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KKR is in talks with Eni about buying a stake in the Italian energy group’s biofuel arm that could value the business at between €11.5bn and €12.5bn including debt.
The US private equity firm is in discussions with Eni about purchasing a stake of up to 25 per cent in Enilive, worth as much as €3.1bn, which is higher than some analysts’ estimates.
Eni aims to use the money raised from any deal to fund its diversification strategy from oil and gas to renewable energy.
It said “strong interest” from financial institutions meant it could also sell another 10 per cent share in the business as its biorefining and biomethane unit bucks a wider trend of investor scepticism towards green energy.
The energy company has signed a temporary exclusivity agreement with KRR to sell the stake, which it said was part of its strategy to get capital from new partners to fund growth.
The company, led by chief executive Claudio Descalzi, earlier this year completed the sale of an 8 per cent stake in its renewable power and retail business, Plenitude, for €588mn.
That deal with Energy Infrastructure Partners gave Plenitude an enterprise value of more than €10bn, which includes debt.
KRR’s interest in Enilive is despite signs of cooling investor interest in biofuels because of weak financial returns and a lack of regulatory support from governments. Biofuels are more sustainable than crude-based fuels.
Shell this month stopped construction on a plant in Rotterdam that was intended to convert waste into jet fuel and biodiesel and later estimated that it would have to write off as much as $1bn.
The valuation of Enilive was “well above market expectations” and the size of the stake on sale was also bigger than expected, said Biraj Borkhataria, an analyst at RBC Capital.
“The price tag is likely to surprise investors positively, particularly as public market sentiment towards biofuels has been particularly negative recently amid weaker margins and risk on policy support,” he added.
Eni shares were steady at €14.06 by late afternoon in Europe. They are down 10 per cent this year.
Other notable deals by Eni this year included the sale of almost all of its UK oil and gasfields to Ithaca, as well as an agreement with US company Hilcorp for its upstream assets in Alaska.
The company is planning to raise €8bn through asset sales between 2024 and 2027.
