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Eni to spin off integrated retail, renewables business in 2022

08 October 2021 Cristina Brooks

Italian energy company Eni plans to launch an initial public offering (IPO) for its newly merged renewables and retail natural gas and power units in 2022 "to crystallize the value of the business."

Eni will sell shares but retain a majority stake in the listed company created through the spin-off of its Gas&Power retail and renewables (Eni R&R) segment, the company said in a 7 October statement. It did not name the stock exchange for the transaction.

The move has been expected since Eni announced it was mulling the spin-off or sale of a stake in its retail and renewable segments in its first-quarter 2021 earnings report. The company had been trying to decide which option would reap the most value.

The spin-off would be financially separate from Eni, with its own balance sheet and investment-grade credit rating, allowing it to access "competitive costs" for debt and finance growth, Eni said. The new company's name and other announcements will be made at Eni's internal capital markets day on 22 November.

"An IPO will unlock significant value, positioning the business for growth and helping both Eni and its customers reach net-zero emissions," said Eni CEO Claudio Descalzi in the statement.

Eni announced that the planned 2022 IPO would be subject to market conditions, possibly a nod to a spike in wholesale power prices in Europe that IHS Markit analysts say has been less profitable for retail power players than for renewable power generators.

Eni provides retail power, gas, and energy services through Eni Gaz e Luz in Italy, France, Greece, Portugal, Slovenia, and Spain (where it expanded recently when acquiring retail player Aldro Energia in 2020).

Its renewable business is building a 35.2-MW wind project in Puglia in Italy and a 30-MW photovoltaic solar plant in Westmoreland County, Virginia in the US. It had 331 MW of installed renewable capacity as of June, and the company said in its second-quarter earnings report the unit expects to have 2 GW in total by the end of 2021. The major is on track to develop up to 6 GW of renewable capacity by 2025 before hitting 15 GW by 2030.

In the most recent quarter, Eni had incorporated this renewable business into Eni Gas e Luz to reduce its Scope 3 emissions, noting the combination created a natural hedge by combining generation and retail power and gas sales. Scope 3 emissions are indirect emissions in a company's value chain.

The company plans to launch new digital services within this business to enhance its green business offerings.

Eni said the IPO would help it grow these business areas further, while providing greater transparency to investors.

The company has prepared for the transaction not only by acquiring renewable generation, but by establishing Eni R&R as the second-largest Italian operator of electric vehicle charging points, with its total ultimately set to increase from 5,000 to more than 30,000 by 2030.

Eni is not the only European energy major to use its renewables unit strategically.

"Oil and gas players in Europe have so far mainly kept the renewable power business in-house or acted via partially acquired renewable power specialists," said IHS Markit Research and Analysis Manager Josefin Berg. "Now we do see an increased interest to tap into the stock market to raise capital for renewables growth. Spain's Repsol already announced this year that it was investigating a public listing of its renewables branch."

Posted 08 October 2021 by Cristina Brooks, Senior Journalist, Climate & Sustainability, IHS Markit

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