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UPDATE 1-Algeria corruption case hits Saipem shares
December 6, 2012 / 10:11 AM / 5 years ago

UPDATE 1-Algeria corruption case hits Saipem shares

* Milan prosecutors probing corruption in Algeria

* Saipem shares down 8.2 percent

* Saipem CEO resigned late on Wednesday (Releads, adds analyst comment, details, shares)

MILAN, Dec 6 (Reuters) - Shares in Saipem dropped on Thursday after Europe’s biggest oil services group came under investigation for alleged corruption in Algeria, sparking concern over possible fines and future operations in the country.

The Italian group’s shares were down 8.2 percent at 0950 GMT. A European oil and gas index was up 0.5 percent.

Saipem said on Wednesday chief executive Pietro Franco Tali had resigned after it emerged Milan prosecutors were investigating orders Saipem had won in Algeria.

The company, which said it acted in compliance with the law, said the probe was looking into activities up through 2009.

A report in Italian newspaper Il Sole 24 Ore said the case focused around an order worth about 580 million euros ($758 million) to build a gas pipeline in Algeria called GK3.

Saipem, which is controlled by Italian oil and gas major Eni , has worked on several contracts in Algeria with state energy firm Sonatrach.

Saipem helped build the pipeline from Algeria that today transports around a fifth of Italy’s gas supplies and is involved with Sonatrach in the GALSI gas pipeline project that will carry Algerian gas into Italy via the island of Sardinia.

It was not clear what the repercussions might be on the group’s business in Algeria, while some analysts were concerned about possible fines.

A note from Nomura on Thursday said an analysis of corruption charges across the sector since 2000 showed that fines were typically in a range of $50-200 million.

Saipem said on Wednesday it did not think the probe would have any material impact on its results.

The company’s order backlog to Algeria stands at around 4 percent of the group total.

“We see the unexpected change in CEO as a negative given Mr Tali’s strong track record and that it will add uncertainty over future operations,” a London broker said.

Tali, who first started working at Saipem in 1993, has been at the helm of the company since 2000 and is one of the most highly respected CEOs in the oil services industry.

Shares in Eni were up 0.5 percent. Eni’s chief financial officer, who had been CFO at Saipem till 2008, also resigned on Wednesday.

$1 = 0.7652 euros Reporting By Stephen Jewkes; Editing by Lisa Jucca and Mark Potter

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