Veolia Environnement Sa · EURONEXT:VIE
Veolia Environnement Sa — Investor Day (December 2011)
120 slides from Veolia Environnement Sa's investor day presentation, Dec 6, 2011
Slide 1: Investor Day 2011
Investor Day 2011 December 6, 2011
Slide 2: Forward-looking statements
Forward-looking statements This document contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and other securities regulations to which Veolia Environnement is subject. The purpose of this document is to describe the strategy that Veol
Slide 3: Summary
Summary 1. Introduction 2. Transformation of Veolia: initial results 3. Financial perspectives 4. Divisional update 5. Conclusion 3
Slide 4: Introduction
1 Introduction Antoine Frérot 4
Slide 5: The world is changing significantly…
The world is changing significantly… Lower GDP growth and decreased public spending in mature markets Increased pressure on margins Requires increased cost control Pressure on credit markets and trends towards deleveraging Increasingly important financial discipline and solid capital structure
Slide 6: … presenting new challenges…
… presenting new challenges… Specific operational difficulties, which are in the process of resolution… North Africa: terminated contracts (Rabat bus and Alexandria Environmental Services) Marine Services (Environmental Services - USA): divestment signed Southern Europe • Restructuring of Energy Ser
Slide 7: … calling for strong actions
… calling for strong actions …Build on strong fundamentals… Strong underlying market drivers Leading market positions Wide portfolio of long term contracts Established growth platforms in emerging markets …to adapt Veolia to a new environment Increase our exposure to fast growing markets Focus o
Slide 8: Transforming Veolia
Transforming Veolia 1. Refocus and deleverage the group 2. Streamline our organization 3. Reduce our costs Improve financial Focus the company on our flexibility value-added solutions Capture highly profitable organic growth opportunities 8
Slide 9: 1. Further refocus and deleverage the company
1. Further refocus and deleverage the company Transport business Limited synergies with the rest of the group Increasing capital intensity UK regulated water activities Limited growth outlook High capital intensity Better fit for financial investors US solid waste activities Insufficient
Slide 10: 2. Streamline our organization
2. Streamline our organization Implement the same organizational structure for all the Company’s activities: Redefine responsibilities at each level Reinforce control by functional teams Process standardization Mutualization of: Support functions at geographical level IT infrastructure and
Slide 11: 3. Reduce costs
3. Reduce costs 1. Efficiency Plan • Increase operational performance • Efficiency gains generated after implementation costs: − 2012: €225m (new Veolia perimeter) − From 2013: €270m per year (new Veolia perimeter) 2. Convergence Plan – Phase 1 In €m • Immediate cost cutting, mainly SG&A • One-off i
Slide 12: Improve our financial flexibility
Improve our financial flexibility Net Financial Debt €16,5bn €15,1bn €15,2bn €15,0bn < €12.0bn(1) Dec-13 e Dec-08 Dec-09 Dec-10 Sep-11 Reduce Net Financial Debt below €12.0bn(1) by December 2013 Deleverage(2) to 3.0x(3) by 2014 (1) Before closing FX rate effects (2) Net financial debt / (Cash flow f
Slide 13: Focus the group on our value-added solutions
Focus the group on our value-added solutions Treat the most difficult pollutants Hazardous waste, sludge from sewage treatment plants, CO2 emissions Propose solutions to growing scarcities Raw materials, water, fossil energies, CO2 quotas Efficiently manage large public services High quality s
Slide 14: Capture profitable organic growth opportunities
Capture profitable organic growth opportunities Focus growth capex on most attractive business / geographical mix: Business Geographical • Global water services • Central and Eastern Europe, China • Non-hazardous waste treatment and • Serve our large industrial recycling customers in their countries
Slide 15: Capture profitable organic growth opportunities
Capture profitable organic growth opportunities Water China(1) Water China 2010-2017e revenue CAGR >12% Continued organic growth Strong improvement of ROCE 0.6 2% 2010 2014e 2017e Waste UK Waste UK 2010-2017e revenue CAGR > 7% Remaining opportunities in PFIs, where Veolia is the market leader
Slide 16: Contemplated reinforcement of Veolia / EDF partnership in Energy Services
Contemplated reinforcement of Veolia / EDF partnership in Energy Services Simplify and reinforce governance Shared 50/50 ownership Simplified holding structure Veolia governs operational and financial policies Full benefits from synergies with EDF Commercial development Buildings energy ef
Slide 17: The new Veolia
The new Veolia Refocused on 3 divisions Revenue breakdown by division(1) Unequalled expertise 2011e (current perimeter) 2014e (new Veolia) Transport Energy Services Relevant synergies in our markets 10% 22% Water Water 38% 47% Energy A more reactive & efficient Services organization 23% Integr
