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Rising oil prices help Italy’s Eni back to black

Italian oil and gas company Eni said on Friday the recovery in global crude prices along with record production helped it swing back into profit in 2017.

Rising oil prices help Italy's Eni back to black
Eni's headquarters near Milan. Photo: Marco Bertorello/AFP

The company turned a loss of €1.46 billion in 2016 into a net profit of €3.4 billion in 2017, much higher than the average of just under 2.0 billion expected by analysts surveyed by Factset Estimates.

Eni's shares climbed 1.5 percent in morning trade in Milan, which was up 1.2 percent overall.

In the fourth quarter alone the company recorded a net profit of €2.1 billion, six times the level of last year and more than three times the amount expected by analysts.

“We close 2017 with excellent results which underline how the process of intense change started in 2014 has transformed Eni into a company able to grow and create value even in difficult market conditions,” chief executive Claudio Descalzi said in a statement.

The rise in crude prices, from an average of $44 per barrel in 2016 to $54 last year, helped swell sales by 20 percent to €66.92 billion. Production also climbed by 3.2 percent to 1.82 million barrels of oil equivalent per day, a record annual average.

While Eni won't present its new three-year strategic plan until next month, it announced Friday it aims to increase output by another three percent this year by stepping up production at its existing fields in Egypt, Angola and Indonesia.

Eni has put exploration and rapid development of production at the heart of its strategy. Last year it launched production at Zohr in Egypt, the largest gas field in the Mediterranean, in a record time of two-and a-half years following its discovery.

It has diluted its holdings in some of those fields, including Zohr, as it strives to maintain financial discipline as it moves forward.

“Looking to the future, we see excellent growth prospects for all of our businesses,” said Descalzi.

“However, growth must be sustainable and we will pursue it in a disciplined way with great respect for the possibility of the most difficult operating conditions,” he added.

by Céline Cornu

BUSINESS

EU finds Italy’s Alitalia loans ‘illegal’ but airline free to keep money

The EU's antitrust authorities ruled Friday that Italy's 900 million euro loans to long-struggling airline Alitalia were "illegal", but cleared the country's new carrier to get state funding and avoid paying back the money. 

Ahmad AL-RUBAYE / AFP
Ahmad AL-RUBAYE / AFP

“Following our in-depth investigation, we reached the conclusion that two public loans worth EUR 900 million granted by Italy to Alitalia gave the company an unfair advantage over its competitors, in breach of EU State aid rules,” said EU competition chief Margrethe Vestager said in a statement.

“They must now be recovered by Italy from Alitalia to help restore a level playing field in the European aviation industry.”

But the authorities in Brussels simultaneously said new flag airline ITA – set to start flying next month – was not liable to reimburse the money and that 1.35 billion euros being injected into the firm by Rome did not breach state aid rules.

“Italy has demonstrated that there is a clear break between Alitalia and the new airline ITA, and that its investment in ITA is in line with terms that a private investor would have accepted,” Vestager said.

“Once ITA takes off, it is for Italy and ITA’s management to make use of this opportunity once and for all. And we will continue to do our part to ensure fair competition in the European aviation sector.”

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Loss-making Alitalia was placed under state administration in 2017 but Italy has struggled to find an investor to take it over. The situation was only exacerbated by the coronavirus pandemic that grounded airlines worldwide.

The Italian government gave the company two loans for the amount of EUR 600 million and EUR 300 million in 2017, as Alitalia scrambled for liquidity without access to the debt market.

Earlier this year Italy said it had reached an agreement with the European Union for a bailout that creates a new debt-free company to take over some of Alitalia’s assets – ITA.

The board of directors of ITA last month approved a binding offer for 52 of Alitalia’s aircraft, related airport slots and other assets.

The Italian government has created a 100-million-euro ($117-million) fund to reimburse Alitalia customers.

Italy provided state loans to Alitalia totalling 1.3 billion euros between 2017 and 2019.

In July, it approved another 700 million euros for ITA.

Further sums are expected in 2022 and 2023, bringing the total to 1.35 billion euros.

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