By Emilio Parodi
MILAN (Reuters) -An Italian court on Monday cleared the way for energy companies to cut off gas supplies to steel company Acciaierie d'Italia (ADI), majority owned by multinational steel giant ArcelorMittal, over mounting debts.
Weighed down by an increase in energy prices and a drop in rolled steel coil prices, ADI has run out of cash and has accumulated a huge debt pile with suppliers.
These include energy giant Eni, owed 104 million euros by the steelmaker as of end-June 2023.
ADI also has more than 200 million euros in outstanding payments to Italian gas grid operator Snam, the steelmaker's last resort supplier, which had asked the court to approve a halt to its gas supplies to ADI.
The administrative court (TAR) of the Lombardy region rejected on Monday ADI's appeal against Snam's request, effectively ending an extension judges granted in October to the business previously known as Ilva.
ADI said in a statement it would appeal the decision before the Council of State, a higher administrative court. Snam was not immediately available to comment.
The ruling is a headache for Prime Minister Giorgia Meloni's government, which is trying to avoid ADI's closure, which would cost thousands of jobs and have serious knock-on effects for the Italian manufacturing sector.
ADI's main plant in the southern Italian city of Taranto is one of the largest in Europe, and is a major employer in Italy's under-developed south.
ArcelorMittal, the world's second largest steelmaker, owns 62% of the group. State-owned investment agency Invitalia has the remaining 38%.
Italian industry minister Adolfo Urso said on Thursday "drastic action" was needed to re-launch the business after ArcelorMittal rejected a government plan to keep it afloat.
The Meloni government is seeking an agreement with ArcelorMittal that would facilitate the company's exit from ADI without triggering a legal dispute, according to people familiar with the matter.
As a short-term solution, the government is considering placing the business under special administration to avoid it being shut down.
This would be similar to Chapter 11 bankruptcy in the United States, allowing a business or individual to reorganize its debts and obligations. It could also buy the government time to look for a new industrial partner for ADI.
Some 8,200 people work at the Taranto plant, while a further 3,500 are employed in related industries. Production has been reduced in recent months, with some parts shut down and many workers on furlough.
(additional reporting by Giuseppe Fonte and Francesca Landini, writing by Gavin Jones, editing by Alvise Armellini, Emelia Sithole-Matarise and Tomasz Janowski)