Eni-Enel Stake Sales Weighed by Italy to Reduce DebtAndrew Frye and Lorenzo Totaro
Italian Finance Minister Fabrizio Saccomanni said the government may sell stakes in Eni SpA, Enel SpA and Finmeccanica SpA, or use the assets as collateral in a bid to lower debt.
“We are considering the possibility of reducing our participation in state-controlled companies,” Saccomanni said today in a Bloomberg Television interview with Ryan Chilcote from Moscow. When asked then if he was referring to companies like Eni, Enel and Finmeccanica, Saccomanni said: “We are considering this.”
“There are a number of issues to be addressed from this point of view because these companies are profitable and are giving dividends to the budget,” he said. “So we have to consider also the possibility to use this as collateral for debt reduction schemes we are considering.”
Saccomanni’s office said later in an e-mailed statement that specific plans reported in the media had not been formulated by the Finance Ministry.
“The minister responded in general terms, speaking about the strategy of reduction of debt, citing many possibilities of creating value from public assets, but without ever citing specific companies,” the ministry said in the statement.
The Italian government, led by Prime Minister Enrico Letta, is turning its attention to the $2.7 trillion debt after reining in the deficit after almost two years of austerity. The debt load has weighed on confidence throughout the European financial crisis and Italy’s two-year recession, with foreign ownership of Italian debt declining to 34.6 percent in April from 35.1 percent in May 2012.
“I hope that before the end of the year we can make clear what are we concretely envisioning in the overall strategy of accelerating the debt-reduction scheme,” Saccomanni said. He didn’t clarify his intention regarding collateral.
Eni, Enel and Finmeccanica underperformed the benchmark FTSE MIB stock index’s 0.4 percent gain as of 5:32 p.m. in Rome. Eni rose 0.2 percent to 16.64 euros and Enel declined 0.8 percent to 2.39 euros. Finmeccanica was the index’s second-biggest loser, falling 1.6 percent to 3.71 euros.
Saccomanni’s remarks “could lead to some pressure on share prices,” analysts at Equita Sim SpA said in a note to investors today.
The sale of government holdings could deepen fissures in the coalition. Deputy Finance Minister Stefano Fassina said in a January interview that the benefit “in terms of debt reduction would be little, while the state would lose control of valuable pieces of industry.”
The Treasury and state lender Cassa Depositi e Prestiti own about 30 percent of Rome-based Eni, the oil producer with a market value of 60 billion euros. The Treasury owns about 31 percent of power producer Enel and 30 percent of Finmeccanica, the Rome-based defense contractor.
Italy is mired in its longest recession in at least two decades and unemployment has risen to 12.2 percent, a record. Italy met about 60 percent of its debt-issuance needs for 2013 in the first half, according to the Treasury. Saccomanni said the presence of non-Italian investors has been adequate.
“We are satisfied with the results we have achieved so far,” Saccomanni said. “Apart from some volatility, the share of foreign holders of Italian debt has remained more or less constant. It has declined during the crisis, but then gone up again.”
Letta, 46, is seeking to stimulate the economy by paying back debt owed by the public administration to its private-sector suppliers. That effort is being accelerated as the government aims to complete 40 billion euros of arrears payments within 12 months, Saccomanni said today.
“We are anticipating there will be a powerful impact from the program of accelerated repayment of commercial arrears,” Saccomanni said.
Still, Letta needs to meet a commitment to European Union allies to keep the budget deficit below 3 percent of gross domestic product.
“I think it’s necessary to couple the current policy to contain the deficit with an effort to accelerate the reduction of debt that can have an effect on the spreads and debt financing costs,” Saccomanni said later to reporters.