ENI S.p.A.

Thank you. Thank you.

Good afternoon and welcome to United 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 shareholders, and progressing our strategy. In the third quarter, we clearly continue to deliver on all those objectives. In Q3, we did report resilient results with pro forma adjusted EBIT of €3.4 billion and cash flow from operational of €2.9 billion, despite deterioration in scenario 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 activity. 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 AnyLive specifically, we are delighted to have confirmed the investment by KKR into AnyLive. The 2.9 billion investment for a 25% stake supports our growth and confirms the value already created. Similar to our planetary transaction earlier this year, it assesses 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 confirmed that construction work at Livorno will begin soon, and we will start our first biojet plant in Gela at the end of this year. Upstream continues to be an area of significant distinctiveness and competitive advantage. In August, we began gas production at Argo Cassiopeia offshore Sicily. Production at Xeronscope 1 and 2 will quickly ramp up into the winter, contributing to gas supply for Italy. John Casper and Ballet in Phase 2 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 Gang 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 centred around the existing Junk Creek FPU. Together, these two hubs will account for over 400,000 barrels per day and the Aeneas equity is over 80%. Additionally, we have identified over 30 DCF for near-field exploration potential, offering potentially very material upside. The scale of this opportunity underscores 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 Prenit and Enel Live 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 INET CCS project in the UK. As a reminder, we are looking to build over 50 million tonnes of capacity before 2030 and grow that to over 40 million tonnes 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 just a debit of €3.4 billion and cash flow from operation of €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 one-third of our EBIT. Finance expense remained slow even before debts began to fall materially, while the tax rate of 51% was consistent with this quarter's oil price and earnings mix. Cash flow from operation for the quarter was €2.9 billion, giving €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 will see an acceleration of this reduction in the coming quarters. Cap is for the quarter was 2 billion euro, and for the 9 months was 6.1 billion euro, minus 10% versus last year. We expect to be below 9 billion euro for the year, even taking into account the seasonally normal uptick of the last quarter. Net cap was €1.6 billion in the quarter and should be below €6 billion, assuming the cash inflow of agreed transactions waiting to close at the end of the year. In global natural resources, EMP contributed 3.2 billion euro 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 up spreads and confirming robust results even in an year of limited volatility. In the two key transition businesses, Enelive delivered strong biorefinery, throughput growth and excellent utilization. EBIT was hurt by the weak bioscenario, but marketing made a strong contribution. Plenitude is also contributing, continuing along its planned growth trajectory. Year-on-year EBIT was lower versus 2023, but it will beat our budget results on an yearly basis. Net debt and leverage in the quarter were both down and we remain comfortable below the top end of the planned 15-25% leverage range, despite closing only one 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 remains our first priority. In September, we paid the first tranche of the annual 1 euro dividend, plus 6% versus last year. Our buyback in the quarter totalled €560 million, or 1.3% of shares in issue, which are now down 12% since we restarted the programme 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 continuing success in our portfolio programme, we also confirm today an increase in the 2024 share buyback. We now plan to repurchase €2 billion in the programme, an increase in €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 implications. It is also an opportunity to build new, highly attractive opportunities around our chemical sector. Fixing the results of this loss-making segment will be a significant contributor to the earnings and cash flow potential we see for E&I 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 continued through 2024. Our response is one of both restructuring and transformation. The future platform of Versalis will have significantly different profiles, one focused on an 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 dedicate 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-advantaged imported raw materials, and we will convert part of the site to the construction of new factory facilities for the manufacturing of stationary network batteries. In the meantime, we plan to shut down cracking at both Praiolo and Brindisi. We will also look to exit or significantly reduce our exposure at 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 in Ragusa. You will be aware we closed operation at Grangemort earlier this year. Further initiatives to drive efficiency in polymers might also be taken. The European chemical 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. The transformation path we chose then by refining evolved into AnyLive 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 barrels per day, the middle of the original guidance, reflecting the expected impact of OPEC plus quotas. GGP pro forma EBIT is raised again to 1.1 billion euro, while we confirm our transition businesses to deliver EBITDA of 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 outward performance versus the original plan of more than 1 billion in each case. We can confirm gross cap is below 9 billion euro and net cap is well below 6. And I have already discussed the outlook for leverage. And this provides a setting for the raise by back to 2 billion for 1.6 billion and the 1.1 in the original guidance. For the purpose of modelling our cash flow for operation for the fourth quarter, you should assume dividend from associate exceeding net income by around 25%. Our relationship 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 represents a very good quarter amid a volatile and challenging environment. We have significantly advanced strategy, developing growth in advantageous 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 the €300 million of savings that we planned for this year. Our recently announced reorganization reinforces our actions in each of these aspects, but critically, our financial performance continues to be highly competitive and resilient. Indeed, we are now positioned in an 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.

