ENI Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 25, 2024

Key Takeaways

  • Eni reported resilient Q3 results with pro-forma adjusted EBIT of €3.4 bn and operating cash flow of €2.9 bn (both down ~14% y/y), while reducing net debt and leverage well ahead of plan.
  • Upstream performance was boosted by the start-up of zero scope 1 & 2 gas production at Dargo Casiopea and approval of the Ganga North development, positioning Indonesia hubs to exceed 400 kboe/d and revealing over 30 near-field exploration opportunities.
  • Transition satellites made strides as KKR invested €2.9 bn for a 25% stake in Eni Live, two biorefineries were sanctioned in South Korea and Malaysia, the Gela biojet plant will start by year-end, and CCS injection began at Ravenna alongside UK CCS funding.
  • Shareholder returns remain a priority with a €1 bn dividend (+6%), Q3 buyback of €560 m and the 2024 share buyback raised to €2 bn, supported by ongoing portfolio disposals expected to generate around €2.5 bn next year.
  • Versalis is being restructured from basic chemicals to a focus on specialized polymers, biochemistry and circular economy, targeting positive EBIT by 2027 and free cash flow breakeven by 2028.
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Earnings Conference Call
ENI Q3 2024
00:00 / 00:00

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Operator

Chief Transition and Financial Officer. For the duration of the call, you will be in listen-only mode. However, at the end of the call, you will have the opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. I'm now handing you over to your host to begin today's conference. Thank you.

Francesco Gattei
CFO at Eni

Thank you. Good afternoon, and welcome to Eni third quarter, nine-month 2024 results conference call. Energy markets continue to be volatile and unpredictable, driven by a mixture of fundamentals, geopolitics, and speculative trading flows. Our focus is on maintaining resilient and competitive operating and financial performance, reinforcing our balance sheet while funding both investment into the business and attractive distribution to shareholder, and progressing our strategy. In the third quarter, we clearly continued to deliver on all those objectives. In Q3, we did report resilient results with pro forma adjusted EBIT of EUR 3.4 billion, and cash flow from operations of EUR 2.9 billion, despite the deterioration in scenarios across most of our main businesses. We also lowered debt and leverage well ahead of our original plan. I will speak in more detail on our results shortly. Let me focus on strategic activities.

Francesco Gattei
CFO at Eni

We are executing at pace around a clearly defined portfolio of businesses. Those businesses are both transition-oriented and where Eni has clear competitive advantages, and where we can generate competitive growth and returns. Starting with the transition satellites and Enilive specifically, we are delighted to have confirmed the investment by KKR into Enilive. The EUR 2.9 billion investment for a 25% stake supports our growth and confirm the value already created. Similar to our Plenitude transaction earlier this year, it accesses a new pool of aligned capital, more appropriate for the different growth and risk profile of this business. Furthermore, the growth is clear. In Q3, we sanctioned two biorefineries, South Korea and Malaysia, and confirm that the construction work at Livorno will begin soon, and we will start our first biojet plant in Gela at the end of this year.

Francesco Gattei
CFO at Eni

Upstream continues to be an area of significant distinctiveness and competitive advantage. In August, we began gas production at Argo Cassiopea, offshore Sicily. Production, net zero, Scope 1 and 2, will quickly ramp up into the winter, contributing to gas supply for Italy. Johan Castberg and Baleine Phase Two will start up before the end of the year, contributing to reach our production targets. Also, in August, and only 10 months after the discovery of Geng North, Indonesian authorities approved our plan of development of the northern hub in the Kutai Basin, as well as significant extension to the plateau at our southern hub, centered around the existing Jangkrik FPU. Together, these two hubs will account for over 400,000 barrels per day, and Eni's equity is over 80%. Additionally, we have identified over 30 TCF for near field exploration potential, offering potentially very material upside.

Francesco Gattei
CFO at Eni

The scale of this opportunity underpins our growth potential beyond the end of the current four-year plan, and of course, offers the opportunity for some early monetization via our proven dual exploration model. While Plenitude and Enilive are currently our main transition satellites, Q3 also saw an important milestone in the development of a new one, CCUS. First, CO2 injection began at our Ravenna project here in Italy. This is the first plant able to capture more than 90% of the CO2 emitted by our upstream plants. At the same time, we secure the key milestone of agreed government funding on our HyNet CCS project in the U.K.

Francesco Gattei
CFO at Eni

As a reminder, we are looking to build over 50 million tons of capacity before 2030, and grow that to over 40 million tons in the 2030s, and it is an ideal vehicle for a tailored satellite structure. Turning now to our Q3 results in more detail. We reported pro forma adjusted EBIT of EUR 3.4 billion and cash flow from operations of EUR 2.9 billion, both down just 14% year-on-year, despite a deterioration in the scenario. Our upstream business were the standout contribution to our results this quarter. Our satellites and associates made up over 1/3 of our EBIT. Finance expense remains low, even before debts begin to fall materially, while the tax rate of 51% was consistent with this quarter's oil price and earning mix.

Francesco Gattei
CFO at Eni

Cash flow from operations for the quarter was EUR 2.9 billion, giving EUR 10.7 billion for the nine months, a consistent conversion of profits into cash. This has served to cover a working capital build, CapEx, net M&A, the dividend, and a portion of the buyback to date. After the effect of the cash out for Neptune in Q1, net debt has fallen in Q2 and Q3, even with only modest divestment income. We'll see an acceleration of this reduction in the coming quarters. CapEx for the quarter was EUR 2 billion, and for the nine months was EUR 6.1 billion, minus 10% versus last year. We expect it to be below EUR 9 billion for the year, even taking into account the seasonally normal uptick of the last quarter.

Francesco Gattei
CFO at Eni

Net CapEx was EUR 1.6 billion in the quarter, and should be below EUR 6 billion, assuming the cash inflow of agreed transaction waiting to close at year-end. In global natural resources, E&P contributed EUR 3.2 billion of pro forma EBIT, with results resilience in the face of lower crude prices, and helped by production up 2% year-on-year. GGP delivered a strong quarter for the summer months, helped by an improving price scenario and hub spreads, and confirming a robust results, even in a year of limited volatility. In the two key transition businesses, Enilive delivered strong by refining throughput growth and excellent utilization. EBIT was hit by the weak bio scenario, but marketing made a strong contribution. Plenitude is also continuing along its planned growth trajectory.

Francesco Gattei
CFO at Eni

Year-on-year EBIT was lower versus 2023, but it will beat our budget results on a yearly basis. Net debt and leverage in the quarter were both down, and we remain comfortably below the top end of the plan, 15%-25% leverage range, despite closing only one major, major divestment in the quarter, while also stepping up our share buyback and paying a portion of the remaining outstanding extra profit tax balance. But, as we discussed at Q2, that is not the full story. We have been advancing our portfolio activity faster and for greater value than we anticipated and planned for. Our expectation is that by year-end, pro forma leverage will be towards the bottom of that range. Shareholder distribution remain our first priority. In September, we paid the first tranche of the annual EUR 1 dividend, +6% versus last year.

