ENGIE SA (ENGIY) CEO Isabelle Kocher on Q4 2018 Results and Capital Markets Day - Conference Call Transcript

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ENGIE SA (OTCPK:ENGIY) Q4 2018 Results and Capital Markets Day Conference Call February 28, 2019 6:00 AM ET

Company Participants

Gary Leibowitz - Director, Investor Relations

Isabelle Kocher - Chief Executive Officer

Judith Hartmann - Chief Financial Officer

Shankar Krishnamoorthy - Executive Vice President, Business Development Oversight

Paulo Almirante - Group Chief Operating Officer and Executive Vice President

Gwenaelle Huet - Renewable Energies Business Unit, France

Franck Bruel - Executive Vice President

Christophe Cuvillier - CEO, Unibail-Rodamco-Westfield

Conference Call Participants

Ajay Patel - Goldman Sachs

Aymeric Parodi - UBS Investment Bank

Carolina Dores - Morgan Stanley

Emmanuel Turpin - Societe Generale

Meike Becker - Sanford C. Bernstein

Olly Jeffery - RBC Capital Markets

Oscar Najar - Grupo Santander

Peter Bisztyga - Bank of America Merrill Lynch

Sofia Savvantidou - Exane BNP Paribas

Vincent Gilles - Crédit Suisse

Vincent Ayral - JP Morgan

Gary Leibowitz

Good morning everyone and welcome to the Four Seasons here in London for ENGIE's Presentation of its 2018 Results. And then more importantly, and for most of the day, our Capital Markets Day, where we will describe to our next chapter of strategic development and financial outlook. And welcome to all of you who have just joined us on ENGIE.com, on our website, for this live webcast. I am conscious I haven't met most of you before. I'm Gary Leibowitz, Director of Investor Relations and Finance Director of ENGIE's Global Business Lines.

I would just say before we get going that today's presentation will include various forward-looking statements. And as usual, the company must disclaim any obligation to update those outside of our normal reporting routines.

Before I hand over to Isabelle, I’ll just describe the outline of the day. Judith will first kick off with the 2018 results. And then she will hand over to Isabelle Kocher, who will describe the next chapter of our strategic vision. Judith will then come back on to describe the capital allocation principles and our financial outlook. We will then have a break for lunch. You’ll all be invited to -- for those here in London to join us for lunch for a 45-minute break. So for all of you, who are listening live on the webcast, there will be a 45-minute break. And then fairly sharply, at the scheduled hour, we will return with four presentations from our colleagues describing in a little bit more depth our outlook on the industry and our specific operational plans for each of the businesses.

The last thing for me to just to say is I look forward to meeting all of you over the next couple of months in quite an active investor engagement program, joined ENGIE immediately from McKinsey, acting as a partner there for the last couple of years and for that had a long background in industry and private equity. I would only say as a newcomer to this and what you about to hear today is that, I think it is very dynamic and exciting what has been achieved and what will be achieved. Both management consultants and people from industry often overuse the word transformation, it's bandied about. But I think in this case, you really do have a company that has set itself up with a platform of really enormous growth on the basis of a really different profile from what it had in the past. And I think it's both inspiring and both -- and very accretive for our shareholder value outlook.

So that's all for me, and I will hand over to Isabelle for a brief welcome.

Isabelle Kocher

Thank you very much, Gary. And good morning, everybody. Very happy to welcome you in that important moment for us. Thank you for being here. Thank you also for joining the webcast for the ones who follow us live. That's very important moment. We are at a juncture in our strategy, three years faster ENGIE began very comprehensive transformation. And I believe you're right to spend time on us, time and view on us, through us time on the energy industry. And this is boiling industry, this is hot to pick for everybody. And we are convinced that ENGIE is the best positioned to seize value creation opportunity in this industry. And we would like to share with you this conviction.

I will leave most of my remarks for a few moments. I will come back on stage after Judith's presentation. I just would like to tell you one thing. This is a very important moment and our teams have been preparing it for months. With one ambition in mind, which is to provide something that is as ambitions as what we have been able to deliver over the last periods.

So we are really excited today with my Executive Committee colleagues, more generally with the ENGIE community, with the Board also, because I'm here also on their behalf. They will help to define this new strategy. We are very excited to set out this strategy for you today. You will see that is a strategy that is focused to deliver set of rules, higher value and better impact. But first of all, we need to take care of shorter term important topic and in that respect I will hand over to Judith Hartmann, our EVP and CFO, who will present to you the '18 results.

Over to you Judith.

Judith Hartmann

Thank you, Isabelle. And hello, everybody. It is great to see you all this morning. I will first talk about 2018 results and I am very pleased to be standing here confirming that we have reached our net income guidance for 2018. We've had solid organic growth also and very good cash flow, as well as we continue to have a strong financial structure.

When it comes to strategy execution in 2018, I want to mention a few points. We've really made this company more profitable over the last three years and that's a journey that continued in 2018 through targeted investments but also through the cost focus.

We have been able to see a strong growth in Client Solutions, including through some of the acquisitions that we've made, and despite the headwind we had in B2C in 2018. 2018 has really been a year of acceleration when it comes to Renewables. We have added 1.1 gigawatt of new capacity and we now have a pipeline with 3 gigawatts a year for the future.

We have increased our assets -- our regulated asset base by over 10% in 2018. As you know our storage business is now also regulated in France. And we have continued to reduce our coal exposure. We've announced of course the sales Glow and we have sold Loy Yang B and this has been a very important topic over the three years and again in 2018.

So now let's look at the numbers, EBITDA and COI at EUR 9.2 billion and EUR 5.1 billion, with an organic increase of 5% each; net recurring income at EUR 2.46 billion, net income at EUR 1 billion and CFFO at EUR 7.3 billion.

Let's first start now to understand this organic growth, let's start with the EBITDA. We had about EUR 400 million impact on foreign exchange and on disposals mostly actually it was a EUR 300 million on foreign exchange. This is primarily driven by the Brazilian real. About half of that the US dollar is of course also one of our big currencies and had an impact here.

And then once you've adjusted for that, you can see the organic growth. Nuclear, of course, we've talked about it all year or at least in the second half of the year, very strong negative impact with EUR 700 million, the volume down significantly. But we have been with the other businesses really able to offset this and have organic growth through strong results in price, volume and lean.

Price, it is mostly our gas midstream business, but also the storage business. On Renewables, it is better hydro conditions, but it is also the fact that we’ve put online a significant amount of gigawatt like I mentioned including the respected sell-downs. And then lean, that's across all the different business lines, the entire company, very good results with a EUR 300 million increase of our EBITDA.

When you look at it by a business lines, very quickly on the next page, a 9% increase on Client Solutions and low CO2 generation, a 4% increase on EBITDA and of course a decrease in the generation-merchant, 29% down.

Let's look at Client Solutions now on the next page. Very strong services performance that you can see, 9% increase total. And you can see on the left, services up 11%, supply up 35%, B2B supply that is and B2C roughly flat. As mentioned the targeted acquisitions already. There was also strong increase in backlog and demand. We can really see it translate our revenues on services are now close to EUR 19 billion, EUR 18.6 billion, so very significant part of the business now with an increase of 8.5% year-over-year.

EBIT margin continued to grow. This is something we're going to continue to work on where we had 30 basis points increase over the last year. And then the installation backlog close to EUR 7 billion, up 10%. B2C we have talked about it all last year, there was some margin pressure and we ended up being roughly flat, good results. So commercially, we've added about 900 million of retail contracts, mostly in France.

If you look on the next page on networks, an increase a 4%, I mentioned already the biggest drive is of course the regulation of the storage business. But also very importantly, the inauguration of the Val de Saône project, which is a very big pipeline to connect the North and the South of France and which was very important for us. We've now installed 2.5 million smart meters and gas. The target is 10 million, and so we’re now at 2.5 million.

And then internationally, we have signed a concession in Brazil on electricity transmission. And you can see on the results on the right hand side, strong organic growth with a 24% increase in international, mostly in Latin America.

Let’s talk about Renewables, I mentioned already this really was a year of acceleration, 9% increase that we saw in the EBITDA, organically it’s actually 15%. Some other things I want to mention is the offshore part in UK here, Moray East, so we got to the financial close. UK is of course the biggest offshore market in Europe.

We've acquired some developers in France and in US clearly to focus areas for us for Renewables. We've had also positive 33% increase of volume in hydro, in France. And I’ve already mentioned the capacity we've added.

On Thermal contracted, two new PPAs signed, very important, in Chile and in Peru. And we've added 1.3 gigawatts in 2018.

Now, when you look at our merchant on the next page, I've already mentioned the pressure there. No surprise for any of you. Obviously the unplanned nuclear outages and we'll get -- we'll talk a little bit more about this in the afternoon. 52% availability rate, this also had a negative impact on our achieved prices. We have to buy back some of the hitches. So that's an impact of EUR 2 per megawatt hour.

On the contrary, we had a positive portfolio effect on some of our generation business in France and in Belgium coming out of the pressure in the respective markets. And then very good results of our energy management business, mostly when it comes to our gas portfolio in Europe.

When you look now at EBITDA to net income, on this page, I would like to mention three things. One is on the tax side, we had positive DTAs. And not a surprise to you, we've mentioned this already in the first half results and we've mentioned it every time that we've been talking to the market, in Australia but also in some of our European countries. This is good news because it shows you that there is a positive cash flow that we're expecting over the next year.

I would also like to mention on this page some of the impairment line; about half of this was already in the first half results. This is mostly driven by our merchant assets. It's basically coal but also some of it is nuclear. And then I would also like to mention on this page a very positive capital gain that you actually see in the other line on our -- mostly on the LNG business. It's in other because of it's a discontinued operation.

Now, let's talk about our growth CapEx. This is obviously fundamental about our growth in the future. So we've invested EUR 4.8 billion of growth CapEx in 2018. In total, over the three years, it’s close to EUR 15 billion and we see it translate already in the 2018 results with about EUR 600 million for the three year period and it will be about EUR 1 billion as of 2019. So significant positive impact. And no surprise you can see the split here on the right, 50% going into low CO2 generation, about a third into Client Solutions and 17% into networks.

With the targeted investment and some of the cost focus, we've really made a point of increasing our profitability over the last three years. And you can see it here with a 90 basis points increase of the total -- of total ENGIE but then you can also see a side business line. I've made this point before. You can see the areas that we're investing in are the ones with higher ROCEs and you can see how each of the business lines have improved their returns over the last three years.

Of course, this was a big sea of transformation -- still on the last stage, thank you. Big transformation also meant that we had a scope impact that was significant, EUR 800 million, no surprise to you there, the nuclear impact I just mentioned. And then on the positive, the EUR 1 billion of CapEx contribution for -- the EUR 1 billion is actually a 2019 number, EUR 600 million like I mentioned in 2018, and very significant our costs efforts of EUR 1.3 billion. You will remember when we started this journey three years ago, we said a EUR 1 billion. So we've really exceeded our targets here and a big testament to the work of all the teams in the different areas.

The financial structure continues to be strong. We have reduced our debt yet again in 2018 by about a EUR 1 billion, EUR 1.4 billion. We've reduced out by almost EUR 7 billion in the last three years. And our cost of debt is now at about EUR 2.7. You can see at the bottom that we are in line with our targets on leverage, so below 2.5 on net debt financial. Net financial debt to EBITDA, 2.3; and 3.7 on economic debt; and of course our A ratings were confirmed at the beginning of last year.

Now, let's look at the 2019 guidance. We foresee a growth in our net recurring income to EUR 2.5 billion to EUR 2.7 billion. And to help you model that net income, there is an EBITDA indication of EUR 9.9 billion to EUR 10.3 billion. This is now including the impact of IFRS 16.

A dividend policy of 65% to 75% on our -- as a payout ratio of the net returning income and our -- we confirm our A category rating, as well as our targets to be at a net financial debt to EBITDA of 2.5. So that's our 2019 targets. I will come back later with more details on the mid-term guidance.

But before that, big pleasure to hand back to Isabelle, who is going to talk about our strategy for the next three years. Thank you.

Isabelle Kocher

Thank you. Thank you very much, Judith. So I believe the '19 guidance we just reviewed is a good introduction to the next session, we start now, which is about the future.

First one, conviction, is that the strong focus we have decided to have over the last periods and also there's significant investment we have made in our technology platforms, in our client-centric capabilities. They have provided us a much stronger foundation.

And I would like just to step back, you remember three years ago we decided to put another transition at the core of our strategy. We did that because we had been in situation that this transition -- energy transition would dramatically accelerate. And we wanted to put ENGIE on the safe side. More than that we wanted to make ENGIE preferred by clients, preferred by talents, progressively preferred by shareholders. Because energy transition corresponding to something that is extremely deep into the society.

We were basically aware that to do so we would have to enroll our people in kind of probably challenging transformation. But we were absolutely convinced that doing so we would be something that would be much more agile, flexible, more generally efficient.

To sum up so far and I would do that quickly but it's important to look at the foundation. We will build the following steps. First, we refocused our company on this three growing segment of the energy industry. The three key ingredients to meet planned requirements, that is to say, energy efficiency, first, of the future. Secondly, renewable. And third, the gas component. The gas component that will be -- by the way will take time but greener and greener. These three ingredients and the growth of ENGIE's activities are now focused on these three ingredients.

So we are very well-positioned to grow, first. And on that three ingredients we build really strong development platforms, just one example, renewable, I won't develop the rest. Renewable, we became probably one of the most efficient, more active also developer in this domain, with an ability to develop between 2 and 3 gigawatt per year. We were not there before and we are probably now top three or maybe two even, you will say better than I would do in Europe to develop efficiently Renewables.

Maybe less visible, we started to build a strong reputation in the innovation community. Innovation is really boiling in our industry. And we started to build some positions in emerging activities, very small at ENGIE scale but probably very important for the future. EV charging, we are number two with EV box.

Microgrids, hydrogen, PV rooftop, biogas. I'm not trying here to be exhausted, just to tell you we consider that to be very active in that domain, was absolutely key for the next steps. To do so in a world that is changing so fast, we decided to bet on decentralization, that’s really a conviction I have, that to be able to systematically sit with where is really needed by our clients you need to put your forces close to the clients, that’s the best way I know. And then we built a few years ago a decentralized organization.

Decentralized with strong guys on the field, that’s the basis. That’s purpose- driven, that is to say we have clear strategic policies that is true for everybody. If you don't do, so you cannot decentralize. So that's a decentralized organization, purpose-driven. We invested a lot in the training of our teams. We spend as you see here EUR 100 million per year in their training over the last three years.

We developed accountability of key elements, individual accountability qualities, accountability at team level. We changed the incentives schemes very concretely and we got a increase of participation and engagement. As evidenced, something we follow closely, by the yearly study we do generally and it’s through an improvement of our KPIs. As a result, we have been able to turn around our profit trajectory. And we constantly posted positive organic growth plus 2% in '15, and '16. That's organic growth of current operating income, plus 2% in '16, plus 5% in '17, plus 5% in '18 and that after use of negative organic evolution.

It’s probably fair to say so that we are now among the benchmark players for the energy transition. I know this is a benchmark, but for sure we are recognized by all our stakeholders as really committed in that domain.

Shareholders, they rank us as a leading player for ESG impact. We effectively more than halved our CO2 over the last years. Clients, they praise our offers as I mean evidenced by organic growth, at the end that’s the best measurement I know. And employees, they -- a big majority of them, they believe strongly in our strategy, in our products, in our services.

So we started our journey. We started our journey towards a faster growing ENGIE very concretely from minus 9% EBITDA organic growth '15 to plus 5% in '18. That is less risky as you take cleaner and more profitable, and return on capital employed increased from a 6.5% to 7.4%.

Regarding Client Solutions, we tell the truth honestly. We tell the truth. If I compare with very ambitious target we fixed at the beginning, we said remember plus 50% over three years. We landed at plus 36%, which is very rough but below. Two reasons beyond that probably. First, we are -- I am personally very conservative regarding [indiscernible] that's the real lesson I learnt from our past.

