Eni may divest stakes in high-potential oil & gas projects, including Côte d'Ivoire and Indonesia, with the aim of financing development in these areas as the group steps up investments on transition.

This was explained by company sources.

These new spin-offs would be part of CEO Claudio Descalzi's strategy to create separate entities, or satellites, focused on specific businesses and capable of attracting different types of investors, including private equity firms and infrastructure funds.

The creation of the satellites allows investors interested in the oil and gas sector but not the energy transition businesses-and vice versa-to choose more precisely where to invest.

"The satellite model is an approach we've built to have multiple sources of financing, so that we hold together the need to meet demand for traditional products with the need to develop new, transition-related products," Chief Financial Officer Francesco Gattei told Reuters.

Starting with 'Eni gas and light,' the group created Plenitude for renewable energy and retail customers. Last year, Enilive was born around the biofuels and gas station businesses, which could open capital to a minority shareholder, as happened with Plenitude.

The two satellites for low-emissions businesses were built by leveraging assets already in the group that were aggregated and entrusted to dedicated management teams. Eni may list both in the next few years to finance their growth.

With this strategy--a unique approach among oil and gas majors seeking to grow in renewable energy--the group aims to show the potential of new businesses that struggle in the early stages to compete with returns from traditional oil & gas businesses, Gattei told Reuters.

In the case of upstream businesses, the satellite model can be used to spin off activities in a specific geographic area.

For example, last month, Eni agreed to merge its upstream activities in the North Sea with Ithaca Energy in exchange for a 38.5 percent stake in the British company.

The nearly $1 billion deal allows Eni to share the effort on investments and receive potential dividends from Ithaca.

Gattei said the group is considering something similar for other exploration and production projects that need investment.

Ivory Coast and Indonesia would be among the potential candidates, sources said.

In Indonesia, the group aims to create a gas hub following the Geng North-1 discovery and by consolidating upstream assets acquired from Chevron and through a merger with Neptune Energy.

In Côte d'Ivoire, Eni made a major offshore discovery in March and is producing oil and gas in the Baleine field, the first net-zero emission field in Africa.

LISTING AND SALE

When it updated its business plan in mid-March, Eni said it plans to raise about €4 billion from listing or selling stakes in its transition-related satellites, and another €4 billion from upstream businesses over the period 2024-2027.

In addition to the recent deal with Ithaca, other examples of satellites built around upstream assets include the Norwegian oil and gas company Vaar, which was formed and listed with the private equity firm HitecVision, and Azule Energy, a joint venture with Bp in Angola.

"Vaar and Azule are among the most autonomous satellites from the group, as they finance their own investments and have their own debt, which is not consolidated," Gattei said, adding that the two companies pay dividends to the parent company.

Eni, on the other hand, continues to hold debt and finance most of Plenitude's investments, but the company now has a partner and could reduce its link with the parent company.

A recent deal with Swiss asset manager Energy Infrastructure Partners valued Plenitude at 10 billion euros, including debt, which is 10 times projected Ebitda for 2024, compared with an Eni group valuation of between 3 and 4 times adjusted Ebitda.

Bioplastics producer Novamont and the carbon capture and storage business could become new satellites on the energy transition front, Descalzi said in March.

Eni has introduced flexibility into its corporate structure, said Lydia Rainforth, analyst for integrated European energy at Barclays, adding in a report that the satellite model facilitates access to "specialized capital."

According to Rainforth, the sale of a stake in Enilive to a partner could set a benchmark for the subsidiary's valuation, and an eventual IPO could be a catalyst for Eni's share price.

According to Biraj Borkhataria, head of energy transition research at Rbc, share sales or deals signaling the value of satellites could leave investors cold until they translate into higher returns for shareholders at the group level.

In mid-March, Eni improved its shareholder compensation policy and increased its 2024 share buyback plan, but Gattei said the group is not thinking about special dividends linked to divestments.

(Translated by Camilla Borri, editing Francesca Landini, Stefano Bernabei)