European Utilities Seminar - december 10, 2004


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European Utilities Seminar - december 10, 2004

  1. 1. UBS EUROPEAN UTILITIES SEMINAR Energy Services on a deregulating market Olivier Barbaroux Chief Executive Officer of Dalkia Investor Presentation Paris - October 12, 2004Paris - October 12, 2004 – Investor Relati ons Directi on 1
  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 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.Paris - October 12, 2004 – Investor Relati ons Directi on 2
  3. 3. Present in 35 countries in 2003 Europe : European leader in Energy Services with a presence in 24 countries Rest of the World : Present in 11 countries At 31/12/03 Managed Staff Geographic zone turnover Managed (Million €) France 2,929 19,161 Northern Atlantic Zone 603 5,226 Central Europe Zone 435 4,898 Southern Zone 677 8,239 Northern Europe Zone 459 3,702 Others* 98 516 5,201 41,742 * Development Zone and specialisation companies with international activityParis - October 12, 2004 – Investor Relati ons Directi on 3
  4. 4. Business ActivitiesThe « guaranteed performance » contract Dalkia’s Guaranteed results core offer Long-term contract Dalkia: a purchaser and transformer of energy • Coal • Temperature in pe rformance Outputs listed • Fuel oil Process of • Heat Upstream contract Energy • Gas oil Energy • Steam • Gas Transformation • Compressed air • Electricity • Lighting • Biomass • ……etc……. Dalkia purchases Dalkia ope rates and maintains its Dalkia sells the finished energy upstream of customers’ energy-transforming product with a guarantee customer site equipme nt (boile r, turbine, air of results (quantity, conditioning system, compressor, quality, rate, availability) lighting system, etc.) Customers: Industry, Tertiary Sector, Public SectorParis - October 12, 2004 – Investor Relati ons Directi on 4
  5. 5. 2003 turnover segmentation Business Activity Industrial Maintenance 8.0% Heating & Cooling Installation Networks 8.0% 24.0 % Public Lighting & Other 5.0% Customer Type Ter tiary (Public Sector) 17.5 %Heating Systems & Indu strial Utilities Muti-technical 14.0% Services 33.0% Facilities Man agement Ter tiary 8.0% (Private Sector) Local Authorities 7.5% 28.0% Residential Building Industrials Managers 29.0% 16.0% Individual HousingParis - October 12, 2004 – Investor Relati ons Directi on 2.0% 5
  6. 6. Strategy & developmentVision for Dalkia France Turnover segmentation of the conventional businesses of Dalkia France by activity and client 100% Other Cogeneration Building 80 Mgt Multi-technical 2004 60 Heating 40 Strategy : Heating Networks Air Con 20 Steam • growth • a more diversified portfolio of services 0 Residential Local Authorities Tertiary Industry Works and customers Other 100% Cogeneration Building Mgt Mai ntenance (process) 80 Cogeneration Multitechnical Building 60 Heating Mgt Air Con Bui lding Mgt Other Multitechnical 2010 40 P 1 e le ctric Compressed Air Air Con Air Con Clean Rooms Cold (process) Heating Networks Steam 20 0 Local Authorities Tertiary Industry Works Resi dential OtherParis - October 12, 2004 – Investor Relati ons Directi on 6
  7. 7. Strategy & developmentThe role of cogeneration • A sizeable electricity generation solution : 7000 MW in France • A good efficiency in terms of GHG emissions • An answer to diversify electricity supply sources • The interest of a decentralised generation source : RTE’s support in PACA ⇒ Cogeneration has an important role to play in the future. Enhanced by increasing tension on the electricity market during next 20 years. Cogenerators like DALKIA will have to manage the equation gas/electricity/CO²/flexibility on the open marketParis - October 12, 2004 – Investor Relati ons Directi on 7
  8. 8. Strategy & development Dalkia’s Value Chain Electricity Upstream Energy Client Needs Energies Transformation (steam, hot water, (gas, coal, HFO, Process compressed air…) electricity…) Global outsourcing of engineering skills Optimisation Technical Short term (P2) Process Energy & Energy of site energy energy Long term (P3) load environmental purchasing assets efficiency Maintenance delivery performance Quota Dalkia ’s Energy S ophisticated Process monitoring, Added Markets technical & understanding forecasting & Value Competence R&D skills trading skills Dalkia’s commitment : to attain excellence at each component of the value-chainParis - October 12, 2004 – Investor Relati ons Directi on 8