Second, and that's something that is important for the future, in these Client Solutions fields, there are a lot of opportunities, massive ones. But part of that is commoditized. And I believe that we are more equipped than before probably to exactly see where we can make a difference and create value.

So here we’ve drawn a few figures. I remember when we started, you asked us okay, you want to be clean and greener. Is it compatible with more profitable? Is it compatible with faster growing? The answer is yes and the evidence is there.

So we have the foundations, strong ones. Now what do we do with that? Are we happy just to have the first results? Of course, the answer is no. What matters now is with different ingredients and very good businesses, profitable ones, growing ones we have, how can we combine them to really build something that would be unique, unique value proposition to become really best-in-class. That's what is about regarding the period we have in front of us.

To define that, eight months ago we took a step back. We involved our teams, our clients massively, really massively which we guess what is probably one of the most ambitious consultation of the industry with thousands of interviews, workshops and very interesting one, in fact we leveraged our decentralized organization.

When I had in mind first identify anticipated trends, on the safe side always, never be in for massive solid assets, first. And second, identify the blue oceans, where can we really bring something that is high added value. So what we meant from that, a lot of things, a lot of insights that will be anyway really interesting for our teams.

Something is very structured, I’d like to insist on that because that’s the basis of our strategy for the future. And I could sum up that this way. You see the fact that after years where the energy transition has been pushed by thoughtful governance is the one where we started and that's the one what is really important, very powerful and that’s the one wave is pulled by industry and by local authorities. They are taking the leadership.

In other words the 3D, remember the 3D that the way we summarized the energy transition when we started a few years ago, we said this about decarbonization, digitalization and decentralization. Of course, probably more than ever, but the last the decentralization is really taking momentum. For a simple reason which is that this industry these local governments, local authorities they are under strong pressure, very strong pressure because they are expected to be able to have the resources to act.

So industries they started, they are relying to effectively start their journey, you’ve seen the boycott, you’ve seen the green manifesto of students that clearly say we don't want to work for companies that are not taking care of CO2, that’s very strong pressure and at the same time the appraisal is not easy because they have to go yes, but competition is fierce and that they have to do so a way that is effectively cost effective.

They started to act with very powerful way and just to share from concrete illustrations on a few examples we are involved in and then we know well. First, they gather together, here you have an example of few tier 1 Swiss companies that decided together to build a renewable facility that would deliver for all of them power and heat, ENGIE invested in that.

The partner, this is an example in the Philippines where we partnered with real estate company, a big one, that decided to integrate platforms in each and every project the CO2 dimension. So we systematically developed for them, rooftop solar, cooling network, energy efficiency pull-on.

Third, the profitability, very important. Green certificate is no longer sufficient. They want to be able to say my energy is coming from that front. And they really triggered something impressive. And we started building for them dedicated plants, big ones, 700 megawatts, and we have a big pipe of that.

Local authorities are saying, pressure I don't need to develop a lot. I believe yellow jacket in the one hand saying not possible to increase energy price or leaving price more generally. And at the same time it was fully surprising that’s truly strong -- that's pushing strong for energy transition. And they started also and they developed systemic approaches which is an important element. An example on gas, north of France that decided to go to 30% biogas systemically looking together as biogas production with farmers, network evolution to distribute that -- that’s it -- to receive way to fuel them and local usages for this green gas, systemic approach. Systemic approach also for [indiscernible] this is an interesting I believe example.

In the US, this is for university, there is a city and with 100,000 people living in this campus. And we started with a very systemic approach for the next 50 years and we invest in this campus $1.2 billion to systematically upgrade everything to go to the zero carbon.

Next please. Another example very different context, of good villages. While they are same in principle, the same principle and then here we will deliver microgrids as we do here in Tanzania to provoke diesel emission green energy and we finance ourselves and we are paid for by mostly you see this is as a service system.

So a lot of different situations, a lot of lot of different contexts, but there are common points. Basically they all tell us the same, we need to go zero carbon, but we need to do that a way that is financed. We cannot dedicate our investment to that because this is not our core business so please finance that for us and build that as a service. Either to be cost effective the price of this service has to be equal to or lower than what they pay today. And it has to also by the way strengthen their core mission.

Our conviction and this is at the core of our strategy for the future is that integrated solutions that would a lot reconcile the different elements in as a service mode has considerable potential, really considerable potential, because this topic is core to our clients but is not core to their capabilities. So here there is a huge market.

Huge marketing volumes and high margins. Why? Because this is sophisticated. This is integrated approach. Let me go back to the US case, the one I mentioned for this university. It started with a very high level conversation with the leading team of the university, you cannot trigger such an approach for 50 years for partner that really become your strategic partner if you starts with energy partner. Then of course it is a strategic decision we see it, first.

Second, to screen the usages, to provoke massive energy savings, massive CO2 savings. And in this case, we are engaged to the deliver minus 25% of energy consumption over the first decade, the first 10 years. It's about behavior. It's about replacement of equipments. So what is critical here? I told you that we invest a lot, 1.2 billion, it is because that you replace and sometimes we early replace some equipment to replace them by smarter ones, sober ones.

For example cooling systems, modern ones, lightning systems, transportation based on EV, et cetera.

Four, you need to fill the role with green energy. Green energy you can be produced on site here rooftop solar may be biomethane of off-site, a part of the energy of this university comes from the big wind farms.

Big Data, Big Data you see because of that's the only way to continuous improvement. So we installed everywhere IoT and Big Data management. Of course, operations, long-term operations. And finally, financing. In this case we financed these are big investments, we are financing them, small GV with accounts.

Not to have that on our balance sheet. So we are part of the GV, we own part of the asset but the idea is also to leverage funds coming from others. So this is an integrated solution. Our ambition is to become the world leader in these integrated solution. The world leader in these zero carbon transition as a service, we could call it this way.

We are the best position to do that. We are probably uniquely positioned to do that, because to do so you need some very important key regions. And we have them. You need presence onsite, you need people onsite very simply to be in contact with the site and the equipment. You need people to just operate onsite, you need people onsite. We have 100,000 people in what we were used to call services, 100,000 people were able to be day-to-day work, ay-to-day onsite. This is what we could call our Client Solutions DNA. You need that, but you also need something that is more an infrastructure DNA. To engage for $1.2 billion program of investment, you got to be absolutely something massive. You need the infrastructure DNA and we have that, of course, that we did over the last decade from the very beginning to build networks, to build the brands, to build levels.

So intent is to combine that in these integrated solutions. And to specialize all our activities to make them contributing to that. Client Solutions and infrastructure activities. A key element of plan for the future is specialization. We specialize for turnaround for certain specialization. We specialize in high-added value services. And they are tailor-made by definition, they are high-tech and they are financed, most of them. And this is the way we will provoke the evolution of all our different businesses.

I will quickly cover our different solutions, I will do that quickly because then Judith will give lot more figures and during the afternoon my colleagues here will enter into a much higher level of detail.

But basically Client Solutions, more high-tech, less commoditized services and more asset under this as we call them now, more assets under its solutions. Our target is that mid-term 50% of our COI in Client Solutions will rely on asset-based solutions.

Renewables, more high-tech sophisticated solutions offshore hedged to biogas not commoditized and especially more renewables built for clients. Our target is that 50% for renewable capacities will be build in the future for companies, because -- and we'll go back to that much more detail. Because they ask sophistication, they ask really specific profiles, profile for renewable that’s exactly sitting with their consumption profile. And not just basic for that profile native one. So renewable, we will also increasing added value.

Networks, very attractive returns and cash generation. We intend to as an example I just mentioned in a few minutes ago to enroll them in territorial approaches. We will give the priority to the conversion to green gas because this is something that is starting in Europe. As in Europe started 15 years ago, the renewable power move now this turn of gas. And we will give priority to that. And we will also select a few number of development in size going in fast growing countries,. You probably know that we know that we have potentially a project in Brazil. And this afternoon quick go back to that also.

And finally, generation and supply, I mean, that's the part of our reach that is still exposed to market. So we will give you a lot of detail on that, main points back to operations for nuclear, further reduction in turnover capacity because it is the end of the route to zero well and B2C. We have a strategy, which is to keep and work on our current footprint in the countries where we already have supply for B2C, but not to try to develop that elsewhere.

Regarding dynamics, dynamics were really generation and supply networks, more stability, good cash flow generation, very strong basis. Renewable, strong growth; Client Solutions, strong growth.

So we've something in our hand that is really special, we are in front of huge market, huge markets, the new one. This is new sector we can maybe face so, we have everything to be able to fuel that. If there is something that keeps me awake at night is, how can we can be sure to scale up at the right pace, how to be sure to be able to seize this huge amount of opportunities? And I’d like to now say a few words, start, three ingredients, three boosters we will really insist on, we will really work on. I will go back to focus then after.

First, strategic design. I told you it starts with a high level approach. We started and we got some I mean really good first results as evidenced by the few ones I just gave and we have a lot of others. But we need to accelerate, so we have decided to boost that very significantly and we are currently setting up a dedicated force that would be extremely strong, we do that in partnership with Accenture to be under ENGIE domain but supported by them with our methodology, they are top class regarding high level client management strategic way and they will bring their support with their metallurgy and their profile, they will surely about 15% of stuff in that dedicated efforts, first element.

Second, digital. I told you digital is very important, big data more generally. We really started our journey, we really have something in that domain that is probably the most important, the most impressive software library in the energy sector, it's just the beginning. This is a key way to make a difference to have offers that are really different and unique and more efficient in these new fields and this software approach boosted massively. We’re continuing to invest and accelerate that and we will also build partnerships on that domain. We started over the last period to develop -- during the Q&A -- we will bring additional partnerships, we recently signed one with GitHub, subsidiary of Microsoft to store and manage this software library very efficient way and make it able to tap into the huge amount of data we gather from our global footprint, digital acceleration, key.

And the third one is very important, is financing syndication. I mentioned the huge amount of investment we are expected to do in these new integrated solutions. We don't intend to have that on our balance sheet. We would like to do that and we will do that with CapEx light way.

Regarding financing, ENGIE has already strong capabilities for the one in this room for us for a long time you know that well. Thermal and power generation we developed 30 gigawatt in the Middle East for example, it accounts for $30 billion investments more or less. Of course we didn't finance that ourselves, only for few parts. We have on average 35% of the equity and we leverage that with that.

Really where we started, it was case-by-case approach, it was big plans. It’s flow of medium sized projects, more or less similar. And we went to second step which is to build platforms -- financing platforms. So the model -- the service model and the key of that is DBpSO. Development, we develop. We win the project. We get the licenses. We build the project, and then we partially sell it. We keep 20% of the equity and we sell 80% of the equity on average. And we keep the operation, that’s very powerful system because it allows us to multiply, we can deliver and develop much more projects because it is CapEx light.

It increases our returns, because we get our development fees and on the broader portfolio of renewable we develop and we are more competitive. That's something we really started last year in France and we built same system in other countries. What we have is to extend that more generally to the Client Solutions -- integrated Client Solutions I just mentioned before. And we are working on the new partnership it will be announcing over the next months, to do that at a very large scale.

Footprint, I told you we specialize. We specialize in high-added value offers. We focus on less geographies. We decide to focus our resources on 20 countries, 30 metropolis or urban areas and 500 Global companies. To be sure to scale up penetration at the right scale. 20 countries we know that were on average. We are involved in them for very long time, we are in that zone knowledge and strong teams in the field. The goal here is to get density and is to implement the model I just described mixing our DNA in integrated solutions.

The urban areas, why do we do that? For the moment ENGIE is a group that has footprint in Southeast Asia and in Africa which is too small. We have decided to go there, targeting metropolis, very dense, very dense areas. And to develop at their scale what I just described for the 20 countries.

It will be progressive but it is a guarantee that ENGIE has a long-term fast growing pace in the future. And we started with six or seven of them. And finally, 500 companies, these companies they are the most exposed to the CO2 dilemma if I can sum-up, because we position, because pressure. And then really started their journey and we will implement a global approach, they have a global strategy, they need a global approach.

And the dedicated C-suite for us I just mentioned before we've been in particular very useful to target the 500 previous companies. So we specialize, we focus, we simplify. We simplify our organization and our reporting.

Our organization, well I told you it's strong conviction for me that we have to continue to bet on local, that’s secret success over the last period and we continue. And we will set in place target-full business lines, doted lines on Client Solutions, Networks, Renewables and Thermal. There will be to accelerate performance program but also the progresses and rapid upgrade of our solutions. Integrate more and more digital rapid pace.

So here is a, reporting organization. Regarding reporting I won't develop because you will go back to that afterwards. But some of you, you told us well ENGIE that’s complex. That is complex. Now ready to I mean integrate in our models. You have reporting that is hybrid, relying on geographies for some topics on businesses for others. So we got the message, we hope it will be easier and we have decided to public -- to publish something that is a metrics, giving both the business line dimension and the geographical dimension. And I hope it will be easier, tell us. I'm sure you will do any way.

So here is the sum up of strategy for the future. Very few number of elements because I could spend hours on that. Talents, talents and people. They are by definition at the core of our strategy.

Regarding strategy that is focused on Client Solution by definition it is about people? So we will continue to investment in our talent to train more and more continue to accelerate. And we also have decided to really push continue to push, because we started our journey but it’s too slow, diversity. And we in particular decided to put challenging objective in front us, which is 50% of senior managers by 2030, ambitious in our businesses. But key also for our ability to understand what happens and to fit with the reality and the society.

A few number of figures and it would be a good transition for Judith presentation, because right now we’ll set the stage, but with the figures in front of my different segments. But in a nutshell, it is a strategy that will lead us to faster group, and we announced between 7% and 9% net recurring income group share CAGR between ‘18 and ‘21, faster groups.

Higher value, I told you we already started our journey on this topic also moving from 6.5% to 7.4% on our positive capital employed. We intend to go upper single-digit by 2021. I'm sure, you'll have questions regarding the formula. So higher value, faster growth, higher value and better impact, better impact of course by construction, decrease strong impact on CO2 reduction -- CO2 emissions reductions. Strong impact on energy access that's the core for our conference today, that's something we would go back over the next periods. We are very strong ambitious because there is a strong need here and also a big market. And more generally since we are fueling the strategy for our clients we will deliver as we are used to say now at ENGIE and how we will progress.

Well, thank you very much. And now I'll hand over to Judith Hartmann to give more positive developments. Thank you.

Judith Hartmann

Faster growth, higher value and better impact and you're going to hear that as a recurring theme over the entire day. Thank you, Isabelle. I will now talk about two topics. One is capital allocation and the other one is the mid-term guidance.

We are indeed a very happy with what we've been able to achieve over the last three years. We've made this a more profitable company and a growing company and we have become a leader in the energy transition.

With the three pillars, energy efficiency, renewables and gas, energy efficiency, of course, is a part of the solution. It's all about making -- having a lower impact on the environment, reducing our costs for the customer. And we already have two-thirds of our employees in this field. Gas is part of the energy solution. It will be there for decades to come. It's easy to transfer. It's easy to serve. It's a perfect complement to renewables and we are working on making it greener. And then of course, renewables with decades, literally, of growth ahead of us and significant investments that you will see going into this.

So then, of course, the question is, how do you accelerate the growth? And really, we think about targeted investments about also asset rotation to speed up the transition. And then more broadly, of course, the capital -- optimized capital allocation. So I will now spend some time on this optimized capital allocation structure the way we think about it.

And you can see it on the next page, of course, the first topic is in alignment with the strategy. What we are looking at really is we’re looking for investments on sophisticated solutions because we believe there is higher value. We are looking at targeting specific geographies, and we're also looking at differently depending on the time horizon and I will now go into each of these.

So on the next page, you can see our highly selective investment criteria, and the way we are thinking about this and really we're looking at finding attractive project where we feel that we can create value, so complex and innovative offers. Typically you get a buyer a better value for the customer but also when it translates into our financials. Integrated offers spanning the full value chain for the customer, same thing that's what they're looking for and where you can create value. Medium to long-term contracts, you've heard me say this before. This is also helping in creating visibility and also recurrence predictability of our financials. More focus on customer based outcome with performance based remuneration, typically you create more value that way and then last but certainly not least, our optimized financing syndication. Isabelle touched a little bit on this and some of my colleagues are going to mention it this afternoon.