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 touch-tone 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 Josh Stone with UBS. Please go ahead.

Thanks, and good afternoon. Two questions, please. Firstly, on AnyLive, 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 given you sold the higher end at 25% to KKR, can you just update us on how much of a priority is that for ENI today? And then second question on the petrochemical restructuring, and you provided some helpful slides on that. Thank you. Maybe just to 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? And also maybe what was the response from the unions or what has been the response from the unions so far on this? And is your target still to reach break-even EBITDA in 2025 is still valid. Thank you.

Okay, thank you, Joshua. I will answer to the first question about AnyLive, and I will leave the floor to Adriano Alfani for the chemicals. On AnyLive, clearly, you remember correctly, once we announced the exclusive agreement for negotiation with KKR, that we have the range of 20 to 25% of disposal and from 5 to 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 to 10%. So 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 10%, because we will have, let's say, a larger disposal of 25 plus an additional 10% if we move to the top end of the 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.

Thanks, Josh, for the three questions about... the chemical piece. Let me start with the first one about the improvement in the results 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 at this time for the 2025 and also for the end of 2024. So the improvements that we expect in the economics of Versailles 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 in his speech. How fast the improvement will come, 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 or five years gradually improving. Of course, an improvement in the scenario in term of possible recovery will help in order to have a bolster in execution plan. But at this moment, we'd like to be a little more, let's say, the catalytic in the outlook from a demand point of view for the reason that I was explaining, based on some developing in the market, automotive sector in Europe, construction and so on. In terms of response from the 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. 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 onboarding in order to do many different actions in order to improve and to create the sustainability for the future, not only in terms of economic sustainability, but also in terms of, of course, people's sustainability in terms of employment and so on. From an EBITDA point of view, that is the third question for 2025. At this moment, it is unlikely that we can break even EBITDA in 2025 in this context of scenario. But, of course, in case of improvement, we can target in order to be significantly better than in 2024 in the performance of EBITDA for 2025. Okay. Thank you. Thank you.

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

Thank you for taking my questions. I have two. The first one is on disposals. So this year we have 3 billion of cash-ins. 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 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, $3 billion, is it a good assumption? Those that 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 400,000 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.

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 on disposal, you know that we have a net M&A cash-in expected in 2024 or 3.6 we raise versus the original assumption. Clearly this includes not only the cash-in coming from the disposal but also the cash-out coming that was mainly concentrated at the beginning of the year once we paid the acquisition of Neptune and a smaller acquisition in the renewable segment. For next year, the expectation is to have additional disposals 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 2.5 billion euros. 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.

And so, 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. So, first of all, this year we've completed our evaluation of the discovery of GangNord that is confirming a potential of a 5-TCF of gas. And of course, the scale of this 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. The discovery resources of that transaction accounts for a number close to another five TCF, which of course will be complementing the Ganga North discovery. So if we consider both the plan of development for the Nord hub, which is Ganga Nord 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 then 400,000 barrels of oil equivalent per day, which is give and take 2 BCF of gas and 80,000 barrels of condensate. On top of that, we have an exploration potential, which we estimated in a region of, of course, unrisked of 30 TCF of gas, which we have significantly risked by the nearby discoveries. Clearly, the discovery of Gangnor have allowed a more detailed reconstruction of the geological model, and now we think that this potential is well and better at risk. And so 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. 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 train operational 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. We have already started the drilling activity in August to develop some fields discovered close to the south hub, namely Marrakesh East. And 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 App.

Thank you. Just on the 400, how much will it be for domestic, let's say, sales, and how much do you think you can export to Bontang?