Slide 18: Guidance and targets
Guidance and targets • Divestments of €5bn • Reduce net financial debt below €12bn(1) 2012-2013 • Cost reduction in 2013: gross impact of €220m Transition and net(2) impact of €120m on Operating Income period • Commitment on dividend policy • €0.70(3) per share in 2012 • €0.70(3) per share in 2013 •
Slide 19: Transformation of Veolia: initial results
2 Transformation of Veolia: initial results Update on Convergence Plan – Denis Gasquet Asset divestments – Hubert Sueur 19
Slide 20: We need to adjust our organizational structure to our new challenges
We need to adjust our organizational structure to our new challenges An organization … with new historically based on challenges to face a growth model… Multi-local Deteriorated global organization economic situation Closest to the client Pressure on margins Move towards further Decentralized Change
Slide 21: We have already demonstrated our ability to adjust costs through our Efficiency Plan
We have already demonstrated our ability to adjust costs through our Efficiency Plan Increasing operational performance by reducing costs of sales Targets always outperformed Additional adaptation plan of the waste division related to 2008 crisis But majority of gains have been transferred to ou
Slide 22: Efficiency Plan: improve productivity
Efficiency Plan: improve productivity 2012 Objectives €225m productivity gains in 2012 (new Veolia perimeter) Net of implementation costs 22
Slide 23: Convergence: the company transformation plan
Convergence: the company transformation plan Define a common operating and governance framework Improve commercial, innovative and operational Standardize our processes efficiency Reinforce accountability Simplify our organization Reduce the number of management layers Increase size effects Enhance
Slide 24: Convergence: significant cost reductions
Convergence: significant cost reductions A two phase plan 1. Phase 1: immediate cost cutting, mainly SG&A In €m One-off implementation cost: €80m in 2012 Net impact on Operating Income (new Veolia perimeter): 2012: €20m From 2013: €170m per year 2012e 2013e 2014e 2015e 2. Phase 2: transform our
Slide 25: Convergence – Phase 1
Convergence – Phase 1 Immediate ambitious cost cutting, mainly SG&A One-off implementation cost: €80m in 2012 Net impact on Operating Income (new Veolia perimeter): 2012: €20m From 2013: €170m per year Dedicated operational team for implementation and monitoring 2013e net savings breakdown by di
Slide 26: Convergence – Phase 2
Convergence – Phase 2 Minimum net impact on Operating Income: €250m in 2015 Total implementation costs 2012-2015: €270m Reducing the number of management layers Eliminate geographic zone structures of the divisions Additional structural simplification of the divisions (Water France: adaptation p
Slide 27: Convergence – Phase 2: Reduction of management layers
Convergence – Phase 2 Illustration: Reduction of management layers Now Convergence Div2 services Div Div2 services Div ZoneUS Zone Zones Europe Business Business Business Unit Unit Units Business Unit Business Unit Unit Business Unit Units Units Units Eliminate geographic zone structures of the divi
Slide 28: Convergence – Phase 2: Shared services
Convergence – Phase 2 Illustration: Shared services New organizational structure at relevant geographical level and mutualization of back-office functions Delegate per geography Shared services Integrated industrial marketing Finance, IT, Purchasing, Legal, Risk Management, Human Resources, Communic
Slide 29: Convergence – Phase 2: NewIT
Convergence – Phase 2 Illustration: NewIT Worldwide convergence of IT infrastructure Priority perimeter: France, Germany, UK and USA Centralized shared service center: VE TECH Expected significant savings with technology standardization and improved governance Total savings: €60m per year (New Veoli
Slide 30: Convergence – Phase 2: purchasing centralization
Convergence – Phase 2 Illustration: purchasing centralization Currently, 75% of group purchases are transversal in nature but we have not taken the full benefit Organize the purchasing function according to two criteria: • Division: categories specific to one (and only one) division • Geography (cou
Slide 31: Conclusion: a strong commitment to reducing costs
Conclusion: a strong commitment to reducing costs Simplification: a streamlined organization for a more integrated and more disciplined group Aggregation: mutualization of back-office functions to significantly decrease our costs Minimum net impact on Operating Income (new Veolia perimeter): • 2013:
Slide 32: Transformation of Veolia: initial results
2 Transformation of Veolia: initial results Update on Convergence Plan – Denis Gasquet Asset divestments – Hubert Sueur 32
Slide 33: We have exceeded our previous divestment objectives
We have exceeded our previous divestment objectives Initially announced divestment plan for 2009-2011 of €3bn, already achieved in H1 2011 Target revision in March 2011 Realized 300 H1 2011 33
Slide 34: Based on a rigorous and thorough portfolio review...
