American water dreams inspire a French revolution

What are Lyonnaise’s plans for America?

I was just with the mayor of Atlanta and he was very pleased that he was now able to extend Lyonnaise’s contract to 20 years. That way there is the time to really invest. With a five-year period

you cannot really invest, you can only manage. With large cities opening up and the EPA continuing to be pushy with standards – and the fact that we’re seeing federal funds becoming smaller and smaller – I believe the market is going to develop. And we need to be a big actor in it.

The US water market is interesting because nobody wants to be the first one in and nobody wants to be the last one. But there are a lot of people in America who want to go into public-private partnerships. Again, in my meeting with the mayor of Atlanta, he told me that they were having a lot of visits from other cities, people coming to see how to run a public-private partnership.

Is America having to learn how public-private partnerships work?

Absolutely. Americans need to understand why the public-private partnership model is interesting. When the municipalities see that they can reduce production costs by 30 or 50%, they see that they can invest those saved dollars in order to fulfil the requirements of the EPA.

How does Lyonnaise’s management structure work in America?

We believe it’s important to be American in the US. What we are doing in the US is working with United Water. In public-private partnerships, we work with staff already in place, but with management from United Water.

What we’ve been able to succeed in is creating a good relationship between the people at the utility and our management. That’s one of the key successes of Lyonnaise/United Water.

You cannot win in this sort of business if you do not have the full support of the employees. For example, when we arrived some years ago in Indianapolis the trade unions were very much against us. Today, the trade unions work with us and not against us. They saw that they were able to continue without too many lay-offs or closures.

You have to remember that Lyonnaise has been in America since 1981 or 1982. So, we’ve been working with and training Americans in the Lyonnaise group for a long time. For example, a member of the board, the Technical Research Director of Lyonnaise des Eaux, is an American.

We’ve been able to recruit good people and train them. There are some French managers in the US, but very few. In the United Water Group there are, I think, three French managers. There’s a Norwegian, and the rest are American. We’ve been able to build a team that is very Lyonnaise in the way it understands and runs the business, but that is American.

To give you one example, we offered employees the opportunity to buy shares in Suez Lyonnaise des Eaux at a preferential price. In the US, more than 50% of employees took the shares. I think the United Water people feel very much that they are Lyonnaise people, too.

Do some of the American public utilities fear the arrival of Lyonnaise and another large French company – because both companies have a lot of money and clout?

I don’t think it’s a question of fear that a French company is arriving, but what I’ve seen is that people want a professional company to come in and act professionally. When a company works with people professionally, there’s no problem at all.

Of course, when there is a takeover there is always fear. I don’t think it’s a French syndrome that’s involved, but a takeover

syndrome. American people, as soon as they see that they have

a very able company coming in, they are fine. In the US, when

they hear that they are going to work with the world leader that

is something very important to them.

When you arrive in a country that isn’t the US, people are more afraid. Lyonnaise has to show that it will use local know-how and how we can exchange good practice between countries. At Lyonnaise, we believe that good practices are not only French ones and we work on ways to exchange good practice.

The strength of Lyonnaise des Eaux is that we went international much earlier and over the years, we’ve been able to build an international network.

How are contract negotiation and relations with American local government different from their French equivalents?

Every country has special ways of dealing with things. That’s why you need local partners – to be able to understand what’s meant by an attitude, or by some words.

We’re lucky in the US because we speak the language. That’s not always the case. When we go to China, well, we have some Chinese-speaking people but not too many. Or Hungary, that’s a

difficult country in terms of language.

One of the things we see all the time with municipalities and local governments is concern over the effect that decisions will have on electors. We find more similarities between France and the US than you might think.

A mayor in France and a mayor in the US are both thinking of the voters, how to avoid raising taxes, how to have a stable tariff, etc. The global culture is everywhere and everyone has understood that when you have a democracy you have to listen to your population.

So contract negotiations aren’t any more American in the US than anywhere else?

They’ve got an American flavour, there’s no question about that. And you’ve got be American to understand some of the points involved.

For example, minority involvement in the Atlanta contract. It’s a city where you need to speak and work with minority shareholders. And we need to involve minority partners in the operation.

If a company is not aware of these kinds of issues, then it’s making mistakes.

What do you identify as the primary challenge facing the US water industry?

I think investment is the main issue – investment to address water quality, wastewater treatment. Lyonnaise is speaking mainly with the big cites and larger municipalities. It is more difficult to work with smaller municipalities. It’s not impossible, but it is more difficult.

How do you see Lyonnaise’s role being different in America than Vivendi’s?

As you know, Vivendi has bought USFilter. USFilter is an equipment manufacturer working in the water sector. Vivendi hasn’t been very successful with public-private partnerships, but they’re doing what they think is best.

I think we’ve got more experience in the US. What is important in a group like Lyonnaise is that we need to be better every day. We can be better today, but tomorrow that could change. So, we’ve got to be better every day.

In the US, Lyonnaise has two feet. First, there is the delegated and regulated water and wastewater management domain. We’re strong in this area and we want to double our revenue in this area in the next three years. We want to do this by helping municipalities to reduce their costs. Then, there is the industrial sector which we want to develop. We’ve purchased Nalco, which complements our Calgon purchase. And Calgon fit in with what we had already.

The way I see it, we’re on two strong feet. On the one, there is the industrial side with chemicals, and on the other, the public-

private partnerships with muni-cipalities.

We want to create synergies between the sectors and also develop a third area – engineering. We are strong in engineering in other countries, but [Suez Lyonnaise des Eaux engineering subsidiary] Degr‚mont is not strong in the US.

Are there other international sectors where Lyonnaise will see strong growth, or will it be primarily America?

A few years ago I would have told you that Asia was the market. It’s been pushed back, but I believe Asia will come back – and come back within one or two years.

One other place is old Eastern Europe – Bucharest, Sofia, Prague. These cities are going to delegation of services privatisation. I think that all of Central Europe is getting there as a market.

South America is a place where we hope things will happen. We won the Santiago contract not too long ago and we are looking closely at Brazil. It takes a bit of time in Brazil, but if you look at what happened in the telecommunications or energy businesses you can see that after a time when people hesitated, things were privatized. So I think Brazil is a major target for the years to come.