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 25-30%. Understood.

Thank you very much.

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

Thank you. Two questions for me. The first one, Francesco, is on distributions. Your 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 moving to a lower level of leverage. Do you think that this upper level is what is effectively sustainable in the current situation? with the context of the current pro forma leverage. The second is on chemicals. I'm just trying to reconcile the billion capex that you announced at the CMB that was for the 24-27 period with the 2 billion that you now have for the five years. Do you think that you're just going to need more investments to get to that free cash flow breakeven level? Is it a timing issue? And when do you think is the right time to bring in a partner in these assets? Thank you.

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 scenario that raised the amount of cash flow we were expecting for this year and we shared according with 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, so the buyback part of the distribution from 1.1 to 1.6%. Then in July, we announced that, taking into account the high acceleration and materiality of the disposal plan, we were able to consider bringing that percentage of distribution of the cash flow that was originally the 32 percent applied to the cash flow operation generated with the scenario we assume in the second in the second forecast up to the limit of 35 this has they say is a brought the potential the additional distribution to an additional 500 million. So the 1.6 could have been raised up to 2.1. We decided to distribute to reach the 2 billion that we announced today. That is equivalent now to a revised 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... They say characterize the new plan, the scenario, the capex, the activity, the portfolio, etc., etc. 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. And all this will help to have a larger distribution, a progressive distribution. 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.

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. We had an outlook for the market, and based on the outlook for the market, we estimate that over the four-year plan, we were in needs of roughly 1 billion euro 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. As Francesco was mentioning during his speech, since March we spent a lot of time based on the fact that some markets are changing, based 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 of the chemical sector is also important because in the car production goes to many different chemical products. So we review completely the entire portfolio in terms of the market and opportunity to grow in the market and where to eventually reduce participation. 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 growing 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 arrived to estimate the $2 billion. We are not in the position today to do the breakdown of this 2 billion, but this is how we move from the 1 billion to the 2 billion today. That's clear. Thank you. You're welcome.

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

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 UK North Sea now that the combination with Ithaca has completed? Thank you.

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 4 billion of cash coming from any live and plenitude reduction or disposal of a minority stake. And clearly that was the opportunity to transform, 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. So the new structure that is coming is an evolution of that energy evolution original model that has matured in specific and now is moving to having a partner that is clearly a financial partner and 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 activity is centralized under that structure that is now called global natural resource. And with the trading activity that is entirely inside the Finally, industrial transformation is clearly now focused on the key dossier of transforming the chemical, creating a similar positive evolution that we saw in the traditional refining system and continuing to transform the refining system that clearly has other activities to be done. deployed in order to add additional biorefining capacity and in particular in certain sites and therefore to reinforce further our any live future business. This is the scope and we think the advantage of having three structures focalizing different segments of business. About our completion of ITACA, the ITACA deal, ITACA is Another opportunity, we had a portfolio that was cash generative, but was, let's say, short in terms of opportunity of new project. We think there is a 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 UK. Clearly for us, UK 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 the renewable space. So for us, this is a strategic position on a broader span of business. Thank you.

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

Hi, thanks for taking my questions. First of all, just to follow up on the UK again, there's obviously some uncertainty around the tax and the capital allowances in the UK. 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 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.

On the first question, it's very easy. I suggest you to direct these questions directly to the to the ITACA management. They will present their results and also the plan for the next year is something that is clearly in their responsibility and the disclosure, we cannot anticipate a disclosure that is still, is 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 floaters LNG. Originally, this is a project that we are is the Congo LNG project. Remember, that was the two floating LNG. One was, let's say, the smaller scale and the larger scale. One was bought. The other is under construction. And, 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. It was 2022, at the beginning of 2022. Then the condition in the market changed. Remember, 2022 was the year where the invasion of Ukraine changed a lot of things. And therefore, we had to accelerate and to buy that ship again. In order to have a model that is substantially replicated from the financial point of view, an installment of payment of, let's say, a number of years to cover the cost of that ship or the capex related to that ship, the hybrid bond is a solution that is substantially replicated. reproducing also enough 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 okay thank you the next question is from hiring haimona bernstein please go ahead uh good afternoon thank you uh congratulations first of all on the the strategic delivery and i have two

question 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? And 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.

