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2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
2005 Annual results
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2005 Annual results

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2006-03-13

2006-03-13

Published in: Business, Economy & Finance
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  • 1. ANNUAL ACCOUNTS 2005Investor Relations – 2005, Annual Results – Paris – March 13th, 2006 1
  • 2. Disclaimer Veolia Environnement is a corporation listed on the NYSE and Euronext Paris. This document contains "forward-looking statements" within the meaning of the provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including but not limited to: the risk of suffering reduced profits or losses as a result of intense competition, the risks associated with conducting business in some countries outside of Western Europe, the United States and Canada, the risk that changes in energy prices and taxes may reduce Veolia Environnements profits, the risk that we may make investments in projects without being able to obtain the required approvals for the project, the risk that governmental authorities could terminate or modify some of Veolia Environnements contracts, the risk that our long-term contracts may limit our capacity to quickly and effectively react to general economic changes affecting our performance under those contracts, the risk that Veolia Environnements compliance with environmental laws may become more costly in the future, the risk that currency exchange rate fluctuations may negatively affect Veolia Environnements financial results and the price of its shares, the risk that Veolia Environnement may incur environmental liability in connection with its past, present and future operations, as well as the risks described in the documents Veolia Environnement has filed with the U.S. Securities and Exchange Commission. Veolia Environnement does not undertake, nor does it have, any obligation to provide updates or to revise any forward- looking statements. Investors and security holders may obtain a free copy of documents filed by Veolia Environnement with the U.S. Securities and Exchange Commission from Veolia Environnement. This document contains "non-GAAP financial measures" within the meaning of Regulation G adopted by the U.S. Securities and Exchange Commission under the U.S. Sarbanes-Oxley Act of 2002. These "non-GAAP financial measures" are being communicated and made public in accordance with the exemption provided by Rule 100(c) of Regulation G. 2Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 3. 2005: Confirmation of a winning strategyl Commitments metl Position of leader in environmental services re-confirmedl Strong growth in business in fast growing markets (revenue up 12.2%)l Continuing improvement in profitability (recurring operating income up 17.5%)l Launch of the single brand name: Veolia 3Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 4. 2005: Confirmation of a winning strategyl Substantial rise in recurring net income (up 33%)l Improved balance sheet (economic net debt/cash flow from operations (1) =3x)l Strong improvement in profitability: after-tax ROCE over 9%l Strong dividend growth (up 25%) (2)(1) Cash flow from operations before tax and interest expense, as defined by the Conseil National de la Comptabilité‛s (CNC) recommendation of October 27th, 2004.(2) Subject to approval by the Annual Shareholders Meeting on May 11, 2006 4Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 5. 2005 key figures (in €m and at current exchange rates)  25, 245 3, 687 25000  22,500  +12.2% 4000  +14.2% (3) 3,228 20000  3000  15000  2000  10000  1000  5000  0  0  2004 2004 2005 2005 Consolidated revenue (1) Cash flow from operations (2) 2 000,0  1 , 904 +17.5% 1,620 700  627 +33.3% 600  1 500,0  471 500  400  1 000,0  300  500,0  200  100  0,0  0  2004 2005 2004 2005 Recurring operating income Recurring net income(1) Revenue from ordinary activities under IFRS(2) See definition on page 4(3) Excluding cash flow from discontinued operations sold in 2004 5 Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 6. Strong dividend growthin line with commitments made Net dividend for 2005 (1) €0.85 per share (up 25%) 0,9 €0.85 0,8 €0.68 0,7 €0.55 0,6 0,5 0,4 0,3 0,2 0,1 0 2003 2004 2005 Growth in net dividend per share. 