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ENGIE Sets Ambition To Be The World Leader In Growing Market For Integrated Zero-Carbon Solutions

March 01,2019

At an investor day, ENGIE announced that, "ENGIE’s ambition is to be the world leader in the growing market for integrated zero-carbon solutions."

"ENGIE’s customer transition roadmaps increasingly require a sophisticated integration of strategy, design, engineering, energy-efficient asset construction, digital platforms, operations management, financing syndication and outcome assurance. ENGIE believes that its unique capability to integrate all these solution elements “as a service” to its customers affords the Group a distinctive leadership position in the industry," ENGIE said

"This approach lends itself to ENGIE’s leading portfolio of customer relationships and infrastructure expertise. This is highly relevant for the world’s top 500 global companies which, far more than in the past, seek global strategy and implementation planning to address their sustainability and zero carbon requirements. ENGIE is seizing industry leadership with comprehensive 360° programs that cater to these companies with an approach that is strategically focused, cost-efficient and subject to robust performance management," ENGIE said

"To achieve this ambition, ENGIE adopts an aligned approach to higher value activity across business lines," ENGIE said

ENGIE said that each of ENGIE’s business lines is aligning to these customer requirements to enable the zero carbon transition: high value-added solutions which are tailor-made, technologically sophisticated, and often enabled by ENGIE’s leading access to bespoke syndicated financing.

Notably, in its Supply segment, ENGIE said that, "ENGIE is continuing to increase its consumer and business contract base, driven by innovative offers and improving service quality. The profitability of this growing customer base is forecast to be offset by industry margin pressure in the consumer segment, and in this context ENGIE’s strategic ambitions in this segment remain limited to our current country footprint."

ENGIE set forth focus for its other segments as follows:

• Accelerating growth in Client Solutions across a broadening array of services including on-site co-generation, heating and cooling networks, public lighting, rooftop solar and EV charging stations.

• In Networks, the Group will continue to generate attractive returns and substantial cash flow. In France, the next regulatory return review will be effective in 2020, and ENGIE will continue to invest in the sustainability of its gas networks, adapting to future green gas requirements. ENGIE will also actively seek attractive opportunities to invest in the growth and energy transition management of networks in dynamic developing markets.

• In Renewables, ENGIE is further scaling its design of complex, multi-source, profiled power purchase agreements (PPAs) and 24/7 green energy flows which are now widely sought. Over the longer term, ENGIE will play a leading role in next generation renewable platforms including offshore wind and green gas. ENGIE targets 50% of new renewable projects dedicated to specific customers by 2021, to be a leading corporate PPA supplier, and to be the world leader in 24/7 green PPAs. The Group plans to add 9 GW of renewables capacity to its portfolio by 2021.

• In the other generation businesses, ENGIE will continue to optimize operations, reducing its CO2 footprint. ENGIE will further narrow its thermal capacity, reducing coal generation and selectively honing gas-fired capacity to customer requirements, including combined technologies such as desalination and co-generation. ENGIE’s Belgian nuclear operations continue to stabilize, with operational availability anticipated to rise as previously announced.

ENGIE said that it is leveraging key digital technology and financing syndication capabilities

"ENGIE has deployed global digital platforms that strengthen our competitiveness, and will continue to scale up software content in ENGIE’s solutions to differentiate us as the leading energy software provider," the company said

"With an industry-leading flow of customer projects, a strong infrastructure investor relationship network and systematic, proprietary structuring capabilities, ENGIE designs financing syndication as an integrated part of our solutions, optimizing customers’ cost of capital and ENGIE’s ability to accelerate its growth with lower individual project capital intensity. This model has been utilized over time in ENGIE’s thermal and renewables portfolios, and will now be implemented across our Client Solutions and other innovation project pipelines," the company said

"ENGIE is aligning its organization and simplifying its financial reporting," the company said

"To further align ENGIE’s organization with this strategy, four Global Business Lines will be created – Client Solutions, Networks, Renewables and Thermal – to support our local teams and accelerate cross-functional performance programmes. ENGIE’s financial reporting will be simplified, with fewer geographic segments and strategic visibility into the progress of each Global Business Line and our energy Supply operations," the company said

ENGIE is adopting selective offer and investment criteria: prioritization of 20 countries, 30 urban areas

"ENGIE applies rigorous strategic and financial investment criteria, and has a clear perspective on attractive investment characteristics. Complex, innovative, integrated, longer-term, outcome-based customer programs are preferred to simple, commoditized, standard fee-for-service business. Investment will be differentiated over distinct time horizons, with consistent hurdles of 200 bps over ENGIE’s WACC, and 400 bps over cost of equity," the company said

"In a move to sharpen geographic focus and capital allocation, twenty countries and thirty major developing market urban areas have been identified as ENGIE’s top investment-led growth priorities, with an objective to build scale, top-3 positions and higher density of operations. ENGIE will also exit approximately 20 countries over the next three years in a move to enhance focus and economic returns," the company said

ENGIE expects to invest approximately €11-12 billion in growth over the 2019-2021 period

"ENGIE intends to invest approximately €4 billion annually in growth capital expenditures and smaller bolt-on acquisitions over the 2019-2021 period, while €6 billion of asset disposals are expected over the period. This €11-12 billion program is anticipated to be led by €4-5 billion for Client Solutions. €2.3-2.8 billion will be allocated to Renewables growth to fuel the c. 9GW of incremental capacity, while €3.0-3.3 billion of additional capital will be invested in our Networks business line," the company said

ENGIE will drive continuing internal cost reduction and improved profitability

"A further 2019-2021 performance program has been launched, consisting of cost reduction initiatives (spanning procurement, digitalization and shared service centers) and revenue and margin enhancement opportunities stemming from optimization of ENGIE’s assets and customer offers. The aggregate operating profit impact of the program is currently targeted at €800 million, with delivery weighted slightly towards 2020 and 2021," the company said

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