Francesco Gattei
CFO at Eni

Our buyback in the quarter totaled EUR 560 million, or 1.3% of shares in issue, which are now down 12% since we restarted the program in 2022. As we reduce shares in issue, this adds further, along with the business performance and the balance sheet strength, to the quality and value of our dividend. With that balance sheet improvement in mind, and the continued success in our portfolio program, we also confirm today an increase in the 2024 share buyback. We now plan to repurchase EUR 2 billion in the program, an increase in EUR 400 million, delivering on our raised commitment announced at Q1, and in addition, reflecting the better-than-planned progress in our M&A. At today's share price, our distribution yield is 11.5%. Our efforts on growing new transition business has broader implication.

Francesco Gattei
CFO at Eni

It is also an opportunity to build new, highly attractive opportunities around our chemical sector. Fixing the result of this loss-making segment will be a significant contributor to the earnings and cash flow potential we see for Eni going forward, and is a real priority for us. Since March, we have been developing a detailed plan, which we now want to take the opportunity to share with you. We also had the opportunity to share this with the unions. Versalis has accumulated material loss over the past years, and this negative trend has continuously continued through 2024. Our response is one of both restructuring and transformation.

Francesco Gattei
CFO at Eni

The future platform of Versalis will have a significantly different profile, one focused on a high-value downstream portfolio of compounding and specialized polymers, one on biochemistry and on circular economy, a portfolio more consistent with Eni technology-led strategy, focused on competitively advantaged businesses into the transition. This transformation can leverage the resource of a highly skilled workforce, but dedicated it to higher value and more sustainable activities. At Priolo, we are evaluating constructing a biorefinery for SAF and a chemical recycling plant employing our Hoop technology. At Brindisi, we target to continue polymer manufacture by using cost advantage imported raw materials, and we will convert part of the site to the construction of a new factory facilities for the manufacturing of stationary network batteries. In the meantime, we plan to shut down cracking at both Priolo and Brindisi.

Francesco Gattei
CFO at Eni

We will also look to exit or significantly reduce our exposure at the Dunkirk. This is a necessary response to the structural disadvantage European basic chemicals manufacturing faces versus other regions. And we will reduce polymer capacity by ceasing polyethylene production at Ragusa. You will be aware, we closed operations at Grangemouth earlier this year. Further initiative to drive efficiency in polymers may also be taken. The European chemicals industry has further deteriorated in 2024, and it is not expected to improve in 2025. In this context, our expectation is to move to positive EBIT in 2027, and free cash flow breakeven in 2028. We are comfortable on the ultimate success of this turnaround, as we faced similar issues over a decade ago in our refining operation.

Francesco Gattei
CFO at Eni

The transformation path we chose then by refining evolved into Enilive, with the resulting scale of ensuring value creation we have been able to specifically highlight today. Moving to guidance. Full year upstream production is expected around 1.7 million barrel per day, the middle of the original guidance, reflecting the expected impact of OPEC+ quotas. GGP pro forma EBIT is raised again to EUR 1.1 billion, while we confirm our transition businesses to deliver EBITDA of EUR 1 billion each. Group pro forma EBIT and cash flow from variation expectation have been reduced from Q2 on the lower scenario assumption, but reflect outperformance versus the original plan of more than EUR 1 billion in each case. We can confirm gross CapEx is below EUR 9 billion and net CapEx is well below EUR 6 billion, and I have already discussed the outlook for leverage.

Francesco Gattei
CFO at Eni

This provides a setting for the raised buyback to EUR 2 billion from EUR 1.6 billion, and the EUR 1.1 in the original guidance. For the purpose of modeling our cash flow from operations for the fourth quarter, you should assume dividend from associate exceeding net income by around 25%, a relationship that also holds for the full year, while the cash tax rate will revert to a more normal level in the low 30s%, down from Q3. To summarize, Q3 represent a very good quarter amid a volatile and challenging environment. We are significantly advanced strategy, developing growth in advantage business and securing value. We are addressing underperforming activity with the prospect of materially improving financial performance, and we continue to pursue our cost reduction program that has already achieved EUR 300 million of savings that we planned for this year.

Francesco Gattei
CFO at Eni

Our recently announced reorganization reinforce our action in each of these aspects, but critically, our financial performance continue to be highly competitive and resilient. Indeed, we are now positioned in a historically strong situation, financially and strategically, and this is confirmed in our decision to raise our 2024 share buyback. That ends my remarks, and now, together with Eni top management, I am ready to answer your questions. Thank you.

Operator

This is the conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question can press star and one at this time. We will pause for a moment as participants are joining the queue. The first question is from Joshua Stone with UBS. Please go ahead.

Joshua Stone
Joshua Stone
Equity Research Analyst at UBS

Thanks, and good afternoon. Two questions, please. Firstly, on Enilive, and congratulations on getting the deal over the line at a still attractive valuation. At the time of the initial agreement, you highlighted the potential to maybe sell another 10% of that business, but, you know, given you sold the higher end at 25% to KKR, can you just update us on how much of a priority is that to Eni today? And then second question on the petrochemical restructuring, and you provided some helpful slides on that. Thank you. Maybe just talk about the path towards profitability from here. How soon should we expect to see a benefit from some of these initiatives, in particular, closing some of these less competitive crackers?

Joshua Stone
Joshua Stone
Equity Research Analyst at UBS

Also maybe, you know, what was the response from the unions, or what has been the response from the union so far on this? And is your target still to reach breakeven EBITDA in 2025? Is that still valid? Thank you.

Francesco Gattei
CFO at Eni

Okay, thank you, Josh. I will answer to the first question about Enilive, and I will leave the floor to Adriano Alfani for the chemicals. On Enilive, clearly, you remember correctly, we had, once we announced the exclusive agreement for negotiation with KKR, that we have the range of 10, so sorry, 20%-25% of the disposal, and, from 5%-10% of the additional potential interest, or stake that could be, let's say, put on sale. Clearly, having the 25%, we are now moving to the lower end, to a lower part of the range of the 5%-10%.

Francesco Gattei
CFO at Eni

We want to see if clearly there is an opportunity to, let's say, eventually bring another partner with a smaller stake, clearly not at the 10%, because we will have, let's say, a large disposal of 25%, plus an additional 10% if we move to the top end of both options. This is the reason we move. We think that it is more appropriate to keep the lower percentage as a reference. And now I leave it to Adriano.

Adriano Alfani
COO at Versalis

Thanks, Josh, for the three questions about the chemical piece. Let me start with the first one about the improvement in the result that we expect. To be honest with you, from a market point of view, we don't expect a significant improvement. We still see a grim outlook. There is no meaningful economic recovery this time for 2025 and also for the end of 2024. So the improvements that we expect in the economics of Versalis are mainly coming in this context of scenario from action that we are going to put in place. That means restructuring the base chemical portfolio, and on the other side, developing and growing the new platforms that Francesco was referring to in his speech. How fast the improvement will come?