2005 pay-out ratio = 53% (1) Subject to approval by the Annual Shareholders Meeting on May 11, 2006 6Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 7. Confirmation of the business model: Growth inafter-tax ROCE Strong improvement in after-tax ROCE since 2002 10,0% 9.1% 9,0% 8.3% 8.3% 8,0% 7.0% 7,0% 6.4% 6,0% 5,0% 4,0% 3,0% 2,0% 1,0% 0,0% 2002 2003 2004 2004 2005 French Gaap IFRS 7Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 8. Strong sales momentum: consolidated revenue(1)up 12.2% € million 26 000 25, 245 24 000 22,500 31 /1 2/2004 31 /1 2/2005 22 000 20 000 18 000 16 000 14 000 12 000 8, 889 10 000 7,777 6, 604 8 000 6,214 5, 402 6 000 4,920 4, 350 3,589 4 000 2 000 0 Water Waste Energy Services Transport Total At constant exchange rates +13.5% +5.5% +8.9% +20.4% +11.4% At current exchange rates +14.3% +6.3% +9.8% +21.2% +12.2%(1) See definition on page 5 8Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 9. Strong presence in growing markets Regional breakdown of revenue(1) € million 1 2, 254 France +6.8% (2) 1 1 , 476 Europe ex. France +17.0% (2) +15.8% (2) North America ,  (2) Asia/Pacific +28.7% +15.0% (2) 8, 244 Rest of World  7, 044 Group VE +12.2% (2) 1 , 985 2, 2981 , 1 28 1 , 452 867 997 31 /1 2/2004 31 /1 2/2005 Consolidated revenue(1) at 31/12/05: €25.2bn (1) See definition on page 5 (2) At current exchange rates 9 Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 10. Growing markets: in France, +6.8% (1) l Water l Renewal of more than 250 public service contracts (Epernay: water and wastewater, Boulogne: wastewater, SIAEP of the Pontault-Combault region: water …). Strong renewal rate in comparison with 2004, estimated cumulative revenue of over €885m l Continued expansion of Veolia Water Solutions and Technologies (purification stations in Perpignan and Sables-d‛Olonne and water treatment plant in L‛Hay-les-Roses …) l Waste l Renewal of collection contracts in Paris (for 600,000 residents) for total revenue: €108m over 4 years; in Caen for total revenue of~€21m over 7 years; in Bourges for total revenue of €30m over 7 years; and in Nancy for total revenue of €105m over 7 yeears. l “Biogas” electricity recovery contract won at Claye-Souilly –Total revenue: €160 m over 15 years (installation of 16 MW of electricity) l Increase in the capacity of the hazardous waste treatment plant at Limay (Ile de France): opening of a 3rd treatment unit of 50,000 additional tons l Start of service of UIOM of Nîmes and Lasse: 220,000 tons of treatment capacity; total revenue of €380m over 20 years l Renewal of the UTOM and MONTHYON DSP contract (total revenue of €170m over 13 years and 200,000 tons/year) and of BOURGOIN (€110m over 15 years and 180,000 tons/year) l Pan-European contract for waste electrical and electric equipment recovery with Alcatel (7,000 tons per year) l Energy Services l Contract won for Arjo Wiggins plant at Wizernes (Nord) - Total revenue: €127m over 12 years l Transport l Full effect in 2005 of the Chambéry contract that was renewed in December 2004 – Total revenue: €156m over 6 years l First private contracts for rail freight between Germany and France(1) At constant exchange rates. 10Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 11. Europe: up 15.8% (1) United Kingdom • Nottingham County (waste) – Length: 26 years - Total revenue: €1.2bn -Veolia Environmental Services chosen as “preferred bidder” Helgelandske n Blackpool (waste) – Length: 7 years – Total revenue: €34m l Shanks‛s “hazardous waste” business (waste) l Weir Techna., division of Weir (engineering in oil sector) (water) • Diageo site (energy services) - Length: 15 years – Total revenue: €45m Norway Germany • Braunschweig (water) –Annual revenue: €350m Weir Techna • Braunschweig (wastewater) - Length: 30 years - Total revenue: €390m La Marschbahn l Dortmunder Eisenbahn (DE) (transport) for half Poland - Annual revenue: €25m Blackpool Nordharz‐Netz Diageo n Nordharz-Netz (Harz) (transport) Nottinghamshire Braunschweig ZEC Lodz - Length: 12 years – Total revenue: €402m Dortmund United Kingdom