Veolia Environnement Sa · EURONEXT:VIE
Veolia Environnement Sa — Investor Day (December 2003)
84 slides from Veolia Environnement Sa's investor day presentation, Dec 2, 2003
Slide 1: Veolia Environnement Investor Day
‘Veolia Emitonnement —Investor Day November27th, 2003 — Pats 4
Slide 2: Jérôme Contamine - Investor Day Presentation
Jér6me Contamine Investor Day Presentation November 27th, 2003 - Paris rt —Investor Day - November27th, 2003 Patis 2
Slide 3: Disclaimer
Disclaimer Veolia Environnement is a comoration 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 Refarm Act of 1995. Such forward-loaking statements are not guarantees of future
Slide 4: Contents
Contents @ ROCE ® Valuation analysis ® Scope of consolidation for the Group after disposals ‘Veolia Emitonnement —Investor Day November27th, 2003 — Pats 4
Slide 5: The Veolia Environnement model: ROCE and Valuation
The Veolia Environnement model: ROCE and Valuation Analysis elements
Slide 6: 1. ROCE: Why and how is it defined?
1. ROCE: Why and how is it defined?
Slide 7: Different levels of capital intensity
Different levels of capital intensity @ The capital intensity of VE's business activities varies depending on the Division but also on the region and type of activity — Example: a landfill may be capital intensive (e.g., in the USA) or not (e.g., the Canton landfillin China, under an O&M contract) @
Slide 8: A key indicator: ROCE
A key indicator: ROCE (EBIT- tax for the Group + share in earnings of companies accounted for by ROCE tt) = the equity method) ‘Average capital employed during year Capital employed = Fixed assets + gross goodwill - exceptional write-downs + share in companies accounted for by the equity method + wo
Slide 9: The ROCE depends on the position on the J Curve
The ROCE depends on the position on the J Curve ® Four portfolios of contracts : Mature regions (France) high ROCE > 11% Increasing part of the curve (> 7%) excl. Cent. & East. Europe Advanced development : ROCE ~5% Cent. & East. Europe,UK,Asia Favorable trend in 2004 USA Action underway = Jnvesimen
Slide 10: From ROCE to ROE
From ROCE to ROE ® ROCE is the “instantaneous” measure of the return on capital employed ® ROCE is relevant for the Division (full group of contracts) - It is relevant contract by contract in relationship to the evolution of the contract ® From a given ROCE, what is the ROE? — Three leverage scenari
Slide 11: 2. Valuation analysis of the company's assets: The Model
2. Valuation analysis of the company’s assets: The Model
Slide 12: Important notice
Important notice This section contains calculations, estimates and opinions af Vealla Environnement’s tuture cash flows and growth that have heen prepared by Veolia Environnement’s management an the basis af financial, economic, market and cther data available as of the date hereof and assumptions a
Slide 13: Cash flows identified according to their maturity
Veolia Environnement’s cash flows have been identified according to,theirmaturity Cash Flows ‘Other cash flows Highly durable cash flows Time \Veolla Emironnement —Investor Day November27, 2003 —| Modeling of cash flows on basis of curve Cash flaws fram future investments Cash flaws fram existing op
Slide 14: Valuation of highly durable cash flows
Valuation of highly durable cash flows | 45% of revenue and 60% of EBITDA * Criteria ® Activities with contracts that are stable, long and/or recurring @ Includes municipal contracts in water, heating, transportation, cogeneration and household waste incineration and landfill activities in the follo
Slide 15: Valuation of highly durable cash flows: method and examples
Valuation of highly durable cash flows Method and examples Valuation method DCF rate @ WACC countries with B of 0.1 (listed English water companies) DCFs @ Long-term plan projected until 2021 ® "Organic" growth scenarios — Variable depending on geographic region and activity — Based on growth observ
