1/24. Ten-Ye. ork 24. May 31

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1 1/24 Ten-Ye ear Netwo ork Development Plan (English shortened version) May 31 st 2015

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3 3/24 List of figures... 4 List of tables... 5 Table of defined terms Executive summary Company Profile Overview and future trends of the European Market Overview and future trends of the Italian Market Development projects of the ITG S.p.A. network Post-FID projects Pre-FID projects Piombino-Islands project a) Rationale b) Technical features c) Timing Financial and Economic Analyses of the project a) Approach b) Assumptions and results Further benefits and synergies with other projects Conclusions... 23

4 4/24 List of figures Figure 1: EU 28 Import needs Figure 2: Piombino- Islands project (preliminary route)... 18

5 5/24 List of tables Table 1: Technical features of the Piombino-Islands project Table 2: Time plan for the Piombino-Island project... 19

6 6/24 Table of defined terms The following terms and abbreviations have been used in the plan: CAM: CMP: ENTSOG: ESW: FEED: FID: GRIP: ITG: LNG : NC: NES: PCI: RES: TPA: TSO: WACC: Capacity Allocation Mechanisms Congestion Management Procedures European Network of Transmission System Operators for Gas Energy System Wide Front-End Engineering Design Final Investment Decision Gas Regional Investment Plan Infrastrutture Trasporto Gas SpA Liquefied Natural Gas Network Code National Energy Strategy Project of Common Interest Renewable Energy Sources Third Party Access Transmission System Operator Weighted Average Cost of Capital

7 7/24 1. Executive summary 1. In accordance with the Decree of the Ministry of the Economic Development of February 27 th 2013, adopted in compliance with the requirements of Article 16 of the Legislative Decree n.93/2011 for the Implementation of the directives 2009/72/CE, 2009/73/CE and 2008/92/CE relating to the common norms for the internal market about energy and natural gas, and relating to the European procedure about the transparency of prices to final industrial customers of gas and electricity, as well as regarding the abrogation of the directives 2003/54/CE and 2003/55/CE, Infrastrutture Trasporto Gas S.p.A, (hereafter also referred to as ITG ), annually releases its Ten-Year Development Plan for the gas transmission network, elaborated following the criteria set by the abovementioned Decree, to the benefit of all potential stakeholders. 2. The latest international events have reshaped the strategic and competitive framework of the future European gas markets. In particular: (i) (ii) the halt of the South Stream pipeline, unilaterally defined by Gazprom in December 2014, and the subsequent plan for the realisation of the Turkish Stream pipeline have increased the importance of the so-called Southern Corridor, where the maximum capacity of the TAP pipeline (20 Bcm/y, 10 more than the initial capacity 1 ) could be potentially filled by Russian gas, and thus might not be able to guarantee an adequate diversification of the sources for the markets in Western Europe (bringing additional gas from Azerbaijan and, potentially, from Iraq, Iran, and Turkmenistan); the collapse of Brent price has led to a global reduction of upstream investments by about 20% (vs 2014) and to a slow-down in the realisation of liquefaction plants for LNG export (e.g. the deletion of Lavaca Bay s Excelerate terminal in Texas and the large impairment of BG group s LNG investments in Australia). All these events might lead to a decrease of the LNG market liquidity and to a greater volatility of LNG spot prices in the upcoming years. 3. In light of these dynamics, ITG believes that Italy will have the actual opportunity of becoming the Mediterranean Europe gas hub, by intercepting flows from North Africa through the existing infrastructures and from Central Asia through the Southern Corridor (through TAP but also from the recent discovered reserves in the Mediterranean Basin, in Cyprus territory). In this regard, the future development of the gas transmission network will play a pivotal role and ITG is willing to contribute to the realisation of the necessary infrastructures. 1 Source: Joint Opinion of the Energy Regulators on TAP AG s Exemption Application

