of 2013 (+€5 million in the quarter; +4.5%). Total revenue net of components offset in costs21

came to €353 million (€96 million in the quarter), up €18 million (5.4%) compared with the same period of the previous year (-€1 million in the quarter; -1.0%). Regulated revenue in the first nine months of 2014, which came to €390 million (€117 million in the quarter), refers to natural gas storage service (€344 million in the first nine months; €97 million in the quarter) and the chargeback to users of costs relating to the natural gas transportation service provided by Snam Rete Gas S.p.A. (€46 million in the first nine months; €20 million in the quarter). The increase in storage revenue (+€7 million in the first nine months, net of components offset in costs) was essentially due to the contribution of investments made in 2012. Non-regulated revenue in the first nine months of 2014, which amounted to €14 million, mainly refers to additional payments for storage relating to thermal year 2013-2014 (€13 million; €2 million relating to thermal year 2012-2013), arising from contractual agreements between Eni and Stogit for activities associated with Legislative Decree 130/2010.

21

These components mainly refer to revenue from the chargeback to storage users of the costs relating to the natural gas transportation services provided by Snam Rete Gas S.p.A.

18

EBIT in the first nine months of 2014 amounted to €263 million (€65 million in the quarter), up €24 million (10.0%) on the first nine months of 2013 (-€1 million in the quarter; -1.5%). The increase was mainly due to higher revenue (+€18 million in the first nine months; -€1 million in the quarter) and lower amortisation and depreciation (+€5 million in the first nine months; +€1 million in the quarter), as well as the control of management costs (+€1 million in the first nine months, net of components offset in revenue; -€1 million in the quarter).

Operating review

Natural gas moved through the storage system

The volumes of gas moved through the storage system in the first nine months of 2014 amounted to 12.58 billion cubic metres, down by 2.74 billion cubic metres (17.9%) on the volumes moved in the first nine months of 2013 (15.32 billion cubic metres). The decrease was due to lower withdrawals from storage (-2.59 billion cubic metres; -35.2%), reflecting milder temperatures in the first quarter of the year compared with the same period of the previous year. In the third quarter, volumes of gas moved decreased by 1.01 billion cubic metres (-24.8%), mainly due to lower injections to replenish stocks.

Total storage capacity at 30 September 2014, including strategic storage, was 15.9 billion cubic metres (the same as at 30 September 2013). Of this volume, 11.4 billion cubic metres related to available storage capacity and 4.5 billion cubic metres to strategic storage (unchanged compared with thermal year 2012-2013)22.

Technical investments

(€ million) Third

quarter First nine months

2013 2014 2013 2014 Change %

change

35 36 Development of new fields (greater return of 4% over 16 years) 97 99 2 2.1 7 12 Upgrading of capacity (greater return of 4% over 8 years) 37 53 16 43.2 8 8 Maintenance and other 21 23 2 9.5

50 56 155 175 20 12.9

Technical investments in the first nine months of 2014 amounted to €175 million, up €20 million (+12.9%) on the corresponding period in the previous year (€155 million).

Investments were classified in accordance with Resolution ARG/gas 119/10 of the Authority, which identified various categories of projects with different rates of return. A total of 86.9% of investments are expected to benefit from a greater return.

Investments with a greater return of 4% over 16 years (€99 million) mainly relate to development activities at the Bordolano and Fiume Treste fields, primarily for well drilling, the acquisition of materials and the execution of work on the plants.

22 On 29 January 2014, the Ministry of Economic Development set the strategic storage volume at 4.62 billion cubic metres for the 2014-2015 contractual storage year (1 April 2014 - 31 March 2015). This was largely in line with the volume set for the 2013-2014 contractual year (4.60 billion cubic metres). The Stogit share of this total was unchanged at 4.5 billion cubic metres.

19

Investments with a greater return of 4% over 8 years (€53 million) refer to well drilling, planning and repowering activities, mainly at the Settala and Minerbio storage fields.

Regulation and other provisions

Consultation document 417/2014/R/gas – “Tariff regulation criteria for the natural gas storage service for the fourth regulatory period”.

On 7 August 2014, the AEEGSI published the consultation document 417/2014/R/gas for the formation of measures under the process launched by Resolution 79/2014/R/gas of 27 February 2014 of the Authority, relating to criteria to determine the revenue recognised for the natural gas storage service for the fourth regulatory period.

