234. Engie, the remarkable turn around (live from Eurelectric Power Summit) - Jun26

With Laurent segle And from London and Gerard Reid from Berlin. This is redefining Energy today. On redefining Energy, we're going to talk about Actually we're going to talk about an event, Laurent, which is your Electrics annual event which took place in han Sinky this year. Oh yes, it was wonderfully organized by Marcus Roamo, the CEO of Fortum and of course by all the team with Christian Ruby.

It was in this fantastic congress center called Finlandia in the middle of Elsinki and the weather was great and yeah, extremely well organized, very pleasant. But first of all, from my partner, A. B Loco Energy is Europe's premier leaser of ten foot container mobile batteries built in Europe with COTL best LFP cells. A Bloco Energy serves fourteen European countries, including France, Germany and the UK.

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Well, it was great because there was a lot of friends there. We had King's Millbond was there on stage, we had Dejan Roseno delivered a fantastic lecture, and of course Bruce Douglas, Killian Daily, Emon Ryan and sorry for all those I don't mention, although I would like to say the second day in the morning there was real podcast stars, not like us, Alistair Campbell and Rorris Steward. The rest is politics We live a very good How was that well, Alista Cambell there is a very brilliant man, very charming and OI still wasn't Embezil.

Did I know anything about energy? Yeah? It tried to talk about energy, try to lecture the whole room full of one thousand energy experts like the system is not well. Manager so well, not a very pleasant character.

That's the only thing I like to say. Anyway, did you meet any pleasant characters? All? The risk was very good.

The other thing you did was you went and interviewed the CEO of the French utility on you with the Irish name. Yeah, it was a real privilege and organized by your Electric to bring Katherine McGregor on the show. So Katrine has been VP of Your Electric for a year and CEO of nerg for five years and a half. So we had a great conversation around a the priorities of your Electric of course, and also a role at Enchi because she has managed to turn around this company which was clearly under valued a few years ago and now it has been performing extremely well.

Well. Listen, why don't we bring around the show. Catherine, Welcome to the show, and thank you very much as a president of Your Electric for inviting me into your wonderful annual conference. Thank you very nice to be here.

We have a very charged agenda because you've been vice president of your Electric for a year. Now, what's your first impression about that community? Your Electric is very important and it's a very very relevant association in many dimensions. Maybe the first one is because it is trying to tackle one of the key challenges and opportunity that Europe is facing.

It's around the carbonation, electrification, sovereignty, security of supply. That's one thing. The second thing is that. It's really carrying this vision that it needs to happen at European level.

So Your Electric is an association of association and it really pushes the view that by furthering the integration of the European energy market, we will be more competitive, we will have a better energy system and electrical system specifically. That's why I'm very excited about what we do at your Electric. I really think that it's again the relevant level at which you know, the policy needs to happen at times when, for example, energy prices go up again. You know, in the wake of Iranian events, there is sometimes a temptation for government to change things, things like market design.

Things that it yes, and you know the fact that an association of association like euro Electric is saying, do not destabilize the system. We need to keep stability in the market. Design very important for investments. Signals.

ETS is the mechanism for the carbonation we cannot mess with. That doesn't mean that we should not listen to what's happening on the continent in terms of competitiveness, industry, et cetera. So we need to. Use ETS to help in a target away some industries, but don't change the framework.

Basically, a New Electric has been really vocal at doing that, and I believe that it has served the purpose and believe that now we have some stability there and it's so critical political government. Sometimes they think that they always need to intervene. An intervention sometimes can create more harm than problem that they are trying to solve. Long story short, I'm very pleased to be part of the EU Electric Presidency team.

We have three very clear priorities, one which is competitiveness and specifically on the industrial side, the second which is the security of the power system, and the third one which is exciting stuff. It's AI, so it's Power for AI and AI for power. As usual, your Electric loves to publish a great report during the summit. One of them was very interesting to me because it was a bit of a new concept called the power couples, where you have integrated industrial partnership models that jointly optimize demand LOOCRB and supply infrastructure and flexibility.

How did you came up with such a concept of power couples? The concept of power couples, it's a really interesting one where when you think about what we've done in terms of the three priorities, one of them was around customers, and to be honest, it sounds for many businesses. It's obvious that you want to think of your customers first. But in the utility sector and the power sector.

It has not always been the case. When you are running a regulated activity, you don't necessarily think so much about adapting what you do for customers. Customer centricity doesn't come obvious, but the realization by making sure that we are here to provide competitive service for customers has indeed fosters to think a little bit differently about this thing. And there's the idea that we need to be closer to customers to really understand the energy need and then to tailor's solution, coordinating across sometimes the value chain, you know, even great connections real estate, obviously energy supply, generation, and then from the customers side, it can be maybe adapting their processes and sometimes even working with other industries in one zone to make sure that this energy ecosystem is truly optimized.

