By Eric Sylvers
Another casualty of oil's collapse in recent months: Italy's
plans to make a dent in its national debt by selling about 4.5% of
oil and gas company Eni SpA.
With Brent crude, the global oil benchmark, down by half since
June and Eni shares about a third lower, the sale of the stake in
Italy's largest company by market value has become unlikely, at
least in the short term. In late August the government was aiming
by year-end to sell the Eni stake, which has a market value of
about EUR2.4 billion ($2.95 billion), as well as 5% of Enel,
Italy's dominant utility.
The sale of part of the government's 30% holding in Eni was a
key part of a government program to raise about EUR11 billion from
privatizations this year and in each of the next two years in a bid
to reduce Italy's national debt, equal to about 135% of gross
domestic product, the highest in the European Union after Greece.
Volatile equity markets were already putting up road blocks to that
plan. The collapse of the price of oil has forced the government to
rethink its strategy.
The government has never officially taken the sale of Eni off
the table, although Italian Prime Minister Matteo Renzi in
September seemed to take a step back when he told a newspaper that
"the privatizations will be done and the targets will be respected,
but I'm not convinced that we need to start with Eni and Enel." He
said "I don't see it as a priority to reduce the state's holding in
two companies that have great potential, their share prices can
still grow."
Since Mr. Renzi's statement, Eni has lost a quarter of its
market value and Enel has shed 8%.
Italy had also been planning this year to sell a 40% stake in
Poste Italiane, the national postal service that also has a large
bank division, and almost half of air traffic control operator
Enav. Both sales have been pushed to next year, further
complicating the government's debt reduction plans. Government
officials first mooted the idea of an initial share sale for Poste
Italiane at least five years ago.
In the hopes of making up for the fewer than expected asset
sales this year with a bumper 2015, the government also recently
said that next year it would sell about 40% of Ferrovie dello
Stato, the national railway company.
A spokesman for the economy ministry said Italy will respect its
privatization target--an average annual sale of assets worth 0.7%
of gross domestic profit this year and the next two years--but
declined to comment on whether the Eni stake will be sold. The Enel
stake will be sold when the market price is right, the spokesman
said.
Eni and Enel declined to comment.
Selling stakes in large Italian state-owned companies has often
led to national hand-wringing and cries that the country was
dumping its best assets at fire-sale prices. The Italian
government's stake in Eni has been unchanged for 13 years while its
holding in Enel has been static for almost a decade with successive
administrations steering clear of tackling the thorny issue of
privatization.
While both Eni and Enel have more than two-thirds of their
shares publicly traded and are run day-to-day without any direct
intervention from the state, the government still plays an
important role by naming the chief executive and chairman of both
companies. Moves that lead to job cuts, difficult to carry out at
any large Italian company, are even more onerous for Eni and Enel
to pull off. Eni, for example, has long wanted to shutter several
of its domestic refineries, but has been unable to do so because of
the job cuts that would ensue.
While the plunge in oil prices has dragged down the market value
of Eni, and the amount of money Italy could raise by selling a
stake, it might, nevertheless, give a boost to the Italian economy,
which relies on the importation of most of the raw materials it
uses, including oil. Some economists estimate that if oil
stabilizes at about $60 a barrel, its current price, Italy's
sclerotic economy could grow an additional 0.5% a year.
Giada Zampano contributed to this article.
Write to Eric Sylvers at eric.sylvers@wsj.com
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