n The Marschbahn (transport) - Length: 10 years – Total revenue: €500m Hradec Shanks Kralove Czech Republic (hazardous waste) Germany Czech. Rep. Slovakia • Hradec Kralove (water) Trnava - Length: 30 years - Total revenue: €560m Poland l ZEC Lodz (energy services) – Annual revenue: €167m pRegion of Liguria Romania Romania n Crivina water treatment plant, near Bucharest (water) Italy Slovakia Crivina • PSA Peugeot Citroën at Trnava (multi-services) - In March 2005: Length: 8 years – Total revenue: €60m Contract start-up - In Dec 2005: Length: 8 years – Total revenue: €65m Contracts won or renewed Italy Company acquisitions l p Acquisitions in Sicily and Calabra (water) • Region of Liguria (energy services) pCalabra - Length: 10 years – Total revenue: €130m Norway Sicily l Acquisition of Helgelandske (transport) (1) At constant exchange rates 11Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 12. North America: up 14,9% (1) - Contribution from all 4 Divisions North America n Denver (transport) - Length: each 5 years – Total revenue: €88m n SCRRA, Los Angeles suburbs (transport) since Jul. 2005 - Length: 5 years – Total revenue:€70m n York (transport) - Length: 5 years – Total revenue: €62m • Cle Elum (water) - Length: 10 years – Total revenue: €4m • Gresham (water) - Length: 7 years – Total revenue: €16m Canada • Fort Knox at Radcliff (water) - Length: 20 years – Total revenue: €30m • Moberly (Missouri) (waste) - Length: 20 years Cle Elum - Total revenue: €23m Gresham Vasko York • Cambridge (Massachusetts) (energy services) Denver Fort Cambridge - Annual revenue: €7m as from 1st year Yellow Dodge ATC • Houston Galleria (energy services): commercial contract SCRRA Transportation Fort Knox LLC Moberly - Annual revenue: €1m USA l Yellow Transportation LLC (transport) Houston l ATC (transport) - Annual revenue: €215m Galleria l Vasko Disposal Solutions in St. Paul (Minnesota) (waste) Contract start-up Contracts won or renewed Company acquisitions (1) At constant exchange rates 12Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 13. Asia – Pacific: up 23.6% (1) China n Shanghaï-Laogang phase IV (waste) - Length: 20 years from Dec. 2003 - Total revenue: €260m Hohhot n Disneyland Hong Kong (waste) - Length: 5 years - Total revenue: €2m Urumqi • Foshan (waste) - Length: 30 years Lugouqiao - Total revenue: €270m • Dongjiang-HuiZhou (waste) - Length: 30 years China Handan Qingdao - Total revenue: €255m over first 20 years • Guangzhou-Likeng phase I (waste) - Length: 10 years ChangZhou - Total revenue: €47m Shanghaï‐Laogang • Urumqi (water) - Length: 23 years – Total revenue: €260m Kunming • Handan (water) - Length: 25 years – Total revenue: €5m Guangzhou‐Likeng • ChangZhou (water) - Length: 30 years – Total revenue: €675m Foshan Dongjiang‐HuiZhou • Kunming (water) - Length: 30 years – Total revenue: €1.1bn Disneyland Hong Kong Incheon Zhuhaï n Qingdao (water) - Length: 25 years – Total revenue: €110m n Lugouqiao (water) since 2005 - Length: 22 years South – Total revenue: €50m Japan n Hohhot (water) - Length: 30 years – Total revenue: €600m Korea Showa n Zhuhaï (water) - Length: 30 years – Total revenue: €400m (water n Canton, university campus (energy services) treatment) South Korea Australia n Incheon (water) - Length: 20 years – Total revenue: €400m Australia Clyde‐Woodlawn n Southern suburbs of Sydney (transport) - Length: 7 years Adélaïde Sydney‐southern suburbs n Clyde – Woodlawn bioreactor (waste) l Adelaïde contract for up to 50% (water) Contract start-up Japan Contracts won or renewed l Water treatment business of the Showa Denko company (water) Company acquisitions (1) At constant exchange rates 13Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 14. Successful bids for major industrial accounts Over €900m in annual revenue from new business with major industrial clients in Europe since 2001 in € million 1000 800 600 400 200 0 2001 2002 2003 2004 2005 Between 2001 and 2005: l Average length of these contracts: 7 years, or a signed backlog of about €6.3bn l A third of the contracts signed are multi-divisional: revenue of €305m l Average length of multi-divisional contracts: 8.6 years, or a signed backlog of €2.6bn 14 Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 15. From revenue (1) to net income € million % change 31/12/04 31/12/05 31.12.05/31.12.04 Revenue (1) 22,500 25,245 +12.2% Operating income 1,481 1,893 +27.8% § Cost of net financial debt -732 -713 § Other financial income and expenses +46 +30 § Tax -184 -423 § Equity in net income of affiliates +24 +15 § Minority interests -137 -179 Net income before discontinued operations 498 623 Net income/loss from discontinued operations -106 0 Net income 392 623 +59.1% Recurring net income 471 627 +33.3% Recurring net earnings per share (in €) 1.19 € 1.61 € +35.3%(1) See definition on page 5. 