8 8/24 4. The first section of the TYNDP is dedicated to a short overview of the current infrastructural and regulatory scenario, as well as to the on-going demand/supply dynamics in the European and Italian gas markets. The second section of the document is related to the development project proposed by ITG and aimed at lifting the isolation of the three major Tyrrhenian islands from the European gas market. This goal is pursued by the realization of two pipelines: Piombino (Livorno, Italy)-Isola d Elba and Piombino - Corsica (in the Bastia area), thus creating the premises for bringing natural gas to Corsica and Sardinia and allowing almost two million EU citizens to finally access the natural gas system. 5. The project has been evaluated according to the methodology developed by ENTSOG (with the document Energy System Wide Cost Benefit Analysis Adapted Methodology ) and approved by the European Commission. Indeed, ENTSOG, in compliance with Regulation (EC) 347/2013, defined the guidelines for the Energy System Wide Cost Benefits Analysisin order to let National and European Regulatory Authorities compare the different proposals and eventually select the Projects of Common Interest. 6. The results of the analysis, as illustrated in the second section of the document, show that the project, a necessary pillar to the development of Corsica and Sardinia s internal grids, would lead to noteworthy advantages for the involved areas 2 : (i) (ii) a net economic benefit greater than 500 M /y, at full deployment a CO2 emissions reduction by 2 Mton/y, at full deployment 7. In addition, the pipelines would guarantee remarkable environmental benefits and advantages in terms of energy bill, market integration and security of energy supply with respect to all other possible alternatives, including LNG transportation. 8. Finally, it is important to remind that PCIs must, inter alia, contribute significantly to at least one of the following specific criteria: (i) (ii) (iii) Market integration, inter alia, through lifting the isolation of at least one Member States and reducing infrastructure bottlenecks in the energy network systems; increase the security of supply by creating the necessary appropriate infrastructures; increase competitiveness, by diversifying, for instance, the supply sources. 2 Results in accordance with the economic evaluation performed under the ESW-CBA methodology, according to the macroeconomic scenarios developed by ENTSOG

9 9/24 (iv) Sustainability, inter alia, through reducing emissions supporting intermittent renewable generation and enhancing deployment of renewable gas. The proposed project satisfies the above mentioned requirements and therefore is qualified to apply as a PCI candidate.

10 10/24 2. Company Profile 9. Infrastrutture Trasporto Gas is a 100% controlled subsidiary of Edison S.p.A group, which is in turn controlled by the Électricité de France (EDF) Group. 10. ITG, as an independent gas transmission system operator, as prescribed by the Legislative Decree 93/11, contributes to the proper operation of the gas transportation network on which the access to natural gas for the Italian consumers relies. 11. As of today, ITG owns and operates in TPA (Third Party Access) the Cavarzere-Minerbio pipeline, which connects the Rovigo s regasification terminal with the national gas transportation network of Snam Rete Gas at the Minerbio interconnection point. 12. The infrastructure plays a pivotal role in the diversification and the security of supply of the Italian energy system. Indeed, the pipeline is the unique interconnection with the Rovigo terminal and, starting from 2009, allowed the opening of a new national entry point, which allows the import of roughly 10% of the national consumption needs, thanks to its yearly capacity of over 9 Bcm of gas.

11 11/24 3. Overview and future trends of the European Market 13. The gas market in Europe is of uppermost importance, being natural gas thee second source (after oil) in the primary energy consumption mix, with a weight w of approximately 25%, notwithstanding the further reductionn of gas demand in EU, due d to the combined effect of the persisting economic stagnation, the boom of RES productionn and the high competitiveness of coal (which is following the t bearish trend of gas prices). 14. However, because of the drop in domestic production, importt needs will remain highh and will likely grow up to 2025, as shown in Figure 1. In light of the forecasted growth of import needs and in order to diversify the gas supply sources, new transportation infrastructuress will be needed all across the EU area. Figure 1: EU 28 Import needs Source: ITG elaborations on IEA, World Energy Outlookk The collapse of Brent prices and the recent geopolitical trends, with the game - changing strategy of Russia, will make this issue even more urgent, for two main reasons: (i) (ii) the increased uncertainty of future gas supplies, especially LNG, due to the foreseen reduction of upstream investments, which will potentially affect liquefaction plant projects in North America, Australia and Africa; the quick saturation of the infrastructures currently planned for the Southern Corridor (i.e. TAP), becausee of the unforeseen flow of Russian gas that will compete against alternative supplies from Central Asia. 16. The goal of the European Commission of creating a more integrated common markett must be considered within this context. In order to achieve this goal, two t main intervention areas have been identified: (i) Regulatory interventions: the creation of an integrated European market comess through the harmonisation of the laws applied by each Member State. For thiss reason and with the primary aim of securing gas supplies, the European Commission decided in the first place to