Adriano Alfani
COO at Versalis

Clearly, gradually, and depending on the speed that we are going to execute all the intervention from a restructuring point of view, that we see over the next four, five years gradually improving. Of course, an improvement in the scenario in terms of possible recovery will help in order to have a bolster in the execution plan, but at this moment, we would like to be a little more cautious, let's say, in the outlook from demand point of view, for the reasons that I was explaining, based on some developments in the market, automotive sector in Europe, construction, and so on. In terms of response from union, every time that, of course, you present an aggressive plan, this was a pretty aggressive plan in terms of restructuring, there are many questions.

Adriano Alfani
COO at Versalis

Fundamentally, they understand that the time for the base chemical situation in Europe is extremely challenging, and of course, the company cannot continue in losing cash, and so something must be done. And so they are fundamentally on boarding in order to do many different action, in order to improve and to create the sustainability for the future, not only in term of economic sustainability, but also in term of, of course, people sustainability, in term of employment, and so on. From an EBITDA point of view, that is the third question for 2025, at this moment, is unlikely that we can be breakeven EBITDA in 2025 in this context of a scenario.

Adriano Alfani
COO at Versalis

But of course, in case of improvement, I mean, we can target in order to be significantly better than in 2024 in the performance of EBITDA for 2025.

Francesco Gattei
CFO at Eni

Okay, thank you.

Operator

The next question is from Alessandro Pozzi, Mediobanca, please go ahead.

Alessandro Pozzi
Senior Equity Analyst at Mediobanca

Thank you for taking my questions. I have two. The first one is on disposals. So three-year, this year, we have EUR 3 billion of cash-in. You've done, you've announced a lot of transactions, but based on what we read in the press, there's a lot more that potentially is going to come through in maybe in 2025. And I was wondering if you can help us to understand how much of the cash-in could be next year. If we use, again, EUR 3 billion, is it a good assumption?

Alessandro Pozzi
Senior Equity Analyst at Mediobanca

Also, if you can maybe give us a bit more color on what you have, maybe at the moment, the opportunities that are more mature compared to others in terms of disposals, if you can. The second question is on Indonesia. You mentioned in the opening remarks that you received approval from new development plans. And I was wondering what sort of activities we could see in Indonesia next year. You mentioned 540,000 barrels potentially could be achieved by the end of the plan. I was wondering, what is the shape of the production growth that we could see from Indonesia in the next few years? Thank you.

Francesco Gattei
CFO at Eni

Okay, I will answer to the first question about the disposal, and then I will leave the answer to Guido Brusco for the Indonesia activity. About the disposal, you know that we have a net M&A cash in expected in 2024 of EUR 3.6 billion we raised versus the original assumption. Clearly, this includes not only the cash in coming from the disposal, but also the cash out that was mainly concentrated at the beginning of the year, once we paid the acquisition of Neptune and the smaller acquisition in the renewable segment.

Francesco Gattei
CFO at Eni

For next year, the expectation is to have additional disposal that are maturing, and these are the origin of the expectation we have on the leverage pro forma, and the range of cash in that we can expect next year is around EUR 2.5 billion. So these are the two figures to keep in mind. This is clearly coming from the disposal. There could be some smaller additional disposal and acquisition that we consider, let's say, covering or offsetting each other. And now I leave to Guido the second answer.

Guido Brusco
COO at Eni

Thank you. First of all, thank you for the question, and let me start with providing some more background on the scale of the asset in Indonesia. First of all, this year we've completed our evaluation of the discovery of Geng North that is confirming a potential of five TCF of gas. And of course, the scale of this discovery is creating a critical mass also for the development of some resources discovered and acquired as a part of the transaction we did last year with Chevron.

Guido Brusco
COO at Eni

The discovery, the discovered resources of a number close to another five TCF, which of course will be complementing the Geng North discovery. So if we consider both the plan of development for the North Hub, which is Geng North, and those discoveries, plus the additional resources that we'll bring in into the South Hub, we envisage a combined production at regime of over than four hundred thousand barrel of oil equivalent per day, which is give and take two BCF of gas and eighty thousand barrel of condensate.

Guido Brusco
COO at Eni

On top of that, we have an exploration potential, which we estimated in the region of, of course, unrisked, of 30 TCF of gas, which we have significantly de-risked by the nearby discoveries. Clearly the discovery of Geng North have allowed a more detailed reconstruction of the geological model. Now we think that this potential is well and better and risks. We are targeting also quite a significant number of exploration wells in the basin in the next four years. That's in a nutshell what will look like the Indonesia asset in the forthcoming years.

Guido Brusco
COO at Eni

To come to your question, and of course, we can leverage on the existing facilities and the excess capacity of the liquefaction plant of Bontang, which is nearby, and which has a total capacity of more than 20 million tons per annum, with only three trains operational of 10 million tons per annum, and utilization of less than 60% last year, so we can clearly leverage on that, and as you know, we are in a premium market. To come to your question, which is the activity we are doing, we are now in the front-end engineering design of the facilities.

Guido Brusco
COO at Eni

We are also. We have already started the drilling activity in August to develop some fields discovered close to the south hub, namely Merakes East. The rig, of course, will continue the activity in the south hub in 2025 and 2026. While we will take very likely by the end of the year or beginning of the next, an FID on the North hub.

Alessandro Pozzi
Senior Equity Analyst at Mediobanca

Thank you. Just on the four hundred, how much will it be for a domestic, let's say, sales, and how much do you think you can export to Bontang?

Guido Brusco
COO at Eni

This is a number which evolves over time. But on the entire life of the field, the domestic component will be in the region of 25% to 30%.

Alessandro Pozzi
Senior Equity Analyst at Mediobanca

Understood. Thank you very much.

Operator

The next question is from Giacomo Romeo with Jefferies. Please go ahead.

Giacomo Romeo
Giacomo Romeo
Analyst at Jefferies

Yeah, thank you. Two questions for me. The first one, Francesco, is on distributions. Your EUR 2 billion that you got to today, that's ahead of your CFFO distribution range. Just trying to understand how to think about this in the context of your now lower moving to a lower level of leverage. Do you think that this upper level is what is effectively sustainable in the current with the context of the current pro forma leverage? The second is on chemicals. I'm just trying to reconcile the EUR 1 billion CapEx that you announced at the CMD, that was for the 2024, 2027 period, with the EUR 2 billion that you now have for the five years.

Giacomo Romeo
Giacomo Romeo
Analyst at Jefferies

Do you think that you're just gonna need more investment to get to that free cash flow breakeven level? Is it a timing issue? And when is the... When do you think is the right time to bring in a partner, in these assets? Thank you.

Francesco Gattei
CFO at Eni

Okay. On the distribution, yes, it's correct that clearly we are above the 35% limit. If you remember, we came through this number through different steps. So the first step was in the first quarter, once there was an expectation, a revision, in particular on scenario, that raised the amount of cash flow we are expecting for this year. And we shared, according to what we have already announced in our distribution policy, the 60%. The 60% of, let's say, upside. And this has brought our distribution for one – sorry, the buyback part of the distribution, from 1.1 to 1.6.