20

Natural gas distribution

(€ million)

Third quarter First nine months Change % change

2013 2014 2013 2014

252 272 Total revenue (*) (**) 763 774 11 1.4

245 267 - of which regulated 743 756 13 1.7

71 88 Operating costs (*) (**) 225 224 (1) (0.4)

127 122 EBIT 379 379

78 80 Technical investments 221 232 11 5.0

680 988 Gas distribution (millions of cubic metres) 5,160 4,509 (651) (12.6)

52,766 54,717 Distribution network (kilometres) (***) 52,766 54,717 1,951 3.7

5.915 6.379 Active meters (millions) 5.915 6.379 0.464 7.8

(*) From 1 January 2014 and only for the reclassified income statement, revenue from the construction and upgrading of distribution infrastructure

entered in accordance with IFRIC 12 and recognised in an amount equal to the costs incurred is shown as a direct reduction of the respective cost items. The corresponding amounts for 2013 were reclassified accordingly.

(**) Before consolidation adjustments. (***) This figure refers to the kilometres of network managed by Italgas.

AES operation – Acquisition of control On 25 June 2014, having fulfilled the conditions precedent for the execution of the planned demerger approved by the Shareholders' Meeting of AES Torino of 18 April 2014, the deed of demerger for the company’s district heating business unit was agreed upon with effect from 1 July 2014. As of this date, Italgas owns 100% of the share capital of AES, a company that operates exclusively in the natural gas distribution segment. Through AES, Italgas directly manages the natural gas distribution service in the city of Turin, with a network of 1,336 kilometres of pipelines, 465,784 active redelivery points and 326 million cubic metres transmitted as at 30 September 2014.

Effects of the operation

As of 1 July 2014, the equity investment held by Italgas in AES, classified until 30 June 2014 as a joint venture and valued using the equity method, is fully consolidated according to IFRS 10 “Consolidated Financial Statements”. The acquisition of control of AES constitutes a “business combination”, and is recorded in compliance with IFRS 3 “Business Combinations”. At the date of the acquisition of control, the following provisions were made: (i) to adjust the value of the equity investment previously held (49%) to the relative fair value, recording the difference compared with the previous carrying value23 in the income statement (€51 million); and (ii) to record the individual assets acquired and liabilities assumed at the relative fair value.

23

This value is represented by the valuation of AES as at 30 June 2014 using the equity method.

21

The statement of financial position of AES at 1 July 2014, including the effects of purchase price allocation (PPA), is shown below: Current values at

1 July 2014 (€ million)

Current assets 38 Non-current assets 303 Total assets acquired 341 Current liabilities 148 Non-current liabilities 31

Total liabilities assumed 179 Shareholders’ equity acquired 162

The economic effects resulting from the acquisition of control of AES have been recorded as of 1 July 201424, i.e. in the third quarter of 2014, and are summarised below:

1 July - 30 September 2014 (€ million)

Total revenue 18

- of which regulated 17

Operating costs 6

EBITDA 12

EBIT 8

Results Total revenue for the first nine months of 2014 came to €774 million (€272 million in the quarter), up €11 million (1.4%) on the first nine months of 2013 (+€20 million (+7.9%) in the quarter). Total revenue net of components offset in costs25

came to €767 million (€265 million in the quarter), up €4 million (0.5%) compared with the same period a year earlier (+€13 million in the quarter; +5.2%). Regulated revenue in the first nine months of 2014, amounting to €756 million (€267 million in the quarter) refers to natural gas transmission service (€721 million in the first nine months; €252 million in the quarter); to technical services associated with the transmission service (€29 million in the first nine months; €15 million in the quarter) and to income from the management of energy efficiency certificates (€6 million in the first nine months). Transmission revenue totalled €721 million (€252 million in the quarter), up €9 million on the first nine months of 2013 (+€14 million in the quarter). The effects arising from changes to the tariff criteria that apply in the new regulatory period (1 January 2014 - 31 December 2019), have been offset by the change in the scope of consolidation.

EBIT amounted to €379 million in the first nine months of 2014 (€122 million in the quarter), unchanged compared with the same period of 2013 (-€5 million in the quarter; -3.9%).

24

The portion pertaining to Snam of the net profit registered by AES in the first half of 2014, before the demerger, is included in the valuation of the investment using the equity method as at 30 June 2014. 25

These components refer to revenue from the repayment by the Electricity Equalisation Fund of costs associated with action to interrupt the supply of the redelivery points at the request of sales companies pursuant to Article 12-bis, Annex A, of the Consolidated Gas Arrearage Act (TIMG).

22

Higher revenue (+€4 million in the first nine months; +€13 million in the quarter) and the decrease in operating costs (+€8 million in the first nine months, net of components offset in revenue; -€10 million in the quarter), mainly relating to the management of energy efficiency certificates, were fully absorbed by higher amortisation and depreciation in the period (-€12 million in the first nine months; -€8 million in the quarter).

