Irene Himona: Thank you. Good afternoon. On the upstream, I see that you now recognize the UK energy profit level as a recurring item. I wonder if you can provide some guidance on the EMP tax rate going forward includes two of these in the current environment. And secondly, on the numbers, the fourth quarter net interest expense you had EUR 54 million, was down very substantially, over 50% sequentially. And you referred to the drivers in your press release. I wonder if we can anticipate this level to be sustainable in 2024. Thank you.
Francesco Gattei : Thank you, Irene. On the UK levy, we kept these scenes the start as a recurring item. We consider this due to the fact there is no expiration date, but there is a generical sentence related to the potential oil price for the removal to consider that in a recurring way. We are not able yet to provide you what will be the tax rate in the plan. What you can tell you is that the impact of these taxes versus last year, taking into account of the start at the end of the last year, year-on-year basis in the range of 1%, 0.7%, 0.10%. On the net interest, we will be very happy if we continue, but unfortunately, it’s not possible because that this is related to the financial asset that we have. We have almost EUR 80 million of liquidity that are gaining from the benefit of the interest rate growth.
While on the other side, we have 70%, 75% of our gross debt that is at fixed rate. So if the interest rate will start to go down and you have to refresh your new debt, this net interest will be higher. Anyway, we will manage and we continue to use different tools to keep as low as possible, to capture, let’s say, as much as saving as possible through our liquidity positions.
Operator: The next question is from Giacomo Romeo of Jefferies.
Giacomo Romeo: Yes, thank you for taking my question. First is a very quick follow-up on your comments on GDP. And just. I understand you are expecting to see more volatility in 2024 and just try to understand how to read into the Q4 numbers, if we take out the impacts from the arbitration. Should that be a good indication of a normalized level of profitability in the absence of significant volatility? Second question is on Plenitude. We have seen some comments during last month from your future partners that sort of talking down the prospects of an IPO of the business, just wanted to check whether this is still the ultimate goal for Plenitude for you and whether there is a full alignment at this point with your future partners. Thank you.
Claudio Descalzi: Thank you. So the first one is for Cristian, the second one for Francesco.
Cristian Signoretto: So, well, I mean in general, our results are, let’s say, geared towards usually the Q1. Q1 usually is the strongest period and quarter of our let’s say portfolio optimization opportunities for a number of reasons that clearly are very much linked to the type of assets that we have in our portfolio. So I’d say that the Q4 underlying result is not a predictor of the Q1 because of this, let’s say, seasonality effect that you have in our business.
Francesco Gattei : Yes, on the planning to the road to the IPO, I confirm that we continue to plan our valorization through the different sources, different way. We mentioned at the beginning of the dual track. If you remember, we have already started to deliver the first of this track by the fact that substantially we fixed a bar, a value that is one of the first elements for valorizing our satellite models specifically. And clearly, we will continue to monitor the market condition 2024 and 2025. Our partner that is yet to let’s say to enter in the entity, in the partnership, clearly as mentioned, something that is probably more let’s say, generic and bit misunderstood, he was thinking that was not necessary to do the IPO. It doesn’t mean that this is the plan. The plan will be to do the IPO at the right condition from the market and clearly to cut to the best value from this opportunity.
Operator: The next question is from Michele Della Vigna of Goldman Sachs.
Michele Vigna: Thank you very much and congratulations on the strong debt delivery and the exploration of the past –
Operator: Mr. Della Vigna, we can’t hear you very well. Can you please speak closer to the microphone?
Michele Vigna: oh, sorry, can you hear me now?
Claudio Descalzi: A bit better, but the line is not very good. But try again, Michele. Yes, better now, yes.
Michele Vigna: Okay, sorry for that. I only have two questions. The first one. Clearly, in printing your data, both you and Michele have been becoming here. I was wondering if you could update us [inaudible] and my second question relates to carbon capture. We’re seeing a lot of progress in view of the market policy support. You have watched the biggest development before this. I was wondering, if you could give us an update on the progress of that.
Claudio Descalzi: So, Michele, we just understood the second but not really very well, we understood the one on update on the carbon capture. The first one absolutely the line is so bad and there are a lot of background noise so we didn’t understand the first one. Okay, update, Guido, you can update please on CCS.
Guido Brusco : I can give you Michele an update on our major CCS project. So for the Ravenna phase one the project is in execution at the moment and we are planning an early Q2 the startup while for the phase two the project I mean we are now doing the engineering work and we’re also completing the legislative framework with the Italian government. The plan is to make a final investment decision by Q2, 2025 and a start-up in 2027. In the UK, you may have read that we have agreed with the UK authorities, the main economic model and we are now negotiating the definitive economic license which we expect to finalize sometime in Q2, Q3 this year. Engineering works have been already done and from a technical side we are now in the procurement phase of the project and the target is to make a cluster FID by Q3 2024 with a start-up in 2027.
Another important element is that in April, five emitters out of a total of eight which have been selected by the UK authorities belongs to the INET Northwest cluster and those have been selected as a priority emitter to access the fund made available by the UK government.
Operator: The next question is from Josh Stone of UBS.