Based on a rigorous and thorough portfolio review... 2009-11 divestments breakdown by divisions Cumulated divestments of €3.6bn from January 2009 to June 2011: Others(1) 1% Transport Water • Totaling 19% of 2008 average capital 29% 27% employed • Sale of subsidiaries accounted for 77% of the total E
Slide 35: … in line with Veolia’s geographic and strategic priorities
… in line with Veolia’s geographic and strategic priorities 2009-11 divestments mainly from Veolia main divestment criteria mature markets Mature activities/markets with limited growth potential • Sale of Waste to Energy activities in the US to Covanta for $450m (2009) Lack of technical differentiat
Slide 36: Relatively high valuation multiples achieved
Relatively high valuation multiples achieved In the context of the post-Lehman financial environment Utilities EV/EBITDA multiple evolution (since Jan 2009)(1) (x) 7.5 7 Average since Jan 09: 6.5x 6.5 6 Last 12-month average: 6.3x 5.5 5 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11
Slide 37: These divestments have created value
These divestments have created value Use of proceeds Reinvestment in strategic opportunities Deleveraging of the group Strategic criteria: • Growth potential 9.1x(1) • Leading market position • Synergies with the rest of the group • High value-added solutions • Barriers to entry • Competitive advant
Slide 38: Focus on recent transactions
Focus on recent transactions Proxiserve • A challenging timing: switch to a more capital-intensive business model • Scope widened • 3 processes Marine Services • A difficult asset at a bad time (Gulf of Mexico crisis) • An expedited process Other H2 2011 transactions • VES Belgium The 2011 €1.3bn di
Slide 39: Our experience makes us confident that we will achieve the new divestment plan
Our experience makes us confident that we will achieve the new divestment plan with good conditions 2010 capital Asset to be divested 2010 revenue employed Transport €5,765m(1) €1,633m(1) UK regulated water activities €317m €985m US solid waste €614m €978m Refocus our geographic footprint €5bn dives
Slide 40: Financial Perspectives
3 Financial Perspectives Pierre-François Riolacci 40
Slide 41: What happened in 2011? Medium term impact
What happened in 2011? Medium term impact 1.3% (0.8%) 1.0% 10% 10.0% 9% 0.3% 0.6% 9.0% 8% Initial 7% 7.6% target (March 6% 2010) 5% 4% ROCE 2009 After-tax ROCE Recent Slow-return Productivity, Normalized tax 3-5 years Business 3-5 years (1) acquisitions assets (2) Asset environment (1) (2) Optimizat
Slide 42: What happened in 2011? 2010-2011e Adjusted Operating Income evolution
What happened in 2011? 2010-2011e Adjusted Operating Income evolution In €m ~ (240) operational difficulties 2,100 2,056 (146) +6% +8% ~ (20) 2,025 ~ (60) 2,000 +4% ~ (90) 1,910 1,900 ~ (90) 1,800 ~ (70) ~ (30) 1,700 1,600 1,500 2010 Published VT 2010 Published 2011 Initial FX + perim Marine Souther
Slide 43: Action Plans have been implemented to address difficulties experienced in 2011
Action Plans have been implemented to address difficulties experienced in 2011 Operational difficulties in Marine Services (USA) • Divestment signed Localized difficulties in Africa and Middle East • Termination of Rabat contract (Oct-2011) • Termination of Alexandria contract (no more employees, no
Slide 44: We have generated strong free cash flow since 2009
We have generated strong free cash flow since 2009 Since the beginning of 2009, we have generated €2.7bn of free cash flow(1) after net capex of €4.4bn • €1.5bn used to reduce net financial debt • €0.9bn returned to parent company shareholders through cash dividend payments Net financial debt evolut
Slide 45: We have reduced our net financial debt since 2009
We have reduced our net financial debt since 2009 and benefited from attractive cost of borrowing Gross financial debt (as of 30 September 2011): €20.5bn • Gross cost of funds steady over the last 2 years, close to 4% Cash & cash equivalents (as of 30 September 2011) of €5.5bn • Average interest of
Slide 46: We have a strong liquidity position...