So that was the idea of power couples, and in the report there are a number of examples that were discussed that really ring a bell actually to energy because we have exactly this approach. For example, we work with data centers. You have to customize the approach very much. That's the idea of the report.

Oh data center. So yeah, nobody talked about it three years ago and now it's all the rage. But before we go into data centers and I know you're and she's doing a lot of work, Katherine, I like to thank you. I like to thank you because a bought shares of NGI the day is one name CEO, and you have delivered to me over the past five years and a half a twenty point five percent return peranum, which is better than your peers in Europe, but also much better than an infrastructure fun the Macquarie and the brook Fields and the Carlisle.

So, as a shaoholder, thank you very much. Where did you have in mind when you arrived five and a half years ago to deliver such a fantastic financial performance? First of all, thank you for the trust. Shareholders are a very very important part of our stakeholders landscape.

We believe shareholders are very important and I have spent and I am spending a lot of time with our investors. Actually, even before joining preparing to become a CEO, I spent sometimes to collect feedback and trying to understand it. We're obviously undervalued. I've felt like we were undervalued and I really wanted to understand and listen to two investors and I always get some interesting insights through their questions to us.

It really gives a very interesting perspective on our businesses, on our strength, but also on the area for improvements, and we continue to have many areas for improvement that energy. So it is true that we have worked with determination over the past five six years now. On transforming the group. If I was to boil it down to two words, I would say strategy.

Clarity of strategy and steadiness of strategy on one side, so clear and steady strategy and the second is the execution execution, execution, and if you have both, you know, then you were able to establish streuss and then you're starting to see the results. It takes time to us text time, and it can be broken rapidly. So we have this thing with my management team that we are not complacent one second, and we have a huge sense of urgency to continue on the. Route that we've started.

So if I look at the strategy, it was really focus, you know, focus on what we are good at, less diversification, and then we are filming who we are. We are utility that drives a lot of the decisions that we made and I'll maybe point to what we've done on the regulated side, because we were very focused on the generation side, which is fantastic. But obviously with our regulated assets our infrastructure business, we're very heavy in gas. Nothing wrong with that, but you know, there's not much growth, so we were looking for growth and regulated assets.

And with the move that we did earlier this year, you keep our networks, we now have this second leg of growth in the regulated arena, which really fits well the utility profile that indeed, investors are waiting from us, like the clarity we say who we are, and then our investment and our capital allocation decisions fit those decisions of who we are. And by the way, I like the word utility. Some people think it's very unsexy. I like it because it says that we are here to do something useful and useful not in the sense that it's also economic sense.

So you should not have your business model are demanding too much reliance on subsidies. For that matter, you know, you have to make sure that what you bring to the world is something that makes economic sense. It's not just lookable. It has to make economic sense.

And this is the whole view that when you have portfolio like we have Attengy, we can do that. We can provide customers to society, government the lowest cost solution obviously with the constraint of CO two because we have all the levers and the integration of all of different portfolio energy management, all that contribute to do that, which is why you always go back to utty. I think it's a great word. It's not just about a financial profile, it's also about what we're here to do.

Going to summarize your strategy since you took the helm, you have done large scale disvestment of fasil fuel and legacy as set for about fifteen billion, and you have concentrated investment in honorable grids, batteries and regulated network with a UKPN while keeping a financial discipline. So you have on a bit of around three which is pretty good. That's how engine two thirty is going to continue to look like. Right now your balance is that would say fifty percent molecule fIF cent electrons, so it has already rebalanced.

That's how you foresee the future. We definitely see our profile to remain quite balanced between non regulated or generation and regulated electricity will become a higher share, especially that with you keep our networks. We are embacking quite a bit of growth, so expect the portion of power within these regulated assets the network business to grow, so more electricity, and in terms of generation, we only produce power anyway, and the share of renewables within our generation portfolio, which is only made of renewables and still thermal plants from gas from natural gas, that share is going to continue to increase.

And the third pillar, so you know we have three pillars and energy. We have the first one which is power generation, the second which is infrastructure, and the third one which is customers. So it's bit to see bit to be energy management. And similarly in the customer pillar you will have also a higher contribution of power.

Within the customers we will sell more power to our customers and within this power we will sell more green power, which is actually good because it's also supporting the margins. If we look at the growth drivers you are talking about, there are three. You've got heat pumps, you get electric transportation, and of course you've got data centers. Do you want to talk about briefly those threes and which one's the most keen into your thinking?

