Good afternoon, ladies and gentlemen, and welcome to Eni's 2012 Full Quarter and Full Year Results Conference Call, hosted by Paolo Scaroni, Chief Executive Officer and Massimo Mondazzi, Chief Financial Officer. For the duration of the call, you will be in listen only mode. However, at the end of the call, you have the opportunity to ask questions. I'm now handing you over to Joost to begin today's conference. Thank you.
Good afternoon, ladies and gentlemen, and welcome to our conference call. I will take you through some of the highlights of this year, and then I will hand you over to Massimo Mondarte, our CFO, who many of you know well from his time as Deputy CFO of Eni and in key positions in E&P for a more detailed look at the Q4 and full year numbers. With regard to the highlights, in 2012, ANI delivered a robust performance. On top of that, we have fundamentally changed the profile of our company. Eni is now financially stronger and more focused.
Our balance sheet has been transformed. Through the disposal of significant stakes in Snam and Galp, we have reduced net debt by almost €13,000,000,000 bringing our leverage to 25% from the previous 46%. Our remaining stakes in Starm and Galp are worth around €5,000,000,000 at current market prices, and we will continue to pursue value creating opportunities. The transformation of our balance sheet has gone hand in hand with that of our long term growth prospects. Exploration has been truly exceptional.
In 2012, we have added over 3,600,000,000 BOE of new resources or almost 6 times our 2012 production. And this is not just Mozambique. We have also had significant success in the Barents Sea, West Africa and in Egypt. And through efficient project sanctioning, we have achieved an organic reserve replacement ratio of 147%. We are on track with our major development projects.
In particular, we are pressing ahead with Mozambique, thanks to the agreement struck with Anadarko in December and confirm FID by 2014. And with regards to cash again, we are progressing steadily towards completion and we will start up before the contractual date of June 2013. Of course, growth needs to be built on a secure base. And on that front, you should note that Libya has delivered a robust performance with a quicker ramp up than many were expecting, although there is still a shortfall compared to pre revolution production levels. While AAMI's value creation opportunities have never been stronger, reaping the full benefits of this transformation requires structural reform of our mid and downstream businesses.
In Gas and Power, we have seen continuing demand destruction. In 2012, consumption was 6% lower in Italy and in key European countries year on year and 12% lower compared to pre crisis 2,008. This has prevented European oversupply from being absorbed and spot prices from closing the gap with oil linked prices. In this context, our focus is on the renegotiation of our supply portfolio. We have now opened renegotiations regarding around 80% of our supply base.
At the same time, we have focused our commercial efforts, our own segments in which we can add value such as retail and LNG. On top of that, we have launched a reorganization to integrate the supply activities of Gas and Power and R and M together with trading, risk management and the wholesale commercial activities of gas and power, including LNG. This integration will allow any to capture synergies between supply, trading and sales, which are becoming increasingly interconnected as the market for natural gas becomes more liquid. This activity will be led by Marco Alvera, who is currently in charge of our risk trading arm and in the past has run the supply activities of Gas and Power. Turning to R and M.
Here too, we are facing unprecedented product demand declines, down 10% year on year in Italy, adding further pressure to Europe's structural refining overcapacity. We have made progress in aligning capacity with demand through the temporary closures at the JLA, Venice and Tarentor refineries and they reduced cost by over $100,000,000 Lastly, Versalis has experienced the worst scenario on record with high naphtha and utility costs and low prices for commercial chemical for commodity chemicals. We are working to reduce our exposure to loss making commodity chemicals, while at the same time striking international alliances to strengthen our position in more profitable niches. Overall, 2012 was a strong year for our company with robust results in EMP and good progress on the restructuring of our downstream businesses. As a result, the Board of Directors intend to submit a proposal to the AGM for a full year 2012 dividend of EUR 1 point 8 per share.
And now over to Massimo for a more detailed look at our numbers.
Thank you, Paolo. In the Q4 of 2012, the market environment was mixed. The average Brent price was $110 slightly up versus both last quarter year on year. The refining margin in the Mediterranean area remained volatile and the Brent Urals margin dropped down from the high level seen in the Q3 to around $2.8 per barrel, 10% lower than the same quarter last year. Despite the improving trend of the euro against U.
