Italian steel plant in talks with Treasury to avert energy crunch - sources

FILE PHOTO: Steam comes out of the chimneys of the Ilva steel plant in Taranto

MILAN (Reuters) - Steel maker Ilva, recently renamed Acciaierie d'Italia, is discussing options with Italy's Treasury to secure gas supplies following a steep rise in prices, two sources close to the matter said on Monday.

Geopolitical tensions stemming from Russia's invasion of Ukraine have propelled gas prices to historic highs, adding to supply chain and environmental problems for one of the largest steel plants in Europe.

Acciaierie d'Italia, 38% controlled by state-owned agency Invitalia and 62% by the world's second largest steelmaker ArcelorMittal, is short of cash and has accumulated a debt of more than 280 million euros ($269 million) with Italian energy group Eni.

The sources said Acciaierie d'Italia had not signed a new gas contract for October yet.

"Talks are going on with the Treasury to find a way to support the steel plant," one of the sources said, adding Acciaierie in theory could tap Italy's gas "default transport" service should it fail to renew its gas supply contract.

Acciaierie declined to comment on the issue.

When a client loses its gas supplier it can ask to get fuel temporarily from gas grid operator Snam under the so-called default transport service before being assigned to a supplier of last resort or agreeing a new contract.

The Italian government in early August earmarked 1 billion euros to keep Acciaierie afloat but the funds have not been disbursed yet.

($1 = 1.0393 euros)

(Reporting by Francesca Landini and Giuseppe Fonte; Editing by Mark Potter)