Slide 16: Valuation of Veolia Environnement's other cash flows
Valuation of Veolia Environnement’s other cash flows 55% of revenue and 40% of EBITDA * Criteria © FCG: ® Developing areas (which will become areas with highly durable cash flaws): — Municipal water outside France — Certain BOT contracts (Europe) — Transportation outside France ® Activities with con
Slide 17: Value of future growth
Value of Veolia Environnement’s future growth: On basis of investment projects’J.curves Method and examples Determination of growth envelope @ Debt stable for company until 2009 @ From 2010, cash flows shared between dividend and growth on basis of a supplementary investment envelope equal to half t
Slide 18: Summary
Summary “ (€bn) Net debt €13.1 bn Current market valuation (1) Those figures include assets to be dispased ‘Veolia Emitonnement —Investor Day November27th, 2003 — Pats — Other liabilities €0.6 bn Snort interests 18 Future growth €6,6 bn Other cash Flows €9,3 bn Highly durabl cash flows €20,9bn Valua
Slide 19: 3. The scope of consolidation for the Group after disposals
3. The scope of consolidation for the Group after disposals
Slide 20: 2003 (e) revenue - adjusted
2003 (e) revenue — adjusted (") 2003 revenue ‘) by divisi: 2003 revenue ‘") by geography Foc ian AsiaiPacitic RoW 3.5% Transport Non T 13% America 8% Energy services a Me Europe 4 37% (1) Adjusted for asset disposals in 2002 and 2003 (Filtration & Separation, Plymouth Products, US Distribution, Surf
Slide 21: ROCE and capital employed
ROCE and capital employed 2002 CE 2002 2009 forecast (em) ROCE ROCE Water 11 838 5.7% Waste 5 043 6.1% Energy Services 2516 73% >10% Transport 1 257 7.3% FCC 1 734 12.0% 2009 forecast i 0 i mo 2002 adjusted 2003 (e) adjusted adjusted CE - Group (€m) 22 732 (average) ~19.000 = Group ROCE 64% _ >10% (
Slide 22: Veolia Environnement targets until 2005
Veolia Environnement targets until 2005 ®@ 4to 8% revenue growth per year ® Net debt stabilized to around €11 bn after disposals @ Free Cash flow — 2003: positive after disposals — 2004: positive ®@ ROCE to between 8 and 9% at the end of 2005 ‘Veolia Emitonnement —Investor Day November27th, 2003 — P
Slide 23: Appendix: Detailed ROCE calculation
Appendix Detailed ROCE calculation \Veolia Emironnement —Investor Day- November27th, 2003 Patis 2
Slide 24: Capital employed 2002 - 2001
Capital employed 2002 - 2001 AtDeo31 2002 AtDen MH AtDac.91 én Doo. of ref. and 20-F 2002 2001 Tangible and intangible Assets reas yeas 18088 Net Goodwil os 6 188 6706 Goodwill amortization (excluding exceptional wit down) 1379 124 Gross goodtil (net of exceptions writedowns) 72 sss Equity method in
Slide 25: Average capital employed 2002
Average capital employed 2002 AtDee. 31 AtDee. 31 en 2002 2001 CE for non-core businesses “124 1095 CE after disposal of non-core businesses 22.972 22.492 * © Restatement of capital employed in 2001 — Filtration & Separation Group) — Plymouth Products Distribution Group — Bonna Sabla Surface Prepara
Slide 26: Calculation of 2002 ROCE
Calculation of 2002 ROCE ‘At Dec. 31 2002 AtDeo. 31 & Doe. of ref. and 20-F 2002 EBIT (operating income) 1971 1971 EBIT for non-core businesses “124 Core-business EBIT 1847 Income tax 437 437 Share in earnings of companies accounted for by the equity method 33 xs Allocation to goodwill amortization
Slide 27: Financial Communication
Financial Communication Nathalie PINON, Head of Investor Relations 38 Avenue Kléber — 75116 Paris - France Telephone +33 1 71 75 01 67 Fax +33 171 75 10 12 e-mail nathalie.pinon@groupve.com Brian SULLIVAN, Vice President, US Investor Relations 1605 Main Street, Suite 710, Sarasota, FL 34236- USA Tel
Slide 28: Water
Water Veolia Emitonnement —Investor Day, November 27th, 208 - Pars 4
Slide 29: Water - Antoine Frérot
Water Antoine Frérot Veolia Environnement, Investor Day November 27, 2003 Paris rt —Investor Day, November 27th, 208 - Pais B