S. Dollar, comparing Q4 2012 with Q4 2011, the U. S. Dollar has appreciated 3.8% versus euro. Before we turn to our results, you should note that following the sale of the 30% of NAM to cash deposit depreciate, which occurred last October from the Q4 NAM is completely deconsolidated whilst the portion of it, the so called continuing operation contribution under IFRS 5
was present in the
Q4 2011. As you may remember, until Q3 2012, continuing operation including the result of NAM's transaction with ENI. This change in perimeter affect our year on year comparisons. In terms of adjusted operating profit, in the Q4 of 2012, we reported a 17% increase to €4,960,000,000 Excluding NAM from Q4 2011, Eni would have reported an increase of approximately 30% in adjusted operating profit. The result reflects a robust operating performance in Exploration and Production division, up 15.4%, also due to the ongoing production recovery in Libya.
Gas and Power reported a profit reversing the prior year loss, driven by the marketing activity, which benefited from the negotiation of certain supply contracts and the ongoing recovery of lithium supplies. Refining and Marketing reported a substantial reduction in operating losses driven by efficiency and optimization gains. Turning now to the adjusted net profit from continuing operation. In 4th quarter, it was €1,520,000,000 a 3.6% decline year on year. Adjusted for the snub deconsolidation this metric would have shown a 9% gain year on year.
The 4th quarter net profit was also impacted by a higher than average adjusted tax rate of 67.3 percent, affected by write down of deferred tax asset accrued as adjusted profit in the previous quarter of this year. Excluding this effect, the 4 quarter tax rate would have been 62.5%, still higher than the 56.4% recorded in the corresponding period 2011 due to the higher E and P tax rate and the lower result from associates. And now I'll give you some highlights for each business. First, E and P. In the Q4 of 2012, reported liquids and gas production was €1747,000 per day.
This figure is calculated assuming the new any conversion rate of gas to barrel equivalent, which was also used in the Q3. Performance was sustained by recovery of the activity in Libya, the start up and ramp up of fields particularly in Russia and higher production in Iraq. These positive factors were partially offset by the shutdown of the Agilif Franklin field in the U. K, forced major events in Nigeria and mature field decline. The stronger production led to higher E and P EBIT, which was up 15.4 percent to EUR 4.876 billion.
And now Gas and Power. In the Q4 of 2012, despite the contraction in European demand, Eni's cash sales of 24,400,000,000 cubic meters were in line with the Q4 of 2011, excluding the impact of the Gulf disposal. Ennis sales in Italy increased by 9.1% from the Q4 2011. The positive performance was driven by increased sales at certain Italian sports exchanges following the positive effect of commercial initiatives. These increases were partly offset by lower sales to the power generation sector, reflecting the ongoing economic downturn, while sales to residential customer were stable.
The increase in the sales in Italy was offset by the fall in European markets, which on a comparable basis were down 8%. This decline is mainly attributable to the U. K. And Northern Europe due to the unavailability of gas, a result of the accident which occurred at Eglin Franklin and the Berrien Peninsula market which was down 9%. In terms of economic results, in the Q4 of 2012, the Gas and Power division reported an adjusted profit of €41,000,000 reversing the loss of €72,000,000 in the Q4 of 2011.
This performance was driven by the marketing activity, which benefited from the renegotiations of certain supply contracts and the ongoing recovery of Libyan supplies. These positives were partially offset by lower sales prices due to the current demand downturn in gas and electricity and strong competitive pressures. The international transport result that generated a result of €75,000,000 was broadly in line with the same period 2011. As you may recall, a number of our gas and power activities among which union to NOVAGAS and GAAP are not consolidated in EBIT. Income from these associates in the 4th quarter accounting for €23,000,000 versus €93,000,000 last year impacted by the European recession and lower income from Gulf following the sale.
As for ARM, in the Q4 of 2012, it recorded an adjusted operating loss of €9,000,000 with a significant improvement for the Q4 of 2011, reflecting the efficiency gains optimization measures, lower throughputs at less competitive plants and better marketing performance due to additional phase to the Italian wholesale sector as a consequence of the shutdown of certain competitor refineries. These positives helped to mitigate continuing margin weakness and volatility. Finally, the other businesses. In the Q4 of 2012, the Chemical division reported an adjusted operating loss of €170,000,000 The improved performance versus last year was mainly due to slightly better margin at Cracking Plants, which benefited from lower supply cost of oil based feedstock and efficiency measures. The Engineering and Construction segment reported a lower adjusted operating profit, which was down by 18.7% in the Q4 of 2012 to €317,000,000 Other activities was in line with the previous year, while corporate shows a loss of €83,000,000 compared to €19,000,000 last year.
