Grupo Santander Downgrades Eni to Neutral, Trims PT

Eni S.p.A E, a global integrated energy company, is set to receive a new chunk of investment for its renewable energy business, Plenitude. The Swiss asset management firm Energy Infrastructure Partners (“EIP”) will increase its stake in Plenitude from 7.6% to 10%. The deal values Eni’s renewable energy and retail business unit, Plenitude,at more than 10 billion euros, including debt.

Eni has stated that EIP will purchase new shares issued by the company for approximately 209 million euros. E has adopted a new “satellite” strategy, wherein it will set up separate business units that are capable of drawing investor attention. The new investments will be utilized to grow the businesses further. The deal with EIP aligns with Eni’s satellite strategy.

E believes that this strategy is an ideal path toward energy transition. Eni plans to build low and zero-carbon businesses that can capture the attention of leading investors and grow organically to become sustainable on their own. Eni has also implemented this strategy on a previous deal involving KKR, a U.S.-based investment firm, that purchased a 25% stake in Enilive, its biofuel business unit. Furthermore, Eni is reportedly talking to several potential investors and seeking partners for its carbon capture and storage business.

EIP mentioned that increasing its stake in Plenitude underscores its confidence in the business.

E’s Zacks Rank and Key Picks

Currently, E carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Archrock Inc. AROC, Smart Sand, Inc. SND and FuelCell Energy FCEL. Archrock and Smart Sand presently sport a Zacks Rank #1 (Strong Buy) each, while FuelCell Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

Smart Sand, Inc. is a low-cost producer of high-quality Northern White frac sand, an ideal proppant for hydraulic fracturing and various industrial applications. The company provides proppant and other logistics services for several companies in the oil and gas industry. With sustained demand in the oil and gas market, the company is expected to see growing demand for its services, supporting a positive outlook.

FuelCell Energy is a clean energy company offering low-carbon energy solutions. It produces power using flexible fuel sources such as biogas, natural gas and hydrogen. The company designs fuel cells that generate electricity through an electrochemical process that combines fuel with air, reducing carbon emissions and minimizing the environmental impact of power generation. As such, FCEL is anticipated to play a crucial role in the energy transition by enabling industries and communities to shift from traditional fossil fuels to low-carbon alternatives.

Zacks Investment Research

By Christian Moess Laursen

Eni signed a deal for Energy Infrastructure Partners to increase its stake in the Italian energy major's low-carbon unit Plenitude.

The Milan-based company said Monday that it agreed to a capital increase of around 209 million euros ($224 million).

This takes the Swiss fund manager's stake to 10% for a total investment of around 800 million euros, including the 588 million euros paid in March, implying a an equity value of around 8 billion euros for Plenitude.

The agreement underpins the effectiveness of Plenitude's distinctive integrated model and strengthens its financial structure, Eni said.

Its the latest step in the implementation of Eni's so-called satellite model, which is part of the company's attempt to diversify its portfolio toward renewable energy and away from oil and gas.

Under the model, it splits off growth business to attract co-investors before seeking potential listings for the units. Last month, it agreed to sell a 25% stake of its biorefining unit Enilive for $3.17 billion.

Write to Christian Moess Laursen at christian.moess@wsj.com