15 Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 16. Strong growth in cash flow from operations (1)  € million  Cash flow from operations (1 ) % change at  Cash flow from current  operations margin(1 ) exchange rates  31/12/04 31/12/05  2005/ 2004  31/12/04  31/12/05  Water 1,504 1,762 17.2% 19.4% 19.9% Waste 986 1,047 6.2% 16.1% 16.0% Energy services 471 581 23.3% 9.6% 10.8% Transport 282 280 - 7.9% 6.4% Others -16 17 - - - (2) Total 3,228 3,687 14.2% 14.3% 14.6%(1) See definition on page 4(2) Excluding cash flow from discontinued operations 16Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 17. Recurring operating income: up 17.5% (1) Marked improvement in profitability € million Recurring operating Recurring operating % change at income margin income constant exchange rates 31/12/04 31 /1 2/05/31 /1 2/04 31/12/05 31/12/04 31/12/05 Water 855 1,002 15.8% 11.0% 11.3% Waste 468 541 14.5% 7.5% 8.2% Energy services 264 332 23.3% 5.4% 6.1% Transport 101 114 11.0% 2.8% 2.6% Holdings -68 -85 - - - Total 1,620 1,904 16.0% 7.2% 7.5%(1) At current exchange rates 17Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 18. Recurring operating income: contribution by division Water: €1,002m, up 17.2% at current exchange rates (up 15.8% at constant exchange rates) Margin: 11.3% versus 11.0% l In France, the regions performed well in the water distribution business, as a result of introducing best practices into all the operating units. l A significant increase in the contribution from Europe (the consolidation of BVAG and particularly the increasing maturity of contracts in the Czech Republic, as well as the positive effects of the five-year price review plan in the United Kingdom) l Start-up of new contracts and good performances from the existing contracts in Asia (improved results from Shenzhen and the start-up of Incheon) l Marked improvement in the results from Veolia Water Solutions and Technologies 18Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 19. Recurring operating income: contribution by division Waste : €541m, up 15.6% at current exchange rates (up 14.5% at constant exchange rates) Margin: 8.2% versus 7.5% l Further improvement in margin, in spite of the impact of higher fuel costs (€13m) l Continuing productivity gains in France (particularly increased profitability in the landfill and hazardous waste businesses) l Marked improvement in margins in the United Kingdom for all businesses, and, more specifically, on integrated contracts, as well as in other European countries l Improved profitability in North America, in spite of the impact of higher fuel costs 19Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 20. Recurring operating income: contribution by division Energy Services: €332m, up 25.7% at current exchange rates (up 23.3% at constant exchange rates) Margin: 6.1% versus 5.4% l In France, increase in operating income driven by the service businesses in the networks and by the productivity program l Outside France, strong growth in operating income: continuing profitable growth in Central and Northern Europe and a very good performance in Southern Europe (Italy and Iberian Peninsula) 20Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 21. Recurring operating income: contribution by division Transport: €114m, up 12.5% at current exchange rates (up 11% at constant exchange rates) Margin: 2.6% versus 2.8% l Operating income resilient, in spite of the impact of higher fuel costs (€17m) l In France, operating income rose strongly, both in urban and inter-urban transportation l Outside France, recovery under way in the