Italy's $21 Billion Privatization Drive Includes State Rail IPO Plan

15 Oct, 2023

Italy's $21 Billion Privatization Drive Includes State Rail IPO Plan

According to insider sources, the Italian government is actively working on a strategy to divest a minority share of the state-owned rail corporation, Ferrovie dello Stato, as part of its ongoing effort to bolster the nation's public finances. This significant move involves an initial public offering (IPO) and represents one of the most substantial privatization endeavors in Italy's recent history, encompassing roughly one-third of the company. The plan aligns with the Italian government's €20 billion ($21.2 billion) privatization agenda, spearheaded by Giorgia Meloni's administration, which was unveiled last month. It's worth noting that it remains uncertain whether the network subsidiary, Rete Ferroviaria Italiana (Rfi), will be included in the transaction.

Daily La Stampa disclosed that the potential value of this sale could reach up to €5 billion. However, the Finance Ministry has clarified that no official plan has been established at this time, and Ferrovie dello Stato has refrained from making any official statements on the matter.

During a parliamentary session in Rome, Finance Minister Giancarlo Giorgetti expressed the intention of Ms. Meloni's right-wing government to partially privatize select state-controlled enterprises, especially those related to infrastructure. Implementing this privatization, even with government support, could take several months, as Italy will need to enact regulatory adjustments to evaluate the tariff structure for railway operators and introduce a framework for the railway network's revenue-generating assets. The CEO of Ferrovie dello Stato, Luigi Ferraris, who assumed the role in 2021 and previously oversaw the IPO of Enel Green Power, would lead this endeavor.

Asset sales are seen as a means for Rome to address concerns from the European Union and investors regarding Italy's considerable debt and high deficit. The government has already factored in revenue from the forthcoming sale of Banca Monte dei Paschi di Siena and is progressing with a deal to sell a stake in ITA, the national carrier, to Deutsche Lufthansa. This strategy aims to reduce a significant liability that has absorbed billions of euros in state support.

In a recent budget update, Italy presented a plan to bring its deficit below the EU-set limit by 2026, a year later than initially anticipated. The strategy also includes the goal of generating €20 billion in cash inflow over a three-year period through privatizations.