We have a strong liquidity position... Liquidity position Group liquidity: €9.7bn, of €bn September 30, which €4.2bn in undrawn 2011 committed credit lines Undrawn syndicated credit 2.7 (without financial facility covenants) Other undrawn credit lines 1.5 Net group liquidity: €5.7bn Cash & Cash equi
Slide 47: … an active management of the bond maturity profile…
… an active management of the bond maturity profile… In Q4 2011, Veolia partially bought back bonds maturing in 2013: • $200m of the USD series with a maturity in June 2013 • €30m of the EUR series with a maturity in May 2013 €m These operations: 1600 Buyback / Tender • Allow optimization of debt 14
Slide 48: ... and no significant upcoming maturities
... and no significant upcoming maturities Less than €700m bond repayment in Bond repayment schedule (€m) 2012 1600 EUR: €10.4bn USD: €1.6bn 1400 GBP: €0.8bn Total: €12.8bn Average net debt 1200 maturity of 8.9 years as of 30-Sep-2011 1000 800 Renewed syndicated 600 loans in April 2011: 400 5-year €
Slide 49: Veolia is adapting its financial profile…
Veolia is adapting its financial profile… …to a tougher environment • Financial crisis and trends towards deleveraging • Lower GDP growth forecasts • High volatility in energy and raw material prices …to a changing business mix • Increased pressure on margins in mature markets • Need for targeted in
Slide 50: Financial consequences of our strategic refocus and restructuring
Financial consequences of our strategic refocus and restructuring A €5bn divestment program over 2012-2013 • UK regulated water, US solid waste, and Transport • Refocus our geographic footprint and business: exit ~ 15 countries to cap presence to 40 countries with capital employed Streamlined organi
Slide 51: New financial profile
New financial profile 2010 Published Impact of 2011, 2012 and 2013 divestments 2010 New Veolia Revenue (€bn) Adjusted Operating Cash Flow (€bn) % margin: 10.5% 11.0% 34.8 (9.8) 3.7 (1.0) 25.0 2.7 Adjusted Operating Income (€bn) Gross Capital Expenditure(1) (€bn) % margin: 5.9% 6.3% 3.3 (0.8) 2.5 2.1
Slide 52: Proportionately consolidated companies
Proportionately consolidated companies Main proportionately Proportionately consolidated consolidated companies in 2010 companies contribution BWB (Berlin contract) 2010 €bn (unless otherwise stated) New Veolia Revenue 5.8 Dalkia International Adjusted Operating Cash Flow 0.9 Operating Income 0.7 Pr
Slide 53: Our transformation will contribute to an improved capital structure
Our transformation will contribute to an improved capital structure Net Financial Debt Evolution €16,5bn €15,1bn €15,2bn €15,0bn Divestments 12,0 (1) <€12.0bn Capital discipline Dec-13e Dec-08 Dec-09 Dec-10 Sep-11 Leverage Ratio Evolution(2) 4,0x 3,8x c.4.0x 3,7x c.3.0x (3) Debt reduction 2014e Dec-
Slide 54: New financial profile by division
New financial profile by division Revenue Adjusted Operating Cash Flow 2010 Published 2010 New Veolia 2010 Published 2010 New Veolia Transport Energy Transport Energy 17% Water Services 9% Services 35% 23% Energy 19% Services Water Energy Water Water 46% Services 46% 18% 39% 21% Environmental Enviro
Slide 55: New Veolia: a refocused company with increased exposure to growing markets...