  9. 9. Dalkia Energy Market Portfolio An important & grow ing portfolio with an increasingly diversified range of energy purchasing ………..… of energies and geographic origin100 TWh (p ci) of energy consumed Segmentation of 2004 Proforma volumes 87 100% 82 Growth 80 Growth 70 80 Others** 60 Romania 60 Slovakia Estonia 40 Iberia 40 & Italy Lithuania Poland 20 Hungary 20 Czech R UK France 0 0 2002 2003 2004 Proforma* Gas Coal Others * 2004 proforma : includes cogeneration at Ploiesti & Poznan ** Others include : petroleum products, renew ables, electricity, heat…. Other Key Dalkia figures • 10.3 TWh’s of decentralised electricity produced from a park of 4800 MW • Gas consumption represents ~1.2% of the total gas consumed in the EU25 • CO2 emissions caught within the EU Emissions Trading Scheme will be 1% - 2% of the totalParis - October 12, 2004 – Investor Relati ons Directi on 9
  10. 10. Dalkia Energy Market Example : French gas portfolio Proficiency Dalkia has a faster switching rate (30%) than the French market (25%) despite its cogeneration position : Strategy : A unique positioning to maximise competitiveness : ⇒ globalisation of Take-or-Pay and Balancing risks ⇒ complete independence towards all energy suppliers ⇒ hedging & optimisation of market risks ⇒ capture the best opportunities when they arise ⇒ partnership agreements with key suppliers ⇒ leverage our portfolio (energies and countries) ⇒ customer benefits from switch, with limited risk 100% ⇒ optimise our positions and flexibility 30 % Means : A highly skilled specialist team 80 ⇒ centrally-based expertise plus network of regional specialists 60 ⇒ experience in all of the key EU25 countries ⇒ capabilities across all markets (gas, electricity, coal, petroleum products, renewables, CO2) 40 Examples : 20 ⇒ mutualisation of gas portfolio in France based on experience gained in the UK 0 ⇒ electricity network services in Eastern Europe 2002 2003 2004 Estimated ⇒ CO2 trading in the UK ETS Non Daily Metered Sites on historical tariff «No competition » ⇒ renewable re-powering in the Baltics Daily Metered (DM) Sites on historical tariff DM Sites on « eligible » contract with incumbent supplier DM Sites on « eligible » contract with new entrantParis - October 12, 2004 – Investor Relati ons Directi on 10
  11. 11. Strategy & development European Emissions Trading Scheme Analysis of EU25 em issions in 2001 Estim ation of Baseline em issions & Quotas Million tonnes Germany 5,000 Pola nd UK N on-CO2 Ita ly Spain 4,000 France Holland Czech R Ex cluded Gree ce 3,000 secto rs Belgium Finla nd Portugal 2,000 CO2 Other Austria 4 sect ors Slovak ia Denma rk Hungary 1,000 ETS 5 sectors Ireland Po wer & Heat Sweden Estonia Million tonnes Quota Lithuania Baseline 0 All GHGs CO2 EU ETS 0 200 400 600 > Preliminary analysis of EU National Allocation Plans (NAP’s) suggests that :- – historical emissions from facilities within the EU ETS are around 2 000 million tonnes – the quota allocations will generate a system-w ide position w hich is either marginally short or long (+/- 1-2%) – the quota supply-side will be heavily influenced by the pow er sector (fuel sw itching betw een coal & gas) > Dalkia’s allocations will be heavily influenced by final NAP’s in France, Czech Republic, Poland and Lithuania - none of which have yet been verified by the EU Commission > Dalkia anticipates : – a quota allocation of between 1% and 2% of the EU25 total for around 250 sites – a net long position, thanks mostly to its cogeneration portfolio (note customer positions and heat regulator positions) > Dalkia will leverage its UK experience & Centralised Energy Team to manage & optimise its important positions across the EU25Paris - October 12, 2004 – Investor Relati ons Directi on 11
  12. 12. Dalkia - Key figures (1) In €m 2001 2002 2003 Forecast 2009 Turnover 4,017 4,571 4,654 4 to 7% CAGR EBIT (2) 224 244 274 EBIT margin 5.5% 5.4% 5.9% Average Capital Employed - 2,516 2,544 ROCE (3) - 7.3% 8.3% > 10% (1) VE’s scope of consolidation (2) EBIT corresponds to operating income as defined in French accounting regulations committee rule 99-02 (3) See definition of ROCE in “The Veolia Environnement model: ROCE and valuation" presentation of November 27, 2003Paris - October 12, 2004 – Investor Relati ons Directi on 12