Afternoon, ladies and gentlemen, and welcome to Annie's First Half twenty twenty one Results Conference Call, hosted by Mr. Claudio Descalzi, Chief Executive Officer. For the duration of the call, you will be on listen only mode. However, at the end of the call, you will have an opportunity to ask questions by pressing star and 1 on your telephone. I am now handing you over to your host to begin today's conference.
Thank you and good afternoon and welcome to Eni's first half conference call. In the first part of the year, we witnessed a strong recovery in the energy market. The rebound in global GDP, the growth In oil consumption and OPEC plus agreement translated into a steady increase in crude prices. The gas market is similarly recovering with summer prices at decade highs. While a highly volatile environment persist, Oil and Gas fundamentals remain positive.
Today, we focus on 3 elements, which define our investment case. First, the 2021 shareholder distribution with the dividend raised to pre COVID level, confirming our commitment to share part of our excess cash generation with shareholders. 2nd, the progress achieved on our retail and renewable businesses ahead of market transaction in 2022. During the quarter, we completed the merger between the two entities and we have been able to accelerate our renewable targets. Finally, our first half results, which are among the strongest in the recent years, with solid performance and strong cash flow generation.
Let's start with the 2021 shareholders remuneration for which we set a brand price of $65 per barrel. In order to define our price deck, we took into account the actual price to date, the expected trend, Market fundamentals and potential risks such as the emergence of new variant of COVID that could impact the market recovery. We will distribute a dividend of €0.86 per share, More than doubling the size of our 2020 dividend. In line with our policy, Half of the dividend will be paid in September and the remaining in May 2022. Moreover, we will start in Q3 a buyback of €400,000,000 that we are executing over the 6 months.
A key element of our investment case is to maximize the value of our retail and renewable businesses. During this quarter, we completed the setup of the new entity incorporating our renewable businesses into Enigas elucha. The internal process for evaluating the best option to maximize the value for this entity is ongoing. And in the coming months, we will be able to update the market on this respect. This combination present a material step in reducing scope 3 emissions, providing the Carboniz product to our customers.
This new entity has unique value proposition. It represents an integrated and synergic platform across the green energy value chain from generation to supply. It benefits from a global presence in well established businesses, both in terms of size and portfolio diversification. Its solid growth profile is supported by a reliable customer base and a strong organic pipeline of renewable projects, which are already complemented by a selective asset acquisition strategy. Its cash flow is robust and visible, Made stronger by the natural hedge between generation and retail sales.
It will be financially independent with its own investment grade rating, drawing full benefit From lower interest rates and higher leverage flexibility, digital solution will be a further lever to announce our green offer to our large customer base. Going into more detail on our renewables, we are announcing an increase of our short- and medium term targets. In the period 2023 2025, we are announcing our installed capacity target by 1 gigawatt, Accelerating our plan. Since the beginning of this year, we have defined, expanded and derisked Our pipeline of renewables project, this now stands at 9 gigawatts of which 2 gigawatts of installed and construction capacity, an additional pipeline of about 7 gigawatt related to assets at different stage of maturity of which more than 3 gigawatts are secured. Almost 80% of our pipeline is in Italy, Spain and France, integrated with our retail presence.
The acceleration of our growth in the coming years The first step toward our goal of more than 15 gigawatts of installed equity capacity in 2,030. Thanks to the acceleration of our renewable growth, 2024 EBITDA will now be over €1,000,000,000 a 10% increase versus the previous guidance and almost double 2021 levels. Our renewables business will benefit from a large captive customer base, A stabilizing factor for result as well as contract optionality. The renewable business will be at breakeven already this year and will deliver more than €300,000,000 EBITDA in 2024. Let's move now to our first half result, one of the best in the last 10 years.
EBIT of €3,400,000,000 is more than 3x the same period in 2020, Driven by the upstream, retailer, NUMLOS and Chemicals, which scored a record performance. In upstream, production at 1.6 5,000,000 barrel per day is in line with guidance. Exploration discovered more than 300,000,000 barrel, almost 2 third of our yearly target. Main successes were in Norway, Angola, Indonesia and Ghana. And we are progressing the business combination in Angola with BP.