As a consequence of lower contribution from any insurance, the group insurance capital company related to the increase in claims percentage. In line with our new structure, we have strengthened our net debt position, which as of December 31, 2012 amounted to $15,400,000,000 a reduction of $12,600,000,000 from December 2011. Net cash generated by operating activities was €12,400,000,000 in the year. It was impacted by the deterioration of working capital of €3,400,000,000 due mainly to the Engineering Construction Business and Gas and Power. But Gas and Power payment has been delays from clients and take or pay prepayment to suppliers and the general deterioration in Europe and at the end economic environment.
Capital expenditure amounted to 12,800,000,000 dollars and mainly relates to the continuing development of oil and gas reserves and the upgrading of Saipem's offshore vessels and drilling units. Financial investment amounted to €57,000,000 Dividend payments to any and minority shareholders were €4,400,000,000 Our balance sheet transformation was driven by the streamlining on our corporate structure Asset disposals mainly related to the sale of 35% of Snam, 9% of Galp and upstream assets including 10% stake in Carajaganaka generated proceeds of €6,600,000,000 and the consolidated €12,400,000,000 of debt. The stronger balance sheet position has been accompanied by an improvement of our cash and cash equivalent position from €1,500,000,000 at year end 2011 to €7,800,000,000 at year end 2012. Thank you for your attention. Now I will hand you over to Paolo for his final remarks.
Thank you, Massimo. Looking forward to 2013, in E and P, we will grow production by over 3% at our planned scenario of about $90 a bundle, driven by key startups such as Kashagan, Angola LNG and the Algerian projects. We will also continue our focus on exploration and target over EUR 1,000,000,000 BOE of new resources. In Gas and Power, we expect results to be lower than the results reported in 2012, owing to significant competitive pressure, especially on the oversupplied Italian market. We will contain the impacts of the market deterioration by accelerating our renegotiation efforts with all our major suppliers.
In R and M, we expect results to be better than those reported in 2012 as cost efficiencies and a stronger acetate performance will more than offset the expected deterioration in the refining environment and weak product demand. CapEx will remain broadly in line with 2012 and will be mainly focused on the development of our new major projects. This will continue to fuel Eni's growth in the future, a theme which we will discuss further in our strategy presentation next month. Thank you for your attention. Massimo and I together with other key managers from the business units will now be pleased to take up your questions.
Ladies and gentlemen, the Q and A session is now open. I'd like to remind you that if you want to register for your questions. Thank you. First question comes from Mr. Tipan Jodlingham from Nomura.
Mr. Jodlingham, please.
Thank you. Good afternoon, gentlemen. Two areas, please, I'd like to make my questions on. Firstly, just on Kashagan. Could you talk about the exact milestones that you now need to reach first oil?
And then the speed up the speed of the ramp up to the threshold for commercial production? And if there is a number that you may give that you've assumed in terms of the contribution from cash again for 2013? My second question comes on to Algeria and the recent news flow around Saipem. I wanted to know has ENI executed own internal investigations on activities and relationships in Algeria? And then has the company taken any further steps there?
And are you comfortable with your corporate governance? Thank you.
Thank you. Claudio will answer the first question on again. I will answer your own material.
So cash again. So we have 3 main milestones. The first one is onshore. We have to finalize the completion by March. And then we start testing with the gas with gas and diesel.
And we have finalized the completion we completed completion onshore and we had to start we have finalized the completion onshore for the 2nd train by March April. So that are the main milestones. In terms of production, we budgeted about a contribution our equity about 19,000 barrels per day for 2013.
And now on Algeria. First of all, thank you for your question. Before going into the details of it, Terex, it would be useful to set out my thinking on the whole subject. Now first of all, any policy is nothing illegal is ever acceptable. It is perfectly possible to do business anywhere in the world without paying bribes.
And if it wasn't, we wouldn't do business there. That needs to be crystal clear. 2nd, to ensure that our actions are compliant with our policy, since I joined Eni in 2,005 and to have ensured that no contracts with intermediaries were entered into. In addition, we have introduced strict anti bribery processes and procedures, which are recognized as some of the best in the world. Bribes are not only illegal.