New Veolia: a refocused company with increased exposure to growing markets... 2011e revenue breakdown 2014e revenue breakdown (current perimeter) (New Veolia) 20% 26% Asia-Pacific (excl. China) North America Asia-Pacific (excl. China) North America 6% China 8% 7% China 6% 4% 6% Central Europe 10% Ce
Slide 56: … enabling Veolia to capture structural volume growth and added value
… enabling Veolia to capture structural volume growth and added value with limited volatility • Definition Examples Revenue 2011e Revenue 2014e Exposure of Higher exposure: revenue and margin Volume to variations in • Industrial customers volumes lever • China water 43% 38% Measured as a percentage
Slide 57: Example of water activity in China
Example of water activity in China In €m Adjusted Operating Revenue Cash Flow 1 200 300 1 000 250 800 200 600 150 400 100 200 50 0 0 2008 2009 2010 2011e 2014e Revenues Revenue Adjusted Operating Cash Flow Note: Excluding VWS, SADE and Asia Pacific structure 57
Slide 58: New Veolia: a changing mix in contract portfolio
New Veolia: a changing mix in contract portfolio Types of contracts Typical length Evolution Build Operate Transfer 10-25 yrs Heavy Capex Concession 10-30 yrs Operations & Maintenance 3-15 yrs Light Capex Design Build Operate (DBO) 2-15 yrs Works < 1 year No Capex Design and Build < 3 years Service
Slide 59: Capital discipline
Capital discipline Transformation pillars Financial criteria Further growth potential Competitive advantages IRR > WACC + 3% Synergies with the rest of Year 3 ROCE > WACC the group Average Pay back < 7 years Barriers to entry Leading market position All investments above €10m to be a
Slide 60: Significant cash flow generation for growth and attractive returns for shareholders
Significant cash flow generation for growth and attractive returns for our shareholders Proforma(1) New Veolia €bn 2010 Normative(3) ~ 2015e Operating Cash Flow + Repayment of OFA 3.2 4.0 Capex (2.5) (2.5) Cost of debt & taxes & others (1.0) (1.0) Subtotal (0.3) 0.5 Divestments 1.1 0.4 Cash flow ava
Slide 61: 2012-2013: A transition period in an uncertain economic environment
2012-2013: A transition period in an uncertain economic environment Based on the new perimeter of the company, objectives for 2012-2013 are: Divestments of €5bn Reduce net financial debt below €12bn(1) Cost reduction in 2013: gross €220m and net(2) impact on Operating Income of €120m Commitment on d
Slide 62: Beyond 2013 – New Veolia
Beyond 2013 – New Veolia After its transition period, the company will present the following financial profile Organic revenue growth > +3% CAGR (mid cycle) Adjusted Operating Cash Flow > +5% CAGR (mid cycle) Leverage ratio(1) of c. 3.0x (2) Mid-term: historical payout ratio(3) Cost reduct
Slide 63: Divisional update
4 3 Divisional update Industry – Denis Gasquet Water – Jean-Michel Herrewyn Environmental Services – Jérôme Le Conte Energy Services – Franck Lacroix Transport – Jérôme Gallot 63
Slide 64: Industrial clients expect global solutions to complex needs
Industrial clients expect global solutions to complex needs Growing environmental constraints require specific competencies Innovative customized solutions Clients are focusing resources and competencies on their core businesses Anticipate and prevent industrial risk Lower production costs, especial
Slide 65: Our strategy for industrial clients
Our strategy for industrial clients Standardized sector-specific solutions Solutions at the heart of the industrial process and founded on our own technologies Move from parallel business lines to integration Switch from a linear economy to a circular economy Intelligent processing of information (s
Slide 66: Our new industrial solutions
Our new industrial solutions Segmentation of our key industrial sectors: • Automobile • Aviation High-volume industries • Power • Oil & Gas • Steel industry • Mining Resource-intensive • Glass industries • Cement • Petrochemicals Industries with valuable • Pharmaceuticals effluents / waste • Electro
Slide 67: Illustration: Integrated solution for Shale Gas producers
Illustration: Integrated solution (water/waste management) for Shale Gas producers 8 5 4 8 7 8 1 6 2 8 8 3 8 1 Mobile water treatment (evaporation) → reuse / discharge 5 Water treatment for odour control 2 Water treatment (evaporation & crystallization) → reuse / discharge 6 Vacuum truck service 3 W