This new company will represent Turia Autonomous operating and financial vehicle, it will allow further growth in the country while capturing Synergies between 2 of the largest local operators. We are aiming to replicate the vast access in a country where we foresee major exploration and development potential. With regard to energy evolution, Versalis, our chemical company, fully captured the positive market upside. Retail and Renewable Is delivering steady growth. In the oil Downstream, marketing results were robust, driven by the gradual recovery in demand, while refining was impacted by negative margins.
Our net profit at around €1,200,000,000 has recovered to pre COVID levels, driven by the €900,000,000 of the 2nd quarter and a tax rate of 55% in the semester. Free cash flow generation in the first half was strong With cash flow from operation before working capital at almost €4,800,000,000 plus 41% versus half 2020 and CapEx at €2,100,000,000 with no change versus last year. At the end of the semester, our balance sheet is stronger and the leverage pre IFRS has decreased by to 25%. Turning to natural resources. Upstream EBIT in the first half was at over €3,200,000,000 an increase of €3,000,000,000 compared to 2020.
Thanks to lower cost and improved scenario despite the lower production. Also cash flow from operation was robust At €4,600,000,000 almost double versus 2020. We expect production to recover in the second half of the year confirming our 2021 guidance of around 1,700,000 barrels per day. In the 3rd quarter, Its expectation at 1,680,000 barrels per day. In second half, production increase We are sustained by recovery from planned turnarounds, ramp up in Indonesia and the emirate of Sargent, Contribution from fast time to market exploration.
In this respect, we confirm that a quicker field in Angola discovered In March, close to our existing FCOs in Block 15 Oxys will be connected to the production in these days, just 4 months after the discovery. Let me spend some more words also on Egypt, which is improving the success of our integrated gas model. In the first half of the year, the Amietta plant successfully loaded 17 LNG cargoes, which contributed to our asset gas production in Egypt, reaching a record level of nearly 4 Bcf per day, nearly 30 additional cargoes are expected in the second half of the year. Finally, GGP, our Global Gas and Energy Portfolio business was at EBIT breakeven in the first half. And for the full year, we confirm an EBIT at breakeven, while free cash flow will be positive at €200,000,000 Moving to Energy Evolution.
In the first half, in Iguazaluci and Renewable, EBITDA was at around €350,000,000 Retail EBITDA contribution in the period was 40% higher than last Thanks to high value services that contributed for 15% of the EBITDA and a 3% growth in the customer base compared to the end of 2020, resulting from organic development and the closing of ADRO Energy, Energy Acquisition in Spain. Retail and Renewable is expected to reach EBITDA of more than €600,000,000 in 2021, better than our original guidance. In R and M, in line with the improving trend on a quarterly basis, we expect a positive second half result, driven by a recovery in demand, biorefining margin improvement and optimization initiatives. Versailles performance was mainly driven by a recovery in demand, coupled with shortage in supply. Margins for polyethylene and styrenics rose to the record levels.
We were able to capture the positive scenario, thanks to the high availability of our plant. In the second half, we expect rebalancing across the industry supply demand that will drive A downtick in prices. However, we expect margins to remain higher than the corresponding period of last year. In 2021, the overall EBIT adjusted pro form a for Downstream is confirmed in the range of €400,000,000 mainly related to chemicals. Turning now to our cash generation.
Free cash flow in the first half was strong at €1,900,000,000 For the full year, assuming a Brent price of $65 per barrel In a slightly negative refining margin, free cash flow generation is expected at €4,000,000,000 Growing to €5,000,000,000 at $70 per barrel, thanks to production growth and capital discipline. Our CapEx is confirmed at €6,000,000,000 Our 2021 performance combined with will allow us to maintain the leverage below 30%. In conclusion, today, we remarked Our commitment to prioritize our shareholders with an increased distribution, our progress in maximizing volume in energy transition and our first half results and full year guidance for a strong 2021. And now with any top management, we are ready to answer your Thank you.
We will now begin the question and answer session. The first question is from Mehdi Ennebati of Bank of America. Go ahead.