12 12/24 develop three Network Codes in the main areas of interest: Capacity Allocation Mechanism (CAM), Congestion Management Procedures (CMP) and balancing rules. (ii) Infrastructural interventions: an integrated market needs adequate infrastructures. For this reason, the European Commission has focused its efforts along 4 corridors of interest, eventually declined in 6 Gas Regional Investment Plans (GRIPs). 17. Meanwhile, the market is more and more connected in terms of price, thanks to the increasing relevance of trading hubs. This trend has been reflected in the price indexation of gas supply contracts, more and more disconnected from the evolution of oil price. Yet, some differences remain across EU markets and they are due to the difficulty of transmitting price signals among hubs because of the infrastructural unbalances among market areas. This issue can be overcome only with the realisation of new interconnections, especially in the bottlenecks of the system.

13 13/24 4. Overview and future trends of the Italian Market 18. Italy plays a pivotal role within the European framework because of the gas volumes coming from North Africa and Middle East. Its favourable geographic spot, along with the presence of the third largest European market in terms of gas consumption (after UK and Germany) puts the country at the heart of the European network and creates the conditions to achieve the goal of the future development of the Mediterranean Europe gas hub. This goal was repeatedly set by various Italian governments, but still needs some crucial interventions to be reached (e.g. the creation of a larger export capacity towards neighbouring countries). 19. The Country has strong chances to achieve the goal of becoming a gas hub, in case the NES (National Energy Strategy) will be put in place, thus allowing the diversification of gas supplies for the entire European Union. The increased import capacity will imply a greater competitiveness of supply sources and, in particular, a reduction of the dependence from Russian gas, thus creating the conditions for a higher supplier switching potential and for the subsequent creation of a virtuous mechanism of competition among sources. Such competition would not only be translated into a price reduction for final consumers, but would also allow for greater flexibility, thus increasing market liquidity. At the same time, market operators would be able to reduce their risk profile by expanding their presence into more than one market. The same operators would thus have greater chances to fulfil their take-or-pay obligations, with a final indirect benefit for the security of supply (they would be less cautious to sign new long-term contracts when the current ones will come to an end). 20. The Italian gas network was born with the aim of supplying the domestic market and is clearly not geared up for an international gas trade dimension, such as the Northern Europe hubs, where a well-dimensioned network of cross-country interconnections has been developed. The idea of developing new reverse flow capacity for the existing interconnections (Transitgas and TAG) is necessary, yet still not sufficient for the Italian gas system to equal Northern Europe hubs. The transition from a transportation system with strictly domestic purposes to an export-oriented one constitutes a huge challenge, also in terms of investments, but, at the same time, the increase of physical flows (even for export purposes) would translate in a greater efficiency in the use of the existing capacity, with an overall benefit for the Italian users, as well. 21. Italy, indeed, thanks to its central position in the Mediterranean area will more and more benefit from the presence of a multitude of diversified import sources, even though it will have to deal with the exiguous capacity and routes to physically transfer the gas towards Northern Europe (as of now this capacity being limited only to Transitgas). This constitutes a potentially limiting factor towards the aim of becoming the Mediterranean Europe hub. For this reason, new routes