We've always done financing obviously on a project basis. Typically, you've heard us say this on thermal. We've really rolled this out now to Client Solutions, the Ohio State example that was given and of course Renewables and 2018 was also a year where we've taken this to the next lvel by creating platforms in different countries, France is an example, Mexico of really saying, as opposed to having project by project, having an entire platform with one co-investor and be able to be efficient. And for sure, we're already thinking of what the next step could be here. That creates value, it’s important for our financials and it's important, like I said, also for the customer.

Now, I'd like to focus on geographies. So we really have a conviction that we have simplified this company over the last three years, when it comes to businesses. The obvious example we have exited exploration and production. So here is now really about simplifying when it comes to countries. We have a firm belief that by focusing on 20 countries and 30 urban areas is how we're going to be able to have scale, how we're going to be relevant in each of these markets. And we're also going to exit 20 countries where we feel -- either for political risk reasons or whatever other reasons, we feel that we couldn't achieve the target.

I will explain to you and how we think about this and talk about the three archetypes of country groups that we’re thinking about. Archetype 1, these are countries that have -- that are developed, they don't have as much growth, their energy consumption might be flat, sometimes even down but there is a strong sense of environmental thinking now. So what are the customers looking for? They're looking for renewables, they're looking towards sustainability including in cities and they're looking for infrastructure renewal.

Typically you will find this kind of concept in Western Europe, North America is an example and in Asia I would mention Australia and Singapore.

The second type of countries are countries with more growth. Typically they already have either good energy infrastructure but a very large increase of need still for energy. Typically, Brazil is an example. Heterogeneous ecological awareness in these different countries. And so what are our customers looking for? Continued growth in large infrastructures literally I believe for decades to come such big need that really you need to meet them with very large infrastructures. Renewable, yes, that's for quite frankly the entire planet, sustainability important and modernization of city infrastructures.

In Europe, Romania will be a good example I mentioned Brazil for Latin America. And then, of course, some of our other Latin American countries there. The Gulf region is going to continue to be a very important part of this story as it has been for us in the past. Third type, these are areas with a lot of growth, often not much infrastructure, there’s still topics on access to energy, that is a rapid urban development. And so obviously the need go in line with that.

Renewable energies, of course, again, sometimes indeed countries, like in African countries, off grid, so a higher importance of microgrids or solar home systems. And sustainable cities, of course, with the entire growth on cities. Africa, I mentioned China, India, some of the reasons are great examples and some countries in Southeast Asia.

The third topic when we think about capital allocation is the time horizons. So we have the businesses that are there and that are contributing. And then we think about it differently in terms of how much capital do we want to allocate to the different time horizons? A large part of our investments are of course, going into therelative short term, the first three years where we're investing now. And you will see it in our returns as well as of -- in the next two years.

The second level will be a topic that we invest in, but you will only see the net income coming through after the three years. Offshore wind is a typical example, that's a very important growth area but a lot of the returns will come after the three years. And then third but certainly not least it's about paving the way for the future. It's obviously smaller amounts but very important also. Technologies that if we don't sort them now, we will never see them. So very important theme based in them all. Example would be lean and gas, but also floating offshore. And you will hear about some examples in each of these areas for the afternoon.

So the common themes about everything that I've said on capital allocation, it's really we're going after attractive and it's on the next page. We're going after attractive projects. You’ve heard me say this before we're looking typically for our plus a minimum 200 basis points or cost of equity plus 400. We're looking at resilience in the business case, we're looking at the risk and reward in what are the commodity -- what’s the commodities closer. And then really looking at entire value chains in our segments and checking where do we want to place our base and how do we think we can create value?

So now I want to mention a few words about reporting. So we heard you loud and clear, you want us to have some more clarity on how we on how we present our numbers. And I want to -- before I go now into the numbers, I want to spend a few minutes here so you can translate and see where the different businesses are sitting.

The geography will still remain a very important way of how we run the business. It's the conviction that Isabelle mentioned, quite frankly. It's getting close to the customer, close to the stakeholders. So that's still a very important element. And we have simplified, it's very intuitive on how we're going to report it. And then on the business lines, we have really now picked lines that are against intuitive toward us in terms of what are the different businesses. They -- we've picked them in terms of what are the KPIs behind them that you can actually model our business and we've also been granular enough, so we get -- because some of them have different dynamics behind them.

By the way we've tested this with some of you and got good feedback. So I hope the rest of you are also going to be happy with this.

So let's look at a few pages just for you to translate between the old reporting into the new one. Client Solutions, the services piece will go into asset-light and asset-based services. We have decided to have a separate column on supply because the dynamics are quite specific behind it. So it's basically B2C and B2B gas and electricity sales.

On the next page you can see our low CO2 power generation. We will give you a view on each of the three different generation businesses, again obviously very different dynamics behind it, so for you it's important to see those. And then on networks, networks infrastructure remains networks. I put the arrow on the upstream but potentially that's a largely gone, there was some very small numbers so that are going to disappear here over the next three years. So here it is our new reporting.

I wanted to mention now some assumptions that have gone into our model before I give the indication and the guidance for the next three years. This is important. I will have a page on external assumptions and one on our operational assumptions. Here are the external assumptions. Macro assumptions, exogenous, obviously foreign exchange Brazilian real and the US dollar are the currencies that impact us the most and you can see what we've assumed as exchange rates.

The European outright prices are still going to be an important factor for our financials. We have a conviction that the prices are going up and we've also added our hedging ratios close to 80% for 2019 and about a third for 2021.

We have assumed normalized weather conditions in France. We've assumed normalized hydro conditions in France and also improving hydrology in Brazil. And then when it comes to the operational or more internal assumptions, here are the four topics I would like to talk about. On networks, we have assumed that there will be a regulatory return review in the French infrastructure businesses in 2020 and 2021.

Then nuclear availability that you see on the page is the one that you see in a REMIT. And we've put some contingencies on our Belgium operations into our model. On consumer we continue to assume like in the past that there will be a full pass through of supply cost in the regulator, gas and power tariffs and we've added the tax rate for you 30% in 2019 reducing by 200 basis points over the next three years.

Okay, so now that you have all of this in mind, now let's look at the three-year indication, our expectations as well as our guidance.

I will start again with CapEx, because again, of course, this is important to drive our growth. Our cash flow range of EUR 6.5 billion to EUR 8.5 billion per year in addition to some of the additional disposals that we're doing, will translate into our capacity to invest about EUR 20 billion over the next three years, 60% of that goes into growth. The asset rotation is most of you already actually know about, half of this is Glow and some of our coal exits in Brazil and in Europe.

And on our growth CapEx, you can see how we have divided it into the different business. So no surprise, big focus here on Client Solutions, EUR 4 billion to EUR 5 billion; network, about EUR 3 billion, EUR 3 billion to EUR 3.3 billion; Renewables EUR 2.3 billion to EUR 2.8 billion. This is already assuming that we're doing some partial sell downs and reinvesting. And then on thermal and supply about EUR 1 billion, a EUR 1.2 billion over the next three for a total like I said of growth CapEx of EUR 11 billion to EUR 12 billion.

We are going to continue to complement this and as you can see it on the next page with a performance plan. Big focus, we've really shifted this company to a much higher performance culture EUR 1.3 billion over the last three years. We've taken it to the next level. We are going to work on EUR 800 million for the next three years.

The levers, some of the levers remain the same around costs. It's obviously procurement, leveraging the size of the company, pools buying, the negotiations that we're doing in-sourcing with some of the fields, digitalization needs to be a big part of what we're doing and already we're rolling out in each of the business lines standardized digital platforms. That's going to help us run the businesses was more efficiently and that's going to help us both the way on cost but also on the revenue side.

And then the shared services needs to be a part of what we're continuing to do lots of efforts, has going on over the three years and some this will really translate now financially in the next three years.

On the revenue enhancement, I mentioned already some of the industrial assets performance improvements and then also we're working on more detailed pricing structure, when it comes to our services businesses.

So this will be an important part like it was in the past.

So now let's look at the indication of how this translates on a EBITDA, COI and on our ROCEp sets. On EBITDA, we will have an increase of 3.5% to 6%, COI of 6.5% to 8% and our ROCE is going to continue to increase will be at upper single-digit at the end of the three-year period.

To be more precise now on business line, I will give you an indication how it's going to translate for each of the businesses on COI. So Client Solution starting from a base of EUR 1 billion will have strong growth rate here of 11% to 14%. And it's really driven by the sophisticated solutions that we're working on and have been working on in the past.

Networks will flat to slightly down. And I mentioned already that there will be some slight impact from the regulatory return review, partially offset with the growth opportunities internationally.

Renewables starting from EUR 1.1 billion with a strong growth rate of 8% to 11%. This is translating what I said earlier, 3 gigawatts of pipeline a year now. And it's really translating into our numbers with 9 gigawatts of capacity added by 2021.

Thermal, EUR 1.1 billion with a slight reduction here. This is the -- and these numbers are excluding on the growth rates the Glow disposal already as you know that is on its way and is happening pretty much as we speak so -- and this is all about continuing to optimize our portfolio and exiting a number of our assets over time.

Nuclear will stabilize and will be in COI neutrality in the later years of the plan and then supply will be roughly flat over the next three years.

Let's look at the balance sheet on the next page. Our -- we have a very strong financial structure like I mentioned and this is going to continue. Financial debt will be slightly down to about EUR 20 billion and our economics debt will be slightly up to EUR 35 billion to EUR 37 billion. We're going to continue to expect our 2.5 and 4 times turns on financial debt and economics debt and we're retaining our term commitment too as A rating.

With all of this in mind now, the only thing you need to calculate, the net income is of course, the interest expense that you have here on the right, we're protecting about EUR 1.3 billion to EUR 1.5 billion a year.

And then on the next page, it translates now into our earnings guidance. So our net recurring income will be up on a CAGR basis, 7% to 9%, that's very meaningful growth over the next three years that we're seeing here, and dividend policy of a payout ratio to 65% to 75%.

So to sum it up, we really believe that this disciplined capital allocation will continue to create value and deliver attractive returns. The geography will have us focused and really have the right level of scale in each of the countries. We will have a CAGR growth of 7% to 9% very importantly, and the dividend policy is attractive and with a 65% to 75% payout.

Thank you very much. We're now going to go into lunch. We’ll come back in the afternoon with some more details by the respective businesses. And then we'll have the Q&A in the afternoon. Thank you.

Gary Leibowitz

Thanks, Judith; and thanks to Isabelle. As Judith mentioned, we will break now for lunch. We're running a little bit behind schedule. So we'll give you 45 minutes and then time to get back and we will resume here and resume our webcast sharply at 1:15 UK time. Thank you.

Okay. Welcome back to everyone here in the Four Seasons and welcome back to our ENGIE webcast, which has just resumed. We hope you had a good lunch here, and we look forward now to building upon everything you heard from Isabelle and from Judith this afternoon. We're going to have quite a bit of elaboration on our operational paths. And I think you'll see that we'll have equal emphasis on our -- the stability and strength of our infrastructure as well as our customer centricity and how that will drive growth. I think you'll hear those in equal measure.

Before we get into these deep dives on our operational priorities, we thought it would be right to build on what Isabelle said around the industry environment, just how dynamic that is and the types of opportunities that we see within that industry landscape and a little bit more on what we find attractive versus perhaps a little bit less attractive from a business model perspective there. So to provide that for you, I'd like to welcome to the stage, Shankar Krishnamoorthy, and he's going to take it from here.

Shankar Krishnamoorthy

So thank you, Gary, for substantially getting the last name right. I will still pronounce it. It's Shankar Krishnamoorthy. So good afternoon, ladies and gentlemen. I've been with the industry for 35 years. And I've never seen it as a fascinating as it has been in the past 5 years to a decade. And I'm going to talk about its evolution over the next 20 minutes or so.

Let me start with something, which is very obvious, which everybody agrees with, which is that the arrival of renewables has made the business of producing electricity much simpler. It has lowered the entry barriers into the sector, no doubt, and then a lot of players have come in on top of the incumbent utilities who ran this business for essentially. But it's happening at a time when the demand for electricity is growing rapidly. It is growing in an environment when people are more energy efficient, they're conscious of their carbon footprint, et cetera. And it's happening not just because of the usual India, China developing market dynamics, it is happening also on account of the fact that we've got newer things like electric vehicles, connected objects, data centers, et cetera, which are making a big impact on the sector. I don't know how many of you would believe it, but if I were to say that, 30 years down the road, the forecast for Germany is that a quarter of its electricity demand will be for electric vehicles. Looks stunning, but that's what for the forecast is.

So you got a growth that is growing significant, 25,000 terawatt hours that the world consumes today becomes 40,000 in, say, next 20 years. Now this demand for electricity is being met with the constructions of what is easily, mostly renewable asset base. So if you look at the next 20 years, you'll find that the solar capacity will go up 10 times in the world and you go out and say wind going up 5.5 times. So these are big numbers, considering the fact that the starting base is also big. It's not nothing, it's a terawatt roughly per day and it goes up significantly over the next 20 years. Which then introduces a particular specificity, which is that the renewable plants run less than coal and gas, the capacity factors are lower. So to meet the same energy requirement out of the plant, you need to build more capacity. So if you look at, therefore, the picture on the capacity, it's actually going up much more than the energy demand and that's for very obvious reasons.

To build this capacity, the sector in the past few years has attracted a lot of money. So let's say, $1 trillion that went into it in the last 4 years. And if you look at the projections for the next, say, 3 decades, people are talking in terms of EUR10 trillion. So it's not EUR1 billion type of business. Really, the sector is huge, It's getting a lot of investments into it. But if you then compare that, let's call it, the ocean type of size with the size of the players in it, there is a big disconnect.

In that, the biggest of players can do EUR1 billion and EUR2 billion, ENGIE's in the room, they also do something like that. And there are not that many big players. So actually the sector can accommodate, it does need more players. And then the question arises as to whether inside this ocean like low-entry barriers sector, is there something which is changing? And whether there is, say, something that is emerging, some sort of an island, if I may, in the context of an ocean? I would say yes. There are islands emerging, which have higher entry barriers, much higher than the rest of the sector.

And to give you how it is developing. If you look at the industry the way it's going, they are happy with the carbon, say, they're happy with certificates. But they also, as Isabelle was saying, they also wanted to look at a situation where they'll, they want to say that, that's the plant from where my electricity come. It's a bit of a physical attachment to a physical asset, and which is then throwing up different kinds of possibilities to do business.

So there have to be players in the world who understand the business of setting up these plants anywhere on the grid, okay, doing the origination for that, during permitting, whatever, finding the best place to connect them to the hook, connect them to the grid and then wield the electricity across the grid to these customers under contracts that get more and more complicated, complex. So that's the island I'm talking about, and this island is becoming much bigger, and [indiscernible] is actually going to speak about that when she talks about Renewables in a few minutes from now.

So what do you have today? Yes, a lot of capacity being added, certainly great for the planet because it is substantially green, it's good for business. But then the value or more value lies in those higher entry barrier islanded businesses inside this ocean of energy sector that we have today.

Compared to, for example, the more what I always keep calling, the more cookie-cutter type of deals that get offered by the state. They give you the land, they do the permitting, connected to their gird, give you a 25-year PPA, gold plated with a state guarantee and then say, give me a price.

Obviously, that lacks creativity compared to the higher entry barrier 1. And therefore, it sets the record for a very low prices for solar, wind, et cetera.

So my first message is, so the sector is about low entry barriers. We all understand that, no doubt about it, but it's phenomenal growth. It's a huge growth, 100% as I said, doubling of capacity in the next 20 years. And complex segments emerging that need a bit more than just being price-competitive, that is not for everybody.

I, that was, let's say, a part on the upstream business of electricity production. I want to now look a little bit at the client side. And I look at it from the perspective of say, energy efficiency, which is a big subject and of which we talk about a lot. Isabelle referred to that in a speech as did Judith and as Jean-Francois, okay. It's important to us, and so, therefore, I use that as a way to look at the client side.