They would also damage our business. Our reputation has always been one of the major drivers of our growth. The goodwill this creates has made Annie one of the major companies in our sector. Now specifically with regards to Saipem, which is an independent listed company, neither any nor I have any involvement whatsoever with the alleged practices under investigation. Indeed, when we found out about the allegations at the end of 2012, in line with our role as major shareholders, we made our concerns known to the Board of Saipem, suggesting they take all appropriate measures, including possible management changes in order to rectify the issue.
This step indicates our 0 tolerance approach on this subject. While any wrongdoing will need to be evaluated by the Italian magistrates, we felt our concern was justified by the red flags, which the investigation raised on-site PEM's processes. More specifically on your question, we commenced our own internal audit with the view to act in a completely transparent method. And as far as our procedures are concerned, particularly our anti corruption procedure, we believe that we are at the top of the best practices in the world as far as NIM is concerned.
Thank you.
Next question comes from Mr. Houtan Yazari from Bank of America Merrill Lynch. Mr. Yazari, please.
Thank you, gentlemen, and good afternoon. I just really wanted to focus around the gas renegotiations, which you say are underway. Maybe you can give us some color on how receptive your gas suppliers are to renegotiations, whether they're going to be applied retroactively like we saw last year and we obviously had a very good Q1 result in 2012 and whether we could potentially expect similar sorts of effects coming through from renegotiations there? And the second thing, I just wanted to move on to Mozambique and just get some just get an update in terms of how the asset negotiations are going there with your partners And whether you're looking to farm down? And indeed, has there been any progress on farming down your 70% stake?
Thank you.
Very good. Now on the first question, I would ask Marco Alvarado to answer.
Thank you, Paolo. Good afternoon. I would like to say without going into the specifics of each specifics of each contract that if on the one hand the increasing liquidity at the hubs is putting severe pressure on our
commercial margins. On the
suppliers are now finally coming to terms with the fact that liquid markets and hub markets are to be reckoned with and have to be taken into account into the contracts. We're in an unprecedented phase where we have effectively all our major contracts open. That's about 80% of volumes. We expect to close most of these in 2013. The timing of the closing of these is not predictable, because it's a lengthy negotiation.
So we expect some volatility in the quarters.
Accounts.
Okay. Very good, Matt. So with regards to Mozambique, this has been an exceptional success for Aimi. We have now 70 5 Tcf of gas in place and an agreement with Anadarko that basically means we can go ahead with the development at full tilt while fine tuning unitization agreement. Now we are very happy to be sitting on 70% of 75 Tcf and are progressing towards FID by 2014.
However, if we were to receive an offer of a strategic alliance, which adds value to the we would of course consider it and inform the market upon its signing.
Wonderful. Thank you. Just a follow-up on that. How comfortable are you going to FID on the Mozambique project without having announced major offtake agreements for gas just as yet?
So the answer is that we don't get any answer there without any contractual option on the offtake. So that is one of the conditions.
Understood.
And we are working on that, Opusia.
Of course, you know that we have co gas as one of our partners. Yes.
And there are also 2 others there is a queue, because these gas is a good and cheap gas. So it is very competitive. And well positioned as well. Very competitive
from the market point of view.
Understood. Thank you, gentlemen.
Next question comes from Mr. Needham Sharma from JPMorgan. Mr. Sharma, please.
Thanks. Afternoon, gentlemen. Two questions, if I may. First one is on your guidance. You guided to a no change in gearing in 20 13 versus 2012 under $90 oil price scenario after factoring in portfolio management.
My question is what extent of portfolio management have you dividend, what is your thinking on both the dividend policy and payout in 2013? Thanks.
Okay. Massimo will answer the first question and then we'll answer the second one.
Okay. As you can imagine, we are unwilling to disclose our assumption as far as the disposal are concerned. So I understand your point and I'll try to give you a different guidance if I may. So if I would say, if we imagine the current scenario I mean Brent price around $110 and we assume still the negative in negative and deteriorating environment in Gas and Power and Downstream and euro versus dollar exchange rate is around 1.3. I would say that the any leverage should be just slightly higher than what we experienced in at the end of 2012.
Okay. As far as dividend is concerned, you took note that our final dividend for 2012 is up 3 0.8% year on year. As for next year and in general for our future shareholder remuneration policy, we will give you further detail at our strategy presentation in March.
Thank you.
Next question comes from Mr. Oswald Clint from Sanford Bernstein. Mr. Clint, please.