14 14/24 will be needed in the future, in order to develop the East-West corridor (in direction of the French south hub PEG south ) as well as it has been done for the South-North corridor. 22. In conclusion, in order to reach its goal, Italy will need to put more efforts in new infrastructures, not only at the domestic level, so that new interconnection points will be identified and new reverse flow capacities in the two existing interconnections with Northern Europe will be developed. In particular, for a full development of the Southern Corridor, also in light of the aforementioned realization of the Turkish Stream and of the diversion of Russian gas volumes originally meant for the South Stream, an expansion of the connections towards Italy and Europe, further than the existing TAP project, is necessary so that an actual diversification of the sources can be reached. 23. However, in its system development strategy, Italy must also bear in mind the existence of large areas in the Country, among which the entire Sardinia region, which are currently disconnected from the gas network. In recent times, natural gas has constituted a key driver for the economic development and the improvement of environmental conditions, therefore the presence of areas without access to the natural gas European system, even where large urban and industrial sites have grown, can be deemed as anachronistic.

15 15/24 5. Development projects of the ITG S.p.A. network 5.1. Post-FID projects 24. In relation with the recent re-starting of its activities in the gas transportation business, ITG has no projects for the realisation of new pipelines in progress, nor it is about to start any of such activities Pre-FID projects 25. ITG has no on-going pre-fid project in advanced stage, i.e. there are no on-going authorisation procedures, yet the company has a project in pre-feasibility stage; moreover, ITG has received no formal request for the development of the network by the transportation users under the terms of the existing network code. 26. For this reasons, the Company focuses its attention to the connection of the national transportation network, in the area of Piombino, with Elba and Corsica in order to allow the penetration in the European gas market of these islands and, in the future, of Sardinia. This initiative was already presented in the TYNDP released in May The project is included in the NSI West Gas corridor, and, in particular, in the ENTSOG - South North Corridor Grip. The initiative is also included in the European TYNDP just released by ENTSOG (TYNDP ) and is also candidate as Project of Common Interest (PCI). With respect to last year, the current document presents the economic and financial assessments required within the ESW-CBA methodology in order to evaluate the expected benefits of the project and to allow a homogeneous comparison with the other PCI candidates. 28. The financial data are based on draft estimations, therefore they must be considered as preliminary, even though they have been fine-tuned with respect to last year s release. For this reason, ITG wants to underline that the following considerations will need further investigation before a final decision on the realisation of the proposal will be taken. 29. In the 2014s release of ITG s TYNDP another project was presented. This project was related to the realisation of a new connection route within the national network between Cavarzere (VE) and Istrana (TV). The 2014 s release of the TYNDP also indicated the following two necessary conditions for the feasibility of such project: (i) that the infrastructure, which would constitute a connection between the sites of Minerbio and Istrana, could be fully used in synergy with Snam Rete Gas network and that a series of preliminary and specific fluid dynamics simulations would be run, in

16 16/24 order to quantify the results in terms of network efficiency linked to the realisation of the project; (ii) that the site of TARVISIO would become a key node in the European network, such that significant exit flows would be needed, as in the design presented in the NES. 30. After accurate evaluations, also with Snam Rete Gas support, the evidence showed that there is a lack of the necessary premises to guarantee an adequate economic return to the initiative. For this reason the proposal was put on hold and therefore has been excluded in the 2015 s release of ITG s TYNDP Piombino-Islands project a) Rationale 31. One of the key areas for the infrastructural development of Italian national network is the connection of the areas of the country still without natural gas, in particular of Sardinia and Elba Islands. According to the current regional plan, the Sardinia island should get access to the methane network with the realisation of the Galsi project. The pipeline planned within the Galsi project, an import line from Algeria, not only would allow an increase in the transport capacity of gas coming from Africa, but would also fulfil the local needs for natural gas availability. The current gas market scenario, however, seems to reduce the odds of the realisation of the project and also according to institutional press releases regarding the initiative, there is no final decision on the matter. In May 2014, Sardinia s Region exited the shareholder group of the Galsi project and is currently looking for alternative solutions in order to bring the Island. 32. Within this context, ITG proposes an initiative aimed at making Sardinia reach the natural gas network, with the purpose of minimising the costs, a crucial factor if one is to consider the sizing of the potential market of the Island. Sardinia s need of starting the methane diffusion in its areas is shared with the neighbouring Corsica and Elba Islands. This need can be satisfied with a common project, by simply integrating the preliminary routes of the Cyrénée 3 project in Corsica, and the on-shore batch of the Galsi project (inland corridor within Sardinia). Under this perspective, ITG proposes the realisation of a connection starting from Piombino and arriving in Corsica, in the Bastia area. The potential synergies would allow the realisation of a connection with Elba, as well. The architecture of the overall project is shown in the following Figure 2. Such project consists, mainly, in 3 groups (or batches) of infrastructures: 3