So for me, this energy efficiency or as a consequence, the lower carbon footprint, that has 3 pillars. One is what I call as the dollar pillar. So if you save some energy, obviously, you save money, very simple to understand. The second is the environmental responsibility pillar, if I may call it so. So it's not any longer, it's just nice to have, being environmentally responsible. I was, in fact, looking at the slide that Isabelle, you were showing, where there are 30,000 school, college students who were saying that we don't want to work for somebody who's not doing sustainable businesses.

So for businesses to succeed in the future, they will have to be environmentally responsible, so that gives way to energy efficiency being a subject, a big subject. And the third one is obviously the technology that's enabling all this. And to look at what's technology is providing. Everything that existed previously is way more efficient than it was. I would not read through this, all this slide, but essential to say that the light, the LEDs are 5x as efficient as incandescent bulbs from the past. You've got volumes at home more efficient. More complex district feed-in systems are 50% more efficient than they were a couple of generations back, et cetera, et cetera.

So what is happening is, technology is enabling the society to become more efficient, no doubt about that. And then it is giving businesses certain choices, okay? One simple choice is for the business to say they developed great, I'm going to replace my less-efficient equipment. But what's happening, the pace at which the technologies are making it easier for people to change is that it's making economic sense even in circumstances where there is substantial residual life left in these businesses, in these assets.

So people are replacing faster, that's an evolution. But then there is another evolution, which has to do with the fact that when you are running a business and you got this non-core stuff around energy, okay? And an opportunity comes for you to say that, well, there is an opportunity to replace this with something more efficient, because I'm going to have a lower carbon footprint, it becomes that much better. And if you were to say, well, if it's done by somebody else with his capital, who is an expert and who is telling me the story about energy efficiency, it's much better.

So that's an evolution that I look at, which is that this is emerging into something of a kind when an increasing number of clients are going to say that, take my stuff away from me, okay, take it with you, pay me a price and invest capital into it and guarantee me what you were promising me in those conversations that you were having with my boss. So it's emerging into, as a service model, in the sense that take the assets away and keep giving me what I was doing myself. Give me electricity, chilled water, heat, whatever. That's an evolution.

And in that space, then this evolution is occurring, I think, it's very important, essential that people who are proposing these businesses to clients are also squeaky clean. It's much easier if you enter another CEO's office and C-suite and tell him that look, my values on carbon footprint are aligned with you. So if you are a company who's recognized as a leader in energy transition, if you are somebody who's gotten as great and then who done stuff to be environmentally responsible, it's easier for you to do that business.

So my couple of takeaways on this part are, firstly, and in fact, what I'm going to do is, I will not quite cover this slide, only for the reason that my friend, Franck, is actually describing it in some detail. Franck, right? So he'll talk about that, so I'll not bore you with my speech on it. Franck's a much smarter, much better speaker and will engage you more than I do. But what I want to see as a conclusion of the second topic is that in the industry, you see a situation where, economically it is making sense for people to phase-out energy consuming equipment, okay? And emergence of as-a-service models. Got 2 more topics to address. So I talk about upstream, electricity production and I talk about the client-side. I want to connect the 2 now, okay. And for it to connect, I'll simply first look at a client and say, okay, what are they doing? And what are they asking? They're asking 2 things. Saying look at these guys for example, not this -- so you got this RE100 [ph] people. I will not dwell at them at any length because Gwenaelle will talk about corporate PPS, et cetera, but okay, let me put it this way: So there are clients who are saying that, okay, I'm going green, absolutely, but I have a compulsion of sorts. I consume energy when I want to consume, which is that I might want it 24/7., I've certainly wanted reliable, high quality, which these renewables are not, okay. They are intermittent, non-dispatchable and they are difficult, so to say, on the grid unless they are properly integrated, okay. So you need people who are in the business of converting something, which is great for the planet, but which doesn't have the characteristics that are needed for someone in the industry who wants to go fully green. So you need people to convert this intermittent to 24/7 quality, reliability power.

And second aspect is the same clients are saying that I want to decentralize, okay. I can install a rooftop solar at my end. When I do it, I would also, for example, sell electricity to the grid when I'm producing more than what I need. At the same time, I might want to draw from the grid when I don't have, and I will also sell it to my neighbor, if he pays me more. And that's happening in Germany, for example. So you got models emerging where you can have ability to give it away to your, say, neighbors. So that's -- kind of expectation is there in the society today with the clients and it is being met. It is been met not just because the regulators are enabling it, they certainly are, but it's -- on top of that, a few other things. And I can cite a few. So you got for example, the knowledge. The knowledge that the utilities, the grid operators and energy traders have a sort of, come to have, based on their 3 to 4 decades of experience in this business. So they have knowledge that is critical to making these expectations be met, okay. The second thing is, there are players with system integration skills. The moment you introduce something like renewables, you require lots of things around it to make it sensible. Because you need players who have been in -- dealing in multiple technologies, having been in very -- multiple parts of value chain. So you need people with system integration skills to make it work.

And lastly, these players, who have the knowledge and the skills to integrate, they need to adopt newer technologies. And digital is obviously as [indiscernible] only too well knows and is pushing, at least in ENGIE, and that's critical. You have to absorb these technologies, make them available, then you can provide solutions that the client want.

Take an example of, say, I take the batteries, for instance. So all business models for today's batteries can actually address 13 different types of services. They address these services to customers where they are located, and to utilities and to the system operators, okay. 13 different services, I'll give you a couple of examples to make it easier to understand.

So you could have a business model developed by a company, simply saying that I take a battery, I install it in a facility to help somebody shave his peak off. Peak of electricity consumption, which involves cost. So if you help someone shave a peak for example, in California, he has to pay less to whoever is supplying him electricity. So that savings are then used to pay to the one who's installed the battery. So that's the kind of a business model. But then, if you have more knowledge, by that, what I mean is, if you for example knew a lot of industries and their consumption profiles, if you have been in the business of managing a portfolio of power plants and if you have been mastering the revenue flows from the grid operator to you, then you can put the same battery that you are installing for multiple services. And that's where you could, for example, look at 6, 7 different services rendered by the same battery at different points in time. So you could take 20 batteries, put them at the sites of 20 different industries and offer to each of them, say, for example, peak shaving offers. At the same time, you can club them together as a virtual power plant, as a little utility and play on the grid, offering capacity and other things. You could also have a chat with the utility to say that look, I've got capacity located close to the load, in the form of batteries. So we can have a chat about you not doing your grid expansion, okay. That's another kind of business model.

So lots of them emerging. And the other one I'll not touch upon, which is a corporate PPA. Except to say that for this to work, say -- so people as they said, green 24/7 from plants located anywhere, so you need guys I mentioned earlier, with the knowledge that say, energy traders have. So these guys are in the business of making or constituting a supply profile that meets requirements of demand at any point in time. And they have the knowledge, et cetera, to understand the nodal pricing, the transmission constraints and all of that to ultimately offer a product to the client who wants green 24/7, et cetera. And this business is actually quite complex and it's not for everyone. So the -- so on this, two things. One, if you are -- there is value in providing integrated solutions, in fact, for the renewables to work, somebody has to be in the business of integrating several solutions. And there is value in upstream and downstream link that I talked about.

The last topic is gas. Will we make our plant -- planet great again with gas? Okay.So you got gas, is not like, I could say, as sexy a subject as electricity has been in the past, say, couple of decades. But it is actually rock-solid. It is rock-solid for the characteristics that it fundamentally has, okay? It is cleaner than coal, everybody understands that. If you look today, coal's doing 38% of all of electricity produced. In 2050, it's estimated to go down to 10%. It might still be around then, with 10%. It's been displaced by renewables to an extent, but also by gas, okay, because gas is cleaner and it is getting greener. Thanks to biogas, thanks to hydrogen. Okay. Therefore, there is gas that is going to flow in the pipes even in 2050. If we look at projections of 2040, in fact, more gas flows in the pipes than today.

And to give you an -- to actually quote the statistics from BNEF, which is all about renewables. According to them, 2050, you got 50% solar and wind, but it is so peaky and so difficult for you to provide 24x7. That, at that time, you need a terawatt of gas fired peakers. Today, in the world, there is only 6.5 terawatts of all capacity existing. So it's a big number. Just for it to sink in, its terawatt or gas pipe capacity needed in 2050. So gas is here to stay. It's getting greener via, first of all, biogas. This business is growing, and potentially it could reach 15x, 20x as much as it was a couple of years ago. Hydrogen, relatively new, but forecasts are that it's going to grow 10 times.

So there is, thing about hydrogen, which is that when you produce green hydrogen, you got, you need green electricity. You can then store hydrogen and then produce electricity back at times that you need. So there is a connection with the grid, which is stronger for, say, a gas system that has got hydrogen in it.

So at the end of the day, my message is on gas are, greener gas to still flow in the pipes and it'll be more integrated with power. That then brings me to the conclusions about where is the value heading. In my view, the cookie-cutter renewable plant, yes, they have value. I'm not saying they don't, otherwise, nobody is going do their business. But then there is more value in tailor-made, green energy solutions. Okay.

There is, of course, upstream, downstream, separated models have existed. They will exist. But if you connected them, there is greater value. [indiscernible], yes. So integrated upstream, downstream models.

And lastly, short-term service contracts are giving way to risk-sharing complexity and long-term commitments. So on that note, I thank you very much for giving me a patient listening. And I'm requesting Paulo, my colleague, to take us through his part. Thank you.

Paulo Almirante

Thank you, Shankar. Good afternoon, everyone. My name is Paulo Almirante, and I'm going to present to you 3 activities of ENGIE, if this works. So let me start with our networks business, gas and power networks. They are a regulated business based on a rough or equivalent business model. We have our thermal contract generation, which as you know, is based on long-term PPAs directly with customers or with local energy authorities. And finally, I will present our position in the energy markets in Europe, which is basically a merchant position.

Let me start with regulated networks and contracted generation. We have a capital employed on this business of EUR30.2 billion, 90% of it is located in France. And it has contributed in 2018 with EUR2.3 billion of current operating income. About 45% of that COI is, that represents about 45% of the group COI. And we expect that by 2021, COI will be stable or slightly reducing, based on 2 factors. First, we are entering into a new regulatory period, and we have assumed conservative assumptions. Second, it does not include our development outside Europe, mainly in Latin America.

If we look at the France, we are present along the value chain in electrification, storage, transmission and distribution, regulated asset base of EUR27.3 billion, which ERDF, accounting for about 50% of the regulated asset base. GRDF is the largest gas distribution company in Europe, with about 200,000 kilometers.

The remuneration of the RAB is in the range of 5% to 7.25%, well aligned with mature infrastructure businesses of this kind in other countries. And as I said before, we expect that in 2019, the vast majority of this remuneration will be reviewed to be implemented in 2020 with exception of LNG, which will see its regulatory period from 2021. About EUR5.1 billion of maintenance in gross CapEx are expected in the period '19 to '21. And our estimation is that we'll get to a level of RAB of EUR29.5 billion by 2021.

2 key strategic objectives for this business. First, to protect the remuneration of the RAB, as we are entering into new regulatory period and in discussions during the year 2019. And second, to rebalance our geographic exposure. We would be considering opportunities of consolidation in Europe, they exist, and we will be developing opportunities outside Europe. That opportunities for us is mainly in Latin America. In power transmission, we already have in operation 500 kilometers. And in Brazil, we have under construction, 1,000 kilometers. Brazil has set up a program to significantly increase power transmission. It's expected that about 6,000 kilometers of auctions will be made every year for the next 5 to 6 years.

However, I want to tell you very important aspect of our investments in this field. We do not act as a mere financial investor. We bring our industrial knowledge, and we are very selective in the projects where we bid. We have to have synergies with our existing operations in Brazil, for example. We will select projects where we can add our industrial knowledge, our competencies. So for us, it's not a mere financial investment. In fact, we are very criterious with our financial criteria when we bid in these auctions in Brazil.

As you probably know, we also have in the same country and the negotiation, 4,500 kilometers of gas pipelines. This is a process that has had different stages. It started back in 2018. It was interrupted, and we are back again in discussions with the seller. Here, again, I want to be precise. We split the business model. On the left side, the financial investment where we are the strategic investor, alongside financial investors and we typically take less than 50% of the equity. RAB kind of remuneration or equivalent.

On the left side, we bring our industrial expertise, we bring the value of our competences to do the operations and maintenance and our long-term contract with the financial platform. So this is the business model that we implement when we make these kinds of investments.

A word on Brazil. We have a positive outlook for Brazil. We have a long-term presence in Brazil for more than 20 years. It's one of the largest countries in terms of contribution for ENGIE, and we will continue to consider investments in Brazil. The new elected administration is favorable to foreign investments. And you could see the results in terms of the stronger currency since the elections and also the increase in the stock market. So for us, Brazil continues to be one of the key countries for further investment.

And how does the future look like for power and gas networks? We believe that power and gas networks will continue to grow, both. They are fundamental for the transition to zero carbon. They can bring different solutions. No -- I don't think anybody consider that they will be only one energy in the future, electricity. I think we have to achieve this zero carbon transition, we have to rely in different options, which it will be brought together by the gas and power networks. For example, on the gas networks, the adaptation of the networks to receive green gas, hydrogen or biogas. This will require new investments very close to the territories, very close with the local authorities, with other financial institutions.

We have in France an investment plan of EUR 0.3 billion to prepare the introduction of green gases in our gas networks. On the power networks, everybody talks about renewables -- developing renewables, but they need the grid to receive renewable generation. So the investment in power transmission is going to be massive to receive all the renewables that we are talking about and our fellow companies in the energy sector are talking about. So we need to have significant investment in power networks. We are also doing discussion and development for power networks. We have a program where we are testing 30 megawatts of brief scale storage with real projects connected to the grid, which are not yet at the commercial stage, but where we bring different suppliers of batteries, different systems to test the behavior of the batteries and the power networks in these kind of configurations. So we are an industrial partner of choice when we talk to local authorities, to the suppliers, to the financial institutions, to developing into group the power and gas networks.

Let me move now to the thermal contracted generation business that ENGIE has historically developed. We have 41 gigawatts, one of the largest operators of power generation in the world. We have 41 gigawatts of contracted generation with PPAs. Significant part of that, about 75% is located in the Middle East, where we have significant market share. For the Gulf countries, we have a market share on power of 30%. And in some of the countries within the Gulf, we have even higher market shares for the production of power and the production of water.

Key driver for this business, improved performance by bringing digital tools, by bringing cost optimization programs that were successful implemented in our mentioned assets in Europe. So this is a key driver for this business. Current operating income of EUR0.8 billion in 2018, reduction to EUR0.5 billion to EUR0.6 billion, aligned with the divestment plan we have essentially focused on coal assets.

Let me show you this interesting slide,which represents the reduction of coal assets in our portfolio. We started in 2015, when we announced the new plan by adding 15.3 gigawatts of coal assets. At the end of '18, we had divided that almost by 2. So 50% reduction of our installed capacity in terms of coal assets. I think this is significant. I think this is probably amongst the industry, one of the fast reductions of exposure to coal, and of course, exposure to CO2. Because when we talk about climate change or zero carbon, should not stay only in the room, it should be implemented in practice. We believe it is the best -- the best for everyone, but we believe also it's the best for the investors by reducing their exposure to CO2 and to bring and to align their investments with a reduction of CO2 emissions.

What you see in the graph there is, the blue line represents the reduction of CO2 emissions for the all of ENGIE. So not only for the coal, it's the total emissions of CO2 of ENGIE. And in 2015, there were 133 million tonnes. In 2018, we are at 66 million tonnes. It's a massive reduction, of course, driven by the reduction of coal assets, which have very high intensity of CO2 emissions. And you see what we want to do. We will continue reducing our exposure to CO2 more or less at the same pace that we did for the last 3 years.

And that's a key strategic objective. We will align ENGIE in terms of direct emissions with a 2 degrees C pathway as established in the Paris agreement. And I think this is key for all of us that we can greatly demonstrate that the actions we make are in fact having an effect or a positive effect in climate change.

