2013 General Meeting

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2013 General Meeting

  1. 1. 2013 General MeetingPierre-François RIOLACCIChief Finance Officer1
  2. 2. DisclaimerVeolia Environnement is a corporation listed on the NYSE and Euronext Paris. This document contains "forward-looking statements" within the meaning of theprovisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actualresults 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 insome countries outside of Western Europe, the United States and Canada, the risk that changes in energy prices and taxes may reduce VeoliaEnvironnements profits, the risk that we may make investments in projects without being able to obtain the required approvals for the project, the risk thatgovernmental authorities could terminate or modify some of Veolia Environnements contracts, the risk that our long-term contracts may limit our capacity toquickly and effectively react to general economic changes affecting our performance under those contracts, the risk that acquisitions may not provide thebenefits that Veolia Environnement hopes to achieve, the risk that Veolia Environnements compliance with environmental laws may become more costly in thefuture, the risk that currency exchange rate fluctuations may negatively affect Veolia Environnements financial results and the price of its shares, the risk thatVeolia Environnement may incur environmental liability in connection with its past, present and future operations, as well as the risks described in thedocuments 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 byVeolia Environnement with the U.S. Securities and Exchange Commission from Veolia Environnement.To ensure the comparability of period, the 2011 financial statements have been re-presented to include:– the impact of the reclassification into “net income from discontinued operations” of operations in the process of being sold such as the Moroccanactivities in the Water division and the Renewable energies activities partially sold as of December 31,2012;– the impact of the reclassification into “net income from discontinued operations” of divested activities in 2012 such as the regulated activities in theUnited Kingdom in the Water division and Solid waste activities in the United States in the Environmental Services division.The 2011 financial statements have also been re-presented for the reclassification into ‘continuing operations’ since March 3rd, 2011 of the activities of thegroup Société Nationale Maritime Corse Méditerranée (SNCM) consolidated within the Transportation Division which was reclassified into “net income fromdiscontinued operations” as of December 31, 2011. The divesture process of the SNCM was interrupted during 2012 1st semester..The 2012 financial statements have been re-presented for the application of IFRS 10 & 11 standards from January 1, 2013.2
  3. 3. 2012 Annual ResultsPierre-François RIOLACCIChief Finance Officer3
  4. 4. 1st year of Transformation ahead of objectives Asset divestments and restructuring Reduction of net financial debt by €3.4bn to €11.3bn Faster than expected cost reductions Improvement in 2nd half adjusted operating cash flow Commercial successVeolia is on the right path4
  5. 5. Good resilience of activitiesΔ Δ constantFXΔ excl. FX andscopeWater +1.3% -0.5% +1.0%Environmental services +0.8% -2.2% -1.9%Energy services +7.4% +7.0% +5.8%Other +21.1% +19.2% +15.3%Veolia +3.0% +1.2% +1.5%29,43928,5765In €M
  6. 6. Water Operations: revenue stable (-0.2% at constant scope and FX)– France: revenue increased 1.3% at constant scope• Continued contractual erosion: -1.6%• Lower volumes: -1%• Positive impact of price and construction activities: +3.9%– Outside France: Revenue declined 1.1% at constant scope and FX• Negative price impact related to Berlin contract• Good performance in Central and Eastern Europe (higher prices)• China concessions: favorable price and volume effect Technologies & Networks: Revenue increased (+4.9% at constant scope and FX)– Increase in industrial activity, particularly in the Oil & Gas sector Adjusted operating cash flow declined 8.4% (-9.4% at constant FX) to €1,172M+1.3%+7.9%-1.5%OperationsTechnologies & Networks11,921 12,078Revenue (in €M)6
  7. 7. 7Environmental Services2012Price and volume of recycled materials -1.9%Waste volumes -Service price increases +0.8%Other (including construction revenue) -0.8%Currency effect +3.0%Consolidation scope -0.3%– Difficult macro-economic context with lower industrial production indices for the second consecutive quarter inEurope and the United States.– Revenue remains supported by hazardous waste, which grew in all four quarters in 2012 (+6.6% organic growth forthe year) Adjusted operating cash flow increased 2.7% (-0.3% at constant FX) to €1,048MQ4 2012: 1st quarter of positive organic revenue growth +3% Revenue of €9,083M: variation +0,8% and-1.9% at constant scope & FX7
  8. 8. 8Energy Services Revenue increased 7.4% (+5.8% at constant scope & FX) to €7,665M– Higher energy prices: impact >€200M (mainly in France)– Favorable weather effect, mainly in France: impact >€100M– Increase in construction activities in France (CRE projects) Adjusted operating cash flow declined 7.6% (-7.7% at constant FX) to€544M– France: negative impact of regulation changes (heating price and electricitytariff from gas cogeneration)– Contribution of Warsaw heating network: €36M– Italy: receivables write down and accrued expenses of -€82M• Excluding the write down and accrued expenses, adjustedoperating cash flow would have increased by 6.3%Outside FranceFrance7,1387,665 +7.4%+6.2%+8.6%Revenue (in €M)8
  9. 9. 9Evolution of adjusted operating cash flowIn €M9
  10. 10. 10Reconciliation of adjusted operating cash flow to adjustedoperating income10In €M2011re-presented2012 constantFXAdjusted operating cash flow 2,852.6 2,722.8 -4.6% -6.2%Depreciation & amortization -1,388.9 -1,479.8Net capital gains +77.1 +84.3Provisions, fair value adjustment & others +17.0 -133.6Adjusted operating income 1,557.8 1,193.7 -23.4% -24.5%