17 17/24 Batch 1 : consists in two pipelines connecting Piombino (in the Tuscany region, in the center of Italy) to the islands of Corsica (at Bastia) and Elba; Batch 2 : based on the Cyrénée route, is the main transmission line on shore Corsica and the connection between Corsica and Sardinia Batch 3 : based on ther Galsi on shore route, is the main transmission line on shore Sardinia. 33. In this scenario, Infrastrutture Trasporto Gas will be in charge of realizing the batch number 1, creating the presuppositions for the realization by other promoters of the remaining infrastructures necessary to provide the Islands with gas (that means the transmission and distribution systems onshore these islands and the off-shore connection between Sardinia and Corsica). 34. Although it is aware of the difficulties for the authorisation and the management of a project which would include two cross-country connections in its overall development, ITG believes that the synergic potential of the infrastructure would entirely justify the underlying logic. b) Technical features 35. As shown in Figure 2, the first project batch would involve two different work sections, the Piombino-Elba connection and the Piombino Bastia connection. Whilst these first two routes would be developed in parallel, in order to exploit the existing synergies, the other ones are meant to be subsequent both from a chronological and a logical point of view. In its entireness, the overall project would deploy for 250 Km off-shore (Tuscany-Corsica and Corsica-Sardinia routes), and for further 500 Km on-shore related to the additional infrastructure necessary to the inland networks in Corsica and in Sardinia

18 18/24 Figure 2: Piombino- Islands project (preliminary route) Source: ITG elaborations (i) (ii) Section 1: the first route of the Piombino-Islands connection is the realisation of a pipeline ca. 30 Km long, for an overall transport capacity of ca. 20 Mcm/year. The arrival point of the connection is the North-East area of Elba,. Through this connection, it t would be possible to substitute most of the current residential gasoil and LPG consumption c with naturall gas. Section 2: the second route of thee project is the realisationn of a connection ca. 120 Km long for an overall transport capacityy of ca. 2.5 Bcm/year between Piombino and Bastia. In addition to the physical connection, a compression station at the starting point would be needed. The connection of the island to the Italian network would allow the conversion of the power generation plants currently fuelled by gasoil and, in the future, to the progressive penetration of the gass in the residential households. As mentioned m before, for thiss purpose another operator should realise the on-shore pipeline crossing Corsica, also drawing inspiration from the publicly available Cyrénée project. 36. ITG has performed the pre-feasibility assessment of this first batch of f the project (i.e. the Piombino-Bastia connection and the Piombino-Elba connection), but it is well aware that its realisation would need greater warranties regarding the feasibility of the following stages of the project and thus needs some further investigationn with otherr TSOs. As of now, the potential development has been assessed in accordance with the known routes coming from other studies, such as the realisation off the Cyrénée project by GRTgaz and by carrying out the necessary corrections in relation with the expected volumes (especially in the Bastia-Pinarello route,

19 19/24 which must include not only Corsica s expected consumption, as in Cyrénée project, but also the expected consumption in Sardinia). 37. In its last batch indeed, the project would allow an interested TSO to connect Sardinia with Corsica s distribution grid, for an overall transport capacity of 2 Bcm/year 38. Once Sardinia s inland grid has been built (partially through the conversion of the existing infrastructures for LPG and gasoil transportation), a substitution of the power generation plants currently fuelled by fuel oil and fuel gas (and under a long-term perspective of those fuelled by coal) would be possible. Furthermore, there is ample room for the conversion of the residential households and of some industrial factories. Table 1: Technical features of the Piombino-Islands project batch Length (Km) outer diameter * ('') Capacity (Mmc/anno) operating pressure (bar) Piombino Elba Piombino Bastia * Preliminary estimation Source: ITG elaborations c) Timing 39. The realisation of the project is planned within a six-and-a-half-year timeframe and has been split in three macro-phases, starting from the second half of this calendar year. A chart of the three project macro-phases is shown in Table 2Table 2: Table 2: Time plan for the Piombino-Island project Basic & Front end Engineering Design Permitting Engineerging, Procurement; Construction & Commissioning Source: ITG elaborations Financial and Economic Analyses of the project a) Approach 40. In accordance with the guidelines provided in the ESW - CBA methodology developed by ENTSOG, ITG has performed an Economic analysis of the costs and the benefits generated by the project for the system.