Slide 68: A new organization to market our integrated industrial solutions
A new organization to market our integrated industrial solutions Creation of a Group Marketing department to drive and design the company’s new transversal industrial solutions Key account management: mutualize commercial resources to promote and standardize our solutions for our major industrial cl
Slide 69: Divisional update
4 3 Divisional update Industry – Denis Gasquet Water – Jean-Michel Herrewyn Environmental Services – Jérôme Le Conte Energy Services – Franck Lacroix Transport – Jérôme Gallot 69
Slide 70: Veolia Water: key 2010 figures
Veolia Water: key 2010 figures Potable water to 100 million people 96,260 employees(1) Wastewater treatment for 71 million people Strong references in all segments World leader of water services of the water market (1) As of 31 December 2010 (including 4,903 employees from the water activities of Pr
Slide 71: Veolia Water: geographic footprint
Veolia Water: geographic footprint 75% of revenue in 7 countries (1) USA: Operations Leader in Central & and maintenance Eastern Europe contracts France: Leader in all business segments Korea / Japan: sole non-national player China: Leader with 40 million people served Top markets representing 75% o
Slide 72: Water: business overview and priorities
Water: business overview and priorities 1 Heavy Capex Municipal 2011e revenue breakdown VW shareholder of Water Cos Historical capital intensive business model Immediate reorganization 14% 2 Light Capex Municipal 27% 59% VW servicing Water Cos Limited / No capex needs Mid term growth dri
Slide 73: Heavy Capex Municipal: shareholder of a WaterCo
1 Heavy Capex Municipal: shareholder of a WaterCo Market characteristics Client is public/political authority Capex needed for: acquisitions (privatization) building / revamping infrastructure HCM 2010 geographical breakdown Trends and priorities French market increasing Capex intensity
Slide 74: France: under pressure in recent years…
1 France: under pressure in recent years… Change in adjusted operating Changes in market conditions cash flow YoY Increasing competition 50 Pressure from clients 0 Re-municipalization threat (50) €m Adverse legal evolution on long term (100) contracts (150) 2008 2009 2010 2011e Decreasing pr
Slide 75: France: future remains challenging
1 France: future remains challenging Contracts for renewal For the next 3 years: €m 250 8.7% 10,0% ~ 22% of revenue to renew 200 6.6% 6.5% 6.9% 8,0% Continuous margin erosion 150 6,0% 100 4,0% 50 2,0% 0 0,0% Adapt organization to customer 2011e 2012e 2013e 2014e needs Revenue for renewal % of Fr
Slide 76: French reorganization: €150m recurring savings
1 French reorganization: €150m recurring savings Reorganize France: Geographical organization specialization Rebuild organization to improve operational and commercial efficiency Allocate more resources to business development Align on new operational standards Standardize organization at
Slide 77: Central & Eastern Europe: capex allocation priority
1 Central & Eastern Europe : capex allocation (1) priority High margin business model Central & Eastern Europe(1) 1 400 25% Facility upgrades to comply with EU 1 200 environmental law 20% 1 000 15% 800 Strategy: €m 600 Consolidation of existing operations 10% Selective development 400 5% 200 Exp
Slide 78: Germany: Berlin contract
1 Germany: Berlin contract Public-Private Partnership: Veolia and RWE acquired 49.9% of the Water Co in 1999 Simplified organization chart 30 year concession Veolia RWE Limited capacity to extract full productivity in current organization 50% 50% RVB Berlin Land Political wish to increase Land gover
Slide 79: China: continued organic growth
1 China: continued organic growth Veolia manages installations in key economic growth locations: Shenzhen, Shanghai, Tianjin Urumqi Beijing Lugouqiao Beijing Beiyuan Tianjin CGE Tianjin TEDA Successful tariff review: increases are Hohhot SINOPEC Yanshan Tianjin Dalian-Tagal Tianjin SODA satisfactory
Slide 80: Light Capex Municipal: Servicing Water Co
2 Light Capex Municipal: Servicing Water Co Client is public WaterCo (mainly Winnipeg (Canada): municipally owned companies) 700,000 inhabitants Operation and capital project management No/very limited Capex needs for all the wastewater facilities for 30 years Very low risk profile contract Ke