Scandinavian countries, and progress in North America (positive contribution from the Los Angeles contract and the acquisition of ATC) and in the Asia-Pacific region (full year impact of the Melbourne contract) 21Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 22. From recurring operating income to operating income € million % change 2004 2005 2004/2005 Recurring operating income 1,620 1,904 17.5% Non-recurring items -139 -11 Of which: Provisions for Berlikomm -55 - Revaluing the Transportation business to market value -70 - Operating income 1,481 1,893 27.8% 22Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 23. Cost of net financial debt € million 31/12/05 31/12/04 Gross cost of borrowing -748 -704 § Re- valuation of non- hedging derivative instruments +8 +12 § Early repayment of the 2008 - - 26 loan § Other +8 +5 Net cost of financial debt -732 -713 Cost of borrowing: 5.12% versus 5.04% in 2004 23Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 24. Net capital expenditures & investments: €2,932 million € million Gross capital expenditures & investments 3,464 l Disposals -348 l Repayment of financial receivables (IFRIC4) -184 Total net capital expenditures & investments 2,932 24Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 25. Value-creating capital expenditures and investments:€3,464m (1) at December 31, 2005 Growth Other developts Projects undertaken before 2005 Projects & Mainte- Financial acquisitions Total nance Financial Industrial Excl. financial undertaken in receivables (2) receivables 2005 (3)Water 584 32 328 174 - 521 1,639Waste 532 57 73 3 126 67 858Energy Services 171 28 81 85 - 173 538Transport 128 58 60 7 - 145 398Others 22 1 8 - - - 31Total 1,437 176 550 269 126 906 3,464Cumulative 1,437 2,163 2,558 3,464(1) Total investments of €3,464m = investments of €2,289m + new I4 receivables of €269m + new projects and acquisitions undertaken in 2005 of €906m(2) Mainly connected to BOT‛s in Water (Brussels, The Hague, Weinan, Baoji, Incheon) and to cogeneration projects, in France and Italy, in Energy Services (treated according to IFRIC4)(3) BVAG, ChangZhou, Kunming, Hradec Kralove, Weir Techna, and Sicily, Calabra in Water, Foshan qnd Shanks in Waste, Lodz in Energy Services, and Helgelandske, industrial market and ATC in Transport 25Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 26. More than €900m invested in new projects in 2005 Transport 16% Asia-Pacific 11% Water 58% North America 10% United Kingdom Waste 7% 5%Energy services 19% Continental Europe 73% By division By region 26Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 27. Cash flow statement at December 31, 2005 € million  Cash flow from operations 3,687  Tax paid ­339  Interest paid ­739  Changes in I4 receivables (new receivables : -€269m; repayment of receivables: +€184m) ­85  Capital expenditures &financial investments ­2,290  Change in working capital requirement ­52  Asset disposals +348  Change in scope of consolidation and increase in minorities‛ capital & dividends received +25  = Free cash flow before new large projects and acquisitions = 555  New large projects and acquisitions undertaken in 2005 ­906  Dividends paid ­374  Capital increase +73  Impact of exchange rates and other ­160  = Change in debt =  ­ 812  Net financial debt at December 31 , 2004 ­13,059  Net financial debt at December 31 , 2005 ­13,871 27Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 28. Change in net financial debt (NFD) at December 31, 2005 € million 62 374 Impact of exchange Dividends rates and 906 paid other Large 739 269 projects (3, 296) Interest paid 1 3, 871 1 3, 059 2, 290 Cash flow (348) generated by (1 84) operating activities Investments and Disposals and new IFRIC4 repayment of receivables IFRIC4 receivables NFD at end 2004 NFD at end 2005 IFRIC4 receivables 28 Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 29. Change in net financial debt (NFD) at December 31, 2005 € million NFD at December 31, 2004 -13,059 l Free cash flow +555 l Investments in new large projects and acquisitions -906 l Dividends paid -374 l Impact of exchange rates and other -87 Net financial debt at December 31,2005 -13,871 LT & ST financial receivables and marketable