20 20/ As far as the benefits are concerned, two areas of interests were identified: (i) (ii) savings related to the improvement of the energy mix efficiency and, therefore, to a lower consumption of the fuels currently used in the areas without natural gas (such as gasoil, LPG and fuel oils); savings related to the positive environmental impact due to the lower consumption of the above mentioned fuels (and, in the future, of coal) and to the subsequent reduction of CO2 emissions. 42. Under the point of view of the additional costs that the system would sustain, 3 areas of interests were identified: (i) (ii) (iii) the costs related to the gas consumption necessary to replace the above mentioned fuels within the islands energy mix; the costs related to the CO2 emissions associated with such gas volumes; the costs related to the investments for infrastructure and plants necessary for the transportation and distribution of gas within the project areas and for the conversion of customers premises (residential households, industrial and thermoelectric plants), which are not currently geared for the use of natural gas. 43. Along with the economic analysis, ITG has also developed some hypotheses for the calculation of the financial sustainability of the project, in coherence with the guidelines provided by the ESW-CBA methodology and by considering the remuneration mechanisms provided by the existing laws of the Italian system. The remuneration, however, will be further evaluated together with the National Regulatory Authorities, after France and Italy will agree on the criteria for Cross-Border Cost Allocation. b) Assumptions and results 44. Firstly, in accordance with the guidelines provided by the CBA methodology, the analysis was run by considering the two scenarios for the evolution of the global Energy business context ( Green Scenario and Grey Scenario), as requested by ENTSOG itself. These scenarios provide an indication of the forward yearly average prices for natural gas, oil, coal and CO2 emission certificates. 45. The prices used for the analysis are those published within the scenarios provided by ENTSOG, directly reported for the commodities listed by the institution or through analogies (linear

21 21/24 regressions or average spreads) for the fuel prices not explicitly listed in ENTSOG s publication (LPG, gasoil, ). 46. Regarding the gas demand, the following assumptions were considered: (i) (ii) gas demand in the Residential segment: in each of the 3 batches of the project, progressive displacement of household consumptions, with an initial partial penetration of the market, in order to get the market target at full deployment after a 3-year transitory stage. The expected target is equal to the current penetration level of residential gas consumptions within Southern Italy for as far as Sardinia and Corsica are concerned, whilst for Elba the target was set in line with Tuscany s penetration level; gas demand in the Power Generation segment in the two main islands: conversion of the plants currently operated through the use of alternative fuels (gasoil, fuel oil,...), in particular: i. in Corsica: substitution of gasoil with natural gas for the Lucciana and Ajaccio plants, on the basis of the current capacity (240 MW overall); ii. in Sardinia: progressive conversion of plants currently using fuel oil and fuel gas for ca. 250 MW overall, in line with the indications of the 2014 s Energetic and Environmental Plan of Sardinia s Region (PEARS). (iii) gas demand in the Industrial segment: the industrial consumption needs potentially targetable in Sardinia come from 2014 s PEARS, as well. 47. The results of the simulation confirmed the value for the system embedded in the project: (i) (ii) (iii) an average net benefit greater than 500 M /year in both scenarios, with an overall net present value of over 4.5 B in the Grey Scenario and of ca. 5.5 B in the Green Scenario ; an Economic Internal Rate of Return (EIRR) greater than 20% in both scenarios; a strong resilience of the benefits, under capex and/or opex variation or time delays, with potential reduction of the achievable economic benefit not greater than 10% of the base case value under all the instances identified within the sensitivity analysis requested by the CBA methodology.