Hi. So good afternoon all and congratulations for the very strong results. I will ask 2 questions, please. First one, On your upstream tax rate, which came at a relatively low level, even if I compare with the previous year, So has it been temporarily impacted by some one offs, which led to Particularly low tax rates this quarter. Or should we consider that is the development Of some projects that you started recently and in a $70 Brent environment, Your upstream tax rate, sorry, in the future should stay below 50%, let's say, between 40% And 50%.
And second question is on your realized gas price, which slightly improved Quarter on quarter, which remains below $5 per ounce, yes. So I understand that for some of your gas production, Your selling price is linked to the oil price with a delay. So should we then expect that your realized gas price We'll strongly increase in the coming quarter, thanks not only to the increase in the spot gas price, but also Thanks to the increase in the oil price that we have seen those last months, which is going to impact your gas price during the second half of this year. And if I may, last small one question. Your refining margin indicator, so it remained negative in the Q2.
Can you tell us about the current level, please? Are you benefiting from the increase in margin that some of your peers have been highlighting since beginning of July?
Thank you. Okay. Thank you. So now Francesco, our CFO, will answer the first two questions and Pino Ricci We'll answer the third one about refining margin, but it's combined with E and P and other margins. So I think it's Francesco and Pina together will answer.
Yes. Thank you. About the tax rate, clearly, what you have seen this year is A more normalized tax rate, actually once you compare with previous year, you were comparing a mix of contribution Of our portfolio that were, let's say, relatively, let's say, not reasonable in term of performance, what we are today seeing that all The component of our portfolio upstream and downstream are more balanced. And in the upstream, the country that have A lower tax rate, for example, certain OECD countries, U. K, U.
S, Italy could benefit To offset the results that will reduce the average tax rate. So the answer is substantially that we are expecting that in a $65 word will be in the range of this 55% that is actually what we have so far achieved and is in line With the 60% guidance that we gave at the beginning of the year in a $60 world. Once the price of oil is growing up, there is, They say this rebalance between the various components. In terms of additional information, you can see that the upstream tax rate is in the range of 45% due to the explanation that I gave, so the different contribution of country. In terms of gas, it is important that what you mentioned, it is true that there are part of our volumes That are related to oil inked.
Generally, oil inked formula have a delay or an average related to 9 months, So 3 quarters of results and therefore, the gas price will follow the trend with a Certainly, say, delay. The spot clearly is weighting 20% and the oil ink instead is weighting 25%. The remaining 55% are volumes sold to fixed price or contractual price that are less relevant, yes.
Thank you.
And now I leave to Richie the answer for the last question.
Thank you, Francesco. About the refining margin, we have seen in July a little improvement in the Margin, but they still remain in very, very weak. What we expect is a further improvement in the second half, But depending to the evolution also of the COVID, Because the different increase In the COVID measures and so could affect the increase of the market. What we could see is that our sensitivity that we have done in case of Margin that continues to be negative in the second half, in the overall energy evolution, we are able to maintain The result of the budget.
The next question is from Arena Gimona of Societe Generale. Please go ahead, Mariam.
Thank you. Good afternoon. My first question concerns the €934,000,000 special item in the second quarter. It appears to be in Refining and Chemicals. I wonder if you can say what it relates to.
And then secondly, Claudio, as you mentioned, you're expanding the renewables portfolio and upgrading The target you recently added capacity in Spain and France. Can you Give us some indication, please, either of the multiples you paid to enter those Projects or indeed some sense of the economics you would anticipate such as equity IRR for example? Thank you.
Thank you. So Francesco will answer the first question and then I talk about the second one. Thank you.
Yes. Ciao, Irene, yes, you have seen, it is correct that we have this write off. Actually, the write offs are completely related to the refining segment. We have updated Our evaluation on the basis of new scenario on the lower margin and very weak margin this year and the coming years, and therefore, we have substantially write it off entirely Our downstream, our refining refineries, this €900,000,000 are related to that.
So for about expansion in renewables, it's true we accelerated our Renewable acquisition and also the organic growth, but that mainly in the last 4 months, we talked about in In organic growth, so we participate through tender and we won or we acquire directly. We can say that We in 4, 5 months, we achieved what we promised to achieve in 4 years. We accelerate Drastically, also in view of the consolidation of the new companies, The new business combination between renewables and retail. So that's the reason we wanted to progress Faster. And then when the company will be there, we'll be capable to have a debt and so to invest In renewables to grow further without impacting our balance sheet and our leverage.
