KEY POINTS
- Eni shares fell for a fifth straight day, losing more than 6% since August 20.
- Italy is considering a windfall tax on energy companies to help fund fuel-price relief.
- The ruling coalition is divided, while Italy and five other EU countries are pushing for talks on taxing energy windfall profits.
Shares in Italian energy giant Eni fell for the fifth consecutive trading session on Thursday as investors remained concerned about the possibility of a new windfall tax on energy companies.
The proposed measure is being considered by the Italian government as part of efforts to raise funds for measures aimed at reducing fuel costs for consumers amid the impact of the US-Iran conflict on global energy markets.
Eni shares were down 0.7 per cent at 10:00 GMT, extending their losses since the close of August 20 to more than 6 per cent. The stock also underperformed Italy’s benchmark blue-chip index, which was down 0.4 per cent at the time.
The decline came as the broader European oil and gas sector was slightly higher, suggesting that concerns surrounding Italy’s potential tax measures were weighing particularly heavily on domestic energy companies.
Italian gas distributor Italgas fell 1.4 per cent, while Enel, the country’s largest utility company, declined 0.8 per cent during morning trading.
The market reaction reflects growing uncertainty over how the Italian government will fund measures designed to cushion households from higher energy and fuel costs.
Italy’s ruling coalition remains divided over the proposed windfall tax. The far-right League has backed the idea, while the more moderate Forza Italia is understood to oppose it.
The disagreement has added uncertainty for energy companies and investors, particularly at a time when European governments are already considering ways to capture some of the additional profits generated by energy companies during periods of market disruption.
EU countries push for energy windfall tax
Italy and five other European Union countries have called for discussions in September on establishing a mechanism that would tax profits earned by energy companies amid disruptions to energy markets linked to the conflict and instability around the Strait of Hormuz.
The proposal could create additional financial pressure on major energy producers and utilities if it develops into a broader EU-wide policy.
For investors, the uncertainty over the size, structure and duration of any potential tax is becoming an important consideration in valuing energy companies operating in Italy.
The Italian government has already taken steps to reduce pressure on consumers.
Italy’s cabinet on Wednesday extended a reduction in excise duties on diesel until the beginning of September. Part of the funding for the measure is being provided through advance tax payments from large energy companies.
However, once the temporary fuel-tax reductions expire, the government may shift towards more targeted support.
Prime Minister Giorgia Meloni’s office has indicated that future measures could focus particularly on helping lower-income households cope with fuel costs rather than maintaining broad-based price reductions.
The situation highlights the difficult balance facing European governments as they attempt to protect consumers from rising energy costs without discouraging investment in the energy sector.
For companies such as Eni, higher taxes could reduce profits and potentially affect investment decisions, while governments argue that energy companies benefiting from exceptional market conditions should contribute more towards supporting consumers.
The uncertainty is particularly significant for Eni, one of Italy’s largest energy companies, as investors assess the potential impact of any new fiscal measures on earnings and future investment.
The company’s continued share-price decline indicates that markets are already pricing in some of the risks associated with the proposed policy, even though no final windfall tax arrangement has been announced.
