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Green IPO candidates in Europe look to private rounds to protect valuation hopes

Regardless of the global enthusiasm for energy transition technology, IPO candidates active in related sectors are having to look at broader funding strategies given turbulence in Europe’s new listing market, sector advisers said.

Italian energy group Eni [BIT:ENI], for example, is conducting late-stage discussions with a limited number of parties for the sale of a minority stake in its business Plenitude, with investors in the renewable and infrastructure sectors looking to back the business, a source close to the situation said.

Only last month, Eni was reported to be nearing a deal to sell around 10% of Plenitude to Switzerland’s Energy Infrastructure Partners (EIP), but no final agreement has been formalised.

Plenitude has been a perennial IPO candidate in Europe but has been subject to delay, as Eni does not want to compromise on what it feels is a fair valuation for the asset.

“These discussions are tricky because Eni still wants to maintain its initial USD 8bn valuation,” the source close to the Plenitude situation said. “The internal understanding is that the presence of an institutional partner could set the unit on a safer growth path, while an immediate listing could hurt the prospects of the business more than any private deal could.”

Some of the investors that have entertained private stake-sale talks could later act as cornerstones in an eventual IPO, having developed connections with management and studied the business thoroughly, the same source added, but noted any Plenitude IPO was unlikely before 2H24.

Another once-talked-about IPO candidate is Enel [BIT:ENEL]’s electric vehicle unit Enel X Way, which is also expected to receive a round of private funding before any listing, with a private deal possible next year, a source close to that deal said.

A market source highlighted the “hit” taken by Eurogroup Laminations Spa [BIT:EGL] ever since listing, as a reason for companies delaying their IPO plans.

“The ambitions of the parent companies did not take into account the events of the past year, like the war in Ukraine and its consequences on the energy market, and now their management teams are facing a completely different market and investor sentiment; this has consequences on valuations,” this source said.

He noted that a lack of EV infrastructure around Italy was also likely to continue to impact business performance in the country, meaning financial projections are often aspirational, based on future revenues as infrastructure grows.

Investors like these stories, the source close to the Plenitude situation said, but noted that potential energy transition stocks need to show sustainable growth prospects and resilience throughout various business cycles, rather than just ambition, no matter how virtuous.

Although investors are disciplined on value, there is clearly substantial demand to support energy transition companies in IPOs.

For example, BNP Paribas Energy Transition Fund, part of BNP Asset Management, is talking to several possible IPO issuers about an anchor or cornerstone role following its participation in Thyssenkrupp Nucera’s [ETR:NCH2] recent listing, Ulrik Fugmann, co-head of the environment strategies group, told this news service.

In France, valuation concerns are also present and have delayed the IPO launch of Ampere, the electric-vehicle unit of listed French car manufacturer Renault [EPA:RNO], with its executives pointing to an IPO in 1H24 rather than 2H23 as had been speculated.

Considering the investment injected into the unit, management is wary of taking too much of a discount due to market conditions and thinks the inherent strengths of the business should be valued at their full potential in a better market, a source familiar with Renault said.

A longer charging period could be preferable to a false start.

A spokesperson for Enel declined to comment. Eni did not respond to a request for comment.