Slide 30: Disclaimer
Disclaimer Veolia Environnement is @ comoration listed on the NYSE and Euronext Paris. This document contains "“forwarc-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
Slide 31: Summary
Summary ® Our position ® Our businesses and contracts ® Markets and competitors ® Our strategy @ Key figures Veolia Emitonnement —Investor Day, November 27th, 208 - Pars 4
Slide 32: Veolia Water: operations worldwide
Veolia Water: operations worldwide pan ~ Grime gout kort s a ous as Franen cuana ruipne a ica ona unt union mana ad arginine Veolia Emitonnement —Investor Day, November 27th, 2008 - Pais 6
Slide 33: Contribution to 2003 (e) revenue after asset disposals
Contribution to 2003 (e) revenue after asset disposals () Design / Build 19% Industrial operations Municipal 11% operations 70% 2003 (e) revenue ‘): €9.6bn (1) After asset disposals in 2002 and 2003 (Filtration & Separation, Plymouth, US Distribution, Surface Preparation Corp. and Bonna Sabla) and t
Slide 34: Geographical breakdown of 2003 (e) revenue
Geographical breakdown of 2003 (e) revenue after asset disposals () RoW 1% Asia-Pacific i 6% Europe (eer es France 61% North America 1% 2003 (e) revenue (?: €9.6bn (1) After asset disposals in 2002 and 2003 (Filtration & Separation, Plymouth, US Distribution, Surface Preparation Corp. and Bonna Sabl
Slide 35: Our business: municipal operations
Our business: municipal operations @ Water and wastewater: distribution networks and plants @ Small water cycle ® Outsourced management of public services ® Mechanisms for creating value on contracts — Contract engineering — Productivity gains — Measurable improvement in service levels — Quality of
Slide 36: An integrated approach aimed at protecting the environment
—— A An integrated approach aimed at ~ protecting the environment Management of natural resources Drinking water production sludge Distribution Sf recycling network Customer management } Storm water and wastewater treatment OLIA VE
Slide 37: Our contracts
Our contracts ®@ General characteristics of contracts — Average duration = with significant Capex = with less Capex — ROCE © Higher than WACC in Year 3 — Project IRR Target: © Higher than WACC +2 Veolia Emitonnement —Investor Day, November 27th, 208 - Pars 10 15-20 years 5-8 years
Slide 38: Our contracts: the J curve
Our contracts: the J curve in€m ROCE 150 0% Piva, 100 Hy Expenditures W% — EBIT 1 % ROCE u 0% “50 ! % ® Productivity gains : Shoritern — Improvementin billing and collection — Maintenance / purchasing / consumption optimization — Reorganization of operation (by sector) Gradual reduction in workforce
Slide 39: Outsourced management of public services
Outsourced management of public services Several contract types: @ Operation & Maintenance (O&M) e Affermage (Concession contract where private operator is not required to invest but only maintain and refurbish) with investment in upgrading ® Design Build Operate (DBO) ® Build Operate Transfer (BOT)
Slide 40: France: a leadership position
France: a leadership position © Over 90% of outsourced managements, through affermage contracts ® About 45% of revenue is paid bacl uthorities ® Générale des Eaux sup ats wastewater = 43% share of w. in terms of populal © Potential growth in waste European regulations on (nitrates, pesticides, turb
Slide 41: The various contract models: BOT Chengdu
The various contract models BOT - Build and operate a plant Chengdu (18-year BOT for water treatment plant) @ 1st BOT in China’s water industry, carried out within specific legal framework (signed in 2000): — Shareholders: Veolia Water 60% Marubeni 40% @ Main technical data: — Capacity 460,000 m3/da
Slide 42: BOT: Chengdu
BOT: Chengdu Analysis of value creation €m ROCE % 4% =m Revenue EBIT —ROCE 80% 40 5% 36 0 40% 25 3% 20 18 20% 10 10% 5 ot tom 2002 2003 (e) 2006 (2) 2016 (2) Veolia Emitonnement —Investor Day, November 27th, 208 - Pars 16