Yeah, you're really talking about electrification, which is indeed a bit of a macro trend. What's interesting is that it takes different flavor in the different regions of the worlds and where we operate, which is why you know, it's always really important to always be quite local in the key markets where you operate because the reality is very very different. So if I look at for example and India, you know they're really accompanying a very big economic growth. Demographic is also supportive and they want to be more resilient, so they have a very significant renewables target to twenty thirty.

They organized the auctions so that executable from the developers and point, and so we are accelerating in India to accompany this very big push on venue both from the India gouvernment. That's an example. In Europe you have a combination of drivers and you know, obviously with with your electric we see them very closely. It's really electrification to support the carbonation and it's also a way to decrease the dependency on imports.

And here mobility is very big drivers for. Sure, so you have a network of ivy charger. We also, yes, we operate around roughly eleven charging points in Europe to our brand and GVO many friends, a bit of Belgium. That's our fund out that's at men called markets.

But yes, so electrification driven by mobility driven also to allot to a certain extent through heat pumps and then also indust shows that can electrify, they will electrify, and the others they'll go to other solutions, like they'll stay with gas, but they'll grunify the gas or biomethane is something that we are also quite excited. And you also have you know, local networks like distree hitting that also can by the solutions. Okay, so now it's time to talk about the eight hundred pound gorilla data centers.

Data centers on Earth. You do them on Earth? Yeah, we are either we are a bit risk covers as a utility, so we have not yet sent us stuff in the space, but the. One of our future guests on the show, we'll talk about that ASID space.

So let's go back to us talk about how you deal with the growth of data centers. Obviously, again market by market, data center operator and specifically Hyperscaler. We've been working with them for a long time mainly and at the beginning it was really PIPA driven, so it's long term contracts that is backing the development of new renewable assets. It sounds easy, sounds straightforward, but it's not a really big project.

Last year we were Engie was number one on PPA. We signed four point eight gigawats and indeed you know there was a lot of data center operator or developer there among our customers, Apple, Meta, Google a few names. But we also did PPA by the way for industrials like bea Safety in Europe. So it's interesting to see even industrials that see that mechanism as important to the decabination gives them the predictability of the prices.

So PPA is a very significant mechanism to work with it at center. But now what we're doing at Energies that we've organized ourselves to also help them accelerate the development time to market is really important and we provide them custom solution that include power land that can include existing assets or assets that will be developed. Energy management, whereby you can manage the energy that is produced locally or and a combination of energy that is supplied to the market and help them also with their energy procurement.

Obviously, storage solutions, batteries to also help with the flexible part, and so we are really scouting and we have now a dedicated project by that we are developing with those hyperscalter to help them accelerate the capacity, which is a huge thing for them because as you know, AI development correlates still very well with compute. Yeah, so you want a lot of our wars, but there's one I really like, which you did the Deal of the Year and Electricity out of the Year at the TOO twenty six and Risk Awards about it was a toning agreement in Germany.

Maybe it's a bit below your radar, but I know the team who did it is smart. You're really great guys. We do. You know, I hate to brag, but I really think that we have some of the best power market people in the industry.

But I shouldn't say it too loud because then I'm afraid that they get poached. But the very nice thing about the team and the energy management team and the supply teams is that you have people who are very high IQ, very very smart people, and they come to NG because they don't necessarily want to work in finance. They'll come to NG because they also want to contribute to have a physical impact on the world. That's why, you know, you have really quite unique profide that way, and I'm very very proud of what they do.

So talking about PPA, let's dig a bit deeper into one of my favorite subjects, which is the Greenhouse Gas Protocol the revision of the scope too, because what you probably not know is I'm the creator of the scope to twenty five years ago and it has been wrongly portrayed by the opponents as a forced one hundred percent matching twenty four seven, where it's just an accounting. It's just an accounting. A lot of people have been very vocal for or against, and here we're just talking about accounting.

Do you have a position on it? Without going into the weeds, it's important to say that if you only look at average consumption over say a year, you could achieve the carbonation of your average consumption over a year by just rapping a lot, a lot, a lot of cheap solar you could volume wise. But from a system standpoint, this is not helpful. It's not helpful.

So you know, I always go back to this utility thing. I think we have to make sure that we do things that help the system. And so when we think regulation. We have to make sure that we don't buy uninternet consequences encourage the development of projects or behaviors that are not helpful to the system.

Okay, I'm just looking accounting, just accounting to support accounting by the hour or by the year. The way to answer to that is that I do think that it's important to not just looking at a yearly average. Okay, I hear you. Now, how much you push, whether it's hourly, maybe you know how much you push is good question.