Thank you very much. First, just on the upstream earnings in the Q4, which look very strong. Can you just talk about if there's anything there on the cost side or talk about cost in the 4Q relative to the last couple of quarters? And also when you have a force majeure in Nigeria, does that mean you don't pay royalties? And therefore, was there royalties not being paid in terms of Q4?
And then secondly, just on Libya, you mentioned there's still a bit of a shortfall versus previous
questions. The 3 questions on cost. In 2012, we have been quite good on cost because we reduced our operating cost and we are in a range of $6.7 per barrel. That is one of the best in the industry and that is one also all the reason of our robust result. So Costa is quite good and that could be also true in the looking forward.
For Nigeria, we don't when we don't produce, we don't pay royalties. So the royalties is linked to production. And for Libya, as you said, we are our performance in 2012 has been quite good. The average is 255,000 barrels per day and that also was our target. We think that we can recover full production by 2013 or it's hard to say in 2014.
So in 2013, we continue progressively increasing and updating our projects and our maintenance.
That's great. Thank you.
Next question
Thank you. Good afternoon. I had three questions, please. Firstly, in 2012, did you have some take or pay obligation? And if so, could you give us the cost and the volume?
Secondly, you coined to 2013 production growth at $90 oil of over 3%. Can you just remind us of your oil price sensitivity in terms of the PSC effect? So what would it be at current prices? And thirdly, in 2012, you had a €4,000,000,000 asset impairment, of which €2,800,000,000 in Q4.
Can you it's a substantial amount.
Can you just remind us of what it's made up of? Thank you.
Okay. A quick answer to your first question. We had a take or pay of €500,000,000 in 2012. On the second question, cloud?
On the second question at today production, the growth should be 2% instead of 3%.
So, I think, Massimo speaking, as far as the impairment, the total inferred cost of €2,900,000,000 in the 4th quarter of 2012. So some color around $500,000,000 related to the E and P assets, some assets in U. S. And in Middle East. All these write down relate to, I would say, industrial reasons.
The majority of the total write down relate to Gas and Power. The total amount is around €1,600,000,000 and relate to the write down of the distillate goodwill. For your information, the remaining goodwill at year end is around €400,000,000 And the remaining part relates to the refining and marketing. The write down amount to €600,000,000 around €600,000,000 and relate to some refinery place we have in Italy.
Thank you very much.
Next question comes from Mr. Alastair Syme from Citi. Mr. Syme, please.
Yeah. Good afternoon, everyone. Can I just ask for a bit of disclosure around the reserve replacement figures for 2012? What are the big moving parts in the 1,000,000,000 barrels that you've added?
So the replacements of this here. One of the main contributors in terms of countries in the replacement of 2012 are Venezuela, Nigeria, Algeria, Congo and Libya that are the main and Russia, yes, Russia for a third party, yes, That are the main contributors coming from the project that we sanctioned in 2020.
Can I just confirm that there's still there's none of Mozambique booked at this point?
No, no, no Mozambique. We can put as a P1 non developed P1 when we take the FID in 2014.
And can you say I don't know in absolute percentage terms roughly how much of cash again is booked at this point?
Cash again cash again, we have nothing this year because we already booked because we took the FID. And then we will during the production after the production we can book something following the start up of the different wells. But this year there is no cash
again. Thank you, Claude.
Next question comes from Mr. Marc Bloomfield from Deutsche Bank. Mr. Bloomfield, please.
Good afternoon. Two questions, please. First of all, on Kashagan. Just wondered if you can give us any sense of whether there's going to be a significant working capital build prior to that project starting commercial production. And on that point, perhaps you can give us some sense of when you expect to book first revenues?
Also on cash again, perhaps you can give us a sense of what you see the exit rate at the end of 2013, please? The second question is on refining and marketing. A very strong result in the Q4 despite indicator margins and throughputs essentially flat year over year. Perhaps you could quantify for us a year over year contribution from efficiency gains and operational improvement And maybe give us some sense of what the expected benefit from those factors is going to be in 2013? Thanks.
Very good. Claudio will answer the first one
The first one about the working capital risk in Chagana, I don't have any significant value to highlight on this respect. So there will be no any significant amount capitalized as far as Kashagan.
So and by the end answering to your question about production is by the end of 2013 or early 2014, we seem to reach about $200,000 per day and then there is a growth going up to $370,000 during 2014. Okay.
