A pressured push to decrease Eni’s stake in continental Europe’s largest regulated gas business has won the support of Italian government leaders and shareholders. However, if the Italian energy giant succeeds in retaining partial ownership of the company, the split could potentially run afoul of European Union rules.
Originally majority shareholders in Snam Rete Gas SpA, the country and continent’s largest regulated gas business, Eni was pushed to reduce their stake in 2009 as a part of a European Union energy liberalization accord. The move was meant to free up Italy’s gas transporting network for greater competition with regional partners.
For proponents of the ownership unbundling, which includes both anti-trust officials and shareholders, the move would benefit Eni by allowing for the deconsolidation of Snam’s 12.2 billion euro in debt, reducing Eni’s debt to 7 billion euro, allowing for increased funding of new exploration and production efforts. For regulators, the move would reduce the chance that Eni could distort natural gas flows into the European market by blocking fuel pipelines from the region’s high priced markets, which it has been accused of doing, according to Bloomberg. Further, the move would allow for the delayed implementation of a law meant to put distance between oil and gas production entities and transportation operators.
For Snam, the split would free the transportation operators to increase investment in European projects, according to the Financial Times.
While the exact details of the government-forced break-up remain uncertain, analysts have predicted that it will require Eni to reduce their stake in the company from 50 to 20 percent, garnering the firm approximately 3.5 billion. Company CEO Paolo Scaroni has signaled that the amount would help Eni increase funding towards projects in Mozambique and the Barrents Sea, according to the Financial Times.
Seemingly cleared from all sides, the deal garnered negative attention last week when the head of Italy’s gas authority remarked that Eni’s 20 percent retention of Snam would violate EU rules on the matter. While reports on the comments did not expand on how exactly they would run afoul of official regulations, given the context of EU pressure towards a reduced Eni role, the warning suggests that more divestment may be needed before moving forward.
Image: Trek Earth