Slide 43: Concession: Bucharest
The various contract models Concession: Bucharest 25-year concession for water and wastewater services (signed end 2000) No. of people served: 1.7 million Service level commitments Capital contribution of €35 million Technical (municipality) and economic (national regulation agency) regulators The c
Slide 44: The concession: Bucharest (2)
The concession: Bucharest (2) Analysis of value creation €m ROCE % 90 am Revenue EBIT —ROCE oes 80 35% a 30% 60 25% 50 20% 40 15% a0 a 10% i 5% 0 0% 2001 2002 2003 (e) 2005(e) 2010 ( 2016 ( * 13.5 manths Veolia Emitonnement —Investor Day, November 27th, 208 - Pars 7
Slide 45: Indianapolis (USA)
Indianapolis (USA): The largest municipal outsourcing,contract in North America (DBO and O&M type) ® Duration: 20 years — $1.5 billion total cumulative revenue — Contract remuneration based on performance ® Comprehensive contract 2 12th biggest city in the US — Operation & Maintenance = 1.1 million
Slide 46: The various contract models: Czech Republic (1)
The various contract models: Czech Republic (1) @ Affermage in mature market: from flagship to expansion | The Czech market (average 20 years; 28 years from 2001 for Prague) — 3.4 million people served (40% of the market in terms of value) — Operating companies under majority control — First operati
Slide 47: Value creation through different contract models (2)
Value creation through different contract models (2) @ Affermage in mature market: from flagship to expansion (continued) The Czech market (average 20 years; 28 years from 2001 for Prague) — Affermage principle with rental of infrastructure to district authorities and limited commitments (entry fee
Slide 48: Improvement in profitability: J curve
Improvement in profitability: J curve Example: Czech Republic €m ROCE % a am Revenue _ EBIT SH NetProfit © —ROCE ies 450 16% 400 14% 360 12% 00 10% 250 a% 200 6% 450 400 8 0 2% += 0% Year 1 Year? Year 8 Year 10 Year 20 Veolia Emitonnement —Investor Day, November 27th, 208 - Pars 2
Slide 49: Optimized semi-public models: Budapest contract
Optimized semi-public models: Example Budapest, contract characteristics (1) ® 1.7 million people served (20-year wastewater contract) ® Type: wastewater service contract under semi-public model but with new investments funded by the municipality ® Prices set on the basis of indexed benchmark budget
Slide 50: Optimized semi-public models: Budapest financial overview
Optimized semi-public models: Example Budapest, financial overview (2) €m ROCE % 120 am Revenue EBIT —ROCE nS 400 20% a0 15% 60 10% 40 5% 20 0 | o% 1998 2000 2002 2007 ( 2017 ( Veolia Emitonnement —Investor Day, November 27th, 208 - Pars 2
Slide 51: Budapest, analysis of value creation
Optimized semi-public models: Example Budapest, analysis of value creation (3) ® Objective: optimization of priority dividend as operator remuneration @ 3 main levers: - Cash savings on operating costs + From the outset, optimize benchmark operating costs + Implement 3-year action plans + Optimize m
Slide 52: The markets
The markets Strong growth in demand with powerful drivers @ Increase in world population (+ 80 million a year), and higher concentration in cities (10% in 1900, 50% in 2000, 66% in 2030) @ Heightened environmental standards and health concerns @ Growing acceptance of outsourced management model as a
Slide 53: The markets: market size and growth
The markets Market size and growth @ The municipal market — €400 billion per year in operation of municipal services worldwide * Only 10% outsourced to private sector (70% in France, <10% in USA), with growth to about 80% outsourced forecast by 2018 — €70billion per year in investment and improvemen
Slide 54: Our main competitors
Our main competitors €bn Country =e SUEZ France 46 RWE Germany 43 Saur France 3 Sevem Trent UK 3 Anglian UK 1 () Veolia Environnement estimates Veolia Emitonnement —Investor Day, November 27th, 208 - Pars a Water revenue(") 5 Main Locations France, USA, S. America, Asia UK, USA, Germany France, Afri