Yes, on the payment related to the windfall tax, we have a last installment. of around 240 million in November. So that should hand the number of payment we did and will substantially reach the level of 2 billion. 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.

Okay, thank you. The next question is from Matt Smith, Bank of America. Please go ahead.

Good afternoon. Thanks for taking my questions. Just firstly, I 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 improvements, I wondered if increased visibility and stability might be an outcome for the buyback as well. And perhaps certainly one way to reduce 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 that you would see any advantage to, or conversely, are you keen to retain the flexibility that a payout ratio gives you? So that would be my first question. And then my second question, I actually wanted to turn on to European refining, if I could. I appreciate this isn't comparable to Vassalis from an E&I financial perspective, but it does seem to be an industry that's facing some structural headwinds 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.

On buyback, clearly, by definition, buyback is a flexible tool. I think that there is not a fixed route 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 and clearly we have the floor once we announce 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 cannot be so deterministic because the life, unfortunately, cannot be predicted at 100%, and the volatility of the oil market is extremely high. I leave now to Pino Ricci for the answer about the downstream refining.

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 the European market through the creation of the biorefining on one side and the diversification in the Middle East with the waste. This strategy allows us not only to create any life 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, very low because today our CERN was 1.7 in Q24, $10 less than the same quarter of last year. And notwithstanding this, we are in a positive region with refining. 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 means that that confirms 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 any live, and we are in equilibrium. In the next years, we will see further transformation. But the most important thing is that this is a success story that we have to repeat in the chemistry.

Perfect. Well, thank you very much.

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

Thank you very much. And congratulations on the strong results and the progress on disposers. 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, 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 3 directive, country by country in Europe. I was wondering if you could give us any visibility of when you think Italy may actually apply the tighter Red 3 standards and therefore raise the renewable diesel demand in Italy. Thank you.

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

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 here. 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. 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, and this has provided some stabilization on particularly the art currency market. 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 further structural reform to provide a better perspective to the country. Coming to Zohr and the gas production, clearly, you know, the overall situation of the country wasn't good until six, nine months ago. most of the international operator reduced completely the activity, and this resulted in a severe drop in the production. Now, with this improved situation, with the country providing more reliable payment, paying the mature dues and recovering the outstanding payment, activity is restarting. And as far as E&I is concerned, we have several production optimization activities being foreseen and being implemented in most of our field, onshore and offshore, and particularly for Zor, we are envisaging a re-coming at the end of the year to start activity beginning of next year to restore some production over there.

Yes, Michele, thank you for the question. As you said, right now actually the third quarter experienced the lowest margin ever seen before. The reason is the supply, demand and balance. But actually, as you mentioned, there are clear mandates and regulations coming in place with decisions already taken. Red 3, the Renewable Energy Directive Number 3, 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 3, it's going to define the growing path in terms of GHG reduction starting from middle of next year. What I would expect is to set new targets starting from 2026. And this is going to be true for Italy and for other countries. 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 going to be probably a quite linear phase in along the years. Another element that I want to highlight in any case is that even now we already know that next year, focusing on Italy, the target, the GIG, the energy content target has been already increased by about 1%. This year is 10.8%. Next year is going to be 11.7%. This is coming from the current renewable energy directive that is keeping its own path. So it's going to 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. That one is going to increase by 100k tonne next year in Italy. And there is already a defined and approved path in order to reach a million tonne with a step up by 100k tonne per year in the following years. So actually, the man-increased path is already in place.

Thank you.

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

Thanks. Yeah, another one on the KKR deal for the stake in any live. 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 any live unique or particularly well positioned in the biofuel market and 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 9 billion euros this year. What are the moving parts there that means that's coming in lower than you had initially expected? Thanks.