We do have projects under development for contracted generation, with 2 key criterias -- criteria. First, we invest where we have leading positions. Second, we invest in technologies, which are sophisticated or where we need to tailor made to our customer. This is the case in the Middle East. As I said before, we have a very significant presence. In Saudi Arabia, we provide 10% of the water and 10% of the power, even more in Abu Dhabi. And we have our clients looking for large cogeneration assets, which have to be tailored to their processes, to their manufacturing processes. So they are not simple kind of assets. They need significant engineering, discussion with the suppliers, equipments that are manufactured specifically for that project.

So this is the assets we have under development, large combined heat and power production, reverse osmosis for water, the integrated and water power production, and of course, also CCGTs. But I want to leave this in your mind. Investment where we have leading positions, in the work, there is a need for engineering, for industrial competencies. And we are moving in the same way in Europe.

We already had the business in Europe, where we provide intensive, energy-intensive industrials with specific products to reduce their intensity, the energy intensity, to short their security of supply by providing backup services. And we are focusing also on that in this new wave of investments.

We provide these kind of solutions as a service, as it was mentioned. A service for us means that we do not go build the assets and go away, or that we provide only the power. No, the idea that we are making, we have 2 gigawatts of electric power, for our assets already under this kind of regime is that we design, we find the best solution for the client, we finance, we build and then we operate.

And the client has visibility over EUR1 million term contract, depending on the cases, as visibility of the prices that it will pay for the power, for the steam or for any other services that might be needed for that specific industry. This is what we call, as a service.

Improving the energy efficiency of the client, reducing their CO2 footprint and visibility for the prices of the client, what it has to pay.

Let me now move into our merchant markets, where we have, I would say, where we combine significant positions along the value chain. At the center, we have our energy management platform. Sophisticated platform, does more than EUR1 million deals a year and connects our assets, being it physical assets, power generation or gas portfolio contracts, connects these assets with the market and with the customers.

If we look at to the left side of the slide, we have our gas midstream business, which is the third largest in Europe. We deliver gas in 17 countries to our customers. We provide 7% of the demand for gas in Europe in this business, which generated in 2018 EUR0.3 billion of COI.

On the right side of the slide, our B2B and B2C supply business. We have 22 million of B2C contracts and about 100,000 B2B contracts. Here, our energy management competencies are able to provide our customers with a number of different products, a catalog of products with a combination of different kinds of power, with gas or not, with flexibility on the supply to adapt to the demand of the client.

This business has generated in 2018 EUR0.5 billion of current operating income. We also have the physical assets, the merchant thermal and the merchant nuclear. Before going into the merchant assets, let me tell you also the benefit of this ecosystem. This is under the same risk framework. We are able to edge our positions across the value chain physically, with assets or financial, with other instruments. But the fact that we have the opportunity to optimize our position with all these elements of the value chain provides us significant competitiveness, and of course, value to our clients when we provide them power or gas.

Let's look to one of the subjects that I'm sure is more weighted in this room, our nuclear operations. We had in 2018 an extremely difficult year. In November, only 6 of the 7 reactors, 6 of the 7 reactors were out of service. So you can imagine the pressure in our teams, the pressure on us, that causes, or the consequence of this in terms of security of supply, results, financial results, you've seen Judith presenting that. But for extraordinary events, we also add an extraordinary team to find the solutions, to find the means to resolve them.

We have 2 kinds of problems, you're probably very familiar with them, but I will describe. First, problems with the concrete on the nonnuclear bankers. This problem, which has started in 2017, require a lot of work to characterize the problems that we had different in different reactors. A lot of engineering and discussion with the Nuclear Safety Authorities to identify the solutions that needed to be implemented to respect the criteria that the Nuclear Sector Authority had provided.

I would say today that this problem for us is now progressing in accordance with the schedule, though it's behind us. We've identified the problem, we have identified the solution, we have agreed the solution with the Nuclear Safety Authorities. We have resolved the problem in some of the reactors. One is in progress, it's out of service for working on these bankers. And the other one will be in 2020 resolved. But now it's just a matter of executing and managing the project. The second problem that we had on our nuclear units were related with the LTO, long-term operations, or lifetime expansion of the assets. This case applicable to the first-generation reactors.

These are very complex projects. These projects need to be identifying permanently what is necessary to prepare in accordance with certain standards in certain normatives which are imposed by the Nuclear Safety Authority. We plan to implement them. But when we go and implement, we identify further requests, further needs and it's continuously reviewed. We are at the end of this program. What you see there is the final schedule for the implementation of the lifetime extension works between '19, depending on the reactor, from August '19 to February 2020 or the last one from October '19 to May 2020. And after having implemented these programs, the only works that would be required for the nuclear reactors will be the normal maintenance, which takes place every 12 months for the first-generation and every 18 months for the second-generation of reactors.

So key objective for us, to stabilize these operations, our 400 nuclear engineers, more than 2,000 nuclear operations personnel are fully committed to stabilize the operations and to achieve a current operating income, which would be positive, but significantly increasing between '18 and '21 on the order of EUR 1.1 billion.

So this is what the teams are committed to do, and to deliver that. The availability that you see in that graph shows that we are coming from about 79% in '16 to 52% in 2018, one of the worst years we had. And what we expect is that availability will recover to approximately the same levels that we have seen in the previous 2 years. So this is our current expectation and we are adjusting the planning with experience that we are gaining in the previous works and the experience that we have found in the previous works. So key for our nuclear operations, to stabilize and to go back to normal.

And what are the next phases? The next phase will be in 2022 and '23. When Doel 3 and Tihange 2 will be achieving the end of operations. And this is well known. This will mark the beginning of the commissioning and dismantling activities for these reactors. In 2025, 3 other reactors will come to the end of their life. But in 2025, it is possible to extend the life of Doel 4 and Tihange 3. We believe this is the best option. No CO2 emissions compared to other potential sources of power. The power price from nuclear, I don't think anybody has any doubt, is lower than any equivalent of other sources. So we believe it is the best option, to extend the nuclear reactors beyond 2025, these 2. However, the Belgian Authorities will have to define their energy policy. And we will be working with the Belgian authorities to demonstrate that this is a good option, but it is for them to decide what they want to do in terms of the energy sector and the power needs that Belgium will have.

One thing we are more or less sure, which is Belgium needs new power production assets, renewables, gas and nuclear. We believe on that. And ENGIE will be prepared to support the development of the power industry in Belgium.

So that was the nuclear part, let me go to the thermal merchant, which is one of the elements in the merchant ecosystem of ENGIE.

Probably forgot that in 2015, this business was facing some major headwinds. We had an initial capacity of 28 gigawatts and a current operating income of minus EUR50 million. The market was really complex, difficult for these kind of assets. Most of this fleet is gas. At that time, we decided to set up a plan to improve the performance of this business, by increasing revenues and by reducing costs. First, we reshape the portfolio. We have closed cash drain assets. We have sold or closed coal assets. The portfolio today is of 21 gigawatts. And this is generating a current operating income of EUR0.3 billion for 3 reasons: First, because we have improved operational performance. We have reduced unplanned outages by 32%. We have reduced the number of trips by 41%, which allows this portfolio to extract value from ancillary services, by providing to the grid services to compensate, to stabilize the grid to compensate from the volatility introduced by other sources. We implemented cost savings -- significant cost savings, EUR180 million in the period '15 to '18 and 34% reduction on administrative costs because we want the portfolio to be resilient. So lower the fixed costs as much as we can.

But we also made another significant change in the way we've mean -- we manage this portfolio. We changed the aging strategy. The aging strategy was based mainly on time, function of time and now, it is a mix of time based and market-driven events. And this makes all the difference for the profitability of this portfolio. So we now have a v-shaped portfolio, that is flexible, to provide ancillary services, and is ready to capture opportunities in the market.

Let's briefly look at the market. So that graph shows the evolution of the clean and dark spreads between '15 and '18 in the French and German markets. Well, the first conclusion that you can see there is that from 2016 onwards, you see an upward trend on power prices. And the reason for this is that the balance of demandsupply is getting very tight.

Well, the first conclusion that you can see there is that from 2016 onwards, you see an upward trend on power prices. And the reason for this is that the balance of demand-supply is getting very tight, and this is not just by 2 or 3 cases. There is a structural problem of demand-supply balance in Central European market, which is going to be aggravated with the recent announcements that you have heard in Germany for the phaseout of nuclear, which we already know, and the phaseout of coal assets. Our estimation is that between Belgium, France and Germany, about 28 gigawatts will be removed from the system between now and 2023. It's a significant capacity without any real big investments going on, on new capacity in these markets.

Okay, so what you see there between, one back. Okay. So what you see there is the position of gas and coal between '15 and '16. So in red, you have the spark spread for gas generation, but it says that they were out of demand. So they were having negative spreads between '15 and '16. In green, coal spark spreads. So they were capturing positive and healthy spreads.

If you move now, please. Next. Yes. What happens in 2016? First, the problems with the nuclear assets in France, which has triggered a huge increase in the power price and at the same time, more or less at the same time, a switch between coal and gas. You see that coal became almost 0 spark spread, and gas became very positive in the market.

This is driven by the higher CO2 prices that we have in the recent months and year, and that will likely to continue. Another element is shown in the graph at the bottom: higher Volatility because the system is tight, higher volatility, and multiple events being it weather anomalies or issues with nuclear fleets in France or Belgium.

However, there is an interesting point here, which is these kind of events became regular. They happen with some regularity. So the conclusion I want to come is that our fleet of merchant asset, that has been reshaped, that is now with a different and dynamic hedging strategy, is capturing value from a market which is volatile and very tight in terms of the demand-supply balance. I will finish rapidly because I think I'm probably late.

In conclusion, we have a very solid base, which delivers stable earnings and strong cash flows, I would say very strong cash flows. And these cash flows fuel our growth businesses of customer solutions and Renewables. Now we'll finish with and hand over to Gwenaelle, which will tell you how she's going to apply the cash flows.

Gwenaelle Huet

Hello, everybody. I'm Gwenaelle Huet. I'm the CEO for the business unit in France regarding Renewables. And France is a kind of laboratory for ENGIE as we experience very strong leadership positions in terms of renewable and very good success stories. So I want to share with you the success and to share with you our recipe to extend this success across the world and specific geographies.

So my focus today will be on large-scale Renewables. But, in fact, Renewables cover many different areas, including decentralized heat and power. And Franck will cover this part.

So just to start with, I would like to share with you my main messages of this journey. We've got 3 priorities for the coming 3 years. The first priority is faster growth, and you will see that we'll have a huge pipe of development. And our objective is to develop around 9 gigawatts in just 3 years. Second objective is higher value with sophisticated technologies, sophisticated contracts and geographies, very selective in these geographies.

So the key word is selectiveness. And last priorities is better impact, to increase the impact on our environment, on our clients. So in other words, our story is to create more and more value for renewables and with renewables with our P&L. So before developing our strategic intention, I'd like to share with you where we stand today. What's our position today within this market? So today, we've got 24.4 gigawatt of installed capacities as you can see in this graph. But for me, this is a very solid foundation for growth.

You will see that we've got very strong positions in France and in Brazil for hydro, but we also have leadership positions in France and Belgium for wind and solar. But we've also built emerging position in other geographies like Latin America and North America. All in all, the message is that we've built a strong development machine, a strong development machine. So how does it translate? And we wanted to share with you our development machine to give you a sense of the pipeline of projects that we've got today.

So first, I can tell you that we can safely rely on an advanced pipeline of projects of between 15 to 18 gigawatts, among which we already have 6 gigawatts secured or under construction. That is awarded or under construction, 6 gigawatt among this 15 to 18 gigawatt. In addition to that, we've got 50, 5-0, pipeline of projects that are at least advanced development. So this is our pipeline of projects. And as you can see, half of it will be onshore wind. And starting 2023, you will see more offshore in our P&L because it will be the starting point where offshore will start to deliver, and I would like to show that to you.

So this is our pipeline. So how does translate in terms of positioning? Isabelle told you that we are in the top 5 in Europe and in the U.S. utilities in terms of RES capacities. But thanks to this pipeline of machine, this development machine, we will reach Tier 1 position in terms of growth. So this is my first message: development machine. How it works. I'm sure that you know the value chain for renewables. I'm sure that you know that. Our strategic positioning is to master all the different segments of this value chain and to always look for scalability and industrialization.

So just let me draw your attention on the industrial part of this value chain: EPC O&M. We've worked, for example, in the past 2 years in France with key suppliers, with partners to optimize our assets, to renegotiate all the O&M contracts, to renegotiate new turbine procurements. But we didn't want to do that in France. We wanted to scale up. So we renegotiated large-scale contracts in Europe. We did master supply agreement, in fact, with key suppliers. And this allowed us to reduce the prices between 10% to 20%. This is competitiveness. This is scaling up, industrialize our development.

So this is the first method I wanted to show you is that in this value chain, we are looking for scalability and industrialization.

Another example, digital. We developed internally a tool which is called DARWIN. It's an internal tool where it collects all the different data coming from all our assets across the world in real time, in real time. And our objective is to develop optimization of the assets, thanks to predictive maintenance and this is happening today. So yes, digital is not a word. It's also something very concrete on our operations. So just few example to show you that we are looking for scalability and industrialization.

And last but not least what is important for me is that our specificity is to be in direct contact with clients every day, 100,000 people every day in contacts with clients. And this is a key differentiator. This is a key differentiator.

What the market tells us today. What are the key market trends? Shankar told you that renewables investments will be massive and will be very sustained, EUR 215 [ph] billion a year, wind and solar; and especially in Europe, Latin America, North America. So it will be massive.

Second market trend: we will see more and more sophisticated technologies. In the short term, it's offshore -- offshore wind. You all know that, but it's also biomethane. It's also geothermal. And on the middle term, we'll see new technologies like floating offshore developing, like grid-scale storage, like microgrids. So all that technologies, that will emerge. And we are taking steps on those technologies also. And in the longer term, we've identified grid hydrogen -- green hydrogen to become quite huge in this market. But what is most important for me is probably the last one, this market trend. This is major. What is happening is really major. Remember renewables? Finally, it started with subsidies. It started with state auctions with feed-in tariffs, with contracts for difference.

What we see today is that it is progressively transferred into auctions done by corporates, done by territories. This is the power purchase agreement that are developing. This is the PPAs. So it started in the U.S. While there is progressive shift towards PPA, but now, we see that expanding elsewhere. So this is a quite interesting evolution from subsidies towards PPAs. And at some point, I'm sure that PPAs will become a standout. It's starting now with PPA as produced, meaning, a client that buy all their electricity from a wind farm or from a solar farm. This is happening today. But they want more. What do they want to? They want electricity -- green electricity that fits exactly to their consumption. So it's a kind of different products, and we are shaping those products. So this is an evolution that we are seeing today, and this will be massive. But don't get me wrong. I don't say that we will not respond to auctions because there are technologies that are less mature. So there will still be auctions from the States, and we've got also pipelines of projects. Just one example, this year -- in 2 years, in France, we've been responding to solar auctions. And we won 500 megawatts with good returns. We'll not stop that, but this trend is important. This trend is important because of its sophistication, and I want to show you more about this sophistication.

So on this basis, what are our strategic intention? I would say there are 3: faster growth, higher value and better impact. And I want to show you that. But to start with, maybe a step back, a step back because Isabelle told you that we are uniquely positioned to benefit from the second wave of this energy transition to be a zero carbon transition as a service company. So how does it translate for renewables? For me, there are 3 components. The first component is sophisticated technologies, sophisticated technologies such as offshore, such as green gas, such as geothermal. Second element is sophisticated contracts, the so-called PPAs with cities, with campus, with corporates. And the last one is finance, and this is the famous DBpSO model I will show you, and I will explain you in detail. So basically, this is the recipe for as-a-service model applicable for renewables.

