Italy’s Saipem to appeal against Algeria LNG contract fine

Italian contractor Saipem said it would appeal against the decision of an Algerian court regarding a contract it won back in 2008 to build a liquefaction train at Sonatrach’s Arzew LNG facility.

Saipem and Snamprogetti, former Eni’s unit that merged with Saipem, in a joint venture with Chiyoda, won the contract from Sonatrach for the Arzew LNG train (GNL3) project with a capacity of 4.7 mtpa in July 2008.

The contract was worth about 2.8 billion euros ($3.17 billion) and the partners completed the construction in 2012.

However, an investigation regarding the contract had started in 2019 and culminated with a decision by the Tribunal of Algiers on Monday to fine Saipem, Saipem Contracting Algérie and Snamprogetti.

“Yesterday the Tribunal of Algiers reached a first-degree decision in relation to the criminal proceeding, ongoing in Algeria since 2019, connected, inter alia, to the 2008 tender for the award of the GNL3 Arzew contract,” Saipem said in a statement on Tuesday.

Saipem noted that the Italian judiciary authority fully acquitted the company regarding GNL3 project on December 14, 2020.

The Algerian court charged Saipem and its units of allegedly: “having obtained a contract, with a price higher than the expected value, concluded with a state-owned commercial and industrial company, benefitting of the influence of representatives of that company”; and of “false custom declarations”.

$218 million fine

The court imposed a fine and compensation for damages against Saipem and its units for an overall amount of about 192 million euros equivalent ($217.7 million), Saipem said.

Following the decision, Saipem would book costs for an equivalent amount at the end of the fiscal year 2021, costs whose payment is suspended following the appeal against the decision, the firm said.

Also, the Tribunal of Algiers sentenced two former employees of Saipem, the head of the project GNL3 Arzew and an Algerian former employee, to five years and six years of imprisonment respectively, Saipem said.

The firm said that the court acquitted another employee of Saipem of all charges.

Saipem added that the Tribunal of Algiers has not yet revealed the reasons for the ruling.

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