Slide 81: Light Capex Municipal: Technologies & Networks
2 Light Capex Municipal: Technologies & Networks VWS Bookings 4 000 Client is public Water Co 3 500 3 000 2 500 Technology driven strategy 2 000 €m 1 500 1 000 Several projects in emerging 500 markets 0 2007 2008 2009 2010 2011e 2012e Global resilience for the Industrial activities Municipal activit
Slide 82: Industry: 3 main target segments
3 Industry: 3 main target segments Clients are blue chip industrial companies Technology driven strategy 3 main sub-segments: Industries with heavy volume & tough environmental constraints like Oil & Gas, Mining and Power Industries with strict corporate water agenda like Food & Beverage and Cos
Slide 83: 2012 Agenda
2012 Agenda Convergence plan with recurring savings in progress Stricter investment selection process Divestment program: UK Regulated, Southern Europe Reorganize French operations Concentrate Heavy Capex Municipal on Central Europe and China Boost Light Capex Municipal For industry, promote technol
Slide 84: Divisional update
4 Divisional update Industry – Denis Gasquet Water – Jean-Michel Herrewyn Environmental Services – Jérôme Le Conte Energy Services – Franck Lacroix Transport – Jérôme Gallot 84
Slide 85: Veolia Environmental Services: key 2010 figures
Veolia Environmental Services: key 2010 figures €9.3bn revenue 84,740 employees(1) Woodlawn landfill (Australia) High Performance sorting facility in Ludres (France) 42 million tons of waste collected Collection services for 87 million people 13 million tons of waste recycled 810,000 client companie
Slide 86: Veolia Environmental Services: geographic footprint
Veolia Environmental Services: geographic footprint 77% of revenue(1) in 4 countries Germany: strong presence UK: leading especially in position due to recycling the development of PFIs France: Innovative leader in all segments US: solid presence in all segments but incineration Top markets represen
Slide 87: VES is the only global operator offering a complete range of waste management services
VES is the only global operator offering a complete range of waste management services Refuse Derived Fuels (RDF) 87
Slide 88: Regulation/awareness evolution
From waste elimination to recovery Worldwide waste (in bn tons) -73% 3.7 Only 25% of worldwide waste is recovered as materials or energy -26% Municipal 1.8 2.7 waste Depleting natural resources, 1.2 environmental problems and rising commodities and energy prices C&I 1.4 1.0 waste 1.2 Our market is d
Slide 89: More exposure to economic cycles and materials prices
More exposure to economic cycles and materials prices Exposure to fluctuating Correlation to economic cycles materials and energy prices Waste market size is driven by VES is becoming a sizeable • Industrial output materials and energy supplier • Domestic consumption Increasing prices are an opportu
Slide 90: Veolia Environmental Services strategy
Veolia Environmental Services strategy Strategic questions Key priorities Progressive decline of 1 Transform our business, from elimination landfilling to recovery, at the right pace in each geography Recycling business models Transition to a higher recovery content exposed to 2 Develop hazardous wa
Slide 91: From waste elimination to resource recovery
1 From waste elimination to resource recovery VES is in a leading position to benefit from the market transformation Technology lead in recovery Effective recovered paper trading organization Exposure to landfilling decline smaller than competition Staying nimble: transition at the right pace
Slide 92: Develop hazardous waste activities
2 Develop hazardous waste activities An industrial business with industrial clients • Complex expertise and high barriers to entry • Valuable waste, can be transported for treatment A capital intensive activity with high return on capital Our strategy: • Develop various recycling processes Nickel re
Slide 93: Adapting the collection business
3 Adapting the collection business Commoditization of collection: • Low barriers to entry • Declining volumes • Strong pricing pressure Increased importance of technological and data content Municipal: real value in smart collection • Incentive schemes: pay per weight / lift • Pneumatic collection
Slide 94: Case study: PFIs in the UK