Francesco Gattei
CFO at Eni

In July, we announced that, taking into account the high acceleration and the materiality of the disposal plan, we were able to consider to bring that percentage of distribution of the cash flow that was originally the 32%, applied it to the cash flow from operation generated with the scenario we are assuming in the second forecast, up to the limit of 35%. This has, let's say, brought the potential additional distribution to an additional EUR 500 million. So the EUR 1.6 billion could have been raised up to EUR 2.1 billion. We decided to distribute it to reach the EUR 2 billion that we announced today.

Francesco Gattei
CFO at Eni

That is equivalent now to revise the cash flow from operation because of the scenario, to something in the range of 37%-38%. This percentage could be, let's say, sustainable in the future. Clearly, it's part of a discussion we will see next year with the new plan. So take into account all the various elements that will, let's say, characterize the new plan, the scenario, the CapEx, the activity, the portfolio, et cetera, et cetera. But on a general rule, the idea is that we want to reinforce the company. The company will be reinforced by growing, diversifying its business, maturing new business lines, and enhancing or bringing back to profitability other negative lines. All this will help to have a larger distribution, a progressive distribution.

Francesco Gattei
CFO at Eni

So I cannot answer you specifically on figures, but I can answer you on a qualitative term and the principle that will drive our distribution policy. And now, Adriano, for the other question on chemicals.

Adriano Alfani
COO at Versalis

Yes. Thanks, Giacomo, again, for the question, so let me go back to March, when we announced the preliminary plan in terms of restructuring of the chemical portfolio. At the time, we had an outlook for the market, and based on the outlook for the market, we estimated that over the four-year plan, we were in needs of roughly EUR 1 billion of investment for the chemical sector in order to transform, so to restructure some piece of the chemical sector, and in order to develop the new platform that are still the same platform that we are talking today.

Adriano Alfani
COO at Versalis

As Francesco was mentioning during his speech, ever since March, we spent a lot of time based on the fact that some markets are changing, based on that in some cases we see more growth compared in some market applications than what we see before. In some cases, like, I don't want to talk always about automotive, but of course, automotive is another piece that, in terms of exposure, the chemical sector is also important because in the car production goes many different chemical products. So we reviewed completely the entire portfolio in terms of the market and opportunity to grow in the market, and where to eventually reduce participation.

Adriano Alfani
COO at Versalis

And we increase in some shape or form the area of restructuring of the base chemical portfolio, because we strongly believe that the base chemical portfolio in Europe is in a very irreversible situation in terms of economics. So we decided to broaden the scope in terms of grow the three platforms, but also to develop new platforms, like the stationary storage battery that we are talking about. And including this new activity, new platform, and also the biorefinery in Priolo, we arrive at to estimate the EUR 2 billion. We are not in the position today to do the breakout of the breakdown of this EUR 2 billion, but this is how we move from the EUR 1 billion to the EUR 2 billion today.

Giacomo Romeo
Giacomo Romeo
Analyst at Jefferies

That's clear. Thank you.

Adriano Alfani
COO at Versalis

You're welcome.

Operator

The next question is from Kim Fustier with HSBC. Please go ahead.

Kim Fustier
Kim Fustier
Analyst at HSBC

Hi, good afternoon. Thanks for taking my questions. I've got two, please. Firstly, could you discuss the significance of the new business structure announced last month? Basically, what does it allow you to achieve, or achieve differently compared to the previous structure? Secondly, could you give us an update on your plans for the U.K. North Sea, now that the combination with Ithaca has completed? Thank you.

Francesco Gattei
CFO at Eni

Yes, about the new structure. The new structure is substantially an evolution of the previous one. You remember that once there was the previous, it was based on the natural resources and energy evolution, and energy evolution had the scope of creating the platforms that substantially helped to generate, we say, almost EUR 4 billion of cash coming from Enilive and Plenitude the reduction or disposal of a minority stake. And clearly, that was the opportunity to transform from, particularly from the point of view of the biorefinery certain sites, and therefore, having a structure of business that could have, let's say, could capture the interest of new investors.

Francesco Gattei
CFO at Eni

So the new structure that is coming is an evolution of that energy evolution original model that has matured, in specific on Enilive Plenitude, and now is moving to having a partner that is clearly a financial partner and has as a main goal the road towards an IPO. For this reason, the decision was to bring this inside the CFO structure. On natural resource, it was decided to improve even further the centrality of the technical capability and the trading capability. For this reason, all the engineering activities centralize under that structure that is now called Global Natural Resources, and with the trading activity that is entirely inside that responsibility.

Francesco Gattei
CFO at Eni

Finally, transformation, industrial transformation is clearly now focused on the key dossier of transforming the chemical, creating a similar positive evolution that we saw in the refining, in the traditional refining system, and continuing to transform the refining system that clearly has other activity to be deployed in order to add additional biorefining capacity, and in particular, in certain sites, and therefore, to reinforce further our Enilive future business. This is the scope and we think the advantage of having three structure focalizing different segment of business. About our completion of Ithaca, the Ithaca deal, Ithaca is another opportunity. We had a portfolio that was cash generative, but was, let's say, short in term of opportunity of new project.

Francesco Gattei
CFO at Eni

Within there is synergies from the operational point of view, but also clearly from the financial and fiscal point of view, and we believe there will be also, in this difficult environment, still some, let's say, opportunity to grow our oil and gas presence in U.K. Clearly, for us, U.K. is becoming a country where we are not just focused on oil and gas, but where we are a major player in CCS, and in renewable, in the renewable space. So for us, this is a strategic position on a broader span of the business. Thank you.

Operator

The next question is from Biraj Borkhataria, RBC. Please go ahead.

Biraj Borkhataria
Biraj Borkhataria
Analyst at RBC

Hi, thanks for taking my questions. First I'll just follow up on the U.K. again. There's obviously some uncertainty around the tax and the capital allowances in the U.K. So could you just remind us what the expected CapEx budget for that entity is next year, and whether you can talk to any sort of flexibility you have if the rules are, you know, more harsh than expected? And then the second question is just on going through the statements. It looks like you issued another hybrid which doesn't look like a retender. I think it's a new one, and, the commentary suggests that it's for FLNG vessels. So just wanted a bit of color on what exactly that was for, and why you chose that route of financing. Thank you.

Francesco Gattei
CFO at Eni

On the first question, it's very easy. I suggest you to direct these questions directly to the Ithaca management. They will present the results and also the plan for the next year. It's something that is clearly in their responsibility and the disclosure. We cannot anticipate a disclosure that is still difficult for us to present our plan, and speaking about someone else that is doing his job, it's even more difficult. About the hybrid you are referring, this is relating to the floating LNG. Originally, this is a project that is the Congo LNG project. Remember, that was a true floating LNG. One was, let's say, the smaller scale and the larger scale. One was both, the other is under construction.