Talking about what we paid, so it's a mix of Capacity in production, under construction and future pipeline. As you know, we have about 9 gigawatts now. That's so an additional 4 or 3 giga, I respect what we said, if I don't I'm not wrong, what we said in February. We have 2 giga this year. So instead of 1 giga by the end of 2021, we have 2 gigawatts in production and in construction as well.
And then we have additional 3 giga that are secured, that means they are in development. And the rest are, we can say, like in exploration in V3, your reserves. That means that it's in our own, we have equities. So it's very easy to get permits because we at least 2 of them are organic. So they are land that are in Italy.
And so it's quite secure, but we put in the medium term. The so the multiple for what we This new quantity Renewables are in the range between 9% 10%, so more 9% than 10%. So it's very good. I can say that to acquire about talk about what is in production. What We acquired 600 megawatt in production for about 660,000,000.
Is it correct, Francesco? Correct.
So 9.10 is a multiple to EBITDA.
Yes. The 9.10 is a multiple EBITDA, yes, Claire. So that is more or less what we invested. And now we continue working on the new company To in the future growing more, faster and be more efficient and give more value to all our company.
Thank you very much. Thank you.
The next question is from Biraj Barghatarya of RBC. Please go ahead.
Hi. Thanks for taking my questions. The first one is on the gas business. You mentioned that contract renegotiations were a contributor to your results in the second quarter. Can you quantify that?
And also let us know if you're expecting any further renegotiations to be agreed later this year. And then the second question is just on your CapEx program in the upstream. You typically had a higher weighting than some of your peers towards Short cycle tieback led projects and these obviously are quite high return and they're Pretty quick to come online and I think you mentioned one earlier. Given where commodity prices are, are you looking to mobilize any additional upstream CapEx So the second half of this year or in 2022? I'm just wondering how much incremental CapEx you could put to work on these types of projects.
Thank you.
Thank you. So the first answer about Carlsa will be given by Christian's senior letter and the second one by Alessandro Pulitti.
So hello, everybody. So as we said during the 3 months ago, we have started a round of renegotiation linked to the fact that The spread between PSO and ETF in Italy has deteriorated substantially. And what we have achieved in the Q2 was actually a first, Let's say, a round of renegotiation of some of the contract. There are still some ongoing, which we expect, let's say, to settle in the course of this year in order basically to Allow us to rebalance our level of portfolio towards the new reality of the Italian market.
Okay. Regarding CapEx upstream, we do not foresee any Any CapEx increase, we will continue with our policy to sustain production through production optimization activity and near Field exploration tieback, as you mentioned, and this is this will not require any extra CapEx for what we have already stated.
Okay, understood. Thank you.
The next question is from Martin Ratz of Morgan Stanley. Please go ahead.
Yes. Hi. Hello. I have 2, if I may. First of all, I wanted to ask about The reference oil price of $65 a barrel that you said, because on your website, there is a schedule that goes to $66 And if you said it at the top end of the range, it would simply be the top end of the range.
But it's a dollar lower. And this may sound like a bit of a nitpicky question, and I don't want to So to be it like that, but the dividend is very important for the E and I share price, so we spent a little time trying to forecast The dividend, given the schedule that you set, that seemed to become a matter of mostly forecasting oil prices and then the dividend would flow out. But now it looks like You're building in margins of safety relative to, let's say, consensus forecasts are for the oil price or what the Forward curve sets for the oil price. And at the moment, that discount between, say, the forward curve or consensus forecast for oil prices and the 65 you set It's about a large margin of safety. So I know this is all a new schedule and we're trying to sort of find our way sort of through this, but of course the situation would change a little bit If going forward relative to sort of oil prices oil price expectations that prevail in the market, you'd start to set rather large margins of Save these large discounts to that when effectively setting your dividend policy.