About the evaluation of AnyLive, I think that the competitive advantage or the structure that we designed and substantially give to AnyLive a quite compelling investment case, rational, because it gives you exposure to the growth business of AnyLive. biofuels with the tightening or regulation, the opening of the SAF markets, and all the changes that could emerge from demand point of view. In particular, we have more and more requests of HVO also for shipping or other uses just as a traditional activity. What is the advantage is to mix this growth opportunity together with the stabilizing quality of our retail. 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 station, buying fuels, buying goods, looking for additional services, etc. And this is the reason you see the result of any life much more stable, even in a difficult market environment, than other competitors. So I think that this is where... The difference is in the fact that, substantially, you can grow, let's say, with a protection that allows you, in any case, to have other elements that generate cash. So, another factor that you not only have a sort of 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 an early 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 historical process. trend that you could see. Clearly, we said that 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 market day.

Thank you.

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

Good afternoon. Two questions, please. One on Versalis. To better understand the capital discipline, can you provide at least some qualitative indication on the $2 billion spending for the restructuring of Versalis? Roughly, how much is related to old plants and how much is driven by growth projects? And if you can be also more specific on new volumes coming from biochemistry and circular economies. 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.

Adriano, if you want to answer about the... Sure.

Massimo, that said, as I said before, that we don't give the split of the 2 billion euro 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 for state business, we used to spend more than 50% of our capex on yearly pays for traditional business. So let's say for base chemical and for commodity polymer, okay? And if you look in terms of projection, in terms of portfolio shifting, What we are going to invest 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, of chemical platforms. 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 2023-2024, is 30% on specialties, where these specialties include the compounding business, the biochemistry, circularity, and so on. And the other 70% is based on chemical and standard polymer. 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 biopies. Yeah.

Okay, about the disposal plan, clearly you know, we have already, let's say, announced that we are currently in a tendering activity. We have received interest from five, six potential investors for the CCS. This is a process that we require also sometimes fine-tuning, but clearly... There is an interest from different operators to join us in a portfolio that is, let's say, spreading from UK, Italy, Netherlands, Norway, and other countries, and that will become one of the major levers for the decarbonisation of harder-to-abate industries. We are continually working on the dual explosion model, so there are some assets that are under negotiation because clearly we are in a more advanced stage for that specific field, so clearly we are referring to some of the last most relevant discoveries. And we are clearly also working on certain additional activity of valorizing, again, some stakes in plenitude and also potentially, but this could take more time. So as you've seen in the past month, we are a very active portfolio activity. I think that we are able to deliver on a very fast way and in a very effective, in terms of value, valorization, our plan of disposal. This is what I can tell you for the time being.

Thank you.

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

Thank you, and good afternoon. Two questions, please. The first one, Just going back to the satellite plan, I think there was some talk in the press 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 Azul, can you just remind us when the drilling in Namibia, when we should actually think about that coming through as well? Thanks.

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 tooling together emitters and storage potential. This is the chain that was never tested. Injecting CO2 in a reservoir is a quite traditional and used activity. We see there is a huge interest because there are targets from a lot of industries to decarbonize their production line. and we have the storage potential so we can deploy our expertise, our know-how, 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 activity is lighter. And in the countries where there is a regulation framework already defined, there is the potential to take FID in a relatively short term. You have seen that the UK has allocated a budget for this activity to support the the players that will be involved so the meters and on the other side the injectors and we are already testing or 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%, up to 96% as a peak of a stream of CO2 that is less than 3% in terms of concentration. So it's more difficult to capture. So it proves that this technology could be extremely effective in minimizing emissions. And therefore, this is a business with a great potential. We need just to be, let's say, passionate 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 Azul, the Namibia, I think Guido.

Thank you. On Namibia, the activity, I mean, we are planning to spot, I mean, Azul is planning to spot 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 spot the first well in December. those wells are not so, I mean, in terms of duration is a month and a half, two months maximum. So we'll have first result of the first well by Q1 and the second well either late in Q1 or.

Guido? The line was interrupted. I think that you said late Q1 or early Q2.

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

Thank you.

The next question is from Henry Tarr. Barenberg, please go ahead.

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 9 billion that you indicated. I just wonder, has anything been deferred or, you know, how have you sort of or shuffled out just how has this CapEx number moved? And then secondly, just coming back to the sort of biorefining outlook, you're clearly sort of building new facilities, three new facilities now, I think. The market today is oversupplied. I mean, how confident sort of are you? I know there's red three, et cetera, but as you look out, when do you think this market comes back into balance? Because I guess we're already seeing some projects get cancelled or delayed due to the current challenges.

