The Italian energy company Eni is in advanced negotiations with the American private equity firm KKR regarding the sale of a stake in its biofuel division Enilive, which could value the business at 11.5 to 12.5 billion euros including debt.

Eni plans to use the revenue generated from the deal to finance its diversification strategy from oil and gas to renewable energy. The company has entered into a preliminary exclusivity agreement with KKR for the sale of a stake of up to 25 percent worth up to 3.1 billion euros, which exceeds the estimates of some analysts.

The strong interest from financial institutions could also enable Eni to sell an additional 10 percent of Enilive. This shows that the company's biofuel and biomethane division is successful, contrary to the general trend of investor skepticism towards green energy.

Under the leadership of CEO Claudio Descalzi, Eni has already completed the sale of an 8% stake in its renewable energy and retail division, Plenitude, for 588 million euros earlier this year. This deal with Energy Infrastructure Partners valued Plenitude at an enterprise value of over 10 billion euros, including debt.

KKR shows interest in Enilive despite signs of declining investor interest in biofuels due to weak financial returns and lack of regulatory support from governments. Biofuels are more sustainable than crude oil-based fuels. Just this month, Shell stopped the construction of a plant in Rotterdam that was supposed to convert waste into jet fuel and biodiesel and estimated that it would have to write off up to $1 billion.

The assessment of Enilive is "significantly above market expectations," and the size of the stake for sale is also larger than expected, explained Biraj Borkhataria, an analyst at RBC Capital. "The price tag is likely to pleasantly surprise investors, especially given the particularly negative sentiment in the public market towards biofuels lately, due to weaker margins and risks in political support," he added.

The shares of Eni remained stable at 14.06 euros in late afternoon trading in Europe. They have fallen by 10 percent since the beginning of the year.

Other notable deals by Eni this year include the sale of nearly all British oil and gas fields to Ithaca, as well as an agreement with the U.S. company Hilcorp regarding its upstream assets in Alaska. The company plans to generate 8 billion euros through asset sales between 2024 and 2027.