Suez

Introduction

History

"SUEZ is the result of a merger between Compagnie de SUEZ and Lyonnaise des Eaux, which took place in June 1997. At the time, Compagnie de SUEZ, which had built and operated the SUEZ Canal until it was nationalized by the Egyptian government in 1956, was still a holding company with diversified equity investments in Belgium and France, mainly in the financial services and energy sectors. Lyonnaise des Eaux was a diversified company involved in water and waste management and treatment as well as construction, communications and the management of technical facilities"

Overview

"At December 31, 2007, with revenues of 12.0 billion euros and 61,915 employees, the Group conducts its business as an operator in over 25 countries. The Group is a global reference player in the environmental market (water and waste). The Group is present in the fields of water management, wastewater treatment, water treatment engineering, and in the fields of waste collection, sorting, pre-treatment, recycling, and waste treatment. It operates both on behalf of public entities and private sector players. In 2007, through its activities, the Group supplied 68 million people with drinking water, and provided wastewater treatment services to 44 million people. In the same fiscal year, the Group provided collection services to nearly 46 million people in the world and over 400,000 industrial and commercial clients, collected nearly 23 million tons of household waste, industrial non-hazardous waste, and medical waste, and treated more than 42 million tons of waste" .

Mergers, acquisitions, businesses and risks

In July 2008 the energy division of Suez merged with French state energy company Gaz de France, creating GDF Suez. In one fell swop the merger created 'the world's fourth largest energy utility by market capitalization, behind Russia's Gazprom, France's EDF and Germany's E.ON'. 'The combined revenues of Suez and Gaz de France were about $117 billion, with earnings of almost $8.85 billion' . Suez Environment, the water and waste division is 35% part owned by GDF Suez, as such there is quite an overlap on the board of Suez Environment from that of GDF Suez.

Suez has acquired various businesses, created a plethora of subsidiaries and ignited partnerships - often of the Public Private (PPP) kind - right across the world. Similar to its apparent rival Veolia - there are accusations that Veolia and Suez work in tandem to secure public contracts - Suez has deployed an expansive strategy, which like Veolia led to financial turbulence for them in the early parts of the 21st century. Like Veolia they expanded into countries that proved problematic, again just like Veolia they have sought various forms of corporate welfare, in the form of loans (soft), grants and subsidies from International Financial Institutions and donor governments to ofset this risk. In addition, like Veolia they have sought safer and less risky new markets. Especially affarmage contracts where they sell their expertise and skills to public authorities and companies, but are not expected to invest. Thats left to the customers and local governments.

Their businesses of energy, waste and water are of the most profound social and environmental importance. All societies require and desire efficient energy, waste and water sectors. Consequently, they are all politically sensitive policy areas. Its no surprise that Suez have a formidable and far reaching lobbying operation, with extensive political connections on their board and memberships and links to a huge amount of lobby networks, trade associations, think tanks and other institutions. Unsurprisingly Suez has secured a host of loans from various International Financial Institutions (IFI's) over the years; a situation tantamount to a form of corporate welfare. Yet Suez enjoys this corporate welfare, which comes ultimately from the worlds taxpayers and/or the tax payers and water customers of their host country, despite being embrolied in various corruption scandals over the years. It seems the worlds policy makers are so fervent in their belief in private provision; they are prepared to ignore and overlook scandal, incompetence, greed and failure in the private water sector.

Suez assesses potential risks to its operations. These risks include how the the Group’s water activities are exposed to 'economic cycles' with higher risks in developing, rather than in developed countries, especially with regard to political, regulatory, or economic instability' . Given that they have over 5.22 billion Euros of debt and the current volatility of the market; not just in in developing countries but also in supposed safe countries, as shown by by the recent economic crisis, it does highlight another of the potential perils in outsourcing, from state to market, such an essential service. Indeed the precarious nature of such reliance on markets will be felt within the corridors of the Suez boardroom: board member Edmund Alphandery was also, amongst other roles, a member of the European Advisory Board' for the now defunct Lehman Brothers .

Suez also identify changes to consumption patterns as a risk to their operations. Observing that consumption patterns have decreased as a result of increasing recognition that water needs to be preserved; they have tried to offset decreasing consumption, and thus decreasing revenue because of that. Therefore producing and developing other activities and services that give them 'greater added value in both drinking water production and distribution and wastewater treatment, notably helping public authorities to meet their obligation to respond to changes in regulations'. Yet they are concerned that these efforts may prove 'insufficient in the future to offset the reduction in volumes the Group may experience, there could be a negative impact on the activity, earnings, and outlook of the Group' . Such pronouncements reveal how Suez are most concerned with their own interests, which may conflict with wider societal and environmental interests and policy.

