By Liam Moloney
ROME - Italian gas-transport company Snam (SRG.MI) is ready to
spend at least EUR1 billion euros to expand abroad, as it tries to
capitalize on opportunities that are likely to arise from recent
efforts to open up Italy's and Europe's energy sector to more
competition.
"Energy issues have become a priority from the European Union,
and we want to take on this challenge," Snam Chief Executive Carlo
Malacarno said in an interview. Malacarne said the company had 1
billion in funds easily available, and could even consider a
capital increase to buy a particularly appetizing foreign
asset.
The European Union has in recent years made a concerted push to
allow more competitors into its energy market - and to increase
partnerships among member states - as it tries to reduce the
27-country bloc's dependence on foreign imports, particularly from
Russia, for its energy needs.
(This story and related background material will be available on
The Wall Street Journal website, WSJ.com.)
Separately, Italy's new government is trying to make the
country's economy more dynamic by promoting internal competition
and lowering Italy's energy costs -- which are among Europe's
highest. As part of its recent liberalization package, the
government has ordered Italy's largest energy company Eni SpA (E,
ENI.MI) to sell its controlling shareholding in Snam.
Malacarne said Eni had over the years been an important
shareholder, backing the company's strategy and investments.
However, Snam will be better able to decide its own fate without
such a key presence in its capital. Eni's exit "might actually make
it easier for us to make deals" with peers, the chief executive
said.
Snam has an Italian gas-transport network of about 32,000
kilometers of lines and a storage capacity of 10 billion cubic
meters. It also owns one of Italy's only two liquefied natural gas,
or LNG, import facilities and distributes fossil fuel to 5.9
million delivery points.
Malacarne said Snam would look for acquisitions across areas of
its business and would even take minority stakes in other companies
"as long as we have some role as operator."
"What we exclude is interest in financial stakes in companies,"
the manager added.
In January, Snam said it had teamed up with Belgian peer Fluxys
SA (FLUX.BT) to evaluate joint European gas infrastructure
projects, including gas storage and LNG activities, as well as the
pipelines that transport gas across countries and then dispatch it
to homes and businesses. A month later, Snam and Fluxys announced
their first joint venture by agreeing to buy some Eni gas assets
linking Belgium and Britain. The deal had a combined cost of EUR150
million.
In the interview, Malacarne said the Fluxys deal was part of an
effort to increase the level of so-called "spot gas" - or gas whose
price is based on market demand as opposed to gas whose cost is
determined by long-term contracts and is transported over pipelines
- from the British market. Most of the EU's pipeline gas is
imported from Russia and Algeria. Europe's recent economic slump
has rendered spot gas prices lower than long-term pipeline
ones.
Malacarne said the Fluxys deal wasn't "exclusive" and was open
to other parties too.
The EUR1 billion euros that Snam can rely on for expansion is in
addition to EUR6.7 billion in funds that the company has set aside
in a new four-year growth plan for Italy through 2015. Snam expects
that by 2015, gas demand would return to levels seen before the
2009 economic downturn in Italy.
-By Liam Moloney, Dow Jones Newswires;
liam.moloney@dowjones.com