Eni: Plenitude pre-IPO stake sale is sweet reward for patience

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Patience is bitter, but its fruit is sweet. Spain’s Acciona did not heed a philosopher’s words. The conglomerate listed its clean energy arm in 2021 during a sell-off in green stocks, wanting to get the initial public offering “over and done with”.

Eni decided to let Plenitude, its renewable power and energy retail business, ripen a bit. The Italian oil major had intended to list Plenitude in 2022 at a mooted valuation of up to €7.5bn. It cleverly put those plans on hold as rising interest rates and supply chain inflation battered the renewables sector.

Eni chief executive Claudio Descalzi’s patience was vindicated on Thursday when he struck a deal with Swiss asset manager Energy Infrastructure Partners. Eni will sell a stake of up to 9 per cent in Plenitude to EIP via a capital contribution of up to €700mn. The terms imply an equity valuation of slightly less than €8bn for Plenitude. Adding in more than €2bn of net debt, the deal suggests an enterprise value/2023 ebitda multiple of 10.5-11 times. 

That is a good result. Renewables developers such as Ørsted and EDP Renováveis trade on multiples of 9.5 and 16.2 times, respectively.

Plenitude intends to expand its wind and solar capacity to 7GW by 2026 from just under 3GW at present. But for now earnings are still driven by its energy retail business, which supplies 10mn customers, largely in Italy. Power retailers usually trade in mid single-digit multiples.

Descalzi had said earlier this year that he still planned to list Plenitude in 2023 or 2024. But whether the majors can crystallise added value from nascent clean energy arms through spin-offs is not yet clear, says Bernstein’s Alex McColl.

Eni has already partly proved the concept through the EIP deal. The oil group trades on an EV/ebitda multiple of 3.5 times.

Confidence is slowly returning to green energy stocks amid mounting expectations that interest rates have peaked. Solar industry costs in particular are starting to fall, though sentiment remains shaky.

If Descalzi wants to attract a significantly higher multiple for Plenitude at IPO, he would do well to harvest his self-restraint as late as possible.