Francesco Gattei
CFO at Eni

Substantially, this hybrid was a sort of synthetic financial tool to replicate a leasing model. Originally, the idea for us was to have a floating LNG, so a ship that was under lease. It was the plan that we had once we sanctioned the project, was 2022, at the beginning of 2022. Then conditions in the market changed. Remember, 2022 was the year where the invasion of Ukraine changed a lot of things, and therefore, we'd had to accelerate and to buy that ship.

Francesco Gattei
CFO at Eni

In order to have a model that is substantially replicate from the financial point of view, an installment of payment of, of, let's say, a number of years, to cover the cost of that ship, or the CapEx related to that ship, this is, the hybrid bond is a solution that is substantially reproducing also in a, from the financial point of view, in a better way, in a much more optimal solution, what we designed as the original plan for that, ship.

Biraj Borkhataria
Biraj Borkhataria
Analyst at RBC

Okay. Thank you.

Operator

The next question is from Irene Himona, Bernstein. Please go ahead.

Irene Himona
Irene Himona
Managing Director at Bernstein

Good afternoon. Thank you. Congratulations, first of all, on the strategic delivery. I have two questions specific to Q3. First of all, on cash flows, the cash tax rate increased more than 10% this quarter. I presume this includes more windfall tax installments. Can you say what remains to be paid in Q4, please, and whether that completes the bill, or if there is more payable next year? Then secondly, your upstream equity affiliates, EBIT, increased about 4% sequentially, despite the weaker oil price. Can you say what is happening there? What drove that strength between Q2 and Q3, please? Thank you.

Francesco Gattei
CFO at Eni

Yes. On the payment related to the windfall tax, we have a last installment of around EUR 240 million in November. So that should end the number of payment we did, and will substantially reach the level of EUR 2 billion that we paid between 2022 to 2024. So that is the last step. About the EBIT contribution, I think this is mainly related to some of our upstream entities, and we can provide you more detail with the investor relations team.

Irene Himona
Irene Himona
Managing Director at Bernstein

Okay, thank you.

Operator

The next question is from Matthew Smith, Bank of America. Please go ahead.

Matthew Smith
Matthew Smith
Business Banking Relationship Manager at Bank of America

Hey, good afternoon, and thanks for taking my questions. Two, please. Just firstly, wanted to come back to the buyback. You've increased it twice this year, quite substantially each time. I mean, given you've built a lot of visibility on balance sheet improvement, I wondered if increased visibility and stability might be an outcome for the buyback as well, and perhaps certainly one way to reduce the complexity in the buyback mechanism might be to offer a recurring stable buyback in euro million terms. I just wanted to test whether that's something you would see any advantage to, or, you know, conversely, are you keen to retain the flexibility that a payout ratio gives you? So that'd be my first question. And then my second question, I actually wanted to turn on to European refining, if I could.

Matthew Smith
Matthew Smith
Business Banking Relationship Manager at Bank of America

You know, I appreciate this isn't comparable to Versalis from an Eni financial perspective, but it does seem to be an industry that's facing some structural headwinds as, as well as cyclical ones at the moment. I just wondered if you'd be willing to comment, your thoughts on the market, and whether you think rationalization might also be required in this sector, to see any sort of tangible improvement in the outlook from here? Thank you.

Francesco Gattei
CFO at Eni

... Okay, on buyback, clearly, by definition, buyback is a flexible tool. I think that there is not a fixed rule for buyback. What we think is a relatively simple model is that we declare a certain percentage of distribution or a range of distribution in cash flow from operation. That is, let's say, clearly split between dividend and buyback. And we say that buyback will improve following additional upside coming from execution or from scenario 60% upside. And on the other side, there is still a possibility, as we did this year, to evaluate with the board the opportunity to, let's say, bring this percentage or evaluating this percentage in a different way than what we did at the original plan, because there is an improvement of.

Francesco Gattei
CFO at Eni

And clearly, we have the floor once we announce the, let's say, the distribution policy or we upgrade the distribution policy during the year, and so then it is a sort of decision that will be protected from practically all the scenario through the balance sheet. So this is the model. I think that this is a quite attractive model, and we do not, we cannot have been so deterministic because the life unfortunately cannot be predicted at one hundred percent, and the volatility of the oil market is extremely high. I leave now to Giuseppe Ricci for the answer about the downstream on refining.

Giuseppe Ricci
COO at Eni

No, thank you. Thank you, Francesco. What we have done on refining in the last 10 years was to reduce the exposure of refining on a European market through the creation of the biorefining on one side, and the diversification in the Middle East with the Ruwais. This strategy allow us not only to create Enilive with the high value that we have seen today, but also to maintain the positive result in the third quarter of this year, with a margin very low. Because today, our margin was 1.7 in third Q 2024, $10 less than the same quarter of last year. Notwithstanding this, we are in a positive region with refining.

Giuseppe Ricci
COO at Eni

What we expect in the next months and years for refining margin in Europe, of course, is a situation with slightly better than this quarter, but in any case, not so bullish, and that it means that that confirm that our strategy is very correct, and the recent shutdown of Livorno for the transformation in biorefinery help us to have the further reduction in this exposure, so at this point, we are at the minimum capacity of refining, just able to cover the request of the marketing of Enilive, so and we are in equilibrium. In the next years, we will see further transformation.

Giuseppe Ricci
COO at Eni

But the most important thing is that this is a success story that we have to repeat in the chemistry.

Matthew Smith
Matthew Smith
Business Banking Relationship Manager at Bank of America

Perfect. Well, thank you very much.

Operator

The next question is from Michele Della Vigna, Goldman Sachs. Please go ahead.

Michele Della Vigna
Michele Della Vigna
Analyst at Goldman Sachs

Thank you very much, and congratulations on the strong results and the progress on disposals. Two questions, if I may. The first one is on Egypt. The country clearly is in a deep energy crisis. They are now importing LNG pretty much all year round. I was wondering if there is a lot you can do in terms of extra drilling and exploration to continue to supply more gas, as you have consistently done in the last few years? And then secondly, I wanted to come back to biofuel. It's clearly a very successful business you've created there. This year has been tougher in terms of margins. One of the drivers that could tighten the market over the next two, three years could be the implementation of the RED III directive, country by country in Europe.

Michele Della Vigna
Michele Della Vigna
Analyst at Goldman Sachs

I was wondering if you could give us any visibility when you think Italy may actually apply the tighter RED III standard, and therefore raise the renewable diesel demand in Italy? Thank you.

Francesco Gattei
CFO at Eni

Okay, first question is for Guido, and the second one for Stefano Ballista.

Guido Brusco
COO at Eni

Nick, thanks for the question. First, let me give you some more color on what is the domestic situation, economic situation in Egypt, which of course, we constantly monitor. So we see positive signals. There have been material investment deals done recently, and financial support packages have been provided by essentially, mainly from UAE, $35 billion, but also IMF and EU for $15 billion in total. So it's a package of $50 billion which has improved significantly the financial position of the country. But, there have been also economic reforms made. In March, Egypt has allowed the local currency to freely float.