Operating review

Natural gas distribution

In the first nine months of 2014, 4,509 million cubic metres of gas were distributed, down by 651 million cubic metres (12.6%) on the first nine months of 2013, mainly due to the weather conditions. At 30 September 2014, Snam had concessions for gas distribution services in 1,436 municipalities (1,435 at 31 December 2013), 1,349 of which were in operation and 87 of which had to complete and/or create the networks. It had 6.379 million active meters at gas redelivery points for end users (households, businesses, etc.), compared with 5.915 million at 30 September 2013.

Distribution network

At 30 September 2014, the gas distribution network covered 54,717 km (52,993 km at 31 December 2013), representing an increase of 1,724 km on 31 December 2013.

Technical investments (€ million)

Third quarter First nine months Change % change 2013 2014 2013 2014

55 55 Distribution 148 164 16 10.8

40 42 Network maintenance and development 113 125 12 10.6

15 13 Replacement of cast-iron pipes 35 39 4 11.4

17 18 Metering 54 49 (5) (9.3)

6 7 Other investments 19 19

78 80 221 232 11 5.0

Technical investments in the first nine months of 2014 amounted to €232 million, up €11 million compared with the first nine months of 2013.

Investments in distribution (€164 million) mainly involved development projects (extensions and new networks) and the renovation of old sections of pipe, including the replacement of cast-iron pipes.

Investments in metering (€49 million) primarily concerned the meter replacement programme and the remote meter-reading project.

Other investments (€19 million) mainly concerned investments in IT, property and vehicles.

23

Business developments

Awarding of Metano Arcore tender

With effect from 1 October 2014, after an award by tender, Italgas acquired the entire equity investment held by the Municipality of Arcore in Metano Arcore S.p.A. (50% of the share capital), for an auction base price of €2.3 million. As of this date, Italgas owns 100% of the company, which holds the natural gas distribution concession in the municipality of Arcore, comprising more than 60 km of network and around 8,700 redelivery points.

24

Other information Legal administration of the subsidiary company Italgas – Palermo Law Court – Proceedings n. 67/2014 R.M.P.

In the context of the legal administration’s preventive measure on assets, which was served upon the subsidiary company Italgas on 11 July 2014 under a decree by Palermo Law Court (hereinafter, the “Decree”) pursuant to art. 34, paragraph 2, Italian Legislative Decree 159/2011 (“Code of anti-Mafia laws and preventive measures, and also new provisions concerning anti-Mafia documentation, under articles 1 and 2 of Law nr. 136 of 13 August 2010”), in a measure dated 2 October 2014 the Judge Designate defined in greater detail the perimeter for the legal administration and the activities of the Board of Directors (hereinafter, the “Measure”).

With reference to the perimeter for the legal administration, the Measure specifies that the objectives of the legal administration’s measure served upon Italgas were mainly inspective in nature, focused on those activities which could reveal whether or not the indications of potential infiltration were well-founded, in order to be able to take the necessary actions. On the basis of this aim and bearing in mind that, in the case in point, there is no type of intervention on the Company’s shareholding and the context of the absolute temporary and short-term nature of the measure in question, the Measure points out that there are no legal, operational or trial reasons which could put the powers proper to the parent company up for discussion, nor respect for the Group’s strategies and objectives and the observance of corporate procedures.

In confirmation of this approach, with reference to the activities of the Board of Directors, the Measure further specifies that, remaining firmly in-line with the provisions of law, the perimeter measure thus defined in greater detail and the specific instructions given to its trustees are based on the following principles and activities:

1. Continuity by Italgas with the strategic guidelines established in the Strategic Plan and in the Budget which had been adopted earlier by Italgas and which provide confirmation of Italgas as lead operator in Italy in the natural gas distribution business, consistent with the Snam Group’s business model;

2. Maintaining the centralised finance and treasury services (Cash Pooling) which are ensured by Snam to cover Italgas’ financial requirements, through access to the financial markets, consistent with the objectives approved in the strategic plan;

3. Maintaining the services provided at a centralised level by the Snam Group in favour of Italgas, in line with and without deviating from existing agreements and powers conferred (with the only exception of restrictions on some powers of attorney, already outlined in a measure dated 6 August 2014);

4. Keeping Italgas within the perimeter of Snam Group’s National Tax Consolidation Convention, with continued respect for the conditions outlined by reference legislation;

5. Italgas’ flow of information being available to Snam for the purposes of drafting the Group’s periodic consolidated financial report, including certification by Italgas’ Management in respect of Snam and in respect of the auditors, in line with present procedures (and also in order to avoid concerns from the auditors);

25

6. Agreement and continuity on the part of Italgas in respect of compliance matters concerning the control system for the Snam report under Law nr. 262/2005 (in line with steps already undertaken through retaining the control system on the Corporate – SCIS report);

7. Continuity in dealings between the controlling bodies of Snam and Italgas: continuity in progressing the duties and meetings of the Italgas control and supervisory bodies, subject to the advisable and necessary involvement of the legal administrative body as a result of the requirements underlying the preventive measure;

8. Continuity in carrying out the Group’s annual Audit Plan, which includes interventions overseen by the Group’s internal audit department in relation to Italgas activities (as was, moreover, already achieved through the already adopted approach of not making any changes or slowing up the annual plan);

9. Continuity in the Group’s procedural core which was assimilated by Italgas and related interactions with Snam’s offices and top management (including, amongst others, the extraordinary transactions process).