Slide 55: Our strategy - focus efforts and resources on
Our strategy - focus efforts and resources on: ® Veolia Water's strongest know-how — Municipal operations and, going forward, industrial operations — Its related expertise for winning and retaining contracts: = design / build ® Solvent markets with demand for sophisticated know-how: — Europe, North
Slide 56: Review of water business strategy in the United States
Review of water business strategy in the United States ® Focus on long-term operating contracts and DBO contracts (80% with municipalities, 20% with industrial customers) ® Divestment of equipment sales business and short-term services to industrial customers ® Divestment of services to residential
Slide 57: Figures for water business in North America
Figures for water business in North America @ Revenue from companies sold or in the process of being sold: - Culligan $700 million in 2003 0 — Everpure $60 million in 2003 © — Equipment/short-term services $1 100 million in 20030 @ Total revenue from companies retained $750 million in 20030 — Estima
Slide 58: Key figures
Key figures [em 2002 2009 forecast Revenue 11 142 3 to 5% CAGR EBIT () 896 EBIT Margin 8.0% Capital employed 11 838 ROCE /) 5.7% > 10% () Excluding Proactiva EBIT corresponds to operating income as defined in French accounting regulations committee rule 99-02 Q) See definition of ROCE in "The Veolia
Slide 59: Financial Communication
Financial Communication Nathalie PINON, Head of Investor Relations 38 Avenue Kléber — 75116 Paris - France Telephone +33 1 71 75 01 67 Fax +33 171 75 10 12 e-mail nathalie.pinon@groupve.com Brian SULLIVAN, Vice President, US Investor Relations 1605 Main Street, Suite 710, Sarasota, FL 34236- USA Tel
Slide 60: Waste (Onyx)
\Veola Emironnement —Investor Day November27th, 2003 — Pais 4
Slide 61: Denis Gasquet
Denis Gasquet Veolia Environnement, Investor Day November 27th, 2003 - Paris rt —Investor Day Noverber27th, 2003 — Pais 2
Slide 62: Disclaimer
Disclaimer Veolia Environnement is a corporation listed on the NYSE ahd Euronext Paris. This document contains "forwarclooking statements" within the meaning of the provisions of the US. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future pe
Slide 63: Contents
Contents @ Our business ® Our positions @ Markets ® Our competitors ® Our strategy @ Key financial indicators \Veola Emironnement —Investor Day November27th, 2003 — Pais 4
Slide 64: Our business
Our business ®@ World No. 2 in Waste management and among the European leaders ® Onyx is the only comprehensive service provider in solid and liquid, hazardous and non-hazardous wastes, working with both municipal and industrial customers — Waste management activities that are continuously evolving:
Slide 65: Our positions - key figures
Our positions — key figures ® 2002 revenue: €6 billion (excluding Proactiva) @ 272,000 industrial customers ®@ 76 million people served worldwide ® 35 million metric tons of waste collected by Onyx @ 54 million metric tons treated in: — 220 sorting centers (household+non-hazardous industrial waste)
Slide 66: Onyx: 2nd largest operator worldwide
Onyx: 2nd largest operator worldwide (presence on all continents) + rmenPeymse Veolia Emironnement —Investor Day November27th, 2008 — Pais 7
Slide 67: Onyx: 2nd largest operator worldwide (one of the European leaders)
Onyx : 2nd largest operator worldwide (one of the European leaders),
Slide 68: 2002 revenue by geographic area
2002 revenue by geographic area Others Asia/Oceania 3% 8% “ f ( Europe 25% including UK 11.5% ee North America ‘Veda Environnement= Investor Day Noverber27h, 2009 —Paie 23.10
Slide 69: The treatment of waste: An integrated value chain
The treatment of waste: An integrated value chain | Collection and services Disposal and treatment \Veola Emironnement —Investor Day November27th, 2003 — Pais 10 fences eae