22 22/ In the end, the project is thoroughly sound in terms of economic results for the involved areas, with a social positive benefit even under the most stressful conditions of the project parameters. 49. From the financial sustainability point of view (Promoter-side), the project presents an internal rate of return in line with the basis WACC proposed by the Authority for the 4 th regulatory period. This outcome, however, shall be revised in light of the assessment by the Regulatory Authorities on the actual applicable fee regime, by considering financial market expectations at the moment of the implementation and in coherence with the risk profile of the initiative. 50. Only after this assessment, a more detailed financial planning of the project might be performed, which, as of today, would be premature Further benefits and synergies with other projects 51. As mentioned in section 5.2.2, the economic analysis of the Piombino-Islands project, according to the CBA criteria has shown: i. an high economic return, with an EIRR greater than 20%; ii. a thorough soundness of the expected benefits regardless of the market scenarios; iii. an high resilience to execution risks (time delays or opex/capex variation), which would only marginally impact the economics of the proposal. 52. Such results must be an incentive to the necessary efforts to pursue the initiative. A further advantage is given by the high reliability of the transport infrastructure through pipeline connection, for which the statistical indexes of out of order are way lower than any other system of energy transportation. 53. Along with the direct economic benefits for the involved areas, the Piombino-Islands project presents economic and environmental advantages that were not subject to a quantitative assessment, but undoubtedly represent a further interest factor to increase the appeal of the initiative for the institutional stakeholders : (i) Firstly, it must be mentioned that a potential positive boost to the economic system of the islands could be granted through the increased competitiveness of energy-intensive industries, thanks to the reduction of their energy bill, as well as the advantage for general manufacturing, services and tourism sectors, thanks to the simplification of fuel sourcing.

23 23/24 (ii) (iii) Secondly, a further advantage in terms of environmental conditions other than the reduction of CO2 emissions must be mentioned, which is related to the substitution of coal and of oil products in the thermoelectric generation of Corsica and Sardinia: the deletion of sulphur dioxide, fine dusts, ashes and heavy metals, along with the reduction of nitrogen products. Thirdly, the existence of a transportation network and a distribution network in the areas involved by the project would be synergic also with the realization of small scale LNG terminals, as they would benefit from the larger potential market created just by these networks. Also the pipe connection between the Islands and the Continent (in Italy) would be synergic with LNG terminals: in fact, such connection may create the presuppositions for a potential future reverse flow from the terminals to the Continent itself. 54. Finally, the involvement of local enterprises and workforce for the realisation of the investment and of the ancillary services (e.g. facilities realisation, transportation services ) and for the management phase (management of the grid and maintenance of the household devices) would have a remarkable impact in terms of social equality. 55. Regarding the potential environmental impacts generated from the implementation of the project, the effects on the ecosystems and on the environmental components (air, water, soil) generated by the presence and functioning of the infrastructures, the evaluation will be performed within the scope of the environmental impact procedure, but it is acknowledged that pipelines are the least polluting among all possible energy transportation solutions (including electric grids). Indeed, the most relevant impacts have a temporary nature and are limited to the construction phase (excavation, installation and setup of the pipes) Conclusions 56. ITG believes that its project proposal is the best option in order to enable the three Tyrrhenian major Islands to access the European gas network.. Low investment costs, low operating costs, low environmental impact, high reliability and high security level constitute the strengths of the initiative. 57. Under the economic point of view, the significant overall investment needs, greater than one billion euro only for the transportation infrastructure, cannot be covered only by transportation fees; thus, unless one wants to create an unbalanced fee regime, a socialized cost sharing system should be applied. The economic return for the system, greater than 500 million euro per year and the social value of the proposed project are such that they fully justify the initiative.

24 24/ The project in its full deployment will have remarkable dimensions, which will require the commitment of several gas transport and distribution Operators. The identified criticalities, however, do not reduce the appeal of the project, given the expected benefits for the system.