Again in the Measure, the Judge Designate makes it clear that Italgas must, in turn, proceed to consolidate the balance sheet of its subsidiary Napoletana Gas and to forward the relevant flows of information to Snam.

On the basis of the aforesaid comments, the Measure concludes that, with the perimeter determined as it is, no evidence comes to light for (nothing prevents) not consolidating the balance sheet of Italgas S.p.A. into the Snam Group, without prejudicing the full autonomy and responsibility on the part of the subsidiary in adopting those decisions which are exclusively within its remit.

Snam continues to co-operate actively with the legal authorities and with the board of trustees, trusting that the current proceedings will rapidly be concluded. In this context, Snam has amongst other things, also in the interests of Italgas, commissioned a leading international specialist company to carry out an autonomous and independent in-depth forensic examination intended to: • reconstruct the evidentiary framework outlined in the Decree, doing so particularly with regard to

Italgas’ dealings with the counterparts recalled in the Decree, and also the control system in force at the time;

• assess the overall solidity of the present internal control and risk management system, referring specifically to the risk of facilitating organised crime and its infiltration in tender contracts.

After completion of the expert activities in carrying out the commission into the accounts-documentation and into the internal control system, the commissioned company confirmed, in summary: (i) that the incidence of supply dealings with the counterparts recalled in the Decree compared with Italgas’ total expenditure at cumulative level turns out to be less than 1% for the period 2009-2014; 0.16% if one considered the Snam Group’s total expenditure for the same period; (ii) that the present internal control and risk management system appears capable of and effective in identifying, preventing or minimising the company’s operational risk of the facilitation/infiltration of organised crime in economic and business activities.

The results of the autonomous, independent in-depth forensic examination have been made available to the Legal Authorities.

26

At present, based on the aforementioned measure and the results of the in-depth activities described above, no significant evidence has come to light which would cause one to alter or supplement the Company’s assessment in terms of the potential impact of current proceedings on its consolidated net assets or net consolidated financial position. The following summary tables show the reclassified consolidated income statement items.

27

Total revenue (€ million)

Third quarter First nine months 2013 2014 2013 2014 Change % change

Business segments 517 510 Transportation 1,558 1,556 (2) (0.1)

7 6 Regasification 23 20 (3) (13.0) 112 117 Storage (*) 364 404 40 11.0 252 272 Distribution 763 774 11 1.4 42 48 Corporate and other activities 122 139 17 13.9

(72) (87) Consolidation eliminations (197) (245) (48) 24.4

858 866 2,633 2,648 15 0.6

(*) As of 1 April 2013, the revenue of the storage segment includes the chargeback of the transportation service provided by Snam Rete Gas pursuant to Resolution 297/2012/R/gas of the Authority of 19 July 2012. These chargebacks (€46 million and €20 million in the first nine months and the third quarter of 2014, respectively) are offset in operating costs associated with the purchase of the transportation capacity provided by Snam Rete Gas.

Revenue – Regulated and non-regulated activities (€ million)

Third quarter First nine months

2013 2014 2013 2014 Change %

change 848 855 Revenue from regulated activities 2,603 2,603

Business segments 511 503 Transportation 1,544 1,535 (9) (0.6)

5 4 Regasification 17 14 (3) (17.6) 87 81 Storage 299 298 (1) (0.3)

245 267 Distribution 743 756 13 1.7 10 11 Revenue from non-regulated activities 30 45 15 50.0

858 866 Total revenue 2,633 2,648 15 0.6

Operating costs

(€ million)

Third quarter First nine months

2013 2014 2013 2014 Change

% chang

e Business segments

94 91 Transportation 307 305 (2) (0.7) 4 6 Regasification 15 16 1 6.7

30 37 Storage (*) 76 97 21 27.6 71 88 Distribution 225 224 (1) (0.4) 44 48 Corporate and other activities 124 140 16 12.9

(72) (87) Consolidation eliminations (197) (245) (48) 24.4

171 183 550 537 (13) (2.4)

(*) As of 1 April 2013, operating costs in the storage segment include the costs associated with purchasing the transportation capacity provided by Snam Rete Gas pursuant to Resolution 297/2012/R/gas of the Authority of 19 July 2012.

