Veolia Environnement Sa · EURONEXT:VIE
Veolia Environnement Sa — FY2004 Earnings Presentation
56 slides from Veolia Environnement Sa's earnings presentation, Mar 17, 2005
Slide 1: Veolia Environnement
VEOLIA Environnement
Slide 2: Forward-looking statements
Veolia Environnement is @ comporation 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
Slide 3: 2004 Results
2004 Results
Slide 4: 2004 highlights
2004 highlights @ Results ahead of targets @ Capital restructuring completed arch 2005 - investor Relatiore 4
Slide 5: 2004 highlights
___, 2004 highlights —_ @ Continued revenue growth under the new scope of consolidation “), up 4.4% at constant exchange rates @ Strong improvement in EBIT (operating income) under the new scope of consolidation: EBIT +13.5% at constant exchange rates @ 41% increase in recurring net income @ Strateg
Slide 6: 2004 highlights
2004 highlights mi @ Strengthened balance sheet : = Significant decrease in net debt to €9.8bn = Free cash flow before disposals of non-core assets of nearl €700m, amounting to approximatelty €300m after dividen payments @ Net ROCE after-tax up more than 1.3 percentage points to 8.3% @ Net dividend
Slide 7: Strategic refocusing completed: commitments met
Strategic refocusing completed: commitments met oo @ Further consolidation of our leadership in environmental services @ Long-term contractual relationship with targeted clients = Municipal, industrial and tertiary @ Long-term contracts with recurring and sustainable cash-flows = Europe, North Ameri
Slide 8: Substantial debt reduction
ail Strategic refocusing completed: commitments Substantial debt reduction Net debt / EBITDA (x) 16,000 + 14,283 4.0 14,000 12,507 12,000 ° 3B 10,000 3,000 6,000 a8 4,000 2,000 | $2.5 2001 2002 2003 2004 © Including €325m of securitised water receivables and €378m relating to a lease in Berlin at 1
Slide 9: Strong increase in free cash flow
Business model confirmed Strong increase in free cash flow © 100 -400 pul mFree cash flaw after dividend payment, Free cash flow before dividend payment -1900 ("Free cach flow cach flow from operations +/- change in working capital requirement - change in the securitisation programme and Daily (disc
Slide 10: Strong improvement in profitability
Business model confirmed Strong improvement in profitability ® Aaat constant EBIT mi exchange rates 3112004-311203 2.9% @ Transportation #12.5% 2.5% ® Holding company EBIT new scope of cons. 1,437 1,616 413.5% ®Divested businesses 314 1 Total consolidated EBIT1,751 1,617 -6.7% 6.1% 6.6% (0 See defin
Slide 11: Improvement in ROCE
Business model confirmed Improvement in ROCE 858 0.6% 8.3% 80% 0.4% 7.0% o oO 6.4% A capital employed ES 6.5 BSS cox} ia ROCE 2002 ROCE 200 US diposdsand Efficiency Plan Maturingcntracts ROC 2004 ‘impairment and contiol over a : 2004, anual results - March 2005 - investor Relators 1“
Slide 12: New shareholder structure
New shareholder structure (1) Individual investors 8.3% CDC 8.4% Société Générale 6.6%, including 3% () Groupama 5.8% Others 57%, of 5 which half are institutions outside France Vivendi Universal 5.3% Treasury stock 4.0% EDF 4% Employees 0.6% \ Shareholder structure at 7 January 2005 Beguine voll a
Slide 13: Key figures at December 2004
Key figures at 31 December 2004 Revenue © 2004/2003 Growth at constant 4 exchange rates for the new scope of consolidation EBITDA |Meseieul 17.8% 0% 1% 2% 3% 4% 5% 6% 7% B% 9% 10% 11% 12% 13% 14% 15% Frou, 2004, anual results - March 2005 - investor Relators 13 ‘
Slide 14: Key figures at December 2004
Key figures at 31 December 2004 @Revenue @EBITDA @EBIT 1,437 1,751 1,616 412.4% = +13.5% (1) See definition on page 6 2004, anual results - March 2005 - investor Relators 14
Slide 15: Key figures at December 2004 (continued)
Key figures at 31 December 2004 (continued) Net income Recurring net income after goodwill amortisation Free cash flow before disposals of non-core assets 168 694 x4 Free cash flow after disposals of non-core assets 662 3,417 x-5 © Including €326m of secutitised water receivables and €378m for a lea
Slide 16: A well balanced company
