Eni and the Energy Future: A Success on Quiet Soles?

Europe's oil giants have faced the multibillion-dollar question for years: how can the transition to the energy future be managed? No company has yet found a definitive solution, as recent strategic adjustments by corporations like Shell demonstrate. However, one concept is beginning to emerge as promising: the Italian energy giant Eni is focusing on the creation of independent subsidiaries that can finance themselves on the capital markets and operate without the burden of the parent company. As part of this strategy, Eni is in talks with the private equity firm KKR to sell a 20 to 25 percent stake in its biofuels division, Enilive. If the deal goes through, this could value the entire company, which includes over 5,000 gas stations in Europe as well as cafes and a car-sharing business, at 11.5 to 12.5 billion euros, according to Eni. Enilive, which is debt-free, is expected to generate one billion euros in EBITDA this year. This would correspond to a future enterprise value/EBITDA multiple of 11.5 to 12.5, significantly higher than other biofuel companies like Neste, which are traded at about seven times. Despite a recently oversupplied market, Enilive stands out due to its own production of raw materials, emphasizes Irene Himona from Bernstein. Even considering higher multipliers for Enilive's other business areas, a deal at this level would be viewed positively. Last year, Eni unexpectedly recorded an attractive sale of a stake in its renewable energy-focused subsidiary, Plenitude. These successes are remarkable in a sector struggling to convince traditional fossil fuel investors of the value of clean energy deals. Despite these successes, the market reaction to the talks with KKR has been minimal. Eni undoubtedly deserves more recognition. Over the past twelve months, the shares of the Italian company have performed worse than those of some competitors, including TotalEnergies and Shell. Additional influencing factors include the pressure from weaker natural gas prices on earnings expectations and negative surprises regarding net debt, as noted by Joshua Stone from UBS. The focus of oil investors on stock buybacks also plays a role, although Eni recently improved its payout policy to 30 to 35 percent of operating cash flow (previously 25 to 30 percent). It is likely that Eni will eventually take its subsidiaries public. However, the current sentiment in the stock markets for clean energy companies is not yet strong enough to support this. At present, Eni is managing to make optimal use of the abundant private capital available and demonstrating that there is indeed value in these efforts.