28

Operating costs – Regulated and non-regulated activities

(€ million)

Third quarter First nine months

2013 2014 2013 2014 Change % change

165 177 Regulated business costs 525 518 (7) (1.3)

108 123 Controllable fixed costs 336 348 12 3.6

25 4 Variable costs 88 47 (41) (46.6)

32 50 Other costs 101 123 22 21.8

6 6 Non-regulated business costs 25 19 (6) (24.0)

171 183 550 537 (13) (2.4)

Amortisation, depreciation and impairment losses

(€ million) Third quarter First nine months

2013 2014 2013 2014 Change %

change

191 199 Amortisation and depreciation 567 583 16 2.8

Business segments

118 120 Transportation 353 361 8 2.3

2 1 Regasification 4 4

16 15 Storage 49 44 (5) (10.2)

54 62 Distribution 159 171 12 7.5

1 1 Corporate and other activities 2 3 1 50.0

191 199 567 583 16 2.8

EBIT

(€ million) Third quarter First nine months

2013 2014 2013 2014 Change %

change

Business segments

305 299 Transportation 898 890 (8) (0.9)

1 (1) Regasification 4 (4) (100.0)

66 65 Storage 239 263 24 10.0

127 122 Distribution 379 379

(3) (1) Corporate and other activities (4) (4)

496 484 1,516 1,528 12 0.8

29

Net financial expense

(€ million)

Third quarter First nine months

2013 2014 2013 2014 Change % change

111 106 Expense on financial debt 376 328 (48) (12.8)

111 106 - Expense on short- and long-term financial debt 376 328 (48) (12.8)

Losses (Gains) on hedging derivatives (2) (2)

- Cross currency swaps (CCS) (2) (2)

(1) Other net financial expense (income) 13 1 (12) (92.3)

(9) (9) Financial expense capitalised (26) (26)

101 97 363 301 (62) (17.1)

Net income from equity investments

(€ million) Third quarter First nine months

2013 2014 2013 2014 Change %

change

(7) 19 Equity method valuation effect 28 68 40

51 Other income from equity investments 51 51

(7) 70 28 119 91

Income taxes

(€ million) Third quarter First nine months 2013 2014 2013 2014 Change % change

197 173 Current taxes 566 541 (25) (4.4)

(Prepaid) deferred taxes

(24) (15) Deferred taxes (60) (53) 7 (11.7)

3 (3) Prepaid taxes 1 (5) (6)

(21) (18) (59) (58) 1 (1.7)

176 155 507 483 (24) (4.7)

30

Reclassified balance sheet The reclassified balance sheet set out below combines the assets and liabilities of the condensed balance sheet based on how the business operates, split into the three basic functions: investment, operations and financing.

Management believes that this format presents useful additional information for investors as it allows identification of the sources of financing (equity and third-party funds) and the application of such funds for fixed and working capital.

The reclassified balance sheet is used by management to calculate the key leverage and profitability ratios.

RECLASSIFIED BALANCE SHEET

30.06.2014 (€ million) 31.12.2013 30.09.2014 Change

20,746 Fixed capital 20,583 21,026 443

14,969 Property, plant and equipment 14,851 15,044 193

363 Compulsory inventories 363 363

4,735 Intangible assets 4,710 5,010 300

1,008 Equity investments 1,024 913 (111)

Financial receivables held for operating activities 2 (2)

(329) Net payables for investments (367) (304) 63

(850) Net working capital (1,155) (817) 338

(126) Provisions for employee benefits (124) (129) (5)

16 Assets held for sale and directly related liabilities 16 16

19,786 Net invested capital 19,320 20,096 776

6,056 Shareholders’ equity (including minority interests) 5,994 6,362 368

13,730 Net financial debt 13,326 13,734 408

19,786 Coverage 19,320 20,096 776

Fixed capital (€21,026 million) rose by €443 million compared with 31 December 2013, mainly due to an increase in property, plant and equipment and intangible assets (+€493 million)26.

Equity investments The equity investments item (€913 million) includes the valuation of equity investments using the equity method and refers in particular to TIGF Holding S.A.S. (€567 million), Toscana Energia S.p.A. (€158 million), Gasbridge 1 B.V. and Gasbridge 2 B.V. (€131 million in total).

26

Of which €288 million from the change in the scope of consolidation.