A well balanced company 2004 Revenue under the new scope x consolidation @ (__ Breakdown by geographical zone _| Rest of the world 5% Asia-Pacific 5% North America 8% Europe exe. Franc 28% Waste 25% 2004 consolidated revenue ): €24.6bn See detrtonon pages (Gn December31, 2004, the company began appl
Slide 17: From revenue to net income
From revenue to net income Depreciation and long-term provisions Renewal expenses Recurring net financial expense Tax at the normal rate Recurring income from equity affiliates Recurring minority interests 257 -163 Recurring net income before 4 Cy goodwill amortisation 460 500 Recurring goodwill amo
Slide 18: EBITDA rising faster than revenue
EBITDA rising faster than revenue under the new scope of consolidation” A81/12/04- 31/12/08 at em constant exchange Water Waste Energy Services : Transportation 283 300 46.5% 8.3% Others -54 +59) EBITDA new scope of cons. |") 3,104 3,313 +7.8% 13.4% | Divested businesses 574 4 —s Total consolidated
Slide 19: Business review: Water
| Business review (1) Water Revenue €9,798m = +3% EBITDA €1,477m = +8% EBIT €830m = +12% 2) @ Steady ongoing contribution from France, despite much less favourable weather conditions than in 2003 (impact of heatwave in 2003). @ Excellent performance in the rest of Europe (EBIT +21%), driven by Germa
Slide 20: Business review: Waste
| Business review (1) Waste Revenue €6,198m +7% EBITDA €962m = +11% 2 €456m = +22% | ant positive impact from productivity gains in France, particularly in the incineration and solid waste businesses, where margins rose by 1 percentage point, and growth in new, high value- added contracts. @ Strong
Slide 21: Business review: Energy Services
Business review (1) _Energy Services Revenue €5,036m +8.2% EBITDA €633m +3.8% EBIT €296m +8% @ In France, an EBIT increase of 2.8%: si engineering activities. icant recovery in @ Outside France, an EBIT increase of 13%: strong growth in Southern Europe (Italy +38%), while the contribution from Centr
Slide 22: Business review: Transportation
Business review (1) 4 Transportation Revenue 1.1% @) EBITDA 46.5% @) EBIT +12% 2) In France, good operating performance in the Paris region and on intercity routes. Strong ean offsetting gs growth in Germany, the Netherlands and Belgium, iculties in some Scandinavian contracts. Robust EBIT growth in
Slide 23: Cost of financing and net financial expense
Cost of financing and net financial expense €m Cost of financing Other financial income and expense Bet @ Recurring + Loan repayments » Currency translation differences + Other + Full-year effect of disposals “ @ Non-recurring Net financial expense -750 -635 +115 —F 2 . Average interest rate of 4.63
Slide 24: Net debt reduced by 22% at December 2004
Net debt reduced by 22% at 31 December 2004 gee @ Net debt at 31 December 2003 @ Free cash flow before disposals of non-core assets @ Disposals of non-core assets (2) © Including €328m of securtised water receivables and €378m regarding a lease in Berlin at 1 January 2004, in accardance with the Fre
Slide 25: Non-recurring income (expense)
Non-recurring income (expense) @ Restructuring costs @ Goodwill amortisation @ Tax @ Income (expense) from divested businesses -208 @ Others 32 7228 28
Slide 26: Impact of disposals in 2004
Impact of disposals in 2004 @ Disposal proceeds: €2,423m Net income from operations Pre-tax gain or loss from disposals Tax expense Related to the disposals Related to currency gains and other Total (1). Including FOC debt of €273m (2) Including €184m already charged to equity. 2004, anual results -
Slide 27: Veolia 2005 Efficiency Plan
= Veolia 2005 Efficiency Plan Annual recurring savings objective of €300m reiterated for 2006 @ 2004 performance was boosted by more than 350 initiatives carried out across the four divisions @ €126m of net annual recurring savings * €116m improvement to EBIT in 2004 = €10m reduction to net financia
Slide 28: Veolia 2005 Efficiency Plan: Main projects
Veolia 2005 Efficiency Plan Main projects Operations 434i" Continuation and extension of efforts to increase Operating procedures productivity in Onyx France's incineration activities, Risks / insurance = improve the logistics of Dalkia and Veolia Water's mobile service representatives, introduction
Slide 29: Veolia 2005 Efficiency Plan: Main projects
