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Last updated: April 7, 2009 6:01 pm
Alexei Miller, Gazprom’s chief executive, had long warned Eni that he would be exercising his right to buy the asset, but concerns over whether the Russian company would be able to come up with the financing created the possibility that the purchase would have to be delayed.
Gazprom has been struggling under the weight of the global financial crisis, the drop in the value of the rouble, the collapse in oil and gas prices and the decline in gas demand from Europe, its most important market.
But the company has a strong ally in the Kremlin, for which it is the strategically most important company.
Gazprom Neft, its oil arm, is seen as an asset Russia was reluctant to give up.
Paolo Scaroni, chief executive of Eni, said in an interview on Monday: “I always said I wanted to keep it. What I didn’t like was the grey area, the possibility of payment in kind or a delay.”
He added that it was not a big surprise that Gazprom was able to come up with the financing because Gazprom Neft was the “crème de la crème” of the Russian oil business with the 1m barrels it produces each day being relatively cheap to extract and the company paying dividends.
“It’s not very big money, $4.2bn,” he said.
For Eni, it means the company will be able to reduce some of its €18bn ($23.9bn) debt as it continues its aggressive capital expenditure programme.
Eni bought the 20 per cent stake in Gazprom Neft at auction in 2007 following the dismantling of Yukos, which had owned the assets until it was nationalised and its politically ambitious chief executive was imprisoned on charges of tax evasion.
Gazprom gained the right to buy back the stake within two years.
The $4.2bn price tag is equal to the price Eni paid, plus interest.
Gazprom will also exercise its option to buy a majority stake in gas assets acquired by Enel and Eni after the collapse of Yukos.
Fulvio Conti, chief executive of Enel, said that the deal would be signed this month.
Investors had been worried that Eni would have faced difficulties continuing to pay its dividend without going into further debt had the cash injection from Gazprom failed to materialise.
Analysts at Sanford Bernstein, the financial services group, said in a recent report: “Eni already has the highest leverage of any of the majors, and therefore the company may struggle to increase debt without putting its credit rating at risk.”
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