Let's go to faster growth. Our first strategic intention: faster growth, how to achieve that? What is our plan? I can tell you that when we have large pipeline and an industrialized approach, we can make the difference. We can deliver huge acceleration. In France, in 2 years, we doubled our capacities in solar. So this is possible, but it's based on a huge pipeline. That's why I wanted to show you our pipeline of projects. But I'm sure you want to see that in figures. First figures in terms of KPI, 9 gigawatt added -- around 9 gigawatt added in 2021. That's our commitment. That's our objective. The bulk of it will come from major technologies, that is to say, wind and solar. But half of these projects, they will come from corporate PPAs, from contracts with cities, with corporates. They will be dedicated to clients. So this is a very concrete evolution. So that means all in all, we will develop around 6 gigawatt of wind and around 2 gigawatt of solar by -- in 3 years. And at the same time, we will set up a sophisticated and innovative technologies, and we will see that starting in -- by 2021 with the first commissioning of our SeaMade project in Belgium. Now I'm sure that you want to see that translated into very concrete financial contribution. So let's go to it.

Next slide. This is the dynamics. This is the dynamic of this story. The dynamic is good returns. We see a strong COI CAGR of 8% to 11% by 2021 globally. Now if you ask me what contribution can we expect by technology? Well, in fact, we can rely on a double-digit CAGR in wind, on a CAGR of around 10% for hydro and a middle single-digit CAGR in solar. So the story that we're explaining here is a story of good returns. So faster growth is for me a growth in terms of gigawatt but in terms of return.

Now to achieve that, I need to show you that it is a story of higher value. How it works? First, we are very clear on our road map. This is the clear message we want to deliver. This is a clear message we will deliver to our teams. We will focus more on corporate and cities PPA, and we will focus more on innovative and sophisticated technologies.

Let's go on this PPA. Let's go on this PPA on sophistication. Why are we talking about sophistication? Because PPA, in fact, it necessitates first, an ability to develop complementary resource of energy, complementary resource of renewables technologies because they complete each other. They have different profiles of production, and what the client wants is something quite stable. So we can mix different technologies when we are able to have in our portfolio different technologies like solar, wind, hydro, for example.

Second element, it requires an ability to shape green product fit exactly to the client needs, to the client consumption, so an ability to do energy management. And lastly, it requires an ability to sell green products to clients. And I would like to show you in this slide that none of our competitors have 5,000 people working in development and operation for renewable on the field, 5,000 people in addition to 2,000 people working on energy management and, at the same time, 100,000 people on a day-to-day basis discussing with clients. This is a very specific element for us. This is unique. All those people are across all the value chain for Renewables. So that's why, for me, this is impressive. And that's why, for me, sophistication of PPA is very important in our strategy.

Now let's go to sophisticated technologies. We mean by sophistication offshore wind, and we've got large projects. We've got projects in the UK We've got projects in Belgium and projects in France. And we just past very good steps in France, notably with the authorizations that we've been awarded. So yes, we're progressing on offshore.

At the same time, we've been developing 2 pilot projects for floating. I told you that this will be a kind of technology for the future. So we wanted to pave the way in this kind of technology. Green gas: again, green gas is also sophisticated technologies.

First on biomethane. In France, we acquired the first developer, the larger developer in biomethane. And we want to industrialize. We want to reduce costs by industrialization of this development. And hydrogen; we also took very good positions across the world in Australia, in Chile and also in Netherlands because we believe in the future. And we want to invest in the future. And all in all, this will come up with scalability. This will come up with microgrid and with grid storage.

When it comes to higher value, I said it was sophisticated contracts with the PPAs, sophisticated technologies. But it's also selectiveness in terms of geographies. So that's why, as Isabelle and Judith explained, we will focus on reinforcing existing and acquiring new leadership positions where the group has density and where the group has strong links to clients. And we will also go for very selective countries where the group will invest both at the same times in client solutions and in RES development. So basically, higher value are these 3 components; sophisticated technologies, sophisticated contracts and selectiveness in terms of geographies.

Now let's go to the DBpSO because we've discussed that, and I would like to share more in detail how it works. In fact, it's the ENGIE recipe for the DBpSO. To make it work, it's working because there is a strong market growth. I think that Shankar explained it very well. There is strong growth in renewables, the first element.

The second element is that there is attractive competitive capital in renewables today. Just we made an auction where recently for 1 megawatt of solar, and we received 50 offers to invest in these projects. So yes, there are people wanting to invest in renewables. And the third one is that we have the development machine with more and more projects to fuel in this machine. So in with these 3 components, the DBpSO is a key success story.

So concretely, it means that we take the development and the construction risks. We monetize almost all the NPV after commissioning and then, do we manage all the industrial part of the assets. Basically, there is numbers of advantages. First thing, it enables us to win more projects. It increases ENGIE rate of return. It enables us to accelerate capital rotation. So that's very positive tool, and we want to expand it across the world in geographies where it is possible. But I'm sure that you want to see it into the P&L. I'm sure that you want to see how it concretely means into the P&L.

So I just take an example here for a 10-megawatt wind onshore solar project in a competitive tender just to show you how it translates. If, for example, we are at cost of equity without DBpSO, with the DBpSO we can reach cost of equity plus 400 bps. So we increase value with the DBpSO. To do that, DBpSO requires lower equity injection. How it works: basically, there are banks. We use banks with debt injection and gearing of around 70% to 80%. And at the same time, we've got external financial partners providing equity. And mostly, we are doing the sell-down between 50% to 80%. And this generates, as you see, very, very quick returns.

So just after commissioning, just after the COD, it generates 80% of the EBITDA. This is the impact on the P&L of the DBpSO. I would also like to illustrate the DBpSO in terms of capital rotation, in terms of CapEx. The message on this slide is that with less CapEx done in the last 3 years, we will do 3x more projects. So less CapEx than in the past 3 years, we will do 3x more projects. This is the effect of the worldwide development of the DBpSO, and you can see it also through the decrease of the average equity share reaching less than 50% in 2021. So this is the impact: less CapEx, more projects.

Now to conclude on the higher value, a word on the ROCEp. The ROCEp will increase starting from 9.3% as you can see in the start here. So it will increase, first element. Second element: CapEx optimization. In fact, we will develop projects that would require around EUR15 billion but, in fact, will finance at the end only EUR2.3 billion to EUR2.8 billion. This is the impact of the DBpSO. So we'll leverage and we will develop around the equivalent of EUR15 billion of projects. Last strategic intention: better impact. For me, better impact, it means a number of things.

First thing, environmental responsibility. Second thing is societal impact with, for example, development of crowd funding, partnering with local authorities and things like that. And lastly, it's better impact for our clients. And this is the link with the PPAs that I've just been presented previously. And I would like to illustrate that with a case study. We've been discussing with target, a large retailer supplier in the US, and they wanted zero-carbon solution delivered as a service. And so we proposed a PPA of 100 megawatt coming from the wind power that we were developing, Solomon Forks Wind park in Kansas, to match 100% of their need for 150 stores in the U.S. So basically, they wanted that. They wanted solar power to supply them in green energy. But this park is not only for Target. It's also used to fuel green energy for T-Mobile. So yes, we're working with other companies because they want wind energy. And at the same time, the story does not end there. They did not want only wind, they wanted also to use their buildings to develop solar. So finally, we ended up with around 55 megawatt developed in all their buildings for solar. So the message here is that when we started discussion with the client, it starts with wind and it ends with numbers of technologies. Because today, our clients, they want to green their supply. They want to green their energy. And for me, this is not an isolated example. There are numbers of others. And as I said before, it started in the U.S. But now, it's spreading in other geographies. So that's why we are taking that very seriously, and that's why we believe we have a strong competitive advantage. So my message here is that it's happening already. It's happening already, and we took bold moves.

So in conclusion, I would like to give you a long-term visibility about our trajectory. I know that the pipeline of projects is very important to fuel this development machine. But then if we go a bit further, you will see the development of the sophisticated technologies that we've got on our pipe. So we've built 2 scenarios, a low-case scenario and high-case scenario, just to give you a flavor of our trajectory. And the main message is whatever the scenario is, both are in -- growing very fast. So both scenarios are growing extremely fast. And on the long term, you can see offshore developing. Because in this trajectory starting 2023, we see the 3, gigawatt of offshore in this trajectory.

So all in all, our story is that we are creating more and more value with renewables. Our development machine will fuel this strategy. We've got a very clear vision on where to go. And we've got 3 priorities: faster growth with the objective of 9 added gigawatt capacity by 2021: higher value with selectiveness in terms of technologies, contracts and geographies; and better impact, including on our client. This is basically the journey we want to propose you for large-scale renewables, and I hope that you will go for it.

So now I propose to give the floor to Franck, which has -- who has another growth story to tell you. It's about Client Solutions.

Franck Bruel

So there were 2 hot spots this afternoon in the presentation. One was to start after lunch, and brave Shankar took that one. The other one was to try to convey a message after Gwenaelle's presentation. So please bear with me.

So I'm Franck Bruel. I'm part of the executive team, and I'm in charge of B2B solutions in France and the development of hydrogen solutions in the world.

So ENGIE is a client solution provider. More precisely, we are the leading provider of energy solutions to our customers. And over the years, we have built a leadership across four continents, very different geographies; but also leadership in the verticals, the technical verticals that really matter in energy efficiency: heating, cooling, technical insulation, even in EV charging. And we have achieved that by gathering the widest possible offer of solutions to make our customers zero-carbon agenda possible.

Of course, we can supply energy where we can source it, and we could profile it to the customer's need, globally, locally, whatever is needed. As far as building efficiency and industrial processes, we can provide solutions, create solutions, implement them. And when you gather all that together with a top of -- with the best class software, you're able to offer smart places solutions to cities and communities, including mobility, whether that would be individual or public transport.

We have built this widest offer on a very unique set of capabilities. First of all, we are recognized for our competency in every single way there is to produce and use energy across the world. Second, we are able to contribute on every single of those segments on the whole value chain from design to installation, to operation and maintenance. And lastly, but not least, we have 100,000 of our employees, of our experts, technicians actually working on our customer sites every day, which gives us a unique, a prime insight on what's happening on those sites, what is the performance, what is the need, and to adapt and to create a database from that.

And I want to pause a minute for this. We have the depth and the width of the technical competence, and we have the knowledge of the customers and the segments. We strongly believe we are the only one in the world with that set of capabilities, and that makes a big difference. And who better to explain that than the CEO of Unibail-Rodamco-Westfield, Christophe Cuvillier, one of the leading commercial property company with more than EUR65 billion of assets.

[Audio-Video Presentation]

Christophe Cuvillier

Strategy we launched in 2016 is a commitment to reduce by half our carbon footprint from 2015 to 2030 which is, without doubt, the most ambitious target in our industry. ENGIE and Unibail-Rodamco-Westfield's strategies really echo each other. ENGIE concentrates on decarbonization. We aim at halving our carbon footprint. ENGIE's based on digitization. Our group is look for innovative solutions to reach the goal sets in this Better Places 2030 strategy. And finally, ENGIE's strategy highlights decentralization. And this is synonymous with agility and success for a company like ours. In addition, with the ecosystem around ENGIE lab, our Group is constantly fed with out-of-the-box ideas. ENGIE has been instrumental in helping us reach our objective to supply all our continental European assets with green electricity. Since January 2018, ENGIE is the exclusive provider of green electricity of 100% of our franchises. There's no doubt that the future of mobility will be a key topic. We welcome 1.2 billion visitors each to our shopping centers. They're responsible for 50% of our global carbon footprint. We'll be looking with ENGIE at all future clean mobility solutions to drastically reduce this environmental impact.

Franck Bruel

What is really nice about this story is that not so long ago, we would have, every year, a very harsh discussion on supplying energy. Now we have a global green energy contract with the whole of his group. Don't get me wrong: we did negotiate that to the penny. But on top of that, we have a global approach, a partnership with him and his team to actually develop the means to reach his ambitious target. And that includes on-site production; heat pumps from rivers; logistics, including logistics of his customers as he mentioned; and the goods.

And we are building together because we're bringing all our technicalities and technical knowledge. We are making his vision viable. It's a very interesting story. Now from this, we actually looked at our customer base, and we decided to organize it by behaviors and needs. And we came up with this segmentation.

The first one is cities, with extreme variety of buildings and usages. That would be hospitals, transport, administration, schools, whatever. Private service buildings are very often buildings with the same destination as the previous ones, but the approach is different. The customer expectation is different. It's a different segment altogether. Industry, we're always asked to supply cost-efficient, greener energy and reliable. And then there is collective housing. And yes, you can see on all those segments we are very balanced and quite significant in sales and knowledge.

And then you look at the business environment and you get quite excited because the market drivers are very strong and long term. Over the years now, the value has been shifting regularly from structure to the actual technical installation from the building to actually, the usage of the building and what we do of it. And that's in favor of us.

On top of that, the awareness on sustainability, of carbon footprint are making the solutions more sophisticated, more complex. And that, again, is helping us and is pushing the third lever, which is outsourcing. Both the industrial decision-makers and the property owners are willing to outsource that complexity to professionals that will deliver the service. And this is us.

And when you look at the business fundamentals, you will see that we have a pretty strong backlog that's constantly building, that's giving us a good vision of what's coming. Our contracts tend to be pretty long and renewed on an 80% base. And at the end, it is a cash-generation business.

Let me take you through those 4 segments to give you a very quick insight on what are the challenges and the opportunities. Here, for cities and public communities, they are all facing, around the world, the same stressful combination: continued urbanization, which is now driving more than half of the world's population to be living in cities; financial squeeze; and a constant pressure from their voters, from their citizens to increase the level of comfort and sustainability in carbon footprint.

We have the answers, the technical answers to every one of the levers they can use to tackle that, including 3D modeling of districts or complete cities and the software that can manage that complexity to make it efficient. But in the end, what we have to do is listen to the customer and actually create a tailor-made solution. That's what we have done with the Longwood Medical central district in Boston. This, we started with, again, an energy contract. And over the years, we created a trust that have driven them to ask us to embark in the creation of their biggest project at the inception. Let's listen to what they have to say.

[Audio/Video Presentation]

Unidentified Company Representative

The critical nature of our patients requires that energy be available 24/7 and be there with resilience, so that we never leave any child unattended. Cost is equally important to us. Sustainability is equally important to us. ENGIE has come to us as one of the greatest new partners, as collaborator, as innovator. They also have been supporters in looking for new ways to be more effective and more efficient in the use of energy. We are building a 14-storey $1 billion new clinical building. And ENGIE has been right there with us, helping to plan such that it will have the most effective and efficient energy as ever before. ENGIE is our partner. And every dollar we will save by making energy efficient and cost effective, we'll be able to support those children and their care.

Franck Bruel

Another great story. And I like this because it is the relationship built over the years by our technician on the field that has driven them to select us as a preferred partner in this project, EUR1 billion medical project. And why are we bringing the right solutions to that project? Because we have been working on this, on this segment of hospital buildings around the world for years. And we can gather our knowledge and create the right solution. Again, a great example.

Private service building. Here, we're trying to help our customers with new behaviors and the need for them to outsource complexity. When you're a building owner and when you -- or you're managing a building, you're facing the very rapid change of behaviors of your customers, the ones that are using this. And you cannot really face the changes of technology and the adaptation. So what you really want is something that can take care of the whole of the building and manage it. That's why, more and more, we are asked to work with the promoter or the active architect from inception, so we can look at the efficiency of the building and the efficiency of running that building from the very beginning. It makes a big difference.

In industry, as I said before, more and more decision makers, actually all of them, have realized that they need to green their processes and their products. But they need to do that cost efficiently and secure the reliability of whatever the energy they need. So we deliver the service, we deliver the solutions with them and we offer to run it for them on a contract base. We contract the performance, the quality and the duration. And that makes us different. In this example here, this is a semiconductor industry. And as you probably know, they operate their process in cleaned rooms. In this case, we have designed the process of air cleaning, air treatment. We have designed and installed it. And we are running a 100,000 cubic meters an hour, which means the floor -- the complete process room is renewed 20 times an hour, pretty impressive. Because we have done that and we have walked the talk and delivered the performance, now, they have asked us to manage the basement of the company where they have all the feeders into the process of the raw materials. And we are the one running the 3D modeling of that basement. It's a very impressive place to visit and a very impressive performance.

