Snam Working on Refinancing as Part of Italgas Spinoff

 

In a refinancing to be carried out by a dozen or so banks, the debt would end up with Snam's Italgas unit, which will be spun off by distributing Italgas shares to Snam investors and listing them, six sources familiar with the refinancing said.

 

That would leave Snam more focused on its goal of becoming a prime mover in integrating Europe's patchwork of grids and making Italy a European gas hub, in line with the European Union's desire to wean itself off Russian gas imports.

 

Snam declined to comment.

 

Snam, which has 13.5 billion euros of debt, is investing more than half its 3.6 billion euro revenues in transmission and would benefit from cutting domestic distribution commitments.

 

While Snam will raise no money from the listing, the deal will cut leverage, making it easier to tap funds on the market.

 

"Snam could go for acquisitions in Europe in order to get more control over the South European gas corridor," Macquarie analysts said.

 

Three of the sources said around 12 banks, including Mediobanca, UniCredit and Banca Imi , were being lined up for a 3.5-4.0 billion euro refinancing package that would see as much as 2 billion euros of group debt being transferred to Italgas on top of its own 1.9 billion euro debt pile.

 

The refinancing is expected to be wrapped up by the summer with a listing of Italgas likely towards the end of the year, the sources said.

 

Snam is controlled by state lender Cassa Depositi e Prestiti (CDP) through a vehicle that also includes State Grid Corporation of China.

 

Four sources said Snam would keep a minority stake in Italgas of up to 15 percent with one source saying it could be as low as 10 percent.

 

A banker with knowledge of the matter said the idea of a shareholder pact between Snam and CDP to allow the state lender to keep a firm grip on Italgas when it is on the market was being discussed.

 

Goldman Sachs is advising Snam on its options, the sources said, adding the structure of the demerger was still under discussion and some of the details could change.

 

European Ambitions
The company, which has a strategic alliance with Belgium's Fluxys, already controls French grid TIGF and Austrian pipeline TAG and recently bought a 20 percent stake in the Trans Adriatic Pipeline that will bring Azeri gas into Europe.

 

It is interested in German gas grid Thyssengas and Austria's Gas Connect Austria as well as a stake in Greece's DESFA.

 

In March Snam launched a feasibility study on demerging all or part of Italgas but gave no further details.

 

Earlier this year the group, under new CEO Marco Alvera, delayed its strategy plan which will now be unveiled on June 29.

 

New rules in Italy's fragmented gas distribution sector cutting concession areas to just 177 from almost 7,000 are expected to trigger consolidation, favouring companies with strong balance sheets.

 

In January sources told Reuters CDP was mulling the idea of merging Italgas with No 2 distributor 2i Rete gas in which CDP is also a shareholder.