April 26, 2018 / 9:01 AM / a year ago

Engie CEO says no plans for German-style split of businesses

PARIS (Reuters) - Engie (ENGIE.PA) CEO Isabelle Kocher said the French utility has no plans for a German-style split of its activities and had considered buying independent power retailer Direct Energie DIREN.PA but decided against it.

Isabelle Kocher, Chief Executive Officer of Engie, attends a news conference in Paris, France January 15, 2018. REUTERS/Gonzalo Fuentes

German utilities E.ON (EONGn.DE) and RWE (RWEG.DE) last month carved up RWE unit Innogy (IGY.DE) between them to create two specialised utilities, with E.ON focussed on grids and retail and RWE on renewable power generation.

That move has given a boost to the stocks of the two German companies, as investors often prefer simpler business models.

Kocher said the move was a surprise for the utilities industry, which will be closely watching the German experiment.

She said the restructuring represented a bet that a utility can be a better power producer without a client portfolio, and a better grid operator without having privileged access to power generation assets.

“We have not made that bet, quite the opposite in fact. We are a group which presents itself to its clients as an architect that can do everything,” she said.


Asked about a possible spin-off of some Engie activities in order to boost the value of the Engie group’s shares, Kocher said this was not something the market was asking for.

“We do not feel market pressure for an operation of that kind,” she told reporters.

She said the pressure to sell off divisions is felt more by companies which are undervalued by the stock market, which was not the case for Engie.

“We are one of the best valued companies in the industry,” she said. “There was a time that we suffered a discount, but that is no longer the case,” she said.

Thomson Reuters data show that Engie has one of the lowest price-to-book ratios in the Stoxx European utilities index .SX6P, with its market capitalisation at about 0.94 percent of its asset value.

Following the German restructuring, RWE trades at about two times book and E.ON at more than four times book.

Kocher also said Engie had looked into buying independent Direct Energie, but had decided against it.

“We knew they were going to sell at some point ... but we did not need to buy an entry ticket into the French power market, we are already there,” she said.

French oil major Total (TOTF.PA) bought Direct Energie last week in a deal that will make it a major challenger to market leader EDF (EDF.PA).

Reporting by Geert De Clercq; Editing by Sudip Kar-Gupta

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