Veolia 2005 Efficiency Plan Main projects 18%" Introducing new cross-company framework agreements for Veolia Environnement and specific divisions, for example: auichawes purchasing policy enforcement, general office purchases, meters and valves, spare parts for buses and trucks etc. = Fulfilling pro
Slide 30: Objective: €100m of additional recurring savings in 2005
Veolia 2005 Efficiency Plan Objective: €100m of additional recurring savings in 2005 TMS © The Veolia 2005 plan currently involves more than 600 initiatives @ Based on the results of this plan in 2004, together with new projections, Veolia has an objective of annual recurring savings of: » €200m at
Slide 31: Targeted investments: €2.6bn in 2004
Targeted investments: €2.6bn in 2004 (") @ Water @ Waste @ Energy Services @ Transportation 108 122 - 67 Austalia, Canada @ Others 16 20 ~ @Totalexcluding FCC 1,268 1,356 @ Fcc 5574 © Excluding FCC Frou 2004, anual results - March 2005 - investor Relations at ‘
Slide 32: Cash flow from operations: +11%
Cash flow from operations: +11% for the new scope of consolidation © Cash flow from FCC and North American disposals €m Total cash flow from operations excluding FCC and North American disposals 3000 . Total cash flow from Total cash flow from operations: 2,701 operations: 2,707 SO 2000 1500 pay 100
Slide 33: Strong increase in free cash flow
Strong increase in free cash flow €m Cash flow from operations Capex and investments (maint. + growth) Improvement in WCR (2 + Disposals and other +246 +399 Free cash flow before disposals of noi re assets (Of which FCC and US disposals: €164,5m ©) Not including the impact of securitisation programm
Slide 34: Further optimization of debt and financing
al Further optimization of debt and financing = =] @ Repayment of dollar-denominated debt: $1.9bn @ Refinancing in the UK: £200m 22-year bond issue gx) @ Extension of the average maturity from 5.5 to 6.5 i years @ Cash position: €8.9bn after the €1.5bn redemption of OCEANE convertible bonds on 3 Jan
Slide 35: Improvement in ROCE after-tax
Improvement in ROCE after-tax Improvement in profitability Average capital ROCE employed WACC (1) = 6.2% @ Water @ Waste @ Energy Services 2,544 2,553 8.3% 8.6% @ Transportation 1,338 1,266 5.6% 7.0% 3 @ Total Veolia 20,857 15,939 7.0% 8.3% (1) After tax, based on the analysts’ consensus, (2) Exclud
Slide 36: Strategy and outlook
Strategy and outlook 36
Slide 37: Veolia Environnement: an industrial company dedicated to ecology
Veolia Environnement: an industrial company = dedicated to ecology Creation of long-term value through innovation based on technology and core competencies m @ Preserving the environment through the treatment and containment of pollution arising from human and industrial activities @ Conserving natu
Slide 38: Commercial successes
ma | Commercial successes = Main contract wins or renewals in 2004 Total cumulative revenue (€ m) Shenzhen (near HongKong) 50 years China 8,500 Kladno-Melnik (Central Bohemia) 20 years Czech Republic 600 Hohhot (Inner Mongolia) 30 years China 600 Eastern Moravia (V.A.K. Zlin) 30 years Czech Republic
Slide 39: Commercial successes
ma | Commercial successes = Main contract wins and renewals in 2004 Total cumulative revenue (€ m) Lyon Villeurbanne 2B years France 500 Lazio, Rome Byears italy 430 Poznan -- Poland 75 per year Druskininkai 30 years Lithuania 110 Richter Gedeon Rt (industrial) 6 years Hungary 80 Montlugon 20 years
Slide 40: Growing markets: France
= Growing markets France: potential for further growth — France: 2004 revenue of €13,440m, CAGR of 5.5% between 2000 and 2004 @ Water = High contract renewal rate = Existing contracts extended to cover more services (new standards, development of wastewater treatment, sludge processing, etc.) = New
Slide 41: Growing markets: Germany
= Growing markets Leading positions in Europe ( Germany: 2004 revenue of €1,300m @ Example: Braunschweig acquisition = Veolia was able to seize this opportunity due to its strong existing positions in Germany = Integrated management of water, electricity, gas and heating for 250,000 inhabitants in a
Slide 42: Growing markets: United Kingdom
