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UPDATE 1-Snam says Eni split won't up growth funding costs
January 23, 2012 / 5:30 PM / in 6 years

UPDATE 1-Snam says Eni split won't up growth funding costs

* Says unbundling would not raise Snam funding costs

* Most likely buyer of Eni’s Snam stake is CDP -analysts

* Separation to boost Eni’s international profile (Adds analyst comment, background shares)

By Stephen Jewkes

MILAN, Jan 23 (Reuters) - The looming separation of Italian gas grid operator Snam from oil and gas parent Eni will not hinder its ability to finance its plans to become a European gas transport network, it said on Monday.

On Friday the Italian government gave the green light to the ownership separation of Eni and Snam as part of a liberalisation decree aimed at cutting energy costs for consumers and business, but analysts have said Snam might face higher funding costs on its own.

“Any (ownership) separation from Eni would not cause us any significant additional cost for financing,” Snam Chief Executive Carlo Malacarne told Reuters on Monday.

Snam, continental Europe’s biggest regulated gas business, is gearing up for a big push outside its domestic market, after a reorganisation of its business and new European regulations.

Last week it signed an agreement with Belgian gas group Fluxys that envisages acquisitions or new investments to create a European gas transport network.

The $15 billion company, which also manages gas storage facilities and distribution, currently accesses all its financing through state-controlled Eni, which owns 52 percent.

“Decisions on the capital structure of Snam today are decisions taken by Snam. We currently go to the market through Eni, but the cost of debt is in line with our shadow rating,” Malacarne said.

Snam, which had debt of 10.7 billion euros at the end of September, told analysts in October its cost of financing was consistent with an ‘A’ rating.

In January Standard & Poor’s lowered its long-term rating on Eni to ‘A’ from ‘A+', following a two-notch sovereign downgrade of Italy.


Under the government’s liberalisation package, a decree allowing Eni to reduce its stake in Snam will be published in about six months, after which the group will have 24 months to act.

“We might well see Eni announcing something on its Snam stake in the early part of this year,” an investment banker in Milan said.

Eni, which has previously flagged its willingness to sell down its stake in Snam, holds a strategy meeting in March.

Ownership separation of Snam from Eni has been officially laid out in a series of measures since 2003 but has repeatedly been halted for national energy strategic concerns.

Snam controls the almost 32,000 kilometres of gas transport pipelines in Italy, and because of its strategic nature analysts believe the most likely buyer would be state-controlled Cassa Depositi e Prestiti (CDP).

CDP, which already holds a stake in power grid operator Terna, last year bought from Eni the TAG gas pipeline that transports Russian gas into Italy.

For Eni, cutting its stake in Snam to below 20 percent would get over 10 billion euros of debt off Eni’s balance sheet, which would allow it to support profitable investments in exploration and production.

“Eni still has a regional flavour rather than international because of its (Snam) gas activities. If it gets rid of that it will become an exploration-led growth player,” says Jason Kenney, oil and gas analyst at Santander in the UK.

Eni, the world’s No. 7 oil operator, is the biggest oil and gas operator in Africa and is set to be the biggest foreign player in the promising Barents Sea area.

Eni’s shares closed up 0.64 percent, while Snam fell 1 percent, compared with a 0.86 percent rise in the wider European oil and gas sector. (Reporting by Stephen Jewkes; Editing by Will Waterman)

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