Saipem to appeal fine by Algeria over gas pipeline contracts

Italian oil services group Saipem said it would appeal an Algerian court ruling, ordering one of its units to pay a 34,000 euro (37,104 dollars) fine.

The payment is due to the unit allegedly inflating prices on contracts to build a gas pipeline.

The market is closely monitoring Saipem’s various legal cases, hoping for signs of reprieve after a fall in orders as oil majors cut investments.

The company is also in the midst of a highly-dilutive 3.5 billion euro rights issue as it seeks to turn its business around and ensure survival.

The firm is jointly controlled by oil major Eni and state lender fund FSI.

Algerian state energy firm Sonatrach awarded a Saipem unit the contract to build a gas pipeline called GK3 in 2009.
The contract was worth about 433.5 million euros, according to Saipem’s rights issue prospectus.

Saipem said on Tuesday the court of Algiers alleges that Saipem Contracting Algerie inflated prices on contracts awarded by a public company engaged in industrial and commercial activities.

It took advantage of the authority or influence of representatives of said company. The Italian group denied any price inflation above market rates occurred and expects the payment of the fine to be suspended once it has presented its appeal.

The company added that the court had granted Saipem’s request to unfreeze two of its bank accounts, which have been blocked since 2010 in connection with the trial. It holds the equivalent of around 82 million euros.

Saipem said Sonatrach had reserved the right to claim payment of damages it allegedly suffered in a separate civil proceeding, but no such claim had been presented so far.

The company’s legal problems in Algeria are not limited to the GK3 contract.