As Engie rejigs corporate structure, renewables emerge as key growth priority

A wind farm in Texas. Engie is focusing its onshore renewables activities on core markets including the U.S., France, Brazil and Chile, while exiting 40 countries. Source: Vestas Wind Systems

After a long search for focus and direction, and five months since its new leader took charge, French multi-utility Engie SA presented a new corporate strategy. The result is a four-pronged group — slimmed down from 25 business units — focused on renewables, energy solutions, networks, and thermal and supply.

"I've now been at Engie for five months, but it feels like much [longer] because we have done so much," CEO Catherine MacGregor said May 18 on the company's first-quarter earnings call, where the new strategy was unveiled.

In renewables, Engie boosted its capacity targets to 50 GW by 2025 and 80 GW by 2030, from 31 GW installed today. Capital expenditure in the business unit will also grow to more than €2 billion per year until 2023 and more than €3 billion annually from 2024. "Those objectives are a step change," COO Paulo Almirante said.

The renewables division, headed up by Almirante, will be focused on onshore wind and solar growth in existing core markets, such as France, the U.S., Brazil and Chile. Offshore wind, in which Engie develops projects via a joint venture with EDP Renováveis SA, will retain a wider geographical scope.

Renewables installations will average 4 GW per year between 2022 and 2025, climbing to 6 GW each year until 2030. "We wanted to present real and achievable targets," Almirante said, rather than announcing higher goals than Engie's peers.

Net-zero by 2045

Engie also announced a net-zero target for all three scopes by 2045, encompassing not just its own emissions but also those created by its customers. This will involve exiting coal generation, introducing carbon budgets for each business unit, and an alignment of investments with corporate targets, as well as those set out in the EU's sustainable finance taxonomy.

With many companies globally also aiming for net-zero, MacGregor sees opportunities for Engie's energy solutions business unit to capitalize on these decarbonization ventures, which often relate to upgrading infrastructure and facilities.

"Energy solutions is a jewel we want to make shine over the next few years ... it's an amazing business model," said MacGregor. "In my mind it's about selectivity: picking the right projects because there are so many."

The company's green hydrogen activities will also be led by the energy solutions unit, and the new CEO voiced optimism for the emerging technology. "I'm fully aware that the promise of hydrogen has been on the radar for a very long time," MacGregor said, but against the backdrop of mounting political support, "the hydrogen ecosystem is being kickstarted."

Part of the hydrogen strategy will be continued investment in gas infrastructure, with the hope of contributing to a "hydrogen backbone" system which transports future green molecules to demand centers across Europe.

'Easier to understand'

Meanwhile, Engie's strategy of asset disposals in non-core markets and geographies is continuing. The company is targeting €9 billion to €10 billion in disposals and is exiting 40 countries.

It is also planning between €15 billion and €16 billion in growth capex by 2023. Spending by its thermal and supply unit will be curbed at below 10% of total capex, with up to 45% flowing into renewables.

As a result of the slimmed-down corporate setup, "Engie will be easier to understand and easier to value," argued CFO Judith Hartmann. Shareholders seemed upbeat, with the company's stock reaching a three-month high in morning trading.

"The strong commitment to reduce Engie's complexity, big step-up in renewable ambitions, new efficiency plan and net zero commitments should ... be positively received," Barclays analysts said in a May 18 note.