Isabelle Kocher: “We have radically changed the organizational structure of Engie”
In her interview with Le Monde on September 22, ENGIE Group CEO Isabelle Kocher talked about the key missions that ENGIE has set itself for successful delivery of the energy revolution today, especially in terms of investment in renewables, gas supply networks and decentralized generating solutions. A revolution that is not without its impact on the operational structure of the Group. Find out more…
Le Monde. Why is Engie so infatuated with the energy transition?
Isabelle Kocher. What we are currently living through is not really on the scale of a transition, but rather an industrial revolution. And it’s triggered a ‘Eureka’ moment in many minds. We saw that spectacularly at the COP21 climate conference. This alignment of interests has already generated some visible consequences. The first is that there’s now a lot more money on the table. Public money, it’s true, but we’re also seeing private money coming forward now. Very large amounts of investment are in the process of converging to support energy generating methods that are compatible with positive climate scenarios.
The second practical consequence is that this accumulation of resources has effectively accelerated the rate at which technologies mature, and nowhere more so than in solar power, where costs have fallen significantly. In 2008, we were looking at €700 per megawatt hour; less than ten years later, a contract was awarded last week in the Gulf states at $24 per megawatt hour! What we are living through is a paradigm shift. Digital technology is allowing us to design radically different infrastructures that are much closer to the realities of consumption, more energy efficient and lower in carbon.
What timescale are we talking about?
Honestly, I can’t tell you that, because I don’t know. And that’s one of the new realities of today’s world. The Americans have adopted an expression from the military, which was used for the first time by a general in a theater of operations: ‘VUCA’, which stands for Volatile, Uncertain, Complex and Ambiguous. That’s the world we live in today. But what I can tell you is that it is happening quickly. This is the first time that we have been able to catch a glimpse of a way to achieve what has always seemed an impossibility: bringing energy to everyone. And the emerging countries of the world have already understood that.
You’ve given yourself three years to deliver radical transformational change for your company. Is that possible and reasonable?
We operate in an industry where we have to think far ahead and advance quickly. Looking forward, we can see a dual world developing by 2050: a world in which 50% of energy is generated by large-scale power plants and transmitted by equally large grids – i.e. the system we are all familiar with in all developed countries – and the other 50% of energy is generated at local level at the point of consumption in our own homes or in the buildings and factories where we work.
To establish Engie as a pioneer in this new world, we have to take action now in three key areas. Firstly, refocusing our business portfolio by pruning those areas of business that are no longer central to the world I have just described: coal-fired power generation, which currently represents 15% of our energy mix, and is expected to diminish to zero within the next three years. The same applies to oil. The third and last key area is in power generation, where we must become less reliant on large-scale power plants, because these assets will be used less and less as the focus shifts to decentralized solutions. In total, we plan to make €15 billion worth of disposals over the next three years. In fact, we’ve already disposed of €6 billion worth in six months.
Over the same period, Engie will invest €22 billion in three areas where we already hold leading market positions. So this is hardly a shot in the dark. These three areas are renewables, supply networks – especially gas, because it prevents the energy system from falling over as a result of the intermittent generating capacity of renewables – and, lastly, every aspect of decentralized solutions. All of which represents an enormous corporate project that we must get to grips with quickly and on many fronts. I am convinced that the best way of creating value for a corporate group is to attune itself to the expectations of its ecosystem.
So how will this corporate project transform the business?
The first thing we’ve done is to radically change our organizational structure. We have to lower the organizational center of gravity, and give our people greater freedom to innovate creatively at the point where value is created… at operational level. We had five large divisions, one for each business sector, each with its own international network. We’re now working towards solutions integration to ensure that when customers look at ENGIE, they see only one face. We have moved from an organization structured around five divisions to one based on geographic region, headed up by people who represent all business sectors and the entire toolbox.
On the way, we have removed intermediate structural layers to shorten decision-making chains. It has been a pretty large-scale restructuring exercise for which we consulted with no fewer than 88 works councils, health, safety and working conditions committees (CHSCTs), etc. And we succeeded in obtaining all 88 recommendations slightly ahead of schedule. So it is possible, even though it would be unrealistic to say that we won’t have problems along the way. Lastly, we have also said that there will be jobs lost in certain places, but that new jobs will be created in other places.
The challenge for all of us, and our people in particular, is to retrain and refocus so that we can make the transition away from sectors in which there will be little or no growth to those in which there will be growth. We’ve already introduced the structure to achieve that, backed by very significant commitments to retraining and reskilling.
So will there be redundancies?
Naturally, some people will prefer to stick with the job they’ve always known, and will therefore leave us.
But there won’t be any large-scale shedding of jobs or a redundancy plan.
This week, the European Commission launched an inquiry, because it suspects that Luxembourg provided Engie with concealed state subsidies between 2009 and 2011…
The European Commission has announced an inquiry involving the government of Luxembourg. It’s that government that the Commission is criticizing, not Engie. No one suspects us of tax fraud. The issue for the European Commission is to decide whether Luxembourg offers equal treatment to all major corporates operating in its country. As far as we know, the answer to that question is yes. It’s now up to the government of Luxembourg to prove it.
Are you concerned to see climate skeptic arguments resurfacing during the electoral campaign, as we’ve seen with Nicolas Sarkozy, who has cast some doubt on humanity’s responsibility for climate change?
No, not really. These voices are now very isolated. The balance of opinion has already persuaded most minds.
What is it you expect of politicians from your industry perspective?
Three main things. Firstly, that we finally arrive at a properly coordinated European energy policy: the kind of imbalances we see between France and Germany, for example, are simply absurd. Next, we absolutely need a meaningful CO2 price for Europe, mainly because it would penalize the economic efficiency of coal-fired generating plants relative to other solutions. And lastly, we need to create a publicly supported financial ecosystem to help startups at the point where they need to raise finance: that’s a decisive factor for the development of European technologies going forward.