Growing markets Leading positions in Europe as { United Kingdom: revenue of €1,530m @ Example: Waste, revenue €740m, EBIT margin over 8%, CAGR 2000 - 2004 of +9% * Restructuring process started in 2000 * Good commercial trend * Improved pricing environment + Development of integrated contracts (Hamp
Slide 43: Growing markets: Italy
= Growing markets Leading positions in Europe { Italy: 2004 revenue of €640m @ Example: Energy Services, revenue up 33% at €504m = Revenue growth 2000-2004: +€370m, of which 50% consisted of organic growth * Growth driven by services to hospitals (60% of the total activities in Italy) * Considerable
Slide 44: Growing markets: North America and Australia
a Growing markets A key player in North America and in Australia North America (transportation): 2004 revenue of €270m, up 22 6 from 2002 January 2005: Denver (buses) Duration: 5 years Current presence in Colorado: €21m per year revenue 125 buses in Denver, 22 in Boulder 400 taxi network in Denver a
Slide 45: Growing markets: North America
| Growing markets 4 major player in North America North America: 2004 revenue of $2,400m, 2010 growth target: > 50 Extension of the wastewater treatment contract in the city of Richmond, California: 18 years, total cumulative revenue of approximately €61m. Virgin Islands: 20 years, total cumulative
Slide 46: Growing markets: Asia-Pacific
| Growing markets Asia-Pacific: a fast-growing region Asia-Pacific: 2004 revenue of ~€1.2bn, up 25% from 2003; 2009 target of > €2bn @ Water = contract in Zunzi (Guizhou province, China): duration: 35 years, total cumulative revenue: €210m © 2 water contracts in China (one in Hohhot in Inner Mongoli
Slide 47: A confirmed business model
A confirmed business model Demand for integrate environmental servi Growth potential Strategic presence geographically _) Increasing interes| Development o fiom financial partners ‘uropean PPP model e/accounting standard Balance sheet optimisation Profitability 2004, anual results - March 2005 - inv
Slide 48: Profitable growth: 2005 objectives
Profitable growth: 2005 objectives @ Revenue growth of 5-7% @ Double-digit growth in consolidated operating income @ Positive free cash flow excluding new major projects and after dividend increase arch 2005 - investor Relatiore “
Slide 49: Medium term objectives
= Medium term objectives @ Continuing growth: = Revenue growth of 4% to 8% per year on average @A selective investment policy ® Gradual reduction in capital intensity f= ROCE of over 10% in 2007 = Maintenance of a sound balance sheet: Net debt/EBITDA ratio << 3.5x @ Double- digit dividend growth
Slide 50: Veolia Environnement
VEOLIA Environnement
Slide 51: Investor Relations contact information
Investor Relations contact information @ Nathalie PINON, Head of Investor Relations 38 Avenue Kléber - 75116 Paris - France Telephone +33 171 75 0167 Fax +33 17175 1012 e-mail nathalie_pinon® groupve.com @ Brian SULLIVAN, Vice President, US Investor Relations 700 E. Butterfield Road -Suite 201 Lomba
Slide 52: Appendix
Appendix Detailed ROCE calculations 62
Slide 53: ROCE, a key indicator
= ROCE, a key indicator (EBIT - tax expense for the company® + share in net earnings of companies accounted for under the equity method @ ROCE @ = average capital employed for the year capitalemployed = __ fixed assets + gross goodwill - exceptional asset write-downs + share ih companies accounted f
Slide 54: 2004 capital employed
2004 capital employed ‘At December 21,2004 At December 21,2004 fem) Reference document(* 2004 Tangible and intangible assets 15 703 15 703 Goodwill, net 3 558 3 558 Goodwill amortisation (excluding exceptional write-downs) 1329 Gross goodwill (net of exceptional write-downs) 4987 Impairment toss on
Slide 55: Average 2004 capital employed
Average 2004 capital employed st December 1 a Dacember 1 2004 2002 Capital employed before disposals of non-core businesses 16 297 18 749 -3 167 Capital employed at non-core businesses!) “ad Average 2004 capital employed 15939 15 582 (Capital employed restatements in 2003: North American assets sold
Slide 56: Signature page
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: March 16, 2005 VEOLIA ENVIRONNEMENT By: /s/ Jérôme Contamine Name: Jérôme Contamine Title: Senior Executive