securities 2,775 Economic net debt at December 31, 2005 -11, 096 29Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 30. Marked improvement in debt ratios (1) € billion Further improvement to the balance sheet 16 15.4  4 15 13.9  14 3.5 x  13.5  13.1  13 13.0  12 3.2 x  3.2 x  3.25 10.9  11.1  11 3.0 x  10 10.3  9 8 2.5 (3) 31 Dec. 2003 31 Dec. 2004 30 Jun. 05 31 Dec. 2005 § Net financial debt(1) Ratios on a 12-month moving basis § Economic net debt (2) Incl. US businesses sold and FCC _  Economic net debt/Cash flow from operations 30  Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 31. Continued optimization of our financing l Current ratings: l Moodys A3 / P-2 Outlook stable / upgraded rating (27/06/2005) l Standard & Poors BBB+ / A-2 Outlook stable l Active debt management (bank and bond) l Average maturity of debt: ~7 years l 74% of debt fixed-rate, or with a capped floating rate l 75% of gross debt in euros l Liquidity position: €7.4bn including €4.8bn in undrawn lines of credit over 1 year 31 Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 32. Veolia 2005 Efficiency Plan Target for 2006 achieved in 2005: more than €300m of recurring savings to income in two years l Impact of €168m on operating income in 2005 l Impact of €284m on operating income over 2 years l Impact of €20m on the financial result and corporate income tax over 2 years l Total expected impact of plan by end of 2006: €400m Beyond then, we shall move from a one-off program savings philosophy to a system of permanent and continuous improvement 32Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 33. Veolia 2005 Efficiency Plan Main projects Operations 35% l Extension of the program to optimize the • Operating processes • Risks / Insurance performance of incinerators in France l Continuation of the program to optimize maintenance in Energy Services l Deployment of projects on bringing best operating practices to all the Water regions in France Support functions 26% l Consolidation of the administrative structures at the • Overheads regional level within Energy Services in France • IT savings l Rationalization of Waste‛s structure in France l Re-organization of Transportation‛s structures abroad (Germany, Sweden, and Denmark) 33Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 34. Veolia 2005 Efficiency Plan Main projects Purchasing • Multi- divisional 21 % l Further deployment of framework agreements l Introduction of an initiative to optimize the • Divisional purchases of local sub-contracting Assets • Real estate 1 8%l Continuation of program to rationalize real estate • Business portfolio portfolio of offices and sites l Closure of loss-making foreign subsidiaries 34Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 35. Change in after-tax ROCE An improvement in profitability WACC (1) = 6% Average capital ROCE (in %) employed (in €m) 2004 (2) 2005 2004 2005 l Water 6,956 7,378 10.3% 11.0% l Waste 4,279 4,540 9.7% 10.0% l Energy services 1,985 2,184 7.5% 8.3% l Transport 1,126 1,144 7.2% 6.4% Total 14,767 15,338 8.3% 9.1%(1) After tax and on the basis of the analysts‛ consensus.(2) Excluding capital employed of businesses that have been sold 35Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 36. STRATEGY AND OUTLOOKInvestor Relations – 2005, Annual Results – Paris – March 13th, 2006 36
  • 37. A confirmed strategy Value creation through the optimization of the resource A model which applies to each of our businesses 37Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 38. A confirmed strategyl In the area of Water, controlling consumption by optimizing network management is a fundamental trend:l Becoming a benchmark in our industry due to: l Our technical know-how supported by important R&D expertise (development of solutions for sludge management, integrated management of wastewater systems, recycling of process water, seawater desalination) l Our customer know-how (implementation of quality standards, environmental awareness programs, training in water conservation and usage)l Creating value: implementation and exchange of best practices 38Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 39. A confirmed strategy l Waste l A fundamental role in the