Guido Brusco
COO at Eni

... and this has provided some stabilization on, particularly the hard currency reserves of the country. But more importantly, starting in August, subsidies on electricity have been progressively reduced, and also subsidies on automotive fuel have been reduced, so enhancing further the financial position of the country. And recently, the new cabinet announced a further structural reform to provide better prospects to the country. Coming to Zohr and the gas production, clearly, you know, the overall situation of the country wasn't good till six to nine months ago.

Guido Brusco
COO at Eni

Most of the international operators reduced the activity completely, and this resulted in a serious drop in the production. Now, with this improved situation, with the country providing more reliable payments, paying the matured dues, and recovering the outstanding payment, activity is restarting. As far as Eni is concerned, we have several production optimization activities being foreseen and being implemented in most of our fields, onshore and offshore. Particularly for Zohr, we are envisaging a rig coming at the end of the year to start activities beginning of next year to restore some production over there.

Francesco Gattei
CFO at Eni

... This is stuff for the-

Stefano Ballista
VP at Eni

Yes, Michele, thank you for the question. As you said, right now, actually the third quarter experienced the lowest margin ever seen before. Reason is the supply, demand, and balance. But actually, as you mentioned, there are clear mandates and regulation coming in place with decision already taken. RED III, the Renewable Energy Directive number three, is one of that, and you have to look at that in a wider context of other supporting mandates. Focusing on the Renewable Energy Directive number three, it's gonna get defined, the growing path in term of GHG reduction, starting from middle of next year. What I would expect is to set new target starting from 2026, and this is gonna be true for Italy and for other country.

Stefano Ballista
VP at Eni

Then the path, in order to get from, just to remind some number, from 14%, that is current Renewable Energy Directive, up to 29%, is gonna be probably a quite linear phase, along the years. Another element that I wanna highlight, in any case, is that even now, we already know that next year, focusing on Italy, the target, the GHG, the energy content target, has been already increased by about 1%. This year is 10.8%, next year is gonna be 11.7%. This is coming from the current renewable energy directive that is keeping its own path. So it's gonna be an add-on, on top of the increasing target we already are experiencing. On top, we have an already defined mandate on pure HVO, so 100% HVO.

Stefano Ballista
VP at Eni

That one is gonna increase by 100,000 ton next year in Italy, and there is a already defined and approved path in order to reach a million ton with a step up by 100,000 ton per year in the following years. So actually, an increased path, demand increase path is already in place.

Michele Della Vigna
Michele Della Vigna
Analyst at Goldman Sachs

Thank you.

Operator

The next question is from Peter Low, Redburn Atlantic. Please go ahead.

Peter Low
Peter Low
Analyst at Redburn Atlantic

Thanks. Yeah, another one on the KKR deal for the stake in Enilive. The valuation you achieved was really quite impressive, given what's going on in the market. Can you perhaps talk a bit about what makes Enilive unique or particularly well-positioned in the biofuel market, and kind of perhaps what kind of why KKR was willing to kind of pay such a level? And then, just separately, on organic CapEx, you're now saying that's going to be kind of below EUR 9 billion this year. What are the moving parts there that means that's coming in lower than you had initially expected? Thanks.

Francesco Gattei
CFO at Eni

About the evaluation of Enilive, I think that the competitive advantage or the structure that we designed, and substantially give it to Enilive, are quite a compelling investment case, rationale. Because I give you exposure to the growth business of biofuels with a tightening of regulation, the opening of the SAF markets, and all the changes that could emerge from demand point of view, in particularly, we more and more request of HVO also for shipping or other users, just as the traditional activity. What is the advantage is to mix this growth opportunity together with the stabilizing quality of our retail.

Francesco Gattei
CFO at Eni

So you are substantially able to travel in this difficult transformation of the transportation model, but you are granted by the fact that there is 1.5 million clients that are coming to our 5,000 service stations, buying fuels, buying goods, looking for additional services, et cetera. And this is the reason you see the result of Enilive much more stable, even in a difficult market environment, than other competitors. So I think that this is where the difference is, and the fact that substantially you can grow, let's say, with a protection that allow you, in any case, to have other element that generate the cash.

Francesco Gattei
CFO at Eni

So another factor that you not only have a sort of a hedging through this retail contribution, but also to have a cash availability that will help you to have capability to fund your investment, and also to have a certain distribution potential in your hands. I believe this is the real, let's say, reason for having such a level of evaluation. About CapEx, the fact that clearly we are improving on a yearly basis the expectation, there is a step up in the last quarter that is generally a natural process following the evaluation of FIDs during the year, and you have down payment once you take FID. I think this is a normal and this historical trend that you could see.

Francesco Gattei
CFO at Eni

Clearly, we said that we're we will be around nine, below nine. It could be something that clearly show, in any case, an improvement versus the expectation that we had, once we announced the Capital Markets Day.

Peter Low
Peter Low
Analyst at Redburn Atlantic

Thank you.

Operator

The next question is from Massimo Bonisoli, Equita. Please go ahead.

Massimo Bonisoli
Analyst at Equita

Good afternoon. Two questions, please. One on Versalis. To better understand the capital discipline, can you provide at least some qualitative indication on the EUR 2 billion spending for the restructuring of Versalis? Roughly, how much is related to all plans, and how much is driven by growth project? And if you can be also more specific on new volumes coming from biochemistry and circular economy. And the second question on disposal, could you please provide more details on the progress of the eventual disposal of a minority stake of new satellites like CCS, as well as biogas? Thank you.

Francesco Gattei
CFO at Eni

Adriano, if you want to answer about the-

Adriano Alfani
COO at Versalis

Sure. Massimo, let's say that, as I said before, that we don't give the split of the two billion EUR in terms of investment, how much it is for one compared to the other one, but let me give some flavor about how it's going to change our portfolio, just to give you an idea, okay? So if you look historically, in terms of traditional business, what you define traditional business or let's say the fossil business, we used to spend more than 50% of our CapEx on a yearly basis for traditional business, so let's say for basic chemical and for polymer, commodity polymer, okay?

Adriano Alfani
COO at Versalis

If you look in terms of projection, in terms of portfolio shifting, what we are going to invest for, in terms of percentage, for base chemical and the standard polymer is in the range of 10%, while 90% of the future investment on a CapEx base will be for the new platforms, okay? Of chemical platform. If you look in terms of the second part of your question, how much we are going to grow, today, the portfolio of Versalis, based on average 2023 to 2024, is 30% on specialties, where this specialty include the compounding business, the biochemistry, circularity, and so on. And the other 70% is base chemical and the standard polymer.

Adriano Alfani
COO at Versalis

After the transformation, so in five years from now, based on our transformation program, so restructuring program and development of new platforms, we expect to go to 65% of the specialty business. And in this 65% is, of course, included the bio piece. Yeah.

