Eni 3Q24 Results | Climate Transition Analysis
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Our view
3Q24 saw significant moves leveraging Eni’s ‘satellite model’, slated to increase available capital to fund low carbon, but the group strategy appears at odds. The company announced the sale of 25% of its biofuels business, Enilive, to KKR for €2.938 billion. We view this as a positive move, with a €500m capital injection from KKR matched by a €500m debt paydown by Eni. Eni claims funding growth through its satellite model will provide access to additional capital markets, but we haven’t seen any evidence. 3Q24 saw a significant emphasis placed on funding debt pay-downs and increasing shareholder distributions across the group - it is unclear if this will also apply to Plentitude and Enilive, as the company currently lags behind peers in low-carbon capex ambition.
Either way, it needs more than it has guided to build its low-carbon business. We estimate that to meet its renewable generation targets, it will need an additional ~€2bn in capex by 2030.
In September, Eni's board approved a new structure, with Enilive and Plenitude now reporting under CFO Francesco Gattei to align with the company’s goal of IPOs of the low-carbon businesses. Eni stated that initial valuations are based on both companies doubling EBITDA over the next four years, with Enilive valued at €11.75bn and Plenitude at €10bn.
Priority questions ahead of 2025 :
1) Quantification of levers to achieve net carbon intensity (NCI) targets:
How can Eni align its Net Carbon Intensity (NCI) target with peers? Eni’s FY30 target of -15% lags peers at -19%-20%, positioning Eni as the least ambitious among Euromajors.
How will Eni balance its -35% absolute emissions target for FY18-30 with plans to grow oil and gas production? Eni has guided up to 15% oil and gas production growth by FY30, the most among European peers behind TotalEnergies. A clear breakdown of decarbonisation levers is required to ensure this growth doesn’t risk emissions targets.
2) Increases in low-carbon investment:
How can Eni increase its low-carbon capex ambition beyond the ~28% currently guided? This ambition places Eni just ahead of Shell in the short term, and the company has no FY30 low-carbon capex targets.
Will Eni’s satellite model deliver higher low-carbon investment than what’s currently guided? Eni must clarify whether proceeds from divestments will be used to align ambition with peers or for shareholder distributions.
Key findings
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3Q24 results saw Eni’s oil and gas production grow 2% on 3Q23 to 1.66 Mboe/d. This growth was driven by ramp-ups in Cote D’Ivoire and Mozambique, higher contributions from Indonesian and Libyan assets, and the full integration of Neptune Energy. The company is guiding towards 1.70 Mboe/d for FY24, in the middle of the previous FY24 guidance of 1.69 to 1.71 mboe/d.
Eni’s adjusted net profit once again fell, down 30% from 3Q23 to €1.27bn. The decline was largely due to an 18% decrease in earnings (-€281m) from Eni’s E&P segment due to lower oil prices, and a -169% decrease (-€247m) in Refining, Chemicals & Power from weaker margins.
Capex was up 7% on 3Q23 to €2.0 bn, primarily driven by Enilive & Plenitude (+40%). The company reiterated its divestment strategy, targeting €2bn of net divestments annually between FY24-27. Eni confirmed FY24 organic capex guidance of <€9 bln, and capex net of proceeds from disposals at <€6 bln. The company again increased FY24 buybacks to €2bn, up from €1.6bn.
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Earnings from Eni’s Enilive and Plenitude segments were down 38% from 3Q23 to €188m, including €118m for Enilive and €70m for Plenitude. The earnings decline was materially driven by Enilive (-44% from 3Q23) due lower biofuel margins/prices from market oversupply.
The company confirmed Enilive and Plenitude's adjusted pro-forma EBITDA (including equity share contributions) guidance of €1bn for both businesses in FY24. Eni reported €712m for Enilive and €853m for Plenitude for YTD FY24. Notably, the majority of Plenitude's earnings (80%) will come from Plentitude’s retail business, which markets gas, power, and services to retail/business clients.
In Plenitude, the renewable installed capacity was flat from the previous quarter at 3.1 GW, up 24% from 3Q23. The company confirmed its target to reach 4 GW of installed capacity for FY24, citing 2 GW under construction, meaning installed capacity will need to grow 29% in 4Q24.
EV charge points grew 20% from 3Q23 to 21,000, but only 3% from the previous quarter. Eni will need to add 3,000 charge points in 4Q24 (+14%) to meet its target of 24,000 in FY24.
In Enilive, 3Q saw Eni take FID on two biorefining JVs, adding 1.05 Mtpa of gross capacity - 0.4 Mtpa in South Korea, set to start construction in 4Q24, and 0.65 Mtpa in Malaysia. Eni also flagged works for converting Livorno into a biorefinery are expected to begin shortly, adding 0.5 Mtpa. The company reported 1.65 Mtpa capacity in FY23, targeting >3 Mtpa by FY26 and >5 Mtpa by FY30. With 3Q developments adding 1.55 Mtpa of gross capacity, Eni appears on track to add 1.35 Mtpa of net capacity by FY26 to meet its target.
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Eni’s sale of 25% of its biofuels business, Enilive, to KKR for €2.938bn is a positive move, with a €500m capital injection matched by a €500m debt paydown. The company has signaled the potential for a further 30% increase in Enilive divestments, following its “satellite model” used in the €588m sale of a 7.6% stake in Plenitude earlier this year. While Eni claims this approach will unlock capital for low-carbon investments, clear evidence is still lacking.
During the earnings call, Eni reiterated its focus on balance sheet strength and funding investments but highlighted that “shareholder distributions remain our first priority,” raising questions about how much capital will flow into low-carbon growth. Eni expects FY24 year-end leverage to fall towards the lower end of the 15%-20% range, supported by €3.6bn in disposals for FY24 and €2.5bn outlook for FY25. This improved outlook led to the increase in its 3Q buyback from €1.6bn to €2bn
Eni has guided towards allocating 28% of capex to low-carbon in the short term, lagging behind peers such as BP (50%), TotalEnergies (33%), and Equinor (30%). No guidance has been provided for FY30. The key question remains whether the proceeds from the Enilive transaction will drive increased low-carbon investment or continue to fuel shareholder distributions. Eni has guided €500m in Enilive capex annually through FY24-27, and this guidance has yet to be updated since the announcement.
