Tue.
Sep 21
2021

Image: Eni

Eni, the Milan-based energy company, may spin off a minority stake in its merged retail and renewable energy business next year, Reuters reported citing an unidentified source.

The renewable power and sales business could be worth about 10 billion euros, according to the report. Cash raised would be used to fund Eni’s transition to greener energy to reduce carbon emissions.

The Italian energy producer announced last month that it would decarbonize its business by 2050 amid a push from the European Union to battle climate change. The announcement was part of a 2021-2024 strategic plan which included merging its renewables generation and retail businesses.

Under this plan, Eni seeks to expand its customer base to 15 million. At the same time, it will increase installed renewable generation capacity to 4 gigawatts (GW) in 2024 and on to 15 GW by 2030. It sees Ebitda in the sector doubling to almost 1 billion euros in 2024, according to a company release.

Eni will invest about 4 billion euros in the retail and renewables division in the strategy plan.

The most probable option would be to list 20-30% in the unit sometime next year, Reuters said. It may also consider a merger with an existing company or teaming up with partners, according to the report.

Eni will consider options to unlock value from the merger of its client and renewable businesses, Reuters said, citing a company spokeswoman responding to the report.

A combination of government support for carbon-free energy, investor activism in ESG, and progressive technology in wind and solar has driven a share boom in renewable energy companies over the past year. Oil companies have scrambled to adjust to these new trends, as well as to increasing demand for electricity-powered vehicles among corporates and consumers.

Peer oil producers like BP or Total have also logged new strategies to become greener by increasing natural gas sales to utilities and investing in renewables. Spinning off units may also be a way to propel the process forward by accessing higher-valuation multiples the market is giving renewable producers and raise cash.

By Stephen Bierman

Stephen Bierman is an energy markets journalist and the editor of New Economy Observer.

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