Francesco Gattei
CFO at Eni

Okay, about the disposal plan, I clearly you know we have already, let's say, announced that we are currently in tendering activity with received interest from five, six potential investors for the CCS. This is a process that will require also some time for fine tuning, but clearly there is an interest from different operators to join us in a portfolio that is, let's say, spreading from U.K., Italy, Netherlands, Norway, and other countries, and it will become one of the major levers for the decarbonization of hard-to-abate industries. We are currently working on the deal exploration model, so there is some assets that are under negotiation, because clearly we are in a more advanced stage for that specific field.

Francesco Gattei
CFO at Eni

So clearly, we are referring to some of the latest, most relevant discoveries. And we are clearly also working on certain additional activity of valorizing again some stakes in Plenitude and also potentially in Versalis, but this will could take more time. As you've seen in the past month, we are a very active portfolio activity, and I think that we are able to deliver on a very fast way and in a very effective in term of value valorization our plan of disposal. This is what I can tell you for the time being.

Massimo Bonisoli
Analyst at Equita

Thank you.

Operator

The next question is from Lydia Rainforth, Barclays. Please go ahead.

Lydia Rainforth
Lydia Rainforth
Analyst at Barclays

Thank you, and good afternoon. Two questions, please. And the first one, just coming back to the satellite plan, I think there was some talking at first about the idea of carbon capture of the CCS side, going into that satellite model. Can you just talk us through what you're seeing on CCS at the moment? And then secondly, on Azule, can you just remind us when the drilling in Namibia, when we should actually think about that coming through as well? Thanks.

Francesco Gattei
CFO at Eni

On CCS, what is now evident is after a number of years where there were some, let's say, skepticism about the potentiality of this industry that is a quite traditional industry. It's nothing particularly new. What is new is substantially to link together emitters and storage potential. This is the chain that was never tested, but injecting CO2 in a reservoir is a quite traditional readily used activity. We see there is a huge interest. There is a huge interest, because there are targets from a lot of industry to decarbonize their production line. And you have, we have the storage potential, so we can deploy our expertise, our know-how.

Francesco Gattei
CFO at Eni

We can keep the cost of that activity as cheap as possible because we are using existing facilities. We are injecting in depleted reservoirs and not in aquifers, so the cost of energy related to that activities is lighter. And in the countries where there is a regulation framework already defined, there is a potential to take FID in a relatively short term. You have seen that the U.K. has allocated a budget for this activity to support the players that will be involved, so the emitters and on the other side the injectors.

Francesco Gattei
CFO at Eni

We are already, let's say, as we mentioned also during the presentation, completed the first part of our project in Ravenna, with a capture of more than 90% or up to 96% as a peak of a stream of CO2 that is less than 3% in term of concentration, so it's more difficult to capture. It proves that this technology could be extremely effective in minimizing emissions. Therefore, this is a business with great potential. We need just to be, let's say, patient in understanding that not only the players, but also the government, have to be ready for having this business as an option in the table. The other question is about Azule in Namibia, I think, Guido.

Guido Brusco
COO at Eni

Yeah. Thank you. On Namibia, the activity, I mean, we are Plenitude spud, I mean, Azule is Plenitude spud, two wells, in the PEL 85 block, which is close to some of the largest discovery made in Namibia. We are quite optimistic on those wells. And, the rig is planned to move by the end of the year, so, we'll likely spud the first well in December. Those wells are not so... I mean, in term of duration, is month and a half, two months maximum.

Guido Brusco
COO at Eni

We'll have the first result of the first well by Q1, and the second well either late in Q1 or

Francesco Gattei
CFO at Eni

Guido?

Guido Brusco
COO at Eni

Yeah.

Francesco Gattei
CFO at Eni

No, wait, there was-

Guido Brusco
COO at Eni

Yeah.

Francesco Gattei
CFO at Eni

Probably the, let's say, the line was interrupted. I think that you said late Q1 or early Q2, I would suppose.

Guido Brusco
COO at Eni

Yeah, the first well will be mid Q1, the results, and the second well, we expect by late Q1 or early Q2.

Francesco Gattei
CFO at Eni

Thank you.

Operator

The next question is from Henry Tarr, Berenberg. Please go ahead.

Henry Tarr
Henry Tarr
Co-Head of Energy and Environment Research at Berenberg

Hi there, and thanks for taking my questions. Two, if I may. One, just on CapEx. The run rate clearly is sort of well below now the nine billion that you indicated. I just wonder, has anything been deferred, or, you know, how is, how have you sort of, or shuffled out? Just how is this CapEx number moved? And then secondly, just coming back to the sort of biorefining outlook. You're clearly sort of building new facilities, you know, three new facilities now, I think. The market today is oversupplied. I mean, how confident sort of are you? You know, I know there's RED III, et cetera, but as you look out, when do you think this market comes back into balance?

Henry Tarr
Henry Tarr
Co-Head of Energy and Environment Research at Berenberg

Because I guess we're already seeing some projects get canceled or delayed due to the current challenges. Thanks.

Francesco Gattei
CFO at Eni

Okay, on CapEx, there is no, let's say, a delayed investment. It's just a matter of maturation of FID that comes at the end of the year. As you mentioned, and also the fact that clearly that we take FID in biorefineries, we will have some FID also in upstream. Additional activity also sometimes in the exploration activity. So a lot of things that normally occurs in the last quarter. On the biorefining outlook, I leave it back to Stefano Ballista.

Stefano Ballista
VP at Eni

Yeah, thank you, you know, thank you for the question. Now, you're absolutely right. The short term, the current scenario, as I said before, it's I would say we have ever seen this kind of level. But actually on the other side, it's definitely clear that the medium scenario is well defined. Regulation are, as I said before, are in place, so there is no debate on that. The RED III is gonna double current growth path, and it's not yet in place. It will get in place starting 2026, let me say. SAF is more than a million ton. Refuel aviation on SAF is gonna be more than a million ton, and this is gonna get in place following year.

Stefano Ballista
VP at Eni

Another example, looking at current decision at country level, we got Germany that actually ban the UER as lever to comply with mandatory blending mandates. And at the same time, they stop the carryover of certificate from 2024 to the following years. This is gonna give, starting from next year, an upside of above 600,000 ton. Same reasoning we could do on the U.S. The LCFS for California is expected end of this year, beginning of the following, is gonna do an increase from 20% to 30% in terms of GHG reduction, with a step-up current estimate. Expectation actually is about 7% as a step-up, starting from following year.

Stefano Ballista
VP at Eni

We are starting to see a lot of tax credit support on SAF. This year, SAF, of course, in Europe, is just a voluntary demand. In U.S., we are starting to see some demand driven also by, let me say, supporting incentives in terms of tax credit. I wanna mention Washington, where you're gonna get a specific tax credit on SAF, and that's why we are seeing some demand over there. Given this kind of trajectory, we see 2030, above 50 million tons of demand, and this is absolutely overtaking supply.

Henry Tarr
Henry Tarr
Co-Head of Energy and Environment Research at Berenberg

Thank you very much.

Operator

The next question is from Martijn Rats, with Morgan Stanley. Please go ahead.

Francesco Gattei
CFO at Eni

Martin?

Operator

Mar-

Francesco Gattei
CFO at Eni

Probably he's dropped the line.

