Engie under pressure as it embarks on slimming plan
French group’s new chief must lead a sharp shift in strategy while keeping investors onside
Even by 2020 standards Engie has had a difficult year. The French energy group ousted a chief executive, hired another, dramatically changed strategy and sold a €3.4bn stake in water and waste group Suez, kicking off a corporate fight that is still shaking the world of French business.
Now the company has to prove to investors it can turn itself round under a new leader as it shifts away from services to focus on energy infrastructure and renewable power — while making sure it does not become a takeover target in the process.
“We needed to tick the box on some big subjects like Suez,” Jean-Pierre Clamadieu, Engie chairman, told the Financial Times. “With these boxes ticked, quarter after quarter, we need to demonstrate that, indeed, growth is happening where we expect it to happen. Now it’s not just aspirational.”
Engie’s planned asset sales next year include the carve-out of a customer services business that employs 74,000 of the group’s 170,000-strong workforce and brought in 20 per cent of last year’s €60bn in sales.
The company has yet to decide if this will be done through an initial public offering or a sale to private equity, and Mr Clamadieu is searching for a management team to run the new business. But whatever route it takes, the pressure is on.
“Engie has to gain in value faster than it sells assets, that’s the game next year,” said one banker close to the group.
Mr Clamadieu admits the company has had a “hard crisis” — it cancelled its dividend — a rare and painful move for a utility. Despite a relatively good third quarter, its share price has fallen about 13 per cent over the course of the year and its market capitalisation stands at roughly €31bn.
The task of turning the company’s strategy into a business plan will fall to Catherine MacGregor, a former executive at oilfield services group Schlumberger who takes over as chief executive in January.
Mr Clamadieu’s job, in part, will be to manage Engie’s largest shareholder with a 24 per cent stake: the French state.
Paris has a reputation as a heavy-handed shareholder. Its board representatives voted against Engie’s October sale of 29.9 per cent of its 32 per cent stake in Suez.
The fact Engie went ahead with the sale has been seen as a significant moment in its relationship with the government, but Mr Clamadieu plays the matter down. France is planning to sell down its holding but there is no timetable, and Engie’s valuation means it is not rushing to market.
Previous chief executive Isabelle Kocher, a former civil servant who tried to radically overhaul the company, was forced out in February.
To her supporters Ms Kocher reinvented Engie as a green energy champion focused on services, and faced opposition from entrenched interests resistant to change. But critics say she struggled to take hard decisions — including whether to sell the Suez stake or buy more — and failed to translate her vision into a functioning business model. Senior Engie figures say privately that Ms Kocher was more focused on the big picture than “nuts and bolts” work.
Engie, in the eyes of investors, had become too hard to understand. And in the eyes of Mr Clamadieu, it had become too complicated internally, making decisions slow and painful.
The chairman said the current structure of the company, made up of 27 business units in almost 70 countries, remained “very complex and is very difficult for a CEO and an executive committee to supervise.”
He believes processes within the group need to be sped up.
“One of the business unit heads was presenting her project to the board and she told me that she had more than 150 people from corporate areas asking questions in the process where this project was prepared and then delivered to the board.”
Engie plans to plough at least some of the money it raises from the asset sales into building up its renewables portfolio. Mr Clamadieu said the company would continue to grow but that larger scale M&A was not on the radar.
It is also looking at winding down its Belgian nuclear operations, in line with the country’s energy plans. Engie has provisioned about €13bn for the eventual shutdown, including dismantling the plants and disposing of the nuclear waste.
While Engie’s changes are designed to make the group easier to understand, they also expose it to a new type of competition, from pension and infrastructure funds as well as oil and gas majors such as Total.
Vincent Ayral at JPMorgan, said that meant Engie would “ultimately” become “an M&A target over the medium to long term, like the rest of the sector”.
But Mr Clamadieu disputes that idea, in part because Engie remains complex and diversified.
“Who could see us as a target?” he said. “I can’t see people organising a large, very large takeover project” when they only want access to “20 per cent or 25 per cent” of the company’s operations.