31

Net working capital

30.06.2014 (€ million) 31.12.2013 30.09.2014 Change

1,766 Trade receivables 2,268 1,942 (326)

162 Inventories 156 176 20

68 Tax receivables 53 43 (10)

347 Other assets 231 374 143

(842) Provisions for risks and charges (837) (790) 47

(627) Trade payables (1,047) (714) 333

(687) Deferred tax liabilities (727) (682) 45

(102) Tax payables (143) (250) (107)

(201) Accruals and deferrals from regulated activities (203) (176) 27

(6) Derivative liabilities (7) (7)

(728) Other liabilities (899) (733) 166

(850) (1,155) (817) 338

Net working capital (-€817 million) increased by €338 million compared with 31 December 2013, owing mainly to: (i) a decrease in trade payables (+€333 million), mainly relating to the transportation segment (+€337 million), due to lower payables from the balancing service; (ii) a decrease in other liabilities (+€166 million), mainly due to the effects of additional tariff components in the transportation service (+€135 million); (iii) an increase in other activities (+€143 million), mainly due to higher receivables from the Electricity Equalisation Fund for energy efficiency certificates (€72 million) and additional tariff components in the distribution segment (€44 million).

These factors were partly offset by a decrease in trade receivables (-€326 million) relating mainly to the transportation segment (-€289 million) due to lower receivables arising from the balancing service, and the natural gas distribution segment, (-€34 million), due primarily to seasonal trends in volumes transported.

32

Shareholders’ equity (€ million)

Shareholders’ equity at 31 December 2013 5,994 Increases owing to:

- Comprehensive income for the first nine months of 2014 866

- Other changes 9

875 Decreases owing to:

- Distribution of balance of 2013 dividend (507)

(507) Shareholders’ equity including minority interests at 30 September 2014 6,362 attributable to: - Snam 6,361

- Minority interests 1 6,362

At 30 September 2014, Snam held 1,127,250 treasury shares (1,672,850 at 31 December 2013), equal to 0.03% of its share capital, with a book value of €5 million. Their market value at 30 September 2014 was around €5 million27. As at this date, all the stock options had been exercised and therefore no residual treasury shares are serving these plans. Net financial debt

30.06.2014 (€ million) 31.12.2013 30.09.2014 Change

13,732 Financial and bond debt 13,328 13,768 440

1,685 Short-term financial debt (*) 2,250 1,774 (476)

12,047 Long-term financial debt 11,078 11,994 916

(2) Financial receivables and cash and cash equivalents (2) (34) (32)

(2) Cash and cash equivalents (2) (34) (32)

13,730 13,326 13,734 408 (*) Includes the short-term portion of long-term financial debt.

Net financial debt was €13,734 million as at 30 September 2014, compared with €13,326 million at 31 December 2013.

Positive net cash flow from operations of €1,095 million fully covered financial requirements relating to technical investments, generating free cash flow of €212 million. After payment to shareholders of the balance of the 2013 dividend (€507 million), net financial debt was €13,734 million, up €408 million compared with 31 December 2013. This amount included €112 million resulting from the change in the scope of consolidation due to the acquisition of control of AES Torino S.p.A. (AES) on 1 July 2014.

Financial and bond debt, which totalled €13,768 million at 30 September 2014 (compared with €13,328 million at 31 December 2013), was denominated entirely in euros, with the exception of a

27 Calculated by multiplying the number of treasury shares by the period-end official price of €4.36 per share.

33

fixed-rate bond worth ¥10 billion, which was fully converted into euros via a cross currency swap hedging derivative.

Financial debt at 30 September 2014 relate mainly to bonds (€10.1 billion, equal to 73.1%), bank loans (€2.4 billion, equal to 17.7%) and loan agreements concerning European Investment Bank (EIB) funding (€1.3 billion, equal to 9.1%)28.

Long-term financial debt of €11,994 million make up approximately 87% of financial debt (around 83% at 31 December 2013) and have an average duration of around five years (unchanged from 31 December 2013).

The breakdown of debt by type of interest rate at 30 September 2014 is as follows:

(€ million) 31.12.2013 % 30.09.2014 % Change

Fixed rate 8,559 64 9,612 70 1,053

Floating rate 4,769 36 4,156 30 (613)

13,328 100 13,768 100 440

Fixed-rate financial liabilities (€9,612 million) increased by €1,053 million, mainly due to two new bond issues in the first half of 2014, with a total nominal value of €1,100 million.

Floating-rate financial liabilities (€4,156 million) decreased by €613 million compared with 31 December 2013, mainly due to net repayments of bilateral revolving credit lines (-€724 million) and the repayment of two term loans reaching natural expiry (-€701 million in total). These effects were partly offset by the use (totalling €550 million) of the syndicated loan and the placement in the first half of 2014 of a bond loan with a nominal value of €150 million.

At 30 September 2014, Snam had unused committed long-term credit lines worth €4.4 billion.

