by Francesca Landini and Ron Bousso
MILAN (Reuters) – Eni could sell stakes in high-potential oil and gas projects, including Ivory Coast and Indonesia, with the aim of financing the development of these areas, while the group steps up investments in the transition .
Company sources explained this.
These new spin-offs would be part of CEO Claudio Descalzi’s strategy to create separate entities, or satellites, focused on specific businesses and capable of attracting different types of investors, including private equity firms and infrastructure funds.
The creation of satellites allows investors interested in the oil and gas sector, but not in energy transition businesses – and vice versa – to choose more precisely where to invest.
“The satellite model is an approach that we have built to have multiple sources of financing, in order to keep together the need to satisfy the demand for traditional products with that of developing new products, linked to the transition”, the director told Reuters finance Francesco Gattei.
Starting from ‘Eni gas and light’ the group created Plenitude for renewable energy and retail customers. Last year, Enilive was born around the biofuels and filling station businesses, which could open up capital to a minority shareholder, as happened with Plenitude.
The two satellites for low-emissions businesses were built by leveraging activities already present in the group which were aggregated and entrusted to dedicated managerial teams. Eni could list both of them in the coming years to finance their growth.
With this strategy – a unique approach among oil and gas majors seeking to grow in renewable energy – the group aims to showcase the potential of new businesses that struggle, in the early stages, to compete with the returns of oil & gas assets traditional, Gattei told Reuters.
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In the case of upstream businesses, the satellite model can be used to separate the activities of a specific geographical area.
For example, last month, Eni agreed to merge its upstream activities in the North Sea with Ithaca Energy in exchange for a 38.5% stake in the British company.
The nearly $1 billion deal allows Eni to share the investment effort and receive potential dividends from Ithaca.
Gattei said the group is considering something similar for other exploration and production projects that need investment.
Ivory Coast and Indonesia are among the potential candidates, according to sources.
In Indonesia, the group aims to create a gas hub following the Geng North-1 discovery and consolidating upstream assets acquired from Chevron and through the merger with Neptune Energy.
In Côte d’Ivoire, Eni made an important offshore discovery in March and is producing oil and gas in the Baleine field, the first with net zero emissions in Africa.
LISTING AND SALE
On the occasion of the update of the industrial plan in mid-March, Eni said it wanted to obtain around 4 billion euros from the listing or sale of stakes in its satellites linked to the transition, and another 4 billion from upstream businesses in the period 2024-2027.
In addition to the recent deal with Ithaca, other examples of satellites built around upstream assets include the Norwegian oil and gas company Vaar, established and listed on the stock exchange together with the private equity firm HitecVision, and Azule Energy, a joint venture with BP in Angola .
“Vaar and Azule are among the most autonomous satellites of the group, since they finance their investments and have their own debt, which is not consolidated,” Gattei said, adding that the two companies pay dividends to the parent company.
Eni continues to hold the debt and finance the majority of Plenitude’s investments, but the company now has a partner and could reduce its relationship with the parent company.
A recent agreement with the Swiss asset manager Energy Infrastructure Partners valued Plenitude at 10 billion euros, including debt, equal to 10 times the Ebitda expected for 2024, against a valuation of the Eni group between 3 and 4 times adjusted Ebitda.
Bioplastics maker Novamont and its carbon capture and storage business could become new satellites on the energy transition front, Descalzi said in March.
Eni has introduced flexibility into its corporate structure, said Lydia Rainforth, an analyst for integrated European energy at Barclays, adding in a report that the satellite model facilitates access to “specialised capital”.
According to Rainforth, the sale of a stake in Enilive to a partner could establish a benchmark for the subsidiary’s valuation and a possible IPO could be a catalyst for Eni’s share price.
According to Biraj Borkhataria, head of energy transition research at RBC, stake sales or deals signaling the value of satellites could leave investors cold until they translate into higher shareholder returns at the group level.
In mid-March Eni improved its shareholder remuneration policy and increased its 2024 share buyback plan, but Gattei said the group is not thinking about special dividends linked to the sales.
(Translated by Camilla Borri, editing Francesca Landini, Stefano Bernabei)