  11. 11. 11Reconciliation of operating income to net income2011 re-presented 2012In €M Adjusted Adjustment Total Adjusted Adjustment TotalOperating income 1,558 -729 829 1,194 -99 1,095Cost of net financial debt -758 - -758 -775 -47 -822Income tax expense -337 -184 -521 -213 54 -159Share of net income from associates 12 - 12 30 - 30Net income from discontinued operations - 121 121 386 386Non-controlling interests -280 107 -173 -176 40 -136Net income attrib. to owners of Co. 195 -685 -490 60 334 394Net income attrib. to owners of Co.published290 -780 -490 60 334 39411
  12. 12. 12Statement of cash flows12In €M 2011 2012Operating cash flow before changes in working capital 3,353 3,085Reimbursement of operating financial assets 441 371Total cash generation 3,794 3,456Gross investments -3,134 -3,282Variation working capital -41 103Taxes paid -368 -336Interest expense -771 -774Dividend -547 -547Others -39 -46Divestments 1,544 5,099Free cash flow 438 3,673Impact of exchange rates -64 -148Others 114 -78Net financial debt 14,730 11,283Change in net financial debt -488 -3,447
  13. 13. Review of asset divestments since 2009:€9bn in divestments completed at high multiples In a post financial crisis context Multiples achieved by division and by geography since 2009 (1) (2)13By Geography By Division13(1) On transactions greater than €50m since January 2009 : 23 operations utilized, excluding Berlin Water, representing €6bn of EV, or 78% of the divestmentscompleted between 2009 and 2012(2) Calculated EV/EBITDA multiples calculated as a weighted average: EBITDA of year n-1 (of year n if the transaction was at the end of the year)Multiples restated for divestments having the highest and lowest multiples
  14. 14. Application of new IFRS 10-11-12standardsPierre-François RIOLACCIChief Finance Officer14
  15. 15. 15Scope concernedWhich treatment for each entity? Dalkia International: joint venture owned 75% by Dalkia and 25% by EDF, with an economicinterest of 50% => change to equity method at 50% VTD: change from proportionate consolidation at 50% to equity method at 50% Proactiva Group: joint venture with FCC owned at 50% => change from proportionate consolidationat 50% to equity method at 50% Shenzhen: joint venture owned at 45%, with 25% economic interest => change to equity method at25% Tianjin: joint venture owned at 49% => change from proportionate consolidation at 49% to equitymethod at 49%Recall BWB (Berlin water contract): RWE sold its stake to the Land of Berlin: Veolia no longerhas joint control => change to equity method at 25% from October 31, 201215
  16. 16. 162012 adjusted operating cash flow bridge Proforma 2012 adjusted operating cash flow of €1.9 billionIn €M-30%* Including Other Europe & Middle East Water ‐€47M, Europe and China Environmental Services ‐€42M, and Dalkia France ‐€20M16
  17. 17. 2012 net financial debt bridge Proforma 2012 net financial debt of €10.8bn (compared to €11.3bn published in 2012) Adjusted net financial debt (less loans granted to joint ventures) of €7.8bn* Net financial debt before application of IFRS 10-11-12 standards, and excluding loans granted to main joint ventures consolidated by proportionate consolidation for €417M-28%In €bn17
  18. 18. 2012 contributions of entities changing to equity methodaccounting from Jan.1st, 2013 (1)In €M2012Revenue 6,200Adjusted operating cash flow 804Operating income 395Net income (Group share) 8Gross capex (2)62918 18Main companies concerned: Dalkia International, BerlinWater (10 months), Tianjin, Shenzhen, Proactiva(1) Following the 1st application of IFRS 10-11-12(2) Industrial and financial investments and new operating financial assets
  19. 19. Impact of elimination of proportionate consolidation (PI)on 2013 objectivesNFD entities PI(Investor Day)In €bn19In 2013, positive cash flow before financial divestments2013 net financial debt (post PI and hybrid) between €8bn and €9bn*2013 Adjusted net financial debt (post PI and hybrid) between €6bn and €7bn** Before closing exchange rates impact
  20. 20. From €16.5bn net financial debt at the end of 2008 to€6bn-€7bn adjusted net financial debt(1) by the end of 2013In €bn202014Leverageobjectiveof 3.0x (3)(1) Adjusted net financial debt excluding debt from JVs and post application of IFRS 10-11-12(2) Net financial debt / (Operating cash flow before working capital + OFA Repayments)(3) Adjusted net financial debt/ (Operating cash flow before working capital + OFA Repayments), ±5%
  21. 21. ConclusionPierre-François RIOLACCIChief Finance Officer21
  22. 22. Mid-term objectives confirmed2012-2013:TransformationPeriod• €6 billion in divestments (1)• 2013 net financial debt, under new IFRS standards: Net Financial Debt between €8bn and €9bn (2) Adjusted Net Financial Debt between €6bn and €7bn (2)• Cost reductions: in 2013: €170M net impact (3)• Extended dividend commitment of €0.70 (4) per share in 2013 (5) and 2014Beginning in2014:NewVeolia• Organic revenue growth > 3% per year (mid-cycle)• Adjusted operating cash flow growth >5% per year (mid-cycle)• Leverage ratio (6) of 3.0x (7) beginning in 2014• Mid-term: Payout ratio in line with historic level• Cost reductions in 2015: €750M net impact (3)22(1) Including the debt reduction of €1.4 billion related to the change to equity method accounting for the Berlin Water contract and repayment of loans to joint ventures(2) Before closing exchange rate impact(3) Net of implementation costs, of which due to the new accounting treatment of joint ventures, ~80% will benefit adjusted operating income(4) Subject to the approval of Veolia’s Board of Directors and the Annual General Shareholders Meeting(5) In cash or shares(6) Adjusted net financial debt/ (Operating cash flow before changes in working capital + OFA Repayments)(7) ±5%

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