So collective housing. The main trend is cost reduction around the world to try to keep the cost of housing low and to adapt to different behaviors, smaller families, aging populations. And here again, we were asked to go into the inception of the project with promoters to create the right offer to the local needs, and this demands local competencies and local knowledge of what's happening in that particular geography because the needs and the expectations are not the same in Stockholm, Santiago, Paris or Shanghai.

So with this unique set of competencies, knowledge, value chain and customer intimacy, we want to create faster growth, developing as-a-service solutions. And as Isabelle has shown you earlier this morning, we want to leverage our historical competencies, things that we master to create a solution and an offer that will make a difference.

So we start with our customer intimacy. We combine that with our historical ability of creating, driving infrastructure to create as-a-service offers, long-term financed with better results.

Let me give you an example in numbers. So here's the story. We have a customer. He comes to us. And he requires an investment, a new asset, whatever you say. We discuss with him. We decide and design the solution with them. Then we create a Project Co. We invest part of the equity with the customer or with investors. We leverage that equity, and then we build the asset and we run it. In the end, we have -- with a total investment cost of EUR100 million, we will invest EUR10 million. And we will produce 9% -- 9% to 12% ROCE over the years on the long-term contract. This is creating more value, and this is a unique offer. And it's not science fiction. We already have, in recent years, look-alike projects in different places. But more importantly so, we have a pipeline of projects where this as-a-service offer will create a difference and will win projects for us.

With these new offers, we believe we can deliver higher growth with a 4% to 7% CAGR over the period with, of course, a higher proportion of growth in areas where we still have a lot of market share to grow, to gain. And as we do that, we'll be developing better profitability on this offer. We'll be increasing our synergies and our operational excellence. And therefore, we expect our COI to grow 11% to 14% to EUR1.3 billion, EUR1.4 billion. Of course, they will include a higher share of asset-based solutions.

On top of this growth, we want to create higher value. And in the business of services, higher value comes with differentiation. You need to be different to actually be able to create value. Financing, syndication, we cover that, strategy design. And as I've mentioned, we are in the business of creating global solutions; of addressing the total strategy of our customers, of corporates, of cities in the way they want to build their zero-carbon agenda. We are creating a team specialized in addressing the C-suite to be able to create that story. Most of the corporates -- the C-suite, they have the understanding. They know they want to develop that, but they very rarely find people who are able to create the solution with them and implement it. So we are creating this.

And then digital acceleration. With the development of sustainability and technology comes complexity. The solutions are more and more complex, and you need to harness that. And the answer is digitalization. We already have a very impressive software library. But the pressure is on my colleague, Yves, here. He needs to deliver the best-in-class, the best-in-class softwares library for two direct purposes. One is to improve our own performance, improve the efficiency of our 100,000-and-still-growing number of technicians on the field, harvest the data that they are producing and that we can use to create a strong data pool and also the software that will enable us to create the best solutions to harness the new technology and make them safe and reliable for our customers.

So with this and to make this happen, we will be investing more than 30% of the group CapEx into solutions, amounting to EUR4.5 billion, EUR4 billion to EUR5 billion over the period. And with that, our commitment is to keep the ROCE of customer solutions in the high single-digit area. To achieve that, we need very selective investment criteria.

First of all, we will favor customer intimacy, tailor-made solutions. We are not in the business of creating standard things that you can copy. We want to understand the customer and offer solutions that nobody has thought of.

Second, we want to be able to develop our financing expertise. We know how to do that. We have the right partners to do that. It makes a difference, and we want to focus on that. And over the years, we will be deploying the DBpSO model that Gwenaelle has successfully developed and we want to imply, implement in this area, too. This will lead us to long contracts, contracts that would last the life of the assets we are financing. And that will give us predictability and recurrence.

Finally, we will favor, of course, we will follow our customers around the world, but we will favor projects where we already have a footprint because density for us means more effectiveness and more synergies.

So faster growth, higher value, but also as it is our motto, better impact towards 0 carbon transition. And I'd like to tell you a story. This is a true story about an industrial company that served the luxury industry. The young manager comes in charge of the whole business, and he hears the request from his customers to green his production. So he comes to us and says, "we need to renovate our old assets for steam production."

Because we have been working with this factory and this company for many years, we sit down with him and we come up with a very different solution. We are not going to renovate this asset. We are going to dismantle it. And in place of that, we are going to build, on the other side of the fence, we are going to build and finance our own asset. We'll be using the local biomass to fuel this asset, and we will sell him steam on demand.

And with the rest of the steam, when he doesn't need it, we produce power and we sell it to the grid. At the end, we have a very long contract. We have created more value because we financed it. We have built it. We are running it. And he has safe, green stream on demand that is creating an impact.

So as a conclusion, we strongly believe that as a service, we'll give us our strong road map to win more projects over the time, the years to come and to create more value with them over the years. Of course, it takes a few, some time to build those projects and make them happen. But we have started and we know where it's taking us. In the end, faster growth, higher value, better impact. This is going to allow us to prove that ENGIE is the leading provider of cost efficient zero carbon solutions for our customers.

Thank you very much. And now it's my order to leave Isabel to conclusion. [indiscernible] microphone?

Isabelle Kocher

Thank you very much, Frank. So we come to the end of this presentation. Now we will switch to M&A. You probably felt the enthusiasm and the motivation of our team. And I like that effectively that this is a team for us that has been able to already grow through very important transformation, and that is a team that really learned to work together in a very efficient way. I'd like to thank them. They are really absolutely fantastic. And beyond them, a lot of people really managed to deliver this first step in our journey. I'd like to thank them. They are following us live, a lot of them today. So thank you very much. I perfectly knew that it has been a strong effort from everybody.

Now we have business transformations. We face a huge market. I believe that it's clear. We have, we have really something special in our hands, really something special in our hands. We can combine the set of new arrow that exactly corresponds to what is needed to show that need. And I believe we are not easy to follow by other players because if you look at the landscape, traditional utilities, they are often, I mean, traditional in terms of infrastructure, development, design, management and financing, but they are not the troops on the field and the on-site presence.

On the other hand, traditional services company, that's exactly the opposite. They have a presence. They are not at our scale, by the way, but they have a presence, but they have not the infrastructure components. That plus the really strong capabilities we already have on digital that Frank just reminded us; plus the high-level client approach we still have, we already have and we'll continue to invest in; and that plus the financing capabilities we effectively developed for the case and that we are now professionalizing and industrializing, I would even say. I believe, really, we have everything to be the leader we want to be, to make the road map of zero transition, zero carbon transition road map of our client possible.

So this is our story. This is beginning of a very promising journey. And we are happy to have the opportunity, first of all, to answer your questions now and then on a regular basis to update you on the progresses we intend to make in this difference topics. So thank you very much.

Question-and-Answer Session

A - Gary Leibowitz

Okay. We'll start with the Q&A here in the room for a few minutes. And I can see there is a lot, but at some point in 10 minutes or so, we are going to take -- invite the operator on the conference line to bring us questions from those on the webcast. So for those of you who have been listening on the webcast, please do register your questions and we'll come to you in a few minutes. But let's start first here in London, in no particular order, the gentlemen there.

Yes, the microphones will be finding their way. If you could mention your name and firm as well.

Vincent Gilles

I was intending to do that. So Vince Gilles, Credit Suisse. One strategic question, one financial question. The financial question is very simple. Sorry, Judith. Every single year, I ask the same question. WACC, what by division, capital employed. Basically, what you tell is you can always target to be above the WACC, which is good news. But where is the WACC going? Where is the WACC at the end of '18? How is it going to churn for the next few years? Particularly -- and that's my second question, as -- and this is for Mrs. Kocher's side, you insisted a lot on financing. And the fact you're being developing a financing, I wouldn't call it a financing arm but financing capability that makes you stand out on the crowd. So how do we link the 2 points? And what makes you unique in financing is one question. The second one is capital employed in the future, WACC at the current stage and in the future. Thank you.

Isabelle Kocher

Well, thank you very much. I will let Judy to elaborate on WACC evolution and introduce just upon saying something, which is very simple. We explained that we intend to develop this as a service model, and again, of equity model, CapEx light. And in this case, we look at our cost of equity, our own cost of equity. We ask 400 basis points of reach on that. If we calculate it on the -- I mean, on the size of the equity we effectively inject, which is not a lot. And now I will hand over to Judith to complete that.

Judith Hartmann

Yes, thank you, Vincent. And indeed, I need -- I didn't need your introduction. I knew it was -- I knew who you were and the question is, of course, very relevant. So our WACC is around 6% for the company. And like we just said earlier, like I said and Isabelle just repeated, the fact that the way we work actually by project is we look at the WACC by project, and then we are expecting the 200 basis points above it. I think this is important because depending on where you are, you're going to have a different risk profile. We have, I'll use as an example a project in Brazil or a project in France is not going to -- we're not going to look at the same WACC. So we're -- we'll look at that really by business. I think the closest also answer to your question was in one of the slides under 2018 numbers on giving you the return rates. It was actually the ROCE by business line. And you can see how those are increasing, and that's really something that we're going to continue to work on. It's very important to us. And clearly, by several measures, where do we invest is the first question. And when you look about some of the businesses that we have sold such as exploration and production, we're really less now with businesses with a higher return. And then like I said, we really are quite sophisticated. We look in it by project and not by -- just by business, and that's how we're going to continue to drive value. Yes, please?

Franck Bruel

Okay just on the fence there.

Meike Becker

Thank you very much for taking my question. This is Meike Becker from Bernstein. I have 2, one general one and one a little bit more on the numbers. How inspirational or conservative would you classify this business plan? How confident are you in achieving or maybe exceeding the numbers? That's the more general question. And the specific question was on your COI growth targets. Could you please reconcile it? Because we have the growth targets for the business units and we have the overgrowth targets. And at least when I do in my back of the envelope math, there's a few hundred million difference. Thank you.

Isabelle Kocher

Judith?

Judith Hartmann

Yes. So on your question on how comfortable we are with this, I think a great page to look at that is quite frankly the assumptions that we have put in. Those are -- those kind of show you the upside and downsides. We've tried to pick assumptions where you -- as you know, our business, there could be swings. What I would say is we are confident in this plan. In fact, it's been our policy to, over the last 3 years, to really make sure that we give our targets that we know that we can achieve and we did in 2018, even though we had incredible headwinds, as you know, in nuclear. So we are very confident on that. When it comes to by business unit or by business line, I should say, depending on where you go on the upper and on the lower end of the range, it does, of course, add up to the total number. And it's the total number that you should take for your modeling.

Gary Leibowitz

Just next door there.

Emmanuel Turpin

Emmanuel Turpin, SocieteGenerale. I'll ask 2 questions, please. First of all, just to make sure I understood a comment earlier on your COI guidance for the networks, and did you say that it excluded developments outside of Europe? And with that in mind, for your growth CapEx for that business line, 3 to 3.3, could you give us a split between what we -- what you qualify as growth CapEx in France and overseas?

My second question is on the customer solution business. You're essentially presenting us with a CapEx budget which is, roughly speaking, the same as in the past 3 years. And I would be interested in knowing the message in terms of split of that gross CapEx. You had given us an indication of the split between tuck-in acquisition and industrial growth in the past 3 years. Do you have such a view for the next 3 years? You are essentially telling us that COI, you will grow by EUR300 million to EUR400 million for customer solution. As a matter of -- to put it in perspective, how much did your COI grow in customer solution in the past 3 years to tell us -- to give us an idea of your -- how achievable this new budget is. And on essentially what sort of normalized ROCE are you looking at for this business?

Isabelle Kocher

So I will hand over to Judith in a few seconds. Before going to figures regarding client solution development, it is twofold. So first, it's to acquire, as we did over the last period, platforms to densify our presence in the field. I mean, I'll remind you that over the last period, we bought 40 companies. So that's first component of our CapEx development on that domain. And the second one is relative to assets precisely. Because by definition, we will start investing in equipments in the way Frank just explained. So it is a mix of the 2 elements. Now regarding specific figures, Judith?

Judith Hartmann

Yes. So you have a number of questions. I hope I wrote them all down. First you had that networks question on the growth rates. When we mentioned, so first of all, I guess, on the CapEx, there's about 2/3 going into France and about 1/3 in the current model that goes international.

What we have, what you've also heard from Paulo's presentation and mine quite frankly is that we do believe there is further growth possible in networks internationally. Now when I mentioned Brazil as a country for, I truly believe that 3 decades to come, we're going to have opportunities around gas pipelines but also electricity transmission. We've signed a big deal last year, an organic one.

As we mentioned, we are looking at some others, even inorganic. And so we believe that there's going to be additional growth to the growth rates that were mentioned. On, then you had a question regarding Client Solutions on the growth versus the past 3 years. What I would say there is it was significant growth. Isabelle mentioned it is 36% year-over-year, '15 to '18. And so we're going to have, there is about a EUR300 million increase.

So we believe that get, I am not sure I would compare the 2 periods because obviously, what we are at the right now is bigger. And so really, we're picking up growth here. And like I mentioned in the 2018 presentation, some of the acquisitions that we did recently are really starting to pay off. I gave the example when I said Middle East and the UK was obviously to breed and keynote. So those are going to continue to grow. We made some acquisitions in other places, Germany, Singapore at the end of last year. So those you're going to see.

So suffice it to say, we're very confident in the growth that we're protecting in Client Solutions. It really is a key area. Strategically you've heard it now from several of us here today, and quite frankly, we're quite confident there. And then your question was around what did we assume on tuck-in acquisitions? We were quite explicit last time in the 3-year plan on the EUR2 billion. We ended up being a little higher than that, and that's roughly what is the assumption again for the next 3 years.

Gary Leibowitz

Okay. Let's go over here now in the front. Just up in the very front here.

Olly Jeffery

My name is Olly Jeffrey from Royal Bank of Canada. A couple of questions, please. The first one's on power prices. I know you said you were constructive in the power prices environment. I noticed in the presentation, I think you're, when you cut the viewer figures in December, the power price then was at EUR50. It might go down in 2021. I think now we're closer to EUR46. Given you're 30% hedged, my math roughly count close that that's around EUR150 million low EBITDA or to use today's power prices. Do you agree with that assessment?

Second one is on OpEx cost. You've been targeting EUR800 million. Three years ago, you targeted EUR1 billion, but you managed to increase that significantly. Do you see room to improve the cost savings this time? And the last one is on Suez. I know you said in December that you are happy with the stake in Suez. So I guess, my question would be do you consider Suez to be cool, non-cool or under assessment?

Isabelle Kocher

I will start with Suez. None of my neighbors prepare the list of answers for you. So regarding Suez, we have been extremely clear. We said that we are happy with the 32% of stake we have in this company. This is a beautiful company. By chance, I know it very well. I worked for it in the past. This is a beautiful company with a great potential. We are extremely supportive of the very ambitious plan the new appointed CEO is expected to present in the months, in the coming months. And by the way, we also announced, you've seen that, I suppose, that we intend to deliver more industrial synergies. We have a lot of things to do together because on part of the Client Solutions, we, I mean, we explained today, you can perfectly plug and then go together with them, part of their all new arm. So there are a lot of things to do between our 2 companies, and I'm happy to see that we effectively accelerated that momentum. Judith?

Judith Hartmann

So your question was on power prices and the impact basically of the mark-to-market. Indeed, the power prices are moving in, so are foreign exchange. So when you look at compared to what I presented, net-net, we are roughly there. We're about EUR100 million short in the outer years. But quite frankly, obviously, this is on EBITDA. But quite frankly, obviously this will continue to move. I believe, we collectively believe that power prices will continue to go up in Europe, and so I'm not concerned about this.

