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Saipem Approves $2.2Bn Plan To Escape Financial Rut

Saipem Approves $2.2Bn Plan To Escape Financial Rut

 

Saipem has forged a new plan to strengthen the troubled company’s financial position by launching a capital increase of around $2.2 billion by the end of the year.

Saipem made the capital increase deal with two of its biggest investors, Eni and CDP, which would be underwriting about 43 percent, while the remainder would be covered by banks.

Worth reminding, Saipem’s board on Thursday approved consolidated financial statements for 2021, reporting a loss of €2.467 billion.

It is worth noting that no new contracts would be acquired in Russia which currently represents a limited portion of the existing backlog.

The updated 2022-25 Plan is based, in its entirety, on the dynamics of Saipem's target markets presented in October 2021 and, specifically, on growth trends in the offshore E&C and offshore drilling businesses.

The expected higher growth will focus on Offshore E&C, for which a 2021-25 CAGR of 8 percent is expected, driven by the recovery of both conventional and SURF sectors, particularly in the Middle East and Africa; offshore drilling, with a 2021-25 CAGR of 16 percent expected on a global scale; and offshore wind, considered a sizeable market with strong growth potential at a 2021-25 CAGR of over 30 percent.

Furthermore, the current energy market scenario could encourage the development of new energy infrastructures for the diversification of energy supply in many countries.

Saipem will attempt a reduction of structural costs, with a target increase for 2022 to over $165 million and over $330 million run rate in 2024, starting from the 2021 cost baseline. Also, the company will look to increase focus on the acquisition of offshore operations, both E&C and drilling, marked by a higher profitability thanks to the company’s consolidated competitive position.

A focus will be increased on the acquisition of offshore operations, both E&C and drilling, marked by higher profitability due to Saipem’s consolidated competitive position.

The plan also involves increased selectivity in the acquisition of onshore E&C business, prioritizing higher-tech projects in the LNG and gas valorization segments, as well as repositioning on low-risk offshore wind business in 2022-23.

The final guideline in the plan will be Saipem's focus on energy transition and circular economy through the development of modular and industrialized solutions, particularly on the CCUS value chain, plastic recycling technologies, and subsea robotics.

Financial package

Saipem said that the revision of the 2022-25 Strategic Plan laid the foundations for the package to strengthen its financial and capital structure, approved yesterday by the Board of Directors.

The goals of the financing package are re-establishing the levels of equity in line with the company's size, reducing the Company's level of indebtedness, re-establishing adequate cash levels over the Plan timeframe, and stabilizing Saipem's credit rating to ensure access to debt capital markets to refinance outstanding bonds.

The Financing Package will enable a capital increase of $2.2 billion expected to be implemented by the end of the year. The company agreed on a new Revolving Credit Facility of up to $1.1 billion, which will be arranged by the start of the capital increase and with regards to which seven banks participating in the Financing Package have confirmed that they have preliminarily approved their participation for approximately $495 million.

Saipem added that it also arranged signature lines on a bilateral basis from banks participating in the Financing Package for an overall amount of around $1.5 billion.

In this context, the Financing Package provides for an immediate liquidity intervention, for a total amount of $1.65 billion.

The liquidity intervention is structured by $710 million by way of Payment on Account of Future Capital Increase by the shareholders exercising joint control over the Company – Eni and CDP. The residual amount was agreed through financial support from leading Italian and international banks.

In this respect, a mandate letter was signed with Banco BPM, BNP Paribas, Citibank, NA London Branch, Deutsche Bank, HSBC Continental Europe, Illimity Bank, Intesa Sanpaolo, and UniCredit.

Read the latest issue of the OGV Energy magazine HERE

Published: 25-03-2022

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