Okay, on CAPES there is no, let's say, delayed investment. It's just a matter of maturation of FFID that comes at the end of the year. You mentioned also the fact clearly that we take FID in biorefinery. 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. The biorefining outlook, I leave back to Stefano Ballista.

Yeah, thank you for the question. You're absolutely right. The short term, the current scenario, as I said before, I would say we have never seen this kind of level. But actually, on the other side, it's definitely clear that the medium scenario is well defined. Regulations, as I said before, are in place. So there is no debate on that. The red three is going to 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 going to be more than a million ton, and this is going to get in place following year. Another example, looking at current decision at country level, we got Germany that actually banned the UER as a lever to comply with mandatory, with blending mandates, and And at the same time, they stopped the carryover of certificate from 2024 to the following years. This is going to give, starting from next year, an upside of above 600k ton. Same reason we could do on US. The LCFS for California is expected end of this year, beginning of the following, is going to do an increase from 20% to 30% in terms of GAG reduction, with a step-up, current estimate, expectation, actually it's about 7% as a step-up, starting from the following year. And then 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 the US, we are starting to see some demand driven also by, let me say... supporting incentives in terms of tax credit. I want to mention Washington, where you're going to get a specific tax credit on SAF, and that's why we're seeing some demand over there. Given this kind of trajectory, we see 2020-2030 above 50 million tonnes of demand, and this is absolutely overtaking supply.

Thank you very much.

The next question is from Martin Ratt with Morgan Stanley. Please go ahead.

Martin? Probably. Let's drop the line.

Martin Bratz, your line is open.

Let's move to the next one.

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

Yeah. Hi, guys, and thank you very much for your time. Just a quick question on IPOs. You mentioned, I think, 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 E&I Live, KKR seems to be paying a significantly higher multiple for E&I Live 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 E&I would like to hold, say, 60% stake in E&I Live, so there's a lot more room to go for partner sales. And then just quickly, following on from E&I Live, a question on voluntary demand for sustainable aviation fuel next year. What are you guys expecting?

Thank you. On the IPOs, clearly in that amount that I mentioned, I was mainly referring to the negotiations that are still ongoing and that 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. 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 up front is high, but it's based also on the expectation of business that will double the EBITDA, plenitude within the four-year plan, and just a bit longer. But, substantially, this is... the time period that could derisk an IPO, taking 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. to the end of someone else 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.

Yes, thanks for the question. On sub-demand, in Europe next year we expect above a million tons. Commonly this is not voluntary demand, this is 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 ton, twice as much current year. So overall, above two million ton.

Thank you.

Okay, we take the last question, please.

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

Thanks for taking the questions. Two, please. First, I just wanted to come back on the distribution policy. Francesca, you talked earlier through the steps that Ian and I have taken through this year in ending up at the $2 billion buyback, which is a very strong and welcome number. It just strikes me that, in the end, the cash flow expectation for 2024 now is that very similar to what you expected in in march and yet the buyback is is nearly double at one point one to two so could you perhaps just talk more conceptually about how we should think about that is 2024 to some degree exceptional or specific in the context of the the progress and the momentum around this 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 then 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 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.

Okay. On the taxes, the windfall tax, clearly now it's clear what is the announcement. So I think that it's not involving clearly the energy system. It's involving different sectors. So I think there is no other speculations around the potential taxes. About the... The buyback you are referring, the doubling substantial of the 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 to let's say to announce to close in term of negotiation in the coming quarter are much above our expectation. 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. in the 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 clearly it depends there is an improvement during the year But an improvement, an implicit improvement in the buyback, if you are able to show that from the point of view of price and scenario, execution of your strategy or portfolio, you see that the quarters comes better than what you expected in February or March once you started your yearly performance. This is, by definition, what is happening this year. Also what happened, I think, one or two years ago, we did the same. I think this completes today's session. I believe it was a quite dense day with a lot of questions, and thank you all for the attendance. Our team of investor relations clearly is always available. Also, during the weekend, John said that he's completely free, so we can ask you to call him and the his team for having all the data or information that we we have not covered during this call thank you ladies and gentlemen thank you for joining the conference is now over you may disconnect your telephones