Eni CEO says Saipem could be sold in longer term

NEW YORK/MILAN Mon Feb 11, 2013 7:58pm GMT

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NEW YORK/MILAN (Reuters) - Italy's Eni (ENI.MI) has signaled it could be open to a sale of its oil services subsidiary Saipem (SPMI.MI) after a widening corruption probe in Algeria left mud sticking to the oil major.

"It's certainly not a priority, but we could consider it in the future," Eni Chief Executive Paolo Scaroni said on Monday on the sidelines of a conference.

An investigation into allegations that Saipem paid bribes to secure a series of contracts in Algeria worth $11 billion prompted the resignation in December of Saipem's long-standing chief executive, Pietro Franco Tali.

The probe cost the heads of other Saipem and Eni executives and last Thursday it emerged that Scaroni himself was under investigation.

"We always considered it (Saipem) strategic ... the events we've gone through now lead us to rethink the relationship long term," Scaroni said.

State-controlled Eni, which owns 43 percent of Saipem, awards about 10 percent of its subsidiary's order portfolio, leading some analysts to talk of a potential conflict of interest.

"Saipem is a totally independent company on which we can only exercise moral suasion," Scaroni said on Monday, adding he saw no reason why he needed to resign over the investigation.

SLIMMING DOWN

Eni is in the process of selling down its stake in Italian gas grid operator Snam (SRG.MI) as it divests non-core assets to focus on more profitable upstream business.

The sale has also allowed Eni to take 11 billion euros of Snam debt off its balance sheet.

Saipem, Europe's biggest oil services group, worth around $16 billion, has net debt of 4.4 billion euros. Sources have told Reuters Eni was considering ways to deconsolidate Saipem debt.

"It may not be an immediate thing, but it's bad news for Saipem. It would mean they'd have to refinance their credit lines, a bit like Snam had to," a Milan analyst said.

At the end of January, a new Saipem management team under Umberto Vergine issued a shock warning on the company's outlook for this year, triggering a sell-off of Saipem shares.

The company, which, like Eni, has ADRs traded in the United States, has said it does not expect to have to make provisions to cover any eventual fine resulting from the Algerian probe.

Eni has extensive gas interests in Algeria, a country that accounts for about 30 percent of Italian gas imports.

(Reporting By Nicola Scevola in New York; Writing by Stephen Jewkes; Editing by Keith Weir, Helen Massy-Beresford and Steve Orlofsky,)

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