area of recycling “materials”, 7 million tons recovered per year l 6.3 MWh of energy produced per year, coming from the combustion from incinerators and recovered biogas l 2.2 million tons of CO2 prevented l Energy Services l Optimization of the choice of combustibles: reduction of greenhouse gas emissions (biomas, geothermic, solar-thermic). Natural gas and renewable energy represent over 70% of the primary energy used by the division l Optimization of energy consumption by consumers: in Ile de France, reduction of 8% of the primary energy consumption within a housing complex. l Optimization of returns from installations and development of cogeneration. l Initial projects to reduce greenhouse gas emissions l Transport l Reduction of greenhouse gas emissions: the opening of the tramway in Saint-Etienne has reduced CO2 emissions by an estimated 120 tons 39Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 40. A common approach by our four divisions l Multi-service offerings for industrial clients l Commercial coordination across the 4 divisions: development of cross-selling and reduced commercial costs l Research & Development: pooling of scientific and technical expertise in the four divisions to promote multi-divisional research programs l Example: the treatment of sludge through a joint project between R&D experts working for the Water and Waste divisions l Another example: preventing legionella with the help of the service skills of the Energy Services and Water divisions. l Training: pooling the funds allocated for training (example: The Veolia Environnement Campus and its extensions abroad) 40 Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 41. 2006: the continuation of profitable growth Targets: l Revenue growth of between 6% and 8% l Growth in operating income higher than that of revenue l Positive free cash flow before new large projects l Delivering balance sheet commitments: economic net debt / cash flow from operations (1) ratio below 3.5x l Increase in the after-tax ROCE l Dividend growth of at least 15% (1) See definition on page 4 41Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 42. Medium-term objectives Targets: l Benefit from the fast growing markets in which the company operates l Revenue: average annual growth of 6% and 8% l Priority to value creating growth IRR ³ WACC +3% l Maintain balance-sheet commitments l After-tax ROCE: 10% in 2007 42Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 43. Veolia Environnement:A confirmed profitable business model l Clear and consistent strategy l 2005: a year of strong performance l Confirmed leadership in environmental services for municipal and industrial customers l Long-term contracts with recurring cash-flows l Global presence in growing regional markets: l Europe, North America and select countries in the Asia-Pacific region l Selective investments and further improvement to the balance- sheet 43Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 44. APPENDICESInvestor Relations – 2005, Annual Results – Paris – March 13th, 2006 44
  • 45. IFRIC (1)Interpretations D12/D13/D14 l Assets concerned: l Assets related to a public service, which are returned to the concession grantor at the end of the contract l A large number of different contracts: analysis of the “substance” of the contracts l Main scope of assets: assets linked to concession contracts (€5.6 bn at 31/12/2005) l Classification of assets by nature in 3 categories l Tangible assets l Intangible assets l Financial assets l Provisional calendar l Interpretations from IFRIC expected in the second half of 2006 l Application by Veolia Environnement in 2006 (1) See Veolia IFRS workshop of February 4th, 2005 45Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 46. IFRIC 4 financial receivables Transport 4% Waste 13% Water 45%Energy Services 38% In 2005: €2,065m Main change related to BOT‛s in Water (Brussels, etc…) 46Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 47. A confirmed strategy Data concerning water consumption and price United Germany  France Sweden Spain Italy KingdomAverage price* of a m3 of 4.45 2.89 2.56 2.32 1.30 0.68water in €(incl. taxes)Averagedomesticconsumption 116 153** 137 190 158 213in