Former Ilva, what happens when the state returns to the majority

MILAN – Expectations for the outcome of this afternoon’s meeting among representatives of the federation are growing The Italian government and Aditya Mittal, CEO of steel giant ArcelorMittal, for defining the future of the former Ilva.

After numerous postponements and a fierce clash within the government between the minister Raffaele Fittoappointed by Prime Minister Meloni to oversee the delicate file, and Minister Adolfo Ursowhich has been promoting the renationalization of Europe’s largest steel mills for at least six months, in the last two weeks the decision was made to return the state through its shareholder Invitalia to the majority. However, this process is complex and full of obstacles, so the outcome of today’s summit is still a question mark.

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Agreements 2020 and weight of members

Based on the 2020 deals they’ve seen Mittal and Invitalia join Acciaierie d’Italia with a 62% stake in the former and 38% in the latter, the situation with the shares was to turn around after two years, and so was the company’s management. But in 2022, by mutual agreement, it was decided to extend the situation for another two years, given that investments in environmental compliance of the company’s emissions, which was effectively completed in August 2023.

Invitalio’s check for 680 million

But in January 2023, due to the pandemic, war in Ukraine and the subsequent rise in energy prices, Invitalia, i.e. the state, was forced to implement 680 million euros which went directly to pay bills not yet settled with Eni and Snam for gas supplies. This money was paid into a capital raising account in anticipation of Invitalia’s rise to majority ownership. But the contract defining the move was never written, remaining in the form of a term sheet and therefore open to different interpretations.

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The main issue, we have learned, concerns management rights once Invitalia exercises its right to increase to 60% and converts the 680 million already paid into equity. What will Mittal’s rights be once it drops to 40%? Who will manage the company? Points that seem not yet resolvedwith regard to the various interpretations of contracts and documents and which should be the subject of today’s shareholders’ meeting.

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1 billion tug of war

This leads to the even more pressing question of future financial resources that need to be invested in the company. Members have spent the last two months fighting over how much money should be paid and in what form. The Indians declared that they were willing to participate in raising the capital by 320 millions, and then go and see if more were needed to purchase the plants from the Commissioners, an operation that must be performed by May 31. For its part, Invitalia is asking for more commitment, 320 for the current management plus a billion to be allocated immediately for the purchase of power plants. And 2023 ended with this tug of war.

If the parties agreed today to increase Invitalia to 60% and new governance, the problem of funds for payment would largely lie on the shoulders of the state, which would have to rely on the billion and 320 million given that Mittal is unlikely to do his part by falling into the minority. If this were the case, the Franco-Indian group would be further diluted and space would be created for the entry of a new industrial partner to search in Italy or abroad (but without steel production in Europe).

Another hurdle to overcome would be a possible EU state aid infringement procedure once Invitalia grows to 60%. But the private partner Mittal paid 1.8 billion to join Ilva and the Italian state would invest more or less the same amount, not to mention that in recent years both France and Germany have proceeded to nationalize their industrial energy giants without warning from the EU.

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