HIGHLIGHTS: Catherine MacGregor - CEO of Engie

0:01Hi, everybody. Tune in to this short version of the podcast, which we do every Friday. For the long version, tune in on Wednesdays. Hi, everyone. I'm Nikolaj Tangen, the CEO of the Norwegian Sovereign Wealth Fund. And today I'm in Paris and thrilled to be joined by Catherine McGregor, the CEO of Engie, one of Europe's energy giants. Now, Catherine's journey is incredible, working on oil rigs in Congo to running one of France's top companies. Catherine took over NGE just when COVID struck and they then faced Europe's biggest energy crisis in decades when Russia turned off the gas. So you have basically been through a lot of interesting things.

0:42So great to have you here, Catherine. Thank you very much, Nicolai. Great to be here. What is NGE? NGE is a very large energy player that is super committed to the energy transition. It has a very long history, about 150 years long, coming from Gaz de France, Suez, also a little bit of British stuff with international power and also some Belgian DNA in the company. But we are now really a very large utility. We are present across the whole value chain of energy. And if I'm to simplify energy, we are present in the production of electricity. We have customers at the end of the spectrum. We have resident customers.

1:35We have industrial. We have city. And in the middle, really important part is the infrastructure, which transport, store, distribute energy. So traditionally, we are the infrastructure operator of gas in France, but we are also present in power. So let's go back a few years. So you had just become the CEO of what is this incredible company. And then, bang, Russia cuts off the gas supply to Europe, or we cut them off.

2:11How did you experience that? Yeah, I have to say it was one year in the job. So a lot going on. Several aspects. Security of supply for Europe, for our country, and of course, as ANG for customers. That was a big stream. There was also financial exposure for the group, as obviously we had commitment with customers. We had long-term commitment backed up by long-term contracts. So when suddenly you have risk on the delivery on this long-term contract on the supply side, then you don't know if you're going to be able to honor your commitment to your customers, which translates into potentially financial exposure.

2:51So that was a big thing. And then there was another theme, if you like, which was all around affordability, managing the price escalation. You know, it was time 10 in some cases, even in certain sport markets, it was time 100 on the power side or the gas side. So how do we manage the affordability for our customers? And, of course, working with the government to try and make sure that the measures that they wanted to take, urgent measures, you know, were not going to have unintended consequences that would have more dramatic effect than actually trying to fix the problems they were trying. So a lot of dimensions.

3:29This was the perfect nightmare. It was the perfect nightmares. Now, you know, looking back, I think there was the sense of urgency. There was a sense of collaboration. There was the sense of trying and do the right thing. And all this, I think, eventually paid results. You know, Europe was, depending on Russian gas, by 40 % for zero. And indeed, we had to find new suppliers and make sure we had enough gas for the next winter. Let's talk about your unique approach to the energy transition. You talk about molecule and the electron. What does this mean in simple terms? It means that if you look at the way Europe wants to decarbonize and to get to carbon neutrality by 2050, electrification is a very important lever.

4:24Electrification means going from 16-18 % of electricity in the final energy mix to 50%. So that's what it means by electrification. So that's, for instance, electric cars and so on. Exactly. What that means though is that 50 % of the final energy mix by 2050 will not be electrified. And therefore, we need to find solution to decarbonize. And a big chunk of this 50 % is the molecules. Today, a lot of that is natural gas. It can be heat. But it is true that we have this view at Engie that you're not going to be able to do everything through electricity. It will be a very important lever to decarbonize.

5:07But we need to tackle the challenge of decarbonization of the molecule. And we use the S because we say natural gas, which is CH4, you know, will be part of the solution. So we need to find ways to replace natural gas with low carbon CH4. So one for one. But we also then need to work on hydrogen, its derivative, to make sure that we have the right green molecule for the right application. Tell me, what are green gases? What are green molecules? So green molecules, they are today biomethane, which is the same molecule as CH4, but produced from waste. And because it's existing waste, it doesn't add CO2, which is why we say the regulation recognize this gas as green.

5:56So the very nice thing is that once you produce it, it's exactly the same usage as today. So you can really replace it with that investment. Now, AI and the implications for energy supply and demand. How important is big tech when it comes to driving energy demand? So obviously, really important data center, you know, AI-focused data center, on average, consumes as much as about a small city of 100 ,000 people. So you have, obviously, load implication. What I would like to emphasize is that our tech customers have been fantastic in helping moving the needle really on decarbonation, on being quite strict that they want to have green power.

6:53They want to actually contribute to the development of additional green power capacity. so we develop a lot of projects with tech companies as counterparty we are also working with some of them on our projects which is famous 24 7 which means that they don't just want to have you know a renewable project and and offset you know average volumes of production versus an average consumption they are really trying to matching to match the consumption that they have on an hourly basis with actually hourly production, which is much, much more difficult to do. And so they've been moving the needle, frankly, and raising the bar in terms of their demand on decarbonation, which I commend.

7:47And I think, by the way, they should not give up. I think that's very important that AI consumption comes with additional productions, with green power, that's really important. Being mindful of the impact on, for example, their development and potential affordability of power in the region where they operate, which is why I think this dialogue is extremely important. You mentioned 100 new jobs. Now you actually employ nearly 100 ,000 people in 30 countries. What's the key to running a company like that?

8:32Everything is about people. It's making sure that you have the right teams, the right engagement. When you have 98 ,000 people, what's really important is to make sure that everybody knows the key priorities, the directions, so that all these efforts that teams and people are making individually translate into actually impact because everybody's pulling the same directions. At least that was my experience when I arrived four years ago, five years ago, is that there was a lot of efforts, but people pulling in all kinds of directions. And how do you make sure that they align? So it's clear priorities, doing not too many different things.

9:22And then you have to explain why that direction is the right one. What we have in a group like ENGIE is people are super engaged on topics like energy transition. And what was really important to us was to make sure that they understood that this purpose and what we're trying to do with energy transition was truly connected with value creation. And if you connect value creation, which means business models and results, results are really important. and you show that you are going to do the energy transition while creating value, and you're not going to do energy transition stuff if it doesn't create value, that is really important because then people start to believe.

10:13They start to believe in the sustainability of what you're doing. Because sustainability in people's minds sometimes is just environmental sustainability, but actually it comes also, and I would say before that, it comes with economic sustainability. Because, you know, the 10 billion euros all in maintenance and gross capex that we invest every year can only be invested over time if you actually generate cash flow. And so that was, for me, it was really very important at Engie that we went through this work internally to really demonstrate to our teams that we had a model that was very much, yes, we are going to do the energy transition.

10:56but we are going to do it in an economically viable manner so that it's going to withstand the test of time.