Engie continued to suffer from a degraded energy environment in 2016, but the deployment of its transformation plan enabled it to resist, the French energy giant anticipating a return to organic growth in 2017.
Engie does better in even years. In 2013 and 2015, following massive write-downs, the former GDF Suez announced record deficits of 9.7 and 4.6 billion euros. Between these two dark years, the company had taken its head out of the water by recording a profit of 2.4 billion euros. It did not recur in 2016. Following the increase in nuclear provisions in Belgium and significant depreciation of assets in Europe, Engie, 28.65% owned by the State, fell back into the red. But the loss of last year (400 million euros) is not commensurate with that suffered in odd years.
Above all, the energy company generated recurring net income of 2.5 billion euros. A result in line with the objectives. Last year, it generated cash of nearly 10 billion euros, which enabled it to reduce its net debt from 2.9 billion to 24.8 billion. “We are happy to present very good news, trumpeted this morning the general manager Isabelle Kocher. We achieved all of our goals. We are where we said we would be. The three-year transformation plan that we have implemented is taking shape faster than expected. ”
This is the case for asset disposals, mainly in fossil fuels (following the sale of thermal power plants in India and Indonesia, electricity production from coal has increased from 15 gigawatts to 7 gigawatts in one year). Two years before the end of the plan, more than half of the € 15 billion divestiture program was completed. Ditto for Lean 2018. This performance plan which provides for 1 billion euros in savings has already been achieved at 53%. Engie has decided to speed it up to bring it to 1.2 billion. Isabelle Kocher appeared confident for the future. “Engie’s strength lies in being well positioned in low-CO2 electricity production, infrastructure (networks and terminals) and energy solutions. These three engines represent 80% of the group’s current operating income. ”
Return to growth in 2017
The manager wishes to reduce the company’s risk profile by orienting it more towards activities at regulated or contractually guaranteed prices. In recent years, the share of these businesses has increased from 50% to 75% of EBITDA. At the end of 2018, Isabelle Kocher is aiming for a ratio of 85%. The general manager foresees a return to growth this year. Recurring net income should fall in a range between 2.4 and 2.6 billion euros. EBITDA is expected to oscillate between 10.7 and 11.3 billion. Following these announcements, the Stock Exchange reacted favorably. At midday, the Engie title took more than 7%.
These annual results are good news for Isabelle Kocher. Since taking over from Gérard Mestrallet last May, the Normalienne’s life has not been easy. Rumors of dissension with his mentor have circulated and his action at the head of Engie has been heckled. The ex GDF Suez is at a turning point. For two years, it has made a 180-degree turn towards the energy transition (renewables, services, digital) with the famous 3 D for decarbonation, digitalization and decentralization as its credo. The transformation generated a gigantic metamorphosis with a restructuring into 24 “business units”, which led to the appointment of 350 new managers. A laborious, thankless and humanly painful project.
Used to large centralized structures with a pyramidal hierarchy, engineers find it difficult to go into start-up mode in a few weeks. When presenting her wishes to the press in January, Isabelle Kocher recognized it. “Sometimes people have a hard time keeping up.” For the boss, the good 2016 results are a source of fresh air. It still has to pursue its plan and find the right investment opportunities, especially in renewables. Engie has a budget of 16 billion euros in its priority businesses by 2018. But to date, only 4.7 billion have been spent. Finally, the energy company must win over the markets. Since 2008, the date of the merger between Gaz de France and Suez, its share price has been divided by four.