CORRECTED-MNI: Italy Weighs ENI Dividend Yield Versus Debt

(Corrects story issued earlier on Feb 12)

The Italian government is looking closely at dividend yields for energy company ENI as it considers whether to push ahead with a stake sale, two sources close to the governing coalition told MNI, adding that planned partial privatisations of state postal and railway holding companies are likely to face significant delays.

While the government’s macroeconomic plan included raising EUR20 billion from privatisations over the next few years, the only sale which is close is that of a roughly EUR1 billion stake in Banca Monte dei Paschi di Siena, the sources said.

In the case of ENI, which saw its third-quarter net profits fall to EUR1.9 billion as energy prices fell, the government is still calculating whether a disposal is the best option.

“It is not convenient to sell parts of companies if the yield of the dividend is higher than what it costs to service our debt,” said one of the sources.

ENI’s dividend yield has stayed around 6% or higher over most of the past 12 months, versus average interest on Italy’s debt of 2.8% in 2023, and an average cost per new issue of 3.76%, according to Treasury data. (See MNI: Italy To Seek To Avoid Excessive Debt Procedure)

DELAYS

Meanwhile, planned sales of holdings in Poste Italiane and Ferrovie dello Stato are likely to take time, the sources said. The postal company, which is 65%-owned by the state, must first present its new industrial plan before what is likely to be a long process of parliamentary approval, while the government has still to decide how to structure a stake sale in the wholly-owned rail holding, which could include a disposal of the network, the train operator or of high-speed routes.

The government aims to keep majority holdings in both Poste and Ferrovie, raising EUR4.7-EUR6.7 billion from the combined stake sales. Bloomberg has reported that the sale of 4% of ENI would bring the government EUR2 billion.

Under European Commission rules, proceeds from sales of state-owned companies are not included in budget deficit calculations, so the operations would only marginally reduce Italy’s debt-to-GDP ratio. (See MNI: Italy Set To Downgrade 2024 GDP Forecast In April-Sources)

“We are keeping control of these companies, we are just selling a part,” one official said, asked about accusations by the opposition that it has no detailed plan for how to use any funds raised beyond easing its debt servicing pressures.