Slide 70: 2002 revenue by business
2002 revenue by business Hazardous waste treatment €671m Disposal & treatment of solid waste €927m Services to industrial clients €3,024m Urban services €1,385m \Veola Emironnement —Investor Day November27th, 2003 — Pais " | Zon]
Slide 71: Operating margins by division (2002 figures)
Operating margins by division (2002 figures) Treatment of hazardous waste 9 to 16% Treatment of solid waste 5 to 25% (other treatment) 20 to 30% (lanafills) Urban services 1to 5% Services to industrial clients 4to 10% \Veola Emironnement —Investor Day November27th, 2003 — Pais 2 | Zon}
Slide 72: Fundamental market growth drivers
Fundamental market growth drivers ® Higher volumes linked to economic growth and to consumption and production practices ®@ Regulatory changes ® Growth in outsourcing (technical sophistication, pressure on public expenditure, industrial companies refocusing on core businesses) \Veola Emironnement —I
Slide 73: The French market
The French market @ New growth potential linked to the end of the 1992-2002 ten-year law (district plans, opening of new landfills ...) — Growth in recycling and incineration — Increase in outsourcing of public services, particularly for selective sorting and recycling \Veola Emironnement —Investor
Slide 74: Markets: Europe
Markets: Europe @ UK — Strong competitive but changing market (bringing to level of environmental standards) — Competition undergoing complete change (acquisition of Waste Recycling Group by Terra Firma) => Recomposition of the landscape and likely consolidation @ Germany — Solid waste: very disrupt
Slide 75: Market trends
Market trends USA ® Solid waste market largely consolidated @ Industrial and hazardous waste concentration movements underway Rest of World @ In most cases, regulations and markets are in the emerging stage, with the potential for long-term growth \Veola Emironnement —Investor Day November27th, 2003
Slide 76: Operating margins by geography
Operating margins by geography Trends observed 2002 France First signs of improvement >6% North America Good resistance 29% Europe Marked recovery in the UK >4% Asia/Pacific Slight economic slowdown >12% \Veola Emironnement —Investor Day November27th, 2003 — Pais 7
Slide 77: Our competitors
Our competitors ®@ Onyx is the only provider offering comprehensive services on a global basis ® Our competitors are: — Sita: smaller, not present inthe US — Regional only: RWE, Rethmann (Germany), Shanks (UK), Waste Management, Allied Waste, Republic (US) — Only covering a part of services: househo
Slide 78: Our strategy
Our strategy @ Enhance our offering to industrial customers through our comprehensive expertise in waste services and through synergies with other VE divisions (integrated offering) ® Limit on investments (projects not requiring direct investment) and reduction in WCR ® Strengthen our international
Slide 79: France - Mid-term outlook
France - Mid-term outlook @ No. 1, present in entire range of services (more than 30% market share) @ Inventory of underperforming municipal waste management contracts and renegotiation ® Reduction in overhead @ Increasing impact of incinerators launched in 2002-2003 ®@ Opening of landfills \Veola E
Slide 80: North America - Mid-term outlook
North America - Mid-term outlook @ No. 4 in solid waste, but No. 2 or 3 to the East of the Mississippi — No. 3 inincineration but recognized as "best operator"; long-term contracts with high visibility — No. 2 in hazardous waste (after Clean Harbors) — Among the leaders in industrial cleaning in a d
Slide 81: Europe / Asia-Australia - Mid-term outlook
Slide 82: Example: Tyseley incineration contract (UK)
Slide 83: Key indicators
Slide 84: Signatures
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: December 1, 2003 VEOLIA ENVIRONNEMENT By: /s/ Jérôme Contamine Name: Jérôme Contamine Title: Chi