Breakingviews - Saipem’s rescue offers Eni risky payback

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Eni’s rescue of affiliate Saipem looks risky. The 48 billion euro Italian energy major is joining a 1.5 billion euro cash call to prop up the troubled drilling company, in which it owns a 30.4% stake, Reuters reported on Tuesday . It will also guarantee an 855 million euro equity bridge from banks for part of the rest. If all goes to plan, that will later be refinanced with a 2 billion euro capital increase with Saipem’s other investors.

. It will also guarantee an 855 million euro equity bridge from banks for part of the rest. If all goes to plan, that will later be refinanced with a 2 billion euro capital increase with Saipem’s other investors.

Eni’s commitment to Saipem has not yielded profit. The company’s shares have dived 90% since a 3.5 billion euro cash call in 2015. This may cast doubt on Claudio Descalzi’s strategy of maintaining stakes in a galaxy of offshoots. The capital increase will help cover a forecast net loss of 2 billion euros in 2021, the result of write-downs on some contracts . But the company has yet to detail its exposure to Russia, where it won in 2019 a 2.2 billion euro share of a liquefied natural gas

. And boss Francesco Caio is under pressure. Still, a global rush to secure more oil and gas resources plays to Saipem’s core drilling strength. Eni’s support is Descalzi’s last chance for some payback.

 

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