Snam Sees Cost Of Debt Staying Below 4% After Tapping Market

Snam SpA (SRG.MI), Italy's biggest natural gas transmission company, expects its average cost of debt to stay below 4.0% this year as it seeks to tap into capital markets to reschedule its debt, Chief Financial Officer Antonio Paccioretti said Tuesday.

Snam expects its average cost of debt this year to be between 3.6% and 3.7% before the refinancing operation, while after the refinancing operation it estimates the cost to be below 4.0%, the CFO said on a conference call on the company's first-quarter results.

The Milan-based company said it expects to tap the bond and banking markets directly in the third quarter of the year. Snam's net debt was EUR10.94 billion at the end of March.

Snam has so far raised financing through controlling shareholder Eni SpA (E).

The Italian government has decided that Eni must relinquish its 52% controlling stake in Snam as part of the country's efforts to boost competition in the energy sector to lower costs. With Eni's exit, Snam must repay its debt to the Rome-based company.

The government has said it will issue the rules setting out Eni's exit by the end of May. Eni will have until September 2013 to give up control of Snam, although Eni Chief Executive Paolo Scaroni has said he expects this to take place before the deadline.

Snam CEO Carlo Malacarne said on Tuesday's call that he can't comment on a report that said a merger with government-controlled Terna Rete Elettrica Nazionale SpA (TRN.MI) is a possibility, because the government's rules on Eni's exit aren't yet available.

-By Liam Moloney, Dow Jones Newswires; [phone]; [e-mail]