Operator

Martijn Rats, your line is open.

Francesco Gattei
CFO at Eni

Let's move to the next one.

Operator

The next question is from Paul Riedman, BNP Paribas. Please go ahead.

Paul Riedman
Paul Riedman
Analyst at BNP Paribas

Yeah. Hi, guys, and thank you very much for your time. Just a quick question on IPOs. You mentioned, I think, EUR 2.5 billion of cash inflow next year from divestments, possibly. Does that include a Plenitude IPO? And then when we think about IPOs for Enilive, KKR seem to be paying a significantly higher multiple for Enilive than maybe where some of your listed peers trade. Why would that not mean that you just focus on increasing partner stakes? I think you've said before that Eni would like to hold, say, 60% stake in Enilive, so there's a lot more room to go for partner sales. And then just quickly following on from Enilive, a question on voluntary demand for sustainable aviation fuel next year. What are you guys expecting?

Francesco Gattei
CFO at Eni

Thank you. On the IPOs, clearly, in that amount that I mentioned, that was mainly referring to the negotiation that are still ongoing and that will be... We expect to close within the end of the year. So that 2.4 is substantially, let's say, a bunch of assets, and do not include any IPO. IPO is difficult to be predicted. It's related to a lot of things, mainly on the financial stability and market condition. You know very well that in Europe this year, still, after 2022 and 2023, is a year of a very, let's say, limited number of IPOs. You are right that there is a very attractive multiple in the evaluation that we received so far.

Francesco Gattei
CFO at Eni

In selling down our stake, the logic for us is to have a balance between expectation of an IPO in the mid long term, and having valorization up front. Valorization forward is high, but is based also on the expectation of business that will double the EBITDA, Plenitude within the four-year plan, Enilive just a bit longer. But substantially, this is the time period that could de-risk an IPO, take into account of the multiple that you are seeing in the market. So this is substantially what we believe, and we do not think that the solution towards an IPO is to have a continuous sell down of a stake, because at the end of the day, you are substantially doing an IPO ...

Francesco Gattei
CFO at Eni

to the end of someone else, then, and you do not control then when you will be able to do an IPO if you continue to reduce your stake. While we want to keep this decision in our hands. About the SAF demands, Stefano Ballista will answer, please.

Stefano Ballista
VP at Eni

Yes, thanks for the question. On SAF demand in Europe next year, we expect above a million tons. To comment, this is not voluntary demand, this is a mandatory demand, so there is no option but to be compliant with that, so this is a given. We see voluntary demand in U.S., we expect doubling this year voluntary demand. It's voluntary, but as I said, linked to tax credit dedicated to SAF, and we expect about a million tons, twice as much current year, so overall, above two million tons.

Paul Riedman
Paul Riedman
Analyst at BNP Paribas

Thank you.

Francesco Gattei
CFO at Eni

Okay, we take the last question, please.

Operator

The last question is from Matt Lofting, J.P. Morgan, please go ahead.

Matthew Lofting
Matthew Lofting
Analyst at JPMorgan

Thanks for taking the questions. Two, please. First, I just wanted to come back on the distribution policy. Francesco, you talked earlier through the sort of steps that you and I have taken through this year in ending up at the sort of the EUR 2 billion buyback, which is a very strong and welcome number. It just strikes me that in the end, the sort of the cash flow expectation for 2024 now is very similar to what you expected in March, and yet the buyback is nearly double at EUR 1.1 to EUR 2 billion. So could you perhaps just talk more conceptually about how we should think about that?

Matthew Lofting
Matthew Lofting
Analyst at JPMorgan

Is 2024, to some degree, exceptional or specific in the context of the progress and the momentum around the strategy and deleveraging the balance sheet? Or when we think forward to 2025 and beyond, should we systematically expect that you begin the year by setting a sort of a floor in terms of the buyback, which inherently is at a more conservative level, and then looking to grow it as you move through the year, dependent on macro and dependent on performance? And then the second quicker question was, Italy taxes. There's been various different reports of moving parts since the summer. And perhaps you could just update us on your understanding there. Thank you.

Francesco Gattei
CFO at Eni

Okay, on this, the taxes, the windfall tax, clearly now is clear what is the announcement, so I think that it's not involving clearly the energy system, it is involving different sectors. So I think there is no other speculations around the potential, taxes. About the, the buyback, you are referring doubling substantial buyback is, exactly the point that you are referring. At the beginning of the year, we are expecting, to have a leverage between 20% to 25%, and, we are doing much better. The number of, disposal, the amount of disposal that we are assuming this year are substantially, including the one that, we expect to, let's say, to announce, to close in terms of negotiation in the coming quarter, are much above our expectation.

Francesco Gattei
CFO at Eni

Completing almost 80%, 90% of your disposal plan in 12 months, clearly not cashing in everything in 12 months, but having this activity substantially de-risked entirely, make a lot of difference in the perception of your distribution policy and your balance sheet strength. Your question about this is a model that potentially could happen in the coming years. I believe in the logic of the buyback that we presented, that the answer should be yes. What we said, once we announced the buyback or the distribution policy, we substantially set the floor. So by definition, you will see an improvement.

Francesco Gattei
CFO at Eni

Clearly, it depends. There is an improvement during the year, but an improvement, an increased improvement in buyback, if you are able to show that from the point of view, price and scenario, execution of your strategy or portfolio, you see that the quarters comes better than you what you expected in February or March once you started your yearly performance. This is, let's say, by definition, what is happening this year. Also, what happened in the, I think one or two years ago, we did the same. I think this is the complete the today's session. I believe that was a quite a dense, let's say, day, with a lot of question, and thank you all for the attendance. Our team of investor relation clearly is always available.

Francesco Gattei
CFO at Eni

Also, during the weekend, John said that he's completely free, so we can, let's say, ask you to call him and his team for having all the data or information that we have not covered during this call. Thank you.

Operator

Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.

Analysts
    • Kim Fustier
      Analyst at HSBC
    • Matthew Smith
      Business Banking Relationship Manager at Bank of America
    • Stefano Ballista
      VP at Eni
    • Joshua Stone
      Equity Research Analyst at UBS
    • Adriano Alfani
      COO at Versalis
    • Guido Brusco
      COO at Eni
    • Alessandro Pozzi
      Senior Equity Analyst at Mediobanca
    • Peter Low
      Analyst at Redburn Atlantic
    • Giacomo Romeo
      Analyst at Jefferies
    • Massimo Bonisoli
      Analyst at Equita
    • Henry Tarr
      Co-Head of Energy and Environment Research at Berenberg
    • Matthew Lofting
      Analyst at JPMorgan
    • Paul Riedman
      Analyst at BNP Paribas
    • Biraj Borkhataria
      Analyst at RBC
    • Lydia Rainforth
      Analyst at Barclays
    • Francesco Gattei
      CFO at Eni
    • Irene Himona
      Managing Director at Bernstein
    • Giuseppe Ricci
      COO at Eni
    • Michele Della Vigna
      Analyst at Goldman Sachs
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