Isabelle Kocher, ENGIE CEO

Interview with Isabelle Kocher for Le Monde – By Jean-Michel Bezat on March 2, 2017

Le Monde. ENGIE is posting a 2016 loss of 400 million Euros, after a deficit of 4.6 billion Euros in 2015. The Group has not yet overcome its difficulties…

Isabelle Kocher. On the contrary! We have launched a transformation plan (2016-2018) and we are ahead of schedule at the end of the first year. The news is very good on the financial front.

For 2016, we made four commitments. In a context in which the energy sector has been severely tested, the Group’s recurring net income is in line with our forecasts, at 2.5 billion Euros. This enables us to pay, as planned, a 2016 dividend of 1 Euro per share. Debt has been reduced by nearly 3 billion to 24.8 billion thanks to cash generation of 9.7 billion, which boosts our financial flexibility. We still have a category A rating.

Nonetheless, we had to depreciate assets which, in accounting terms, reduce our net income to – 400 million. We have effectively revised the value of our portfolio. Our assets (power plants, gas terminals…) exposed to market price fluctuations are continuing to suffer.

We have decided that they will account for only 15 % of our activities by end 2018 (against 50 % three years ago).


The markets seem less optimistic than you, judging by the steep drop in share price …

I am aware that there are questions. And they are legitimate. They do not relate to strategy, quickly understood and accepted inside the company and by analysts, but rather to the rate of change and the capacity to execute an extremely ambitious plan. The market is wondering whether we shall be capable of getting a good price for assets which are no longer at the heart of tomorrow’s energy. In one year, we have already disposed of 53 % of the required 15 billion and at transfer prices above market expectations. We are implementing our plan faster than expected and in good conditions. We are creating value as part of these disposals.


Don’t these asset disposals give the impression of a Group going backwards?

We have taken the decision not to wait to dispose of these assets. You have to understand that reinvestments will not contribute to income for two or three years. I recognize that, for a while, we are concentrating our business and that revenues are declining. But the effect of these disposals on income is limited, whereas we are selling 20 % of our business!


Does this mean that the refocusing of the Group on no-carbon or low-carbon energies to make it the “energy transition leader” is not in question?

Some have had the impression that ENGIE was taking a leap in the dark by selling activities which work well and staking all on new solutions which will provide growth sometime in the future. This is not the case. ENGIE has a treasure beyond price: 80 % of its activities today are at the heart of an energy transition, I would even say revolution. And the 16 billion of investments for 2016-2018 provided for in the transformation plan are made in business areas which we know well and which are growing: electricity generation from gas and renewable energies, major infrastructures (gas, electricity networks…), integrated services for our customers, particularly in the energy efficiency area.

We are ahead of schedule in our investment programme, which is refocusing the Group on the sectors which have a better risk profile and growth potential: three quarters are identified and secured. We are also investing in additional growth levers five and ten years from now: energy production at home or in tertiary buildings, management of services based on electric vehicles (rental, recharging…), hydrogen generation without CO2< emission.


How did you meet the challenges of ENGIE’s many business areas in 2016?

Our three strategic business areas are growing. I have two obsessions: speeding up their development, but also clearly identifying problems and optimising our portfolio. In 2016, Electrabel obtained the visibility it needed from the Belgian parliament through the authorization to extend the operation of nuclear reactors by ten years and a revision of taxes. Another example: thermal power plants in Europe, which have earned money for the first time in years. With liquefied natural gas, which is at the bottom of the cycle, we have halved the cost structure and renegotiated purchasing contracts. We are speeding up international development with major projects in solar energy in Mexico and South Africa, in gas in Saudi Arabia and in electrical networks in Chile. ENGIE has multiplied by nearly six the rate of development of solar in 2016 and grew 22 % in renewables as a whole. In energy services, I can announce today the purchase of Keepmoat, one of the UK leaders in regeneration, particularly energy regeneration of buildings, for nearly 400 million.


How far has the execution of your operational performance plan progressed?

The “Lean 2018” plan anticipated 1 billion of savings in three years; we have already reached 530 million in one year and we are raising the target to 1.2 billion by 2018. Here again, we are ahead of schedule, thanks to the mobilization of our teams, to whom I’m grateful. These plans didn’t come out of the head of three people – the whole company is mobilised.


However, there is a feeling that strong internal tensions exist. Gérard Mestrallet, Chairman of the Board of Directors, criticised the sacking of an Executive Vice President…

I’m surprised to see how closely I’m being observed. I’m not sure that my 39 male colleagues on the CAC 40 are subjected to the same scrutiny. Yes, after a year I adjusted my executive committee. This is normal. Nobody pretends that a group of ENGIE’s size can be transformed easily. There is massive buy-in to the strategy defined by the Board of Directors. We would not have obtained these results without a community of managers pushing for change.


Your relations with M. Mestrallet, even though he chose you, are not as harmonious as they were…

Don’t listen to these rumours! The support of the Board of Directors is explicit and total. The speeding-up of our transformation plan will enable ENGIE to restore strong organic growth in 2017, since we’re expecting a recurring net income of 2.4-2.6 billion. I’m full of confidence. I meet many long-term investors and they all tell me: we believe in you, stay on track!