Italy: Energy groups set to benefit from green EU funds

Brussels: Eni, Enel and other state-controlled Italian energy groups are due to benefit from a partial transfer of European Union funds to the REPowerEU scheme, credit rating agency DBRS said.

In a report analysing Italy’s challenges to spend €191.5 billion of EU post-COVID funds by 2026, DBRS noted that the Italian government was trying to shift some of that money to the green energy initiative dubbed REPowerEU.

“We believe this transfer along with a further extension to the deadline, if successful, would lead to more investments flowing through to Italian companies where the government has a significant stake, such as Eni, Enel, Snam, and Terna, and allow for a more rapid and efficient investment cycle,” the credit rating agency said.

So far, utilities and energy groups have received relatively small amounts from Italy’s EU post-COVID funds, DBRS said, mentioning the €1 billion and €3.5 billion respectively awarded to power grid operator Terna and the country’s biggest utility Enel.

“EU funds allocated to the large Italian energy and utility companies that have the required expertise to efficiently invest these funds could lead to an increase in these companies’ revenue and EBITDA, with consequent positive credit implications,” said Edoardo Danieli, Assistant Vice President, European Corporate Credits at DBRS Morningstar.

Italy intends to use funds coming from the European Union under the so-called REPowerEU plan to completely wean itself off Russian gas and turn the country into energy hub for the bloc, Prime Minister Giorgia Meloni said earlier this year.

With total funds close to €300 billion, the REPowerEU plan is aimed at ending the EU’s dependence on Russian fossil fuels and tackling the climate crisis. It includes about €225 billion of untapped loans made available under the NextGenerationEU pandemic recovery plan launched in 2021.

Italy hopes to draw some €6 billion from the REPowerEU scheme, and wants to top it up with €3 billion from national funds and a yet-to-be-announced figure from its share of the EU post-COVID programme, subject to approval from Brussels.

The European Commission is currently assessing Italy’s demand to unlock the funds but EU officials in charge have until now resisted political pressure to give the Italian government a full passing mark on all the targets it needs to fulfill.

Italy is by far the largest recipient of the EU’s pandemic recovery fund, and has already received €67 billion from Brussels in two instalments. The third payment is currently suspended, as Italy has fallen short of meeting a set of targets set by the European Commission to unlock it.