And I think beyond that, one thing that is important to point out is what Paolo alluded to. The way our European generation is now optimized, whenever you have an imbalance in the market, it could be for a few hours or few days, you have power prices that go way about that. Could be EUR500, could be whatever. Then it's really then that we make additional money, and that's become now a regular event. And so you need to take both of those into account. But Suez, like I said, we're mark-to-market roughly in line at the moment. And the question on lean 2018. Yes, same thing. Like you said, it's important to us to give targets that we are confident that we can achieve. The EUR800 million, when you've just EUR1.3 billion, is actually significant. I believe that we can do this. There is a lot of actions that have actually been -- action plans that have already been implemented that we're going to see. I mentioned 2 of them when I was talking earlier. The digital platforms, for example, on renewables that we put in place or that we're in the process of rolling out globally on our thermal fleet. Those are topics that take you some time to put in place. But once they're there, they're really going to start showing return. So I'm very confident. And then, of course, on purchasing as well as on shared service centers, lots of work that is going to carry over from last year's plan. In 2018, we had an entire effort, what we call smart spending, which was a very positive of about EUR 100 million, EUR 120 million on COI just in a 2018. That's going to translate into the future. So we are confident this is going to be a lot of work. But that teams are rallied behind us, and we are confident that we can make this happen.

Gary Leibowitz

Okay. There's one just right, straight through here.

Oscar Najar

Oscar Najar, Santander. Two questions. The first one is regarding the Belgian nuclear liabilities. You have a target of EUR 35 billion to EUR 37 billion economic net debt by 2021. My question is where is the increased values assuming for historic and dismantling provisions in economy net debt? And the second is regarding the [indiscernible] income you could have shared. You have allocated EUR 6 billion in disposables, including GLOW. So what is the contribution of those EUR 6 billion in assets today in 2018 to see the impact in 2021 in the net recurring income?

Isabelle Kocher

Judith?

Judith Hartmann

So on your first question on the economic debt. So we have assumed where it's assumed the current nuclear provisions, as you might, know there will be a nuclear tri-annual revision that is going to happen in at the end of this year. So really, we will see at the end of this year what the outcome is. The calendar is as follows. There is several steps where many external experts could take into account on operational assumptions but also in interest rates and thus discount rates. So you will see there might be a set of rumors starting in May the papers. But the reality is it's half a year process, and we will only know at the end of this year in the fourth quarter what the impact of that is. So that was the first question. Gary, remind me what the...

Gary Leibowitz

Rough COI of the EUR 6 billion assets.

Judith Hartmann

Absolutely. So the disposal numbers, so about -- we said EUR 6 billion. And like I said, half of it is actually a continuation of the 3-year plan that we have just brought behind us, which is, of course, GLOW which is announced and the coal exits in Europe and in Brazil. So there will be an impact of roughly, you could assume EUR 300 million to EUR 400 million on net income and probably double that on COI depending on the timing. And I want to reiterate like I did for the last year, three years actually, that we will be -- none of this is a fire sale. We will be very opportunistic in the market in terms of making sure that we sell the assets when the time is right. We will do like we have in the last 3 years a professional process around each of these. And we'll make sure that we get the right prices and the right multiples just like we did in the last 3 years. Thank you.

Gary Leibowitz

Let's go just to the front here. He has been waiting for a while.

Ajay Patel

Good afternoon. Ajay Patel from Goldman Sachs. Thank you for presentation firstly. Three questions for me. Firstly, on GLOW. Just to double check, the net recurring income guidance includes GLOW in there for the future numbers. So I was a little confused because the COI had a note and they're excluding GLOW, and then I was just wondering if the net recurring number was GLOW included or not.

Secondly, in regards to the growth in renewables on the COI level, what proportion of the profits are gains from the DBpSO model as an asset sales stance? And then lastly, on the cost-cutting side, what are the restructuring costs to delivering that EUR100 million plan?

Isabelle Kocher

Judith?

Judith Hartmann

Okay. So your first question was around GLOW and was it included or not. So we're assuming that it's going to be -- that the sale is going to be concluded in the first quarter of this year. You know that we have signed this at the very end of last year. You -- it was publicly discussed that there were some remedies that were asked by the regulators, so all of that is ongoing like I said earlier -- as we speak actually. One of the remedies was to sell one of the assets beforehand that was signed last week, at the end of last week. And so we're waiting for the -- or GLOW is waiting for the regulatory approval.

So we have assumed this is happening in the first quarter, and that's in all the indicators. So on the debt, on the net income, on everything else.

You had a question on restructuring cost. You've heard me -- when you heard me mention a lot of the efforts on Lean 2021, they're not actually people related. They are related to digital, they are related to purchasing. And so and we have assumed some costs for GLOW -- for whatever implementation cost that we might have of roughly about EUR200 million. But like I said, a lot of it is actually the digital component and purchasing. So it's -- the cost is in the OpEx as we speak. Then was your question on the percentage or the rough split, let's say, of the increase of renewables of how much was DBSO, that's obviously a very important part of the business model. It really helps us, like Gwenaelle was explaining, to get at the sell down when the plans go live a lot of the financial benefit. And so that's roughly between EUR120 million to EUR200 million by 2021.

Gary Leibowitz

Okay. Next, so just is here.

AymericParodi

Good afternoon, everyone. Aymeric Parodi, UBS. Thanks for the presentation. One question on the renewables. You disclosed long-term growth path for 2030, 2040. I was just wondering how important France is in your scenario in light of the BP and the 10-year energy road map unveiled in December?

Isabelle Kocher

Gwenaelle?

Gwenaelle Huet

Yes. In this strategy, we've been under a strong growth for wind and solar in France, and you've seen already the objective that we mentioned. So our objective for wind in France is 3 Gigawatt by 2021, and the objective in solar by 2021 in France is 2.2 Gigawatt. In addition to that, we'll continue to pave the way on offshore. But obviously, it will not account in the P&L in 2021 because it will take longer time. And we will continue to develop biomass where, but it's just starting basically. So you have the figure for wind and solar.

Gary Leibowitz

Just there.

Carolina Dores

Carolina Dores from Morgan Stanley. I have 2 questions. Just to understand the growth in renewables because I can see from the presentation that you expect the COI on wind and solar to grow by EUR150 million. The rest is probably higher power prices on hydro. And that is on EUR2.5 billion of CapEx. So of net CapEx, how do you think about this next CapEx?

Is growth CapEx minus the capital employed that you, of what you sell? Or growth CapEx minus capital employed plus capital gain of what you sell? And my second question is how much of the cost cutting of this EUR800 million is actually benefit earnings? Because if I look at how much your COI is growing and how much nuclear is improving, power prices, effect of growth, I get a little bit short on the improvement, especially because you had an impairment in 2018, which I'm assuming there is a benefit on your D&A from 2019 onwards. So I'm curious about how much of this EUR800 million is actually benefiting earnings.

Isabelle Kocher

So Judith on the global dynamic, I would say, including your cost cutting and D&A, et cetera, and on Gwenaelle on the trajectory for renewables.

Gwenaelle Huet

Yes. On the CapEx, well, you, I presented the gross CapEx and the net CapEx. Net CapEx is after implementation the DBpSO model. So what is showed in the slide is that we will change our average equity share within the projects. And for solar, it will come from 58% share into our projects and to 40% by 2021. And in wind, it will be from 55%, 58% share to towards 50%. So this is a way to recycle the capital. And when it comes to net CapEx, it's after this recycling of capital.

Judith Hartmann

Okay. You had a question regarding the cost cutting, the EUR800 million. That is a net impact on EBITDA. So when you did your breach, I mean, some of it was already teased out, I guess, in some of the other questions. There was a scope impact that I've have mentioned. The nuclear will be positive. The nuclear, I would only, when you value model that, be careful that you don't just assume it's, that that's the complete step up. We had a partial offset like I was showing in September. The fact that nuclear was down helped some of our other merchant businesses, and Paolo did a great job to explain how those all stick together. So you cannot just assume it's 100% because some of the generation business, engine businesses will normalizing. But it is, of course, very positive. You're right. So lean will be very positive and it goes into the growth, obviously. I sometimes get this question on is lean on top? And how do you distinguish it between the business lines?

Quite frankly, if we didn't do that, it's, you wouldn't have the growth that I was talking about in the different business lines. You cannot like separate it that way. We had very good examples earlier on Client Solutions. It helps us to be competitive. You want to be able to win in the marketplace. And you need to be at the right price point, and that means you need to be at the right cost point. And so it is a very important aspect that goes across the different businesses. So I hope that should help you to do the bridge.

Gary Leibowitz

Okay. Let's go all the way over here.

Sofia Savvantidou

Sofia Savvantidou from Exane. A few questions for me as well. So first of all, on the strategy. I understand the focus on the Client Solutions and the renewables, and I understand the strong cash flow that is generated from the merchant business. I don't necessarily see though how the merchant business has a future with the other two. So is there a strategy to continue to decline that going forward?

And the second question is on the credit rating. I think you might be the last remaining European utility that is still defending a rating in the A categories. What is really the rationale behind that, especially given your quite low cost of debt?

And the third question is on the numbers. Obviously, you're spending a lot of CapEx in renewables, you're doing some tuck-in acquisitions. How much, if you can give us a figure of your capital employed, is not going to be earnings effective at the end of the business world premium? So if you had it in Turin, how many millions or billions of capital employed will actually not be fully generating any earnings?

Isabelle Kocher

Okay. On market, I will ask Paolo to elaborate a little bit more and Judith regarding the two other questions, rating in particular.

Paulo Almirante

So regarding the merchant business, what I have presented is the optimization of the portfolio. So we have significantly reduced our capacity and we continue to reduce coal generation, merchant businesses, essentially in Europe. We don't have any significant merchant businesses outside Europe. And this business, after its reshaping, is quite useful to offset other parts of the merchant ecosystem. So as Judith just said, when for some reasons, we have capacity that is not available, prices go up and this business captures and edges other businesses. So that's an integral part of the way we operate in the merchant market in Europe.

Judith Hartmann

Okay. So you had a question on the nonproductive CapEx. At the end of the period, we've assumed about EUR3 billion, and it really has to do with the timing of the commercial operation dates on what, how it flows in. So that is the assumption there. And then you asked a question on the rating, which is, of course, a very good question also. And really, what I would say there is we are indeed, this is indeed a very strong rating. We are still in a big transformation so we feel that it is good to have a relatively conservative balance sheet policy at this stage. And so that's why we have assumed in this model the current KPIs that are in line with the A rating.

Isabelle Kocher

All right. To complete a little bit because beyond your questions, I feel one question you don't really ask, which could translate as the following way. You tell us basically, you have a beautiful story, but are the figures translating it? You didn't say exactly that. But it's -- well, first of all, we promise something that is very high. 7% to 9% growth per year is very significant, and well, that's the first time we give multiyear guidance by the way. And that's something that you really ask us truly. We have been extremely transparent regarding the hypothesis [ph] as Judith just reminded them. So you can see that we are probably really on the safe side. And that it is probable that in 2021, we -- the ENGIE we just explained we are starting now is able to deliver more. Now we have the EBIT to deliver what we promise. And then we already promised between 7%and 9%, hopefully, we do more. That's just the -- I mean, regarding your hypothesis, that's also the first time we believe we give even our contingencies. Normally we don't need them, but we have injected them in the model.

Gary Leibowitz

Okay I think we've got time for just a couple more. Just one there.

Vincent Ayral

Vincent Ayral from JPMorgan. Thank you for clarifying that the guidance is somehow conservative in order to be delivered on. Actually I was looking at the capacity to accelerate on that. My first question is regarding the bottleneck. If we're looking at potential acceleration, is it demand from the customers? Is it the capacity to deliver or would be the financing capacity? The point number 2 goes on, if you were to be the financing capacity despite you DBpSO, then the question would be would it be possible to envisage to do this DBpSO OP, we'll call it, on existing assets? Basically you talked about a partnership to be announced in a couple of months. You have PPAs around the world. Could you extract here some capital to deploy somewhere else and maybe accelerate? And that could be looked as well on existing assets like the infrastructure. There have been a number of articles, headlines today, and that was led by BFN. They said that potentially, you will be considering a gradual exit from the infrastructure business. So that's a key question for the market today. I needed to ask that. And finally, I also needed to come back on shares. I understand your statement now. What I would like to understand is, when you talk about synergies with shares, the strategic fit, if you can give some more color. Thank you very much.

Isabelle Kocher

Well, I will start by the last one. We have several projects together. Some we can speak about, some not yet because we are in the competition to win some bids. And competitions are -- not all of them are public, so. But we have already started nevertheless. We, for example, started to leverage the Suez lands to implement renewable. And renewable is also a matter of access to lands, they have a lot of. And then we started typically that kind of systematic cooperation, bio gas. The same that you will be fueled on a regular basis regarding what we effectively do together.

The bottleneck, it's a very good question. That's -- and the point is to try not to have any bottleneck. And that's the reason why I spend time to tell you the boosters we are really setting in place. Financing won't be an issue. I just mentioned and I will tell you more in a few months that we are currently negotiating an additional platform that would be a big one, really big one to manage that there is no limit, if I can say so, coming from that.

The access to, I mean, strategic negotiations, strategic design, high level with the leading teams of the company or the local government we work with is really something we also managed to put that skill rapidly. And I mentioned the way we will do so. So -- well, normally we are able. That's the, clearly, the strategy we have to start this engine large scale. It will take time to effectively trigger, that is to say, between the moment you start the negotiation and the moment you sign the contract, there are a few months. But my expectation is that we will see something that is really growing. And I go back to my formal comments. We are used to speak and diffuse when we -- well, when we have a high level of detail, but this is something that is really expected to grow rapidly.

Regarding infrastructure, your question is about transportation. That's true that this story is a little bit different by definition, I would say, or by construction. We explained the story about decentralization, and a big part of our gas networks will contribute to that by -- I mean, GDF, more generally distribution networks. They will be progressively involved in the regional projects.

Regarding transportation, the -- I mean, the way to upgrade the value proposition is different. It's more about better connection with the other transportation networks. And here probably, there is -- and I already said that, by the way, but there is probably something to do progressively with other transportation players to be, I mean, able to deliver industrial synergies with them. And there is a law under discussion at the French parliament that will effectively give us the flexibility to maybe look at something in that domain. So this is effectively a different story. But my feeling is that the transportation players, they will go to a kind of consolidation one way or another. And it is very important for us to be part of that.

Gary Leibowitz

Okay. And then there was one on financing.

Judith Hartmann

That was the one that I answered.

Gary Leibowitz

You got that one. Okay. All right, we got time for one last. Sitting, yes, just on the back.

Peter Bisztyga

It's Peter Bisztyga from Bank of America Merrill Lynch. Just following up on your last answer. Have you assumed anything in your EUR6 billion of disposals for GLT gas specifically? And also how much of your EUR11 billion to EUR12 billion great investment plan is earmarked for some of the acquisitions that I think you mentioned to the press that you're targeting to TAG in Brazil, potentially on a COI as well? And then can you also tell us what you're assuming in terms of a network return cut in 2020 in France? Or alternatively, could you tell us what your net income CAGR would be if those returns remained flat?

Isabelle Kocher

Judith?

Judith Hartmann

Okay. So you had a number of questions. One was on did we include some of, did we include TAG basically in the number? Some of the other, quite frankly, rumors on acquisitions, I wouldn't necessarily believe everything that is in the press. A TAG is, of course, something that is public that we're looking at that, and that is not yet in this growth CapEx. So that would be, we would look at that, but it's, could be part of it, but it's not yet fully modeled it. You had a question on what's GLT in the EUR6 billion.

No, not, Isabelle, like she said, we're open to look at that, but we are, there is nothing and nothing concretely planned right now, so it's not in the EUR6 billion. And then you had a question on the French regulatory returns. I think what's important to keep in mind is everything being equal, when you just look at the tax rate that is going down in France, then everything being equal, this could be an impact on the returns.

But obviously, we are also paying less tax. So quite frankly from that perspective, it is a wash. So it's early days on that. We will really know much more over the next year or 2. Is it prudent? It could be. Let's say with, we're obviously, it's early days. And right now, quite frankly, it's difficult to say anymore than that. Did I cover the 3 questions?

Gary Leibowitz

I think so. I think so. Okay, guys. Right, we're a little over time, but that's going to do it for us for today. Thank you very much for attending here and for joining on the webcast. We won't be leaving these events for so long. We, in fact, intend to step up the pace of bringing you insights on delivery of the strategy. You can look forward, as I've said to some of you over the break, to some type of presentation from us every 3 or 4 months on a specific topic. Much shorter for, say, 60 or 90 minutes, to give you a chance for more frequent Q&A. Thanks very much.