Josh Stone: Hi, good afternoon. Two questions, please. Firstly, on your biofuel business, I just noticed your throughput was down quarter-on-quarter despite the ramp-up of the PBF by refinery. So was there maintenance impacting that or any comments you can make there? And potentially also if you could talk about where you see profitability in HVO today, given the impact of lower credit prices, both in Europe and the US, and how much of your feedstock program is able to offset that? And then second question on working capital, there was some released during the quarter, but if I go back over the last two years, there’s sort of been a trend, or there’s about EUR 4 billion billed over the last two years. So how much of that do you think can release over the next period? Is there anything you can make any comments on that? Thank you.
Claudio Descalzi: Stefano?
Stefano Ballista : Yes, in HVO, and on bio product, 2024 is let’s say, transitionary year. This is well known and well expected. In Europe, we got Sweden change of obligation getting in place exactly this year. It’s going to be partially compensated by a widespread of increased obligation in other countries, including, as an example, Italy, France, Holland, among others. In the medium term, we see still strong performance from biofuel demand. For a set of reasons, I just touched the RED III directive, the Renewable Energy Directive that has been approved by year end of last year, countries are going to have 18 months to deploy it at country level, a number. In terms of energy content, it’s going to jump from 14% RED II to 29% RED III.
Same in US, we got this year a significant capacity getting in, well known in advance. Demand is increasing linearly. In 2025, we’re going to get impact from, among others two main topic. One is the new clean production credit that is going to substitute the current blending tax credit. The new credit is going to apply on local facilities. So this is going to, in a way, create a barrier to current import flow to US. We have an estimate number of more than one million ton coming to US from foreign countries in 2023. The second point is, the second element is carb is expected to increase California target in terms of GIG reduction from 20% to 30%, 2030. And then last just a small signal, but we got a couple of days ago, New Mexico is the first non-West Coast state in U.S. approving an LCFS obligation mechanism.
Again, 20% GIG reduction in 2030. So in the medium term, demand is definitely increasing and strong. From an asset perspective, we are working on all key levers to optimize profitability at whatever market scenario, namely vertical integration, feedstock flexibility and product diversification. We are also looking to move flows from U.S. to Europe wherever arbitrage is going to be open.
Francesco Gattei : In terms of working capital trend, it’s very difficult to anticipate how it could be in the next quarters. Substantially what we can do is, or we can say that this is a matter of related to the trend of prices. So once you have a growing price, there is generally an increase in your working capital position and clearly on your capability to lift, so to reduce your stock positioning both in the upstream and clearly also in the other sector, in particularly in the downstream. So I would say that clearly, we were very active from this point of view. On the other side, we were helped by the price trend.
Operator: The next question is from Alejandro Vigil of Santander.
Alejandro Vigil: Hello. Thank you for taking my questions. I have two. One about the implications for Plenitude on the current scenario of lower power prices in Europe. This is going to have some implications in your strategy at this beginning of the year. And the second question is about the outlook for refining in Europe. In the beginning of the year we also see an increase in refining margins in January if you can elaborate on your thoughts on that. Thank you.
Claudio Descalzi: Okay, Stefano, Guido, Plenitude answered the first question.
Stefano Ballista : Thank you, Alejandro. On the energy price level of course on the renewable production where we are spot prices who will take the impact of the lower prices but on the other side on the retail activity lower prices reduce a lot our risk in the portfolio because the volume risk is reduced and the working capital is released, so our combined business model helps us to pass through this period like we did this year with the result of 2023.
Claudio Descalzi: Pino? Yes sir.
Stefano Ballista : Okay. Could you hear me?
Claudio Descalzi: Yes, very well.
Stefano Ballista : About the refining in Europe in this first period of the year, we are seeing again very high volatility. And in the last period with the closure of the Suez, of course, we have increased the spread related to the difference from diesel and the brand that are arriving more or less during the first phase of the war Russia-Ukraine. It means a very high impact on the margin on the traditional refining. Of course, what we expect in this year is that this volatility will continue and probably we could gain to this for some months, waiting for the driving season when we will see the increase also the market of gasoline. So the results are quite good. Notwithstanding this, we will continue our strategy for the mid and long term because the traditional refining in Europe could not be very profitable in the mid to long term.
For this reason, we are continuing in the program of evolution and transformation of the traditional refining in biorefinery. We are maintaining the Middle East refining system that is less volatile and more stable in the profit.
Operator: The next question is from Lydia Rainforth of Barclays Capital.
Lydia Rainforth: Hello, and thank you for taking the question up. Two, please. Firstly, just in terms of the upstream and the five day fast track start-up coming onstream, the Neptune acquisition coming into the portfolio, how do you think about the margin per barrel evolving as we go forward? I’m assuming that actually we should see that as incremental to it. And then secondly, and I appreciate it if you don’t want to answer this question, but just around the conversations that the government is looking to sell part of the stake in ENI, what do you think about when you’re thinking about the buyback for 2024, whether any would want to be involved in at least offsetting some of that impact in terms of the market? Thank you.
Claudio Descalzi: Okay, so the first question, maybe I give some first answer then, I don’t know if Guido want to add something. Clearly, when we talk about the margin upstream, we have to go back to the fundamentals that are at the cost, because we cannot do anything on the price of the cost. So you must have a very low exploration cost, you must have a very low operating cost, and a very low development cost. So our cost in terms of exploration this year was approximately $1 per barrel discovered. We had a very exceptional year, we discovered a lot of resources, and that is the base. If you have to buy something like that, if you have to buy a risked exploration, you have to spend much more, you have to spend around between $5, $6 or up to $10 per barrel.