At 30 September 2014, bond loans maturing within the subsequent 18 months came to a nominal amount of €900 million. Covenants

The principal bilateral financing contracts syndicated by banks and other financial institutions active from 30 September 2014 contain obligations (covenants), in line with international practice. These obligations are related to, inter alia, the respect of financial covenants (with the exception of the syndicated loan), as well as of pari passu, negative pledge and change of control clauses. Some of these obligations also apply to the bond loans issued by Snam, as part of the EMTN programme. Over the course of the first nine months of 2014, all the relevant verifications of the contractually anticipated financial covenants confirmed, on 30 September 2014, they were respected.

With reference to the legal administration’s preventive measure on assets, which was served by Palermo Law Court upon its subsidiary company Italgas on 11 July 2014, in relation to the possibility that the Decree may determine the activation of the aforementioned clauses, the following should be noted:

28

With effect from 20 March 2014, Snam directly took over two loans with the EIB totalling €300 million, which had previously been brokered by CDP.

34

• With reference to the capital market, on the date of the Interim Report, and based on the information available, Snam does not believe that the effects of the Decree and the subsequent updates to it are enough to meet the prerequisites of activating the aforementioned contractual safeguards

• With reference to the banking market and to the relations held with the European Investment Bank, Snam has continued to provide information on the successive updates made to the Decree, including the Action taken by the appointed judge on 2 October 2014. The Company has received no requests to activate the clauses of contractual safeguard in favour of the creditors subject to them.

Reclassified statement of cash flows and change in net financial debt

The reclassified statement of cash flows set out below summarises the legally required format. It shows the connection between the opening and closing cash and cash equivalents and the change in net financial debt during the period. The two statements are reconciled through the free cash flow, i.e. the cash surplus or deficit left over after servicing capital expenditure. The free cash flow closes either: (i) with the change in cash for the period, after adding/deducting all cash flows related to financial liabilities/assets (taking out/repaying financial receivables/payables) and equity (payment of dividends/capital injections); or (ii) with the change in net financial debt for the period, after adding/deducting the debt flows related to equity (payment of dividends/capital injections).

35

RECLASSIFIED STATEMENT OF CASH FLOWS

Third quarter First nine months 2013 2014 (€ million) 2013 2014 212 302 Net profit 674 863

Adjusted by: 201 128 - Amortisation, depreciation and other non-monetary components 543 465

4 5 - Net capital losses (capital gains) on asset sales and eliminations 2 10 269 239 - Interest and income taxes 822 734 (96) (148) Change in working capital due to operating activities 6 (342) (29) (78) Dividends, interest and income taxes collected (paid) (567) (635) 561 448 Net cash flow from operating activities 1,480 1,095

(263) (311) Technical investments (701) (823) (597) Equity investments (597)

1 Change in consolidation scope and business units (9) 2 Divestments 12 7

(22) (29) Other changes relating to investment activities (161) (67) (318) 108 Free cash flow 24 212 316 (82) Change in short- and long-term financial debt 467 319

1 Equity cash flow (503) (505)

6 Effect of change in scope of consolidation 6

(1) 32 Net cash flow for the period (12) 32

CHANGE IN NET FINANCIAL DEBT

Third quarter (€ million) First nine months

2013 2014 2013 2014 (318) 108 Free cash flow 24 212

(112) Financial payables and receivables from acquired companies (112) Exchange rate differences on financial debt (3) 1

Equity cash flow (503) (505)

(317) (4) Change in net financial debt (479) (408)

36

IFRS financial statements

Balance sheet

30.06.2014 (€ million) 31.12.2013 30.09.2014 ASSETS Current assets 2 Cash and cash equivalents 2 34

2,067 Trade and other receivables 2,442 2,279 162 Inventories 156 176 28 Current income tax assets 15 4 8 Other current tax assets 8 8

65 Other current assets 95 44 2,332 2,718 2,545

Non-current assets 14,969 Property, plant and equipment 14,851 15,044

363 Compulsory inventories 363 363 4,735 Intangible assets 4,710 5,010 1,008 Equity-accounted investments 1,024 913

151 Other non-current assets 147 192 21,226 21,095 21,522

23 Non-current assets held for sale 23 23 23,581 TOTAL ASSETS 23,836 24,090

LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities

1,503 Short-term financial liabilities 1,947 1,456 182 Short-term portion of long-term financial liabilities 303 318

1,274 Trade and other payables 1,898 1,363 53 Current income tax liabilities 95 204 48 Other current tax liabilities 47 42 74 Other current liabilities 88 58

3,134 4,378 3,441 Non-current liabilities

12,047 Long-term financial liabilities 11,078 11,994 842 Provisions for risks and charges 837 790 126 Provisions for employee benefits 124 129 687 Deferred tax liabilities 727 682 682 Other non-current liabilities 691 685

