Edison SpA (EDN.MI), a leading Italian energy company, said Friday its 2011 earnings could fall if the outcome of the renegotiations of long-term natural gas contracts aren't successful.

Edison, which is controlled by Electricite de France SA (EDF.FR) and A2A SpA (A2A.MI), said that without a positive "resolution" of the gas contract renegotiations this year, then its 2011 earnings could be weaker.

As an oversupply of the fossil fuel hits the European markets due to lower consumption from the slower economic pace and as from new sources of unconventional gas, such as shale gas, importing companies are asking for contractual changes. Among such companies there are Germany's E.ON AG (EOAN.XE) and Italy's Eni SpA (E).

In October, Edison Chief Executive Umberto Quadrino said the company would go to arbitration against its gas suppliers, including OAO Gazprom (GAZP.RS), unless they agreed renegotiate the prices of their contracts to take into account lower spot prices.

Higher long-term gas contract prices, when compared with spot ones, lowered earnings as they become unprofitable, said the CEO on the October conference call.

Edison said the board of directors approved the 2011 budget, while the new mid-term strategic plan will be assessed at a future unspecified date.

In a statement, the Milan-based company said its 2010 preliminary earnings before interest, taxes, depreciation and amortization, or Ebitda, are about EUR1.35 billion. Edison's 2009 Ebitda, a key measure of profitability for utilities, was EUR1.47 billion.

Edison shares close 1.2% lower at EUR0.87, underperforming the 0.7% gain on Italy's benchmark FTSE Mib Index.

-By Liam Moloney, Dow Jones Newswires; +39 06 6976 6924; liam.moloney@dowjones.com
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