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Eni's (E) Kenyan Subsidiary Secures Funding for Green Transport

Eni SpA’s E Kenyan subsidiary received a substantial $210 million investment from the International Finance Corporation (“IFC”) and the Italian Climate Fund. This significant move aims to bolster sustainable energy and agriculture in Kenya. The initiative focuses on expanding the production and processing of advanced biofuels, marking a pivotal step toward decarbonizing the global transport industry and uplifting the livelihoods of up to 200,000 small-scale Kenyan oilseed farmers.

Investment Breakdown and Objectives

The investment, unveiled at the 2024 Africa CEO Forum in Kigali, Rwanda, comprises $135 million from IFC and $75 million mobilized by the Italian Climate Fund. It is part of the Italian Government’s Mattei Plan implementation in Kenya. The funds will be utilized to increase the production capacity of advanced biofuel feedstock in Kenya and enhance processing capabilities through the construction of new processing plants. The project aims to boost oilseed production from 44,000 tons to 500,000 tons annually.

Support for Farmers and Environmental Benefits

The initiative will significantly benefit Kenyan farmers by providing essential resources such as inputs, mechanization, logistics, certification, and training. These efforts will enable farmers to cultivate oilseeds on degraded land unsuitable for food production or in rotation with food crops, thus enhancing soil fertility and sustainability.

Claudio Descalzi, Eni's CEO, emphasized the broader impact of the partnership with IFC and the Italian Climate Fund, noting that it would enhance Eni's agrifeed stock projects in Kenya. He highlighted that the initiative would expand its reach to up to 200,000 small-scale Kenyan farmers over the next five years, thereby strengthening Kenya’s integration into the biofuels value chain.

Strategic and Environmental Implications

The investment aligns with the global push toward decarbonization. Over the past five years, biofuel demand has surged nearly 6% annually, driven by the transport sector's quest for sustainable solutions. Projections indicate that in a net-zero by 2050 scenario, biofuel use in transportation could more than double to 9% by 2030. Although the production of sustainable biofuels is currently more costly than traditional fuels, advancements in technology and increased capacity are expected to reduce costs.

Gilberto Pichetto, Italy’s Minister of the Environment and Energy Security, underscored the dual impact of this investment. He noted that the operation aligns with the principles of the Mattei Plan and addresses two major priorities — investing in the strategic biofuels supply chain crucial for the future of transportation and addressing the growth of Kenya’s agricultural sector. This intervention is expected to have significant socio-environmental impacts, strengthening resilience to climate change.

Future Prospects and Sustainability

IFC’s involvement extends beyond financial support to include advisory services aimed at developing a robust advanced biofuel value chain in Kenya. This includes promoting good agricultural practices and enhancing the professionalism of farmer aggregators. All biofuel feedstock from Eni will be certified under the International Sustainability and Carbon Certification scheme, ensuring adherence to stringent environmental, social, and economic sustainability standards.

The success of this project in Kenya could serve as a model for similar initiatives across Africa, fostering sustainable development and climate resilience on the continent.

Conclusion

The $210 million investment by IFC and the Italian Climate Fund in Eni’s biofuel project in Kenya is a landmark development with far-reaching implications for sustainable energy, agricultural development, and climate resilience. By supporting small-scale farmers and expanding biofuel production, this initiative promises to transform Kenya into a leader in the global biofuel industry while contributing significantly to the fight against climate change.

Zacks Rank & Other Key Picks

E currently has a Zack Rank #2 (Buy).

Investors interested in the energy sector may look at some other top-ranked stocks like SM Energy Company SM, Marathon Petroleum Corporation MPC and Sunoco LP SUN. While SM Energy and Marathon Petroleum sport a Zacks Rank #1 (Strong Buy), Sunoco carries a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

SM Energy is set to expand its oil-centered operations in the coming years with an increasing focus on crude oil, especially in the Permian Basin and Eagle Ford regions. The company’s attractive oil and gas investments can create long-term value for shareholders.

The Zacks Consensus Estimate for SM’s 2024 earnings per share (EPS) is pegged at $6.60. The company has a Zacks Style Score of B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

Marathon Petroleum's acquisition of Andeavor has expanded its foothold in the Permian Basin, creating an enviable retail and marketing portfolio. MPC’s emphasis on operational excellence, safety, and environmental responsibility, coupled with investments in low-carbon initiatives, positions it well for sustainable growth and continued value creation for shareholders. 

The Zacks Consensus Estimate for MPC’s 2024 EPS is pegged at $19.53. The company has a Zacks Style Score of A for Value. It has witnessed upward earnings estimate revisions for 2024 in the past 30 days.

Sunoco is a leading wholesale motor fuel distributor in the United States, boasting a vast distribution network spanning 40 states. With long-term contracts servicing over 10,000 convenience stores, it distributes over 10 fuel brands, ensuring a stable revenue stream. SUN currently has a Value Score of A.

The Zacks Consensus Estimate for 2024 and 2025 earnings per unit is pegged at $5.07 and $4.47, respectively. The company has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 30 days.

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