London — Energy group Eni is looking to spin off its new retail and renewable energy business next year and could list a minority stake to raise money to bankroll the company’s energy transition, an industry source close to the matter said.
The business, which includes renewable power generation and energy sales to customers, could be worth in the region of 10 billion euros, the source said.
Eni raised the bar on its climate ambitions last month, pledging to be carbon neutral by 2050 as it seeks to keep pace in an industry under mounting investor pressure to curb emissions.
As part of those plans Eni said it would merge its renewable energy and retail businesses to make it one of Europe’s biggest clean retail players, growing its customer base in synergy with its green ambitions. Eni has said the business will double its core earnings to 1 billion euros ($1.2 billion) in 2024.
“The new unit will be up and running by June and then the most likely option on the table is to spin it off and list 20-30% sometime next year,” the source said.
Other options include a merger with an existing company or teaming up with partners, the source said but added these were less likely.
Several European energy companies, including Spain’s Repsol, are looking at spinning off parts of their renewables business as a way to raise money to reduce debt and pay for the shift away from oil and gas.
Shares in renewable companies have soared over the past year while oil company shares dropped sharply due to the pandemic and investor concerns over their future role in the low-carbon economy.
Spinning off Eni’s new division would more than double its trading multiples, the source said, and would also provide scope to raise 2-3 billion euros of debt, away from Eni’s balance sheet, to fuel growth in its renewables business.
An Eni spokeswoman said: “As we said at our strategy presentation we will consider options to unlock value from the merger of our client and renewables business.”
An HSBC research report in January said public listings of low carbon operations could increase the value of these businesses by 5 to 6 times outside an oil major rather than inside, based on current valuations of renewable companies.
Spin offs or sales of stakes, however, also risked reducing oil companies’ exposure to low-carbon electricity, the HSBC report said.
At its strategy update in February, Eni said it aimed to increase its renewable energy capacity to 4 gigawatts in 2024, from 0.7 GW this year, before ramping up to 15 GW in 2030 and 60 GW in 2050 “fully integrated with Eni’s clients”.
Merging the retail and renewables businesses will allow Eni to increase its retail base some 50% by 2030 to 15 million customers and to use 45% of its own green power production to serve customers and help to meet Scope 3 targets, which include emissions from products sold.
Eni, which has placed retailing at the heart of operations, has pledged to spend around 4 billion euros on the new division from here to 2024.
($1 = 0.8391 euros)
(Reporting by Stephen Jewkes, Ron Bousso, Shadia Nasralla, Dmitry Zhdannikov and Nina Chestney. Editing by Jane Merriman)