And I was wondering if you could talk a bit about Why you said 65 rather than simply the top end of the schedule? And also why what levels of margins of safety You would like in this reference oil price sort of going forward. That would be one thing. And the second thing I would ask you I wanted to ask you is about refining And the EU's sort of fit for 55 sort of package. Look, in the fit for 55 package, refining still sort of But the way things are going, it could well be that either there could be de carbonization targets for refining and Are already quite low, incurring more CapEx is not easy for the European refining system Kind of absorb and when you put start to put those things together, you wonder sort of what the sort of true long term sort of viability of this business is and it's already been sort of challenging for some time.
So in the context of Fit for 55 decarbonization, potentially more CapEx, What do you think the long term prospects are for the refineries that you still own?
Okay. Thank you, Martin. I'm sorry to answer to both questions, then my colleague can intervene if there is some additional points. First of all, your point about $65 per barrel clearly has been discussed among us It was a very critical point because on that, we base our dividend and also the buyback. So why 65?
65 is not safe for us. It's no margin for us. It's not really We made a calculation, as I said during the presentation, based on what is the price now, What is our view, clearly, you talk about sorry, The forward curves, but our view about where we are, our countries And our business and then also the uncertainties that we are still living. We are not clearly in a clear situation. We still have some uncertainty.
We don't know exactly what is going to happen in September, October, What is going to happen for the 4th waves of the variant of COVID? So clearly, we have some uncertainty. So the 65,000,000,000 really is in the up side of what was our evaluation. And we signed an agreement because we want to relate to recognize to our shareholders after the 2020 A clear focus so a clear priority. We also said The buyback of €400,000,000 will be will happen in 6 months, not in 12 or 18 months.
So we accelerate and we start immediately the €400,000,000 So We anticipate and we say clearly. So that is a quite interesting point because we don't Spread over a long period of time, but we put all together. So that are the reasons. Then clearly, we We'll see in February, March when we present our strategy and maybe we can say something Additional on our policy as we did in the Q1 when we changed our we reduced the floor to increase the share of the free cash flow for our shareholders. For refining, For refining, clearly, refining in Europe is under pressure, it's not now.
COVID clearly creates additional pressure and additional Fragility emerged and the negative margin that we have in the last 3, 4 quarters Clearly, the results are not just demand, but also refineries that sometimes are not I talk in generally, but it's clearly It's true also for us, we are not closely linked to upstream. We are not closely linked to chemicals. So we have additional cost With respect to other geographies and in Europe, we had another staff that Is the cause for the taxation for CO2, so the ATS, we have a carbon pricing That before was very low. Now it's more than double in the last 6 months. We are close to €50 per ton and Forecast is to increase.
So it's in a very fragile situation. For that reason, we started already. We closed 2 refineries. We So in this refinery in biorefineries and our plan that we really started is to have a rightsizing of at least 3 of our refineries, clearly to reduce the capacity, to reduce the cost and that is the first step. Thank you, Martin.
I don't know if there is other points from our colleagues. I don't think so. Okay. Thank you.
Thank you.
The next question is from Massimo Bonisoli of Equita. Please go ahead, sir.
Good afternoon. Three questions. One on Retailer Renewables. Your guidance of €350,000,000 EBIT Implies only €40,000,000 in second half twenty twenty one versus almost €200,000,000 in second half last year. If you can shed some light on the second half in Retail and Renewable.
The second is on Chemical. The average plant utilization rate was only 65% in second quarter. Considering the very good margin, why the utilization was so low? And should we expect some operating leverage maybe in second half? And also an indication of our margins in petrochemical in July would be helpful.
3rd question on the shareholder remuneration. Given your current share price, would you consider maybe next year a different mix in shareholder remuneration, so I mean more buyback than dividend? Thank you.
Okay. Thank you for the question. So, Alberto Querino, you asked the fair Question about EBITDA. Yes.
Okay. For the retail, as you currently mentioned, in the first Semester, we had a very strong semester with almost €80,000,000 more than last year And we are now in EUR262,000,000 EBIT. If we look at the forecast, We still are better than last year, but we are reducing the GAAP and we are forecasting EUR 382 million. Part of this is the seasonality. So we have anticipated some of the margins that We were expecting during the year, we have anticipated in the first half.