And as far as the refining and marketing margin is concerned, obviously, the shape of the result we got quarter by quarter in 2012 is related to the trend of the margin. So by definition, we benefited from the spike we had in the Q3. And then as far as the internal effects are concerned, what I could add is that we gained something like €100,000,000 in terms of efficiency. So reduction in fixed cost during the 2012. And we also benefited from the partial closure of some sites we have in Italy that are the one for example, Venice that now is under a transforming process to a biorefinery and some other sites among which Gela that has been partially stopped and this result in a total benefit for our margin.
Thanks.
Next question comes from Mr. Michele della Vigna from Goldman Sachs. Mr. Della Vigna, please.
Good afternoon. I'd like to ask 2 questions, if I may. The first one is on E and P. We've seen a big improvement in the realizations for both oil and gas in Q4 versus Q3. I was wondering what the key drivers are there.
And then my second question is regarding buybacks. You approved the program with your Board. I was wondering under which scenario of oil price or further disposals you would start to use that to avoid going into an inefficient balance sheet? Thanks, Alex.
Very good.
So the first question we the good increase comes from mainly Libya that has a good production in terms of cars in the last quarter. Then the U. S, Italy, the U. S, Italy and Iraq that we have some good increase. That are the main contributor in Ecuador sorry that are the 4 main contributors in the last quarter.
Now as far as the buyback program is concerned, you are aware that the last AGM, we acquired the authorization of buying back up to 10 percent of our shares. Now we will talk again about this subject at our strategy presentation in margin, which will present the whole plan for cash back to shareholders.
Thank you.
Next question comes from Mr. John Rigby from UBS. Mr. Rigby, please.
Thank you. Thank you for the opportunity to ask questions. I've got 2 clarifications and then one border point. On the guidance that you've given for 2013 on production, Can you explain what your adjustment is if you've done any for Elgin Franklin? So is this an underlying number?
And can you just are you able to lay your hands on the number of what Elgin Franklin did contribute to your production in 2012? And also on your Gas and Power guidance, going back to the comments right at the start of the call on the Q and As, does the guidance that you're providing take into account any expectation on the retroactive adjustments that you mentioned? And then the second question, that was a double part first question. The second question is around Saipem. And I know, Mr.
Scroni, you made some comments, I'm not sure how official they were or not a couple of days ago about Saipem. But it does raise the question, a point that you've made before of having equity ownership and no control. If the sort of arm's length investment that you have runs the risk of damaging both E and I and your personal reputations. And I just wonder whether you were prepared just to expand a little bit about that in the aftermath of what's taken place? Thank you.
Very good. Claudio on the first one, I will answer the other.
So, on the first one, Helgi and Franklin, our hypothesis was to have a startup. If We have a startup in margin that has been confirmed by the operator Total and by also by the authority in U. K. So that is we will start as you know with 4 wells 2 plus 2. And then during the year if all the technical issue will be fixed, we can add additional 2 wells.
That is the problem. In 2000 and for the years, we have a so for the 3 months we have a loss of 88,000 barrels. In 2012, Franklin for us was a loss of 20,000 barrels per day. That was average.
Okay. On the guidance on Gas and Power for 2013, let me try to give you some insight into the various moving parts. 1st, when looking at year on year comparisons, you should remember that to the shutdown in 12 included a number of extraordinary positive and negative impact from supply and sales contract negotiations. While we do not disclose the individual numbers, you should bear in mind and we said it before that on an underlying basis, Gas and Power was not profitable in 2012 as our supply does not yet reflect the deteriorated market conditions. Now how this situation requires several elements.
Now first of all, gas and electricity demand will continue to be weak in our hypothesis. On the back of an extremely weak 2012, we are expecting only a very limited improvement in Europe and none in Italy. Now the negative market context coupled with the significant take or pay pressures accumulated not only by us, but by all major operators, Italian market. Already, we have seen the Italian hub price, which we call PSD, trading below European hub prices, a trend which has impacted the 2012, 2013 commercial campaign significantly. Now given the increased pricing pressure, absent any change in supply costs, we will see gas and power results well below those achieved in 2012 on an underlying basis.
So the question become, what will happen to supply costs in 2013? Now on the assumption that we will close all the negotiation in 2013 and including the retroactive benefits of the negotiation we are working on, we expect to limit the impact of the market deterioration. In that case, 2013 would look similar to the underlying 2012. I don't know if I gave you an answer, but it's a kind of complex guidance to give you in such a complex market. Now on Saipem, your question is in fact, does what has happened change our view of what is an appropriate shareholding in Saipem?
