Eni to shed retail-renewable energy stake

 Italian energy group Eni is planning to spin off a minority stake in its new retail and renewable business next year, it said on Friday, after announcing first quarter profits that missed expectations.

Several European energy companies, including Spain's Repsol , aim to divest parts of their renewables business to raise money to reduce debt and pay for the shift away from oil and gas.

Eni said it planned to list or sell a minority stake in the business that includes renewable energy and retail energy sales next year, confirming a Reuters report from March.

Analysts at Jefferies said the business, which has 10 million customers and plans to grow green power generation to over 5 gigawatts (GW) by 2025, could be worth 9 billion euros ($10.89 billion) including debt.

Eni expects the new unit to almost double its core earnings, or EBITDA, by 2024 to 1 billion euros.

"The combination of these two entities clearly could move the vehicle to the range of a double-digit multiple (to EBITDA)," CFO Francesco Gattei said on a call with analysts.

In the first quarter, Eni's adjusted net profit jumped almost five times to 270 million euros ($327 million) as firmer oil prices offset lower production.

The result was below an analyst consensus of about 440 million euros, in part due to a weaker performance in gas and refining margins. Cash flow from operations fell 12% to 1.6 billion euros.

"That's less scope for upwards estimate revisions that peers will benefit from coming out of earnings," said Bernstein.

At 1422 GMT Eni shares were down 2.4% while the European oil&gas index was down 0.4%.

Pandemic lockdowns throttled fuel demand last year prompting energy groups like Eni to rein in investments and returns. But Europe's energy companies this year have posted increased earnings boosted by higher oil prices as demand starts to pick up.

"We have been able to improve our outlook for the coming months, forecasting free cash flow generation in 2021 of more than 3 billion euros," Chief Executive Claudio Descalzi said.

The group, which confirmed a full-year production target of about 1.7 million barrels of oil equivalent a day, hiked its cash flow from operations target to more than 9 billion euros, from less than 8 billion euros previously.

It said it was looking for acquisitions to grow its green business to reach 4 GW of renewable capacity by 2024 from 1 GW this year, with a focus on the U.S. and southern Europe.

In 2021 the company expects to make disposals worth around 500 million euros while buying assets worth 1 billion euros.

It also said its share buy-back programme was expected to resume with a Brent reference price of at least $56.

"Eni is in very good shape... the premises are good," Gattei said. ($1 = 0.8267 euros) (Reporting by Stephen Jewkes; Editing by Edmund Blair, Barbara Lewis and Louise Heavens)

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