But you have also to always balance the level of expectation versus affordability. Yeah, but look, we trade electrons every fifteen minutes. We can track the green everything. If it depends on the markets, you see, it depends on the matter.

So Europe has a very excellent liquid shortterm markets as well as longer term markets. So Europe can do things. But you also have to really make sure, especially if you add you know, additionality, et cetera, that it remains affordable, particularly for industries, and the level playing field across different continents is something that my customer keep reminding me, which is why you know, I'm a bit balanced on these things, because from a principal point of view. Of course early matching is much better, but we have to make sure that in terms of implementation we are not overly punitive on costs.

Yeah, I don't want to spend too much time again you said matching, We just want the accounting. Okay, let's pivot probably towards our last subject, which is going forward. And of course you're probably more disciplined than your clients, the Hyperscados with CAPEX budget bigger than the Russian military size each year, but you're still going to invest what's our CAPEX plan? So we have indeed an ambitious cap ex plan of around twelve billion euros a year on average.

About ninety percent of that is split evenly between generation mainly renewables and batteries, and infrastructure, which has you know, the networks, power networks, gas networks on the maintenance side, and also the local infrastructure, which we didn't spend much time but dis rehitting this week, cooling, which is obviously also an important part of this whole equation. Well, Catherine, thank you so much for coming on the show. I think I'm going to keep my eng shares because I accurring into the upper right direction, so that's I to very much and thanks to your Electric for welcoming us.

And what the Electric is doing is in our opinion opinion of a lot very positive push towards more integration and security. So thank you very. Much, thank you for having me. So job you want.

Let's say something about the uk ON network because that was ENNGI huge acquisition at the beginning of this year. Yeah, I think it's very interesting to see what's going on and the utility landscape across Europe. What you're definitely saying is a whole pile of what I would call utilities deciding that grid companies, and then you've got a whole pile of grid companies who are deciding they are generators. And obviously, Angie Vidim what it's doing here is sort of saying, hey, listen, it's all about grid going forward.

They've really been very good. They didn't overpay it. Basically, they got it at the same price that I think Macquarie or not the big of those funds proposed a few years ago. Very financially disciplined.

So they have a dead on a bidh which is around three and honestly, the financial performance is better than the beginning for funds as a utility. I guess they have a better email which done private equity firms or sometimes not all of them, but sometimes can be perceived as sucking the old substance was here as a utility. They are very well perceived and so they get those deal done. Very interesting.

I think I'm going to add, well, I think you're probably going to say Angie and the likes of Angie who are deciding to go into making more acquisitions. And the one thing that they did by buying Uka Power Networks is they bought best in class. So if you're looking at a distribution grid operator in terms of all metrics, whether it's capacity, utilization, costs, these guys are top class. So others, you're buying something that becomes a platform feared by others.

That's what I think they'll do now. Have been extremely polite and civilized. You know me, we didn't talk about nuclear in Belgium, which is a bit of a headache and she's trying to get out. So how did you bite your tongue.

I'm a guest. I want just good news, smiles and conviviality. Very good, the congratulation that you achieved that. We didn't talk about hydrogen Okay, we didn't talk about of shot Wind of shore Wind, and she has a partnership with DPR and it's a bit the good, the bad and the ugly.

So the good is in France they're managing two giganticoff show part of Normandy and of the Vande region, so this is working pretty well. They have a big of shot Wind park in northern Scotland which is not going very well because they have a lot of technical problems. And of course the very ugly part was there foray into the US, just done very ugly. So I'm not sure they're really going to develop more of short Wind.

No. And by the way, that's why very interesting the movie Integrate. Is that telling you something? Yeah, and it's really telling something the big state.

Yeah. And to conclude, there was a lot of conversation around twenty four seven so and she's very supportive of the revision of the greenhouse Gas Protocol for a much more granular accounting of electrons. And while we were in Helsinki there was all the great reform of Texas arrived and same Texas and cut particular as accepted to start tracking the green electrons on an hourly basis or another success in our fight against the people who explain us that it's impossible. So all this is going in the right direction.

Got any other takeaways, No, that's pretty much it. Your Electric is doing great, superb organization, and Fortum has really helped them organize a very very successful annual conference. So I encourage our listeners if they want to come this once a year and it's very variable. Well I'm looking forward to next year's event.

We thank Katherine for coming on the show, Christian Ruby and all the team for organizing all this, and jab that you talk to you next week and looking forward. Thank you for listening to Redefining Energy. Don't forget to rate the show and subscribe on Apple Podcast, Spotify, or the platform of your choice.