Lobbying

In a world of ever increasing water use, especially by industry and business, its no revelation to report that they are working hard to ensure a favorable regulatory and legislative environment in which they operate. The prospect of increased social and environmental regulation far from being welcomed is seen as a risk. They state that 'The Group’s businesses are subject to environmental protection, public health, and safety rules that are increasingly restrictive and differ from country to country'. Adding 'the competent regulatory bodies have the power to institute administrative or legal proceedings against the Group, which could lead to the suspension or revocation of permits or authorizations held by the Group or injunctions to cease or abandon certain activities or services, fines, or civil or criminal penalties, which could negatively and significantly affect the public image, activity, financial position, earnings, and outlook of the Group' and that 'Regulatory changes may also affect prices, margins, investments, operations, and, therefore, the activity, earnings, and outlook of the Group' . Yet they often attempt to portray themselves as guardians of the environment and the worlds natural resources rather than being concerned foremostly with costs and margins. Its no surprise then that they would attempt to influence the regulatory environment wherever they operate.

Lobbying assists in Masking their real objective which is to maintain the commoditisation and marketisation of those resources. Positioning themselves as best placed to benfit from the continuation and expansion of such a system. A clear example of this mindset is the CEO Water Manadate. The Polaris Institute write that 'Touted as an extraordinary call to action, it is a devious initiative by some of the global water giants to position themselves as environmental stewards while also exercising even more control over water management'. Moreover 'The last four areas (and their associated pledges) read like a handbook on how for-profit water companies can bring their agenda into every aspect of global, national, regional, and local water policy making. For example, in the collective action, public policy and community engagement areas of the Water Mandate, the CEOs state that corporations need to work closely with all levels of government, civil society and international institutions' .

Political Connections

As seems to be the way with the big water companies Suez has filled its boardroom with ex Government Ministers, European Commissioners, parliamentarians and political officials. Given the political nature of its operations this is unsurprising...however the ensuing disproportionate influence that this private company enjoys in the public sphere raises questions over whether the same influence or voice is given to or heard by citizens. This influence is assisted by the contacts, expertise and experience brought by the Suez employees and board members who have a political track record.

There is an wealth of political experience on the Suez board, predominantely from France but also from the EU, the UK and Canada. Perhaps the most illustrious of these is Etienne Davignon a former European Commissioner between 1977 and 1985. Davignon was caught up in controversy in 2007 when it was discovered he was a special adviser to European Commissioner for Development, Louis Michel. There were concerns at a potential conflict of interest for Davignon given 'the large emphasis on infrastructure projects in Michel's Africa strategy, Davignon's role as adviser makes Suez very well prepared for the bidding process for these contracts' . Lord Simon, a former UK Minister for European Trade and Competiveness between 1997-1999, also sits on the board of Suez.

Others with political experience and links include.

Board member Jean-Francois Cirelli; he has wide experience of the French Government. 'From 1985 to 1995, (he) held management positions at the Treasury Department of the French Ministry of Economy and Finance, before becoming technical advisor to the President of the French Republic from 1995 to 1997, and economic advisor from 1997 to 2002. In 2002, he was appointed Assistant Director of the office of the French Prime Minister, Jean-Pierre Raffarin, in charge of economic, industrial, and social affairs' .

Valérie Bernis, a French citizen, she is a graduate in Economics from the University of Economics of Limoges. From 1986 to 1995, Valérie Bernis was press officer at the office of Edouard Balladur, Minister of the Economy and Privatization, then communication director of Cerus, then communication officer of Edouard Balladur, Député de Paris, and press officer for the Office of Prime Minister Edouard Balladur .

Ex Chief Executive officer Yves-Thibault de Silguy. From 1976 to 1981, he worked at the Ministry of Foreign Affairs and then from 1981 to 1985, for the European Commission. He then worked at the French Embassy in Washington as a Counsellor (economic affairs) from 1985 to 1986. From 1986 to 1988, he was an adviser in the Prime Minister’s office with responsibility for European affairs and international economic and financial affairs .

Board member Anne Lauvergeon has wide experience in both business and politics. In politics: 'Since 1990, she served as an Executive Assistant of the International Economy by the French president. Ms. Lauvergeon has been Ingénieur en chef of the Corps des Mines and is responsible for studying chemical safety-related issues in Europe for the Commissariat à l'Energie Atomique (CEA) since 1984, mineral resources administrator for the Ile-de-France region since 1988, Deputy Department Head at the Conseil Général des Mines since 1988, special assistant for international economics and trade to the President of the French Republic since 1990, Deputy Secretary General of the organization of G7 summits for the President of the French Republic since 1991' .