And part of that is also the Strong contribution of extra commodity that we experienced in the first half because of the superb bonus And the incentivization that we have taken into consideration in the second half with A bit of contingency because of the uncertainty of the legislation. But overall, the forecast in 2020 1 is still €20,000,000 better than last year.
Chemicals, Adriano, if you can answer about Versalis, please.
Sure. Thanks for the question. Let me explain. I mean, in the second quarter, we have been facing some plant turnaround And particularly in Brindisi, where we have the biggest cracking and the polyethylene business that were supposed to grow in a turnaround between end of Q1 beginning of Q2. And in order to catch the highest Margin that we have seen at the end of Q1 April, we have postponed, but we have not been able to postpone later than As in May.
So the asset utilization is a result of the turnaround in Brindisi and turnaround in Brindisi was in cracking, aromatics and polyethylene. In addition to that, we have been we had also planned around in Mantova for steramic business. It's a big site. And so the $65,000,000 take in consideration these 2 big turnaround. If you go to the second question about the margin, definitely in the first half of the year, we have seen incredible margin that relate to the shortage of product And especially on the polyethylene that we have seen record elastomer that has seen very high margin in ceramics as well.
In June, we have seen margins start declining, mainly as the consequence of increase of raw material costs, but also stabilization of Supply and particularly increase of import again from other regions like North America. In July, I mean going to the Specific question, in July, we've seen a further reduction in margin. We expect that this margin will stabilize in the 3rd quarter, But overall, the margin will remain in the second half higher than in the same period of last year.
So for the last question, as you know, we have already a policy, a dividend policy that's considered Floor and the variable part that is a portion of the free cash flow and the buyback. So clearly, we are already in the situation where we pay the dividend and the buyback following A formal following a price. So it's not the time now to talk about a new policy. Clearly, I think that If there is any update, we'll communicate any update in February March when we perform the strategy presentation. At the moment, that is a policy and that is already considered in the policy.
Thank you.
Thank you very much, Fredericio.
The next question is from Alastair Syme of Citi. Please go ahead.
Hi, everyone. Two questions. Firstly, I was intrigued by your comments about the Gasoluci will have So independent credit rating, one of the problems with your own credit rating is the rating agencies have insisted on You're keeping it pretty close to the Italian Sovereign. So I wondered how you avoid that problem with Gasolucia Given that you're only going to list 10% of the business. And secondly, I wonder if you could update on plans you've had or you've previously talked about to Replicate the VaR energy model in other regions of the world such as Angola and the Far East?
Thank you.
Okay. So yes, Francesco will answer the first question.
Clearly, about the new entity, In IniGasolucha Renewables, we will start clearly the evaluation from agency. And Clearly, it will benefit of the combination of the stable and growing cash flow coming from retail And from the potential from the growth of the high growth potential of renewables, what you mentioned about The difference is spread at the maximum notch that are required by the credit agency cannot be avoided. Clearly, there are Reference, but what will be important that I would expect the company will be investment grade. So I don't think this will be a problem For raising a quite material amount of capital.
The second question is for Alessandro.
Okay. About creating other business opportunity like The Vor Energy model that we created in Norway, we can confirm that we are progressing in Angola with BP. Sure. That's, let's say, ongoing activity. And we are also actively looking for other kind of these opportunities around the world.
Since we believe That they could bring both operational and capital allocation synergies, so they are very beneficial to the
Sir, has your questions been answered?
Yes. Thank you very much.
Okay. Thank you. The next question is from Robert Ranieri of Intesa Sanpaolo. Please go ahead.
Yes. Thank you. Good afternoon, everyone, and thank you for the presentation. Just going back to the Renewable business, I have a specific question on regulation in Spain. You mentioned Spain and France as the areas few of the areas important My question is, if you can give us an update on The regulatory risks related to the CO2 ex margin cap And the discussion from the government, the Spanish government at the moment and basically if you have any news on that.
Also on Renewable Business, after the acquisition you had in the offshore wind, My question is specific and also, I would say, strategic. The question is, If you are still committed to investing In the offshore wind, so basically if you think that this kind of a business It's economically viable. I'm saying that because some of the traditional offshore wind operators are Exiting from the offshore wind. My third question is on chemical. If you are very specific on figures, if you can give us a split Of the $400,000,000 in AVP guidance between refining and biochemicals and oil based chemicals.