l/d /percapita* For drinking water and wastewater**141 l/d per capita for those with a meter  47Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 48. A confirmed strategy Some examples of value creation by optimizing network management Network yield On award of contract Now PARIS RD 78% 94% PRAGUE 59% 70% RABAT-SALE 68% 82% 48Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 49. J curve trending upwardExample: Czech Republic (group of contracts) Year of contract 1996 Pilsen 4 million people served 1998 VOSS Sokolov 1999 SCVK (N. Bohemia) 1.JVS (S. Bohemia) AQUA Příbram VODOSPOL Klatovy 2000 SMV (Moravia) 2001 Prague I – 66% 2002 Prague II – 34% 2004 Central Bohemia: Kladno Melnik Moravia: Zlin 2005 Hradec Kralove (E. Bohemia) Slavos Slany (Central Bohemia) 2006 Prostejov (Moravia) 49Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 50. J curve trending upwardExample: Czech Republic € million ROCE (%)  700  18,0%  600  16,0%  14,0%  500  12,0%  400  10,0%  300  8,0%  6,0%  200  4,0%  100  2,0%  0  0,0%  1996  2001  2002  2003  2006  2016  Revenue  Operating income  Net profit  ROCE  l Model of a group of operating contracts with limited investment (initial entry + other contractual investments) l Customer payments based on an adjusted cost + fee basis (adjusted for increases in inflation with the ability to retain productivity gains) 50Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 51. ROCE, a key indicator (Recurring operating income – tax expense for the company(1 ) + equity in net income of affiliates – income linked to financing operations for 3rd parties ROCE = Average capital employed for the year Capital employed = fixed assets + goodwill(2) + investments accounted for using the equity method + working capital requirement (3) – provisions – other debts (1) Excluding the proceeds from the capitalization of tax loss carry forwards arising on disposals in North America and related restructuring measures (2) Under IFRS, elimination of amortization of goodwill (3) Including net deffered tax l Why deduct provisions? l Capital employed is the capital that earns a return, i.e. shareholders‛ equity, minority interests, net financial debt 51Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 52. 2005 capital employed At December 31, 2005 At December 31, 2005 (€ million) Reference document(*)Tangible, other intangible assets &« assets related to concessions » 13,523 13,523Goodwill 4,863 4,863Investments accounted for using the equity method 201 201 Inventories and work in progress 646 646 Accounts receivable 10,112 10,112 Accounts payable -10,374 -10,374 Net deffered tax 3 3 Tax related to disposals in North America & related restructuring measures -117Working capital requirement 387 270Provisions -2,387 -2,387Other liabilities -362 -362Capital employed 16,108(*) Official report for the French market authorities 52 Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 53. Average 2005 capital employed At December 31 At December 31 (€ million) 2005 2004 Capital employed 16,108 14,568 Average capital employed in 2005 15,338 53Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 54. Calculation of 2005 ROCE (€ million)  At 31/12/2005 Recurring operating income 1,904 Income tax -423 Tax loss related to disposals in North America and related restructuring measures 21 Total tax expense -402 Equity in net income of affiliates 15 Income linked to financing operations for 3rd parties -126 Results of operations, net 1,391 Average capital employed in 2005 15,338 ROCE after tax  9.1%  After-tax ROCE 9.1% 54Investor Relations – 2005, Annual Results – Paris – March 13th, 2006
  • 55. Investor Relations contact information l Nathalie PINON, Head of Investor Relations 38 Avenue Kléber – 75116 Paris - France Telephone +33 1 71 75 01 67 Fax +33 1 71 75 10 12 e-mail nathalie. pinon@veolia. com l Brian SULLIVAN, Vice President, US Investor Relations 700 E. Butterfield Road -Suite 201 Lombard, IL 60148 - USA Telephone +1 (630) 371 2749 Fax +1 (630) 282 0423 e-mail brian. sullivan@veoliaes. com Web site l http: //www. veolia- finance. com 55Investor Relations – 2005, Annual Results – Paris – March 13th, 2006

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