Now let me first point out something which has gone somewhat forgotten that despite the recent share price fall, Saipem has been extremely good investment for Penny. Investors who bought the shares at the listing in 2019 have made their money 18 times over between reinvested dividend and share price appreciation. And the total shareholder return in the last 10 years has been 300%. This using as numbers the today numbers, not the numbers of 2 months ago. As I've said, reviewing our long standing relation with Saipem is not a priority at this time.
However, just to give you some insight into our thinking, As we have shown in 2012, we have a pragmatic view of our corporate structure and where our North Star is shareholder value creation. Today, to date, our view has been that on balance disposing of any stake in Saipem would not be in the interest of our shareholders. That's because we judged that the synergies between the two businesses on top of Saipem's extremely strong prospects were worth the complexity of consolidating and guaranteeing the liabilities of a company we don't control and can't control by law. And because we did it, if we did it, we would damage its business model. Now, we periodically review the advantages and disadvantages of our corporate structure and our judgment of the best way to create value for our investors may change over time and what has happened recently might contribute to it.
Okay. That's very clear. Thank you.
Next question comes from Ms. Kim Fusier from Credit Suisse. Ms. Fusier, please.
Yeah. Hi. Good afternoon. Two questions, if I could. Firstly, if I could ask the I guess the usual question on Galp.
I believe we're approaching the end of the lockup period on the 28th February. And I was wondering if you could offer any thoughts or comments on how you see the remaining off stake? And my second question, I guess, is on Chemicals. I think last year, you guided to a €400,000,000 EBIT improvement by 2015, but you actually made a record loss in 2012. So do you still believe that you're on track to achieve that target?
Thank you.
Massimo the first one and Daniela Ferrari the second one. Okay. Sorry, but I cannot give you clearly
any guidance as far as talc is concerned. So what we can confirm is that idea is not to keep this position for longer periods, but again, I'm not able to give you any clear guidance about when and how we will go on disposing these shares.
Okay. About chemicals, 2012 was the year when we started to engineer. We announced the new strategy at the beginning of 2012. We changed the name. We started to engineer an intervention on the structural reforms we had to do in our industrial system.
And we are going to apply those starting from August this year. So the full effect on what we have under control will start to happen from August onward. This means restructuring of the poor performing site, change of our portfolio. So alongside the engineering of that during 2010, we have strike a few deals to reposition our site internationally in most growing market and interesting markets for the chemical business. There has been an unprecedented combination of scenario for us in terms of raw material price and commodity price of our chemicals, which made us to make an unprecedented loss.
But we are confident that this will come under our control during 2013.
Are there any more questions?
No more questions at the moment. There is one more question from Mr. Andreas Scauri from Mediobanca. Mr. Scauri, please.
Good afternoon. Mr. Scauri, I had just a follow-up question on gas marketing guidance, detailed guidance that you just provided.
The guidance that you said, does it include potential
positive one off from the renegotiation of contracts that you are implementing and you expect to close in 2013 or not? Thank you.
Yes. I would say yes. We expect also we included in this guidance some positives.
I don't know if you can answer, but is it possible to quantify or not, I imagine?
No, no. We are in the middle of a negotiation and of course, middle of several negotiations and it would not be appropriate to give you more details now.
Okay. Thank you.
Next question comes from Mr. Jason Kenney from Santander. Mr. Kenney, please.
Hi, there. Just a short question and sorry if you did mention this earlier, but I joined the call late. Just on the tax guidance for this year, obviously, a surprisingly strong tax charge in the Q4 with the hit €230,000,000 But if you could guide for what 13 tax should be and how we should think about tax with a rising upstream contribution that would be great.
Yes. The guidance I can give you as far as the 2020 is concerned is a slightly higher tax rate than the tax rate we experienced in 2012 due to the fact that as I would say it's clear after this discussion the contribution of the Italian businesses will be poor in 2013 versus an increase in the contribution from the E and P businesses abroad that suffer a higher tax rate. And so that's the reason why the guidance would be slightly higher.
Great. Thank you. Well, perhaps if there's no more questions, we can wrap this up. If you do happen to have any more, you can get in touch with us at the Investor Relations number. Thank you very much.
The control room confirmed. There are no more questions. Ladies and gentlemen, the conference is over. Thank you for calling.