And my last question is still on the GeniCassiza. It's about a long term view. My question is, do you see any room Still room for oil based chemicals in the long term. We talked about the margins on aromatics and polyolevins Right before, which were very good. I'm wondering if you want to invest Downstream on this value chain of the traditional and oil based chemicals or The only investment that will be devoted to the bio chemicals, anchoring chemicals.
Thank you very much.
So I give the floor to Alberto and also Alessandro Delazzopper for the first two questions.
Okay. In terms of the legislation, the regulatory risk in Spain, of course, I will not enter into the details. It's under discussion. But For what I understood, it's probably more hitting retail than renewables. And currently, the whole environment in Spain It's very incentivating in an incentivating mood for renewables.
So we see A very dynamic market for renewables in Spain. In terms of the offshore wind, of course, we will continue to invest. Dougherty Bank for us was kind of entry point in this technology, and we will build up On the experience of Dougherty Bank, and we will participate also to we are participating now in Scotland to some auctions. And we believe that we need a mix of photovoltaic, onshore wind and offshore wind in the future.
Okay. Adriano, can you take the floor to answer all the chemicals question, please?
Sure. As Carly mentioned at the beginning, the $400,000,000 that we For the 2021 are mainly driven by the chemical sector. So I would say roughly 75% to 25 Between chemical and renewable. In term of guidance or in term of What we expect for the other stream of business in addition to polyethylene and aromatics, we clearly have a big participation also In the sparynx market and in elastomer, although these are smaller than the polyethylene business where we play today. We see margin in elastomer and ceramics stable for the remaining part of 2021, And we expect that also for the next 12 months, the margin will remain pretty much at this level, Mainly driven by recovering demand in the construction, so and durables, so mainly for Steremics And in automotive special in special application for automotive industry for elastomer.
So we had some special product for new tire performance, a new compounding performance of the last summer business for automotive sector. Also because the driver, as you know, in the automotive sector are completely changing from
Hello?
Can you hear me? Hello?
Yes, sir. Your line is open.
Okay, good. So I hear it sounds great. And especially because the driver for automotive sector are completely changing and the type of product that trend is digitalization for Multi products are changing and we are trying to go in this direction. What about downstream business that is the third part of your question? Definitely, it's something that we are looking very, very carefully.
And as you know, we already made an acquisition To go downstream in compounding and molding more related to the polyethylene business, although it opened Also for elastomer, that is the 40% of acquisition of the project. And today, if you want to capture higher margin in chemistry In the chemical sector, you need to specialize. And the specialization is coming either from product or going down in the value chains offering solutions to And these are the two directions that we are moving as a Versalis. So specialization of the portfolio in terms of product And moving downstream in the value
chain. Thank you very much. Very clear.
The next question is from Giacomo Romeo of Jefferies. Please go ahead.
The first one is about your retail and renewable business and I'm looking at the incremental details you And particularly regarding the customer growth expected from $10,000,000 to $15,000,000 And Obviously, at the moment, you are making a very good margin on this business. And I would like to understand what's Your thinking behind the potential effects on margins driven by liberalization of the market In Italy and whether this could bring a margin erosion. The second question is really getting some your thoughts on the 50 or 5 legislation around biofuels, whether what you thought about the biofuels targets, particularly regarding sustainable aviation. And some of your peers have expressed concern about the cap on animal fat feedstock and so whether it will be good to hear your view on that
Alberto, please follow-up.
Yes. On the margins, Of course, you are right. Liberalization is an ongoing process. So far, a bit slow in Italy, I have to say. But Certainly, the result will drive the margins to become smaller than they are now.
However, we have these very clear. We have incorporated that in our 4 year plan. And the reason why we will still grow in terms of results is because we will be growing in all the high value Services. So we are already providing around 20% of our EBIT with extra commodity services, And we believe that in the future, this will be very more and more important. So we are somehow Replacing the reduced margin per customer with extra services that we can provide to our customers.