14,384 13,457 14,280 7 Liabilities directly associated with assets held for sale 7 7

17,525 TOTAL LIABILITIES 17,842 17,728 SHAREHOLDERS’ EQUITY Snam shareholders’ equity

3,571 Share capital 3,571 3,571 1,928 Reserves 1,850 1,932

561 Net profit 917 863 (5) Treasury shares (7) (5)

Interim dividend (338) 6,055 Total Snam shareholders’ equity 5,993 6,361

1 Capital and reserves attributable to minority interests 1 1 6,056 TOTAL SHAREHOLDERS’ EQUITY 5,994 6,362

23,581 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 23,836 24,090

37

Income statement

(€ million) Third quarter First nine months 2013 2014 2013 2014

REVENUE 905 918 Core business revenue 2,744 2,785 25 19 Other revenue and income 91 74

930 937 Total revenue 2,835 2,859 OPERATING COSTS

(151) (165) Purchases, services and other costs (490) (489) (92) (89) Personnel expense (262) (259)

(191) (199) DEPRECIATION, AMORTISATION AND IMPAIRMENT LOSSES (567) (583) 496 484 EBIT 1,516 1,528

FINANCIAL INCOME (EXPENSE) 2 4 Financial income 5 15

(103) (101) Financial expense (368) (318)

Derivatives 2

(101) (97) (363) (301) INCOME FROM EQUITY INVESTMENTS

(7) 19 Equity method valuation effect 28 68

51 Other income from equity investments 51

(7) 70 28 119 388 457 PRE-TAX PROFIT 1,181 1,346

(176) (155) Income taxes (507) (483) 212 302 Net profit 674 863 212 302 - Snam 674 863

- Minority interests Earnings per share

0.06 0.09 - basic (€ per share) 0.20 0.26 0.06 0.09 - diluted (€ per share) 0.20 0.26

Statement of comprehensive income

(€ million) First nine months 2013 2014

Net profit 674 863

Other components of comprehensive income

Components that can be reclassified to the income statement:

Change in fair value of cash flow hedging derivatives (effective share) (3)

Portion of equity investments valued using the equity method pertaining to “other components of comprehensive income”

(6) 6

Total other components of comprehensive income, net of tax effect (6) 3

Total comprehensive income 668 866

. attributable to:

- Snam 668 866 - Minority interests 668 866

38

Statement of cash flows (€ million) Third quarter First nine months

2013 2014 2013 2014 212 302 Net profit 674 863

Adjustments for reconciling profit for the period with cash flow from operating activities:

191 199 Amortisation and depreciation 567 583 7 (19) Equity method valuation effect (28) (68) 4 5 Net capital losses (capital gains) on asset sales, cancellations and eliminations 2 10

(2) (4) Interest income (5) (15) 95 88 Interest expense 320 266

176 155 Income taxes 507 483 (51) Other changes (51)

Changes in working capital:

16 (17) - Inventories 63 4 25 (155) - Trade receivables (31) 354

(77) 78 - Trade payables 56 (342) (4) (3) - Provisions for risks and charges (3) (19)

(56) (51) - Other assets and liabilities 62 (339) (96) (148) Working capital cash flows 147 (342)

3 (1) Change in provisions for employee benefits 4 1 67 13 Dividends collected 68 52

(3) Interest collected 1 1 (95) (87) Interest paid (310) (263)

(1) (1) Income taxes paid net of reimbursed tax credits (326) (425) 561 448 Net cash flow from operating activities 1,621 1,095

Investments: (77) 130 - Intangible assets (211) (233)

(186) (441) - Property, plant and equipment (490) (590) (597)

- Equity investments (597)

1

- Change in scope of consolidation and business units (9) (23) (30) - Change in payables and receivables relating to investments (162) (68)

(882) (341) Cash flow from investment activities (1,469) (891)

Divestments:

1

- Property, plant and equipment 2 1

- Intangible assets 10

- Equity investments 7 1 1 - Change in payables and receivables relating to divestments 1 1 3 1 Cash flows from divestments 13 8

(879) (340) Net cash flow from investment activities (1,456) (883) 1,133 574 Taking on long-term financial debt 2,997 1,949

(1,211) (491) Repaying long-term financial debt (3,358) (1,021) 394 (165) Increase (decrease) in short-term financial debt 687 (609) 316 (82) 326 319

1

Sale of treasury shares 4 2

Dividends paid to Snam shareholders (507) (507)

317 (82) Net cash flow from financing activities (177) (186) 6 Effect of change in scope of consolidation 6

(1) 32 Net cash flow for the period (12) 32 4 2 Cash and cash equivalents at start of period 15 2 3 34 Cash and cash equivalents at end of period 3 34