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JULY 19, 2004
France's Poweo: Aiming To Spark A Revolution Can Poweo's Beigbeder become a serious rival to France's electricity monopoly? Jacques Mayadoux used to chafe at his electricity bill. As the co-owner and general manager of Saint Karl Coiffures, a chain of 160 hairstyling salons in France, Spain, and Portugal, Mayadoux used to sign off on bills as high as $6,000 a year per salon. Then he read about a new private electric utility called Poweo, which undercuts state-owned Electricité de France (EDF) by 10%, and asked Poweo to make a pitch. In mid-June, he switched all 90 Saint Karl salons in France from EDF to Poweo. "We didn't hesitate," he recalls. Mayadoux is just the kind of client that Poweo's founder and chief executive, Charles Beigbeder, had in mind when he set up the company in mid-2002 with an initial personal investment of about $2 million. France had only weeks before agreed to a phased opening of its $18.5 billion commercial electricity market. That left room for a low-cost startup to buy juice from the national grid at wholesale prices and resell it. At first, Poweo snared a few contracts from among the large industrial customers who were allowed to tender freely for their electricity needs. But on July 1, the entire commercial market opened at once. Poweo now has 2,400 customers, including eight Carrefour hypermarkets and a local unit of Alcoa (AA ), and it's adding 400 a week. "Our value added is choice and price," Beigbeder says, sitting in his modest office in Paris' La Défense business district, near the gleaming I.M. Pei-designed 40-story headquarters of EDF. As Europe's monopolies are forced to give ground, a new class of entrepreneurs like Beigbeder is stepping up to the plate. Their bet: If you offer the same goods and services as the big boys, but at a discount, consumers will come. That credo is behind the success of no-frills, low-cost airlines like Ryanair (RYAAY ) that took aim at inefficient national carriers. Among telecom companies, upstarts like Sweden's Tele2 and France's Iliad are hacking away at the market share of incumbents with lower prices and smart marketing. Poweo's model is one that already works in Britain for about 40 power discounters. THIN MARGINS Beigbeder, now 40, is an old hand at the cheap-is-beautiful game. As a young investment banker in Paris at Paribas and Credit Suisse First Boston (CSR ), he was intrigued by U.S. online brokers who charged a fraction of usual commissions. He began Self Trade, France's first online discount brokerage, in 1997 and sold it to German online finance group DAB Bank in 2000. But he was paid in DAB stock, which tanked in 2001. "It was rough," he recalls. "I didn't know what I'd do." It didn't take him long to dream up Poweo. In early 2002, when the EU forced France to begin opening its power sector to competition, he regrouped with some Self Trade colleagues and formed Poweo. In early 2003, Poweo snared its first client: French tobacco group Altadis. With none of EDF's overhead, Beigbeder is keeping a tight rein on expenses. "Anything that can be subcontracted out is," he says. But because Poweo uses EDF's power plants and grid, which represent 80% of his costs, Beigbeder says the best discount that he can offer is only 10% below EDF's tariffs. "We had been hoping for a bigger savings," he admits. He expects $38.4 million in sales this year, and $216 million in 2005. That kind of growth may be attractive, but the fact remains that the real money is to be made in power plants and grids. By comparison, Poweo's margins as a retail supplier of electricity are thin, notes ABN Amro (ABN ) power analyst Michael Charlton. Charlton predicts that EDF will put up a fight when France's residential market opens in 2007. By that time, though, Beigbeder may even have dreamed up his next business.  By John Rossant in Paris
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