Thank you. And now Pino Ricci will take the floor to answer for 55 versus biofuel, biojet and the European legislation and regulation. Pino,
please. Thank you, Gautam. Thanks for the question. 5055 increased the ambition of Europe in term of Transition, accelerating the target and this is a very good opportunity for Biofuels because it's impossible to reach this target only with electrification. That it means that all the target will increase in biofuel for transportation, Road transportation, but also aviation and marine transport.
That means that who has Advantages in technology and the plant for production of good biofuels, both bio And biodiesel or biojet has an advantage a competitive advantage. About the Biojet, we are seeing a very good accelerations. We know that all of the airplane Companies, all airport companies are thinking in which way they Could anticipate the regulations and also considering What is expected in European ambition that it means 2% of bio Fuel in Biojet within 2025 at least 6%, 8% within 2,030, that means A lot of 1,000,000 tons of biofuels. For this reason, we have planned to Convert part of Jela Biorefinery to produce 150 kilotons per year of biojet Before 2024, but probably we try to anticipate something. About the animal fat, we have no particular concern about animal fat because our Strategy is to diversify the feedstock and increase the number And the topology of feedstocks that we have to supply in the market.
Our strategy is to enlarge the supply by Trading and commercialization, but also to develop internally feedstock. For this reason, we are growing in the production of feedstocks, both From low eloc agriculture, especially in marginal and rotation field in different countries in the world And the collection of cooked oil and looking at for other different feedstocks. And we are pursuing also the vertical integration in order to have to be empowered in order
Just to add something because it's better to remember that, First of all, we can diversify our feedstock because we build, we construct the technology. So it's our own technology Coming from our R and D, so we expanded the feedstock. Now we can treat more than 150 Different kind of feedstock and that allow us to have a different spectrum. And secondly, that Everybody knows, but it's better to remember that by 2023, we'll stop using palm oil. We continue with the primary but different kind of, as Pino said, the kind of feedstock that is not competition with food And then can give more breath and more also positively impact agriculture in Italy And in the country where we are, that is very important because it's diversification respect to the oil and gas.
So it's one of the UN SDGs, that's part of our philosophy and our approach. So we help the biorefinery, we help Europe, but we are also the country where we work. Thank you.
Very clear. Thank you. Over UBS. Please go ahead.
Yes. Hi. Thanks a lot. So two questions. Firstly, Since we have spoken about tax, I thought I'd come back to that.
Can you just explain or maybe to shed a light on whether there's Any value or opportunity, now that you're beginning to identify Earnings streams around biorefining, the renewables and circular bits of the chemicals, obviously.
Hello. Hello.
The question is from Bertrand O'Dea of Kepler Cheuvreux. Please go ahead.
Thank you for taking my question. I have 2. The first one is on renewables and especially in Italy. Do you see progress on the permitting process, which is which was very, very slow due to administrative constraints? The Italian government has come up with, I would say, with a simplified procedure to accelerate
Renewable
permitting, that is the first question. And then I have A bit of a housekeeping question on Q2 Upstream performance. In the press release, it is noted that Clean Edit Benefited from retroactive contractual revision. Can you quantify the positive impact on Q2 upstream EBIT from ZOZA Networking's contractual revision and give some color on that.
Alberto, you answered on the new one and Francesco on the
Yes. Yes, there is clearly a Strong commitment of the government to simplify the procedures for authorization of renewable Projects, this is the so called simplification decree, the Creto Simplificazzione. At the moment, it's a bit too early to evaluate the impact. It will be positive, but it's difficult to say how positive it will be because it requires to put in place some committees at Government level to manage this authorization. The idea is To bring this authorization from the regions, the commons and to try to centralize a bit.
But of course, you don't know how quick will be the process even though centralized. That's
We'll see. Okay. About the one off effect on E and P in the quarter, It's just above €100,000,000 and it is mainly related to certain renegotiation in countries in Africa That we're covering previous quarters, so that is this cumulative effect and additional variation or improvement Related to infrastructure cost and funds. So that is the reason of the one off.
Thank you.
Mr. Discalci, there are no more
questions registered at this time.
Okay. So thank you very much. Thank you for listening to us. And in any case, as you know, for any other question in the future, We are available every time to answer your question. Thank you.
Have a good day.
Thank you.