Online Extra: Q&A with Suez' Gérard Mestrallet

The boss discusses how the water and energy outfit has put itself into the 20 most global groups in the world

As top dog of water and energy group Suez, Gérard Mestrallet is about as close to the peak of corporate France's power structure as you can get. Yet, he was every inch the relaxed and informal executive when he talked with BusinessWeek Europe Regional Manager John Rossant recently. In his shirtsleeves and quaffing his favorite beer -- Belgium's Stella Artois -- the chairman and chief executive reflected on Suez' strategy. Following are edited excerpts of their conversation:

Q: It has been a pretty exciting few years since you took over Suez in 1995.


Suez had become a financial group, with interests in banking, insurance, and real estate. When I took over, I had to ask myself whether we'd keep units like [investment bank] Indosuez [and] Generale de Banque in Belgium. The question was whether we could become a real actor in financial services. I worked on the question for six months, and the answer was: No, we couldn't be. So at the beginning 1996, I sold Indosuez to Credit Agricole.

The bet we were making was to get Suez out of finance and into energy, but without being sure we could really do it. We only had a minority interst in [Belgian energy giant] Tractabel. By 1997, we merged with Lyonnaise des Eaux, and our strategy was to build a global leader in water and energy. And I think we've succeeded. If you look at foreign direct investments relative to sales, and the percentage of our workforce outside France, we're now among the 20 most global groups in the world.

Q: You were tempted to make a splash in Enron-style energy trading, and, indeed, you have an energy-trading operation in Houston. This could have been dangerous, no?


We know a lot about energy trading, since we're No. 1 in electricity trading here in Europe. Our U.S. headquarters is in Houston, not far from Enron. But we always conceived of energry trading as a complement to our core activities. Houston has been very useful as a lot of our European team has learned there. And now that European energy markets are being liberalized, we're in good shape.

And remember, we started our U.S. trading activities after we already had 15 power stations in the U.S. But I was also approached by a lot of people asking why we didn't sell our power stations and concentrate in trading.

Q: European integration seems to be hitting some road bumps. Are you worried?


I'm very confident. I'm profoundly convinced that our moves forward in Europe have been positive and progressive. First, the Single European Act, then the euro. Each step has been a miracle. There's no possibility of going back. You could have a plateau.

Europe needs to find once again its calling, above and beyond simple economic questions. Europe needs to take new steps. And I don't think our problems are worse than what the U.S. went through [in the 1960s and 1970s]. European construction has always gone faster in periods off economic growth. Right now, with a slow economy, we can see a phenomenon of falling back on ourselves. We see a little more egoism around. But fundamentally, we're on track.

I was born in 1949, so I lived through the second half of the 20th century. Fifty years of peace in Europe is a miracle. And the construction of Europe, the integration of Europe has consolidated this peace.

Q: But the enlargment of the European Union to 10 new members in 2004 poses some problems?


I work a lot with the European Round Table. We favor enlargement [of the EU] because adhesion to Europe creates supplemental competitive advantages for everyone. But it's evident that you have to find more democratic legitimacy for Europe. The weakening of the European Commission in Brussels would be a disadvantage for European construction.

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