Case study: PFIs in the UK Veolia Privatization of municipal waste treatment infrastructure remaining opportunities Long-term contracts (25 years): • Integrated waste to materials and energy recovery • Treatment exclusivity • Guaranteed volumes • Electricity sold on the open market (30% of revenue
Slide 95: France: VES is a leader
France: VES is a leader VES is a leader with a 20% market share, strongly positioned on resource recovery Revenue 2010: €3.3bn Others Munic. Recycling is the main growth driver 9% Collection Landfilling 19% Increased competition, especially in collection 9% Demanding recycling targets set by “Grenel
Slide 96: Good commercial dynamic
Good commercial dynamic During the crisis, we reinforced our commercial efforts, which have produced good results for municipal customers since 2009: 2010 Commercial Balance(1) (annual revenue) Contracts to Lost Renewed New Commercial be renewed contracts contracts contracts gains €155m €70m 76% €37
Slide 97: Solid track record in cost adjustments
Solid track record in cost adjustments Starting at the end of 2008, VES was heavily impacted by the economic crisis • Sharp drop in waste volumes (around 10% drop in industrial waste) • Worldwide crash in recycled materials prices VES implemented a drastic adaptation plan: Adaptation of the cost str
Slide 98: 2012 Agenda
2012 Agenda Slowdown of the economy • Adaptation to a possible severe economic downturn (ability proven in 2008) Decrease of materials prices during H2 2011 expected to continue in 2012 Cost savings plan in motion Controlled capital expenditures: investments at 2010 level, with increased PFI investm
Slide 99: Divisional update
4 3 Divisional update Industry – Denis Gasquet Water – Jean-Michel Herrewyn Environmental Services – Jérôme Le Conte Energy Services – Franck Lacroix Transport – Jérôme Gallot 99
Slide 100: Veolia Energy: key figures
Veolia Energy: key figures 900 urban/ local heating and cooling systems 88 000 MW Thermal heating 53,457 employees(1) 7500 MW of electricity Generation 120 000 energy facilities Managed 7m tons of CO2 saved per year #1 in Europe (1) As of 31 December 2010 100
Slide 101: Veolia Energy: geographic footprint
Veolia Energy: geographic footprint 82% of revenue(1) in 8 countries North America: growing position in District Heating Networks Central Europe and Baltic UK and Nordics: countries: District Heating industrial network leader utilities and energy services China: growing position in France: District
Slide 102: Veolia Energy’s market: Local Energy
Veolia Energy’s market: Local Energy COUNTRY REGION SITE Primary energy (coal, oil, gas) and Grid Power Supply Local Energy Production Biomass, Heat, Steam.. Geothermal 2 thermal Energy Services power Local Energy Production District network 3 1 Waste incin, industrials 102
Slide 103: Veolia Energy business development models
Veolia Energy business development models Networks Industrial Energy Utilities Services Installations Soft FM 103
Slide 104: CO2 trends
CO2 trends Context Strategic impact Change of European regulations Energy efficiency remains the core of • Progressive decrease of free quotas our strategy: 7,1 Mt GHG emissions assigned (0 expected in 2027) saved in 2010 • Most actors, including Dalkia, will move CO2 is a part of fuel price: its ri
Slide 105: France: a strong presence in 3 activities
Others France: 10% 31% Networks a strong presence in 3 activities Services 36% 23% Industry France Capture strong opportunities High commercial activity on all segments more than 7,600 contracts awarded in 2010 ; 3 600 8% net revenue growth: €98m retention rate: 80% average contract length:
Slide 106: Central and Eastern Europe: proven value creation
Energy services Central and Eastern Europe: 11% proven value creation Industrial Utilities 22% 67% Networks Central and Eastern Europe (1) District Network value creation model 2 500 30% 25% 2 000 20% 1 500 15% €m 1 000 10% 500 5% 0 0% 2006 2008 2010 2012e 2014e Initial Performance Organic growth En
Slide 107: Italy: under strategic review
Italy: under strategic review Situation assessment Priority: restore profitability Fast external growth / insufficient Accelerated integration of acquired integration companies • 2006-2007: private residential • 2008: property management ; Reduction of cost basis Telecom Harsh competition due to cri
Slide 108: Industrial markets: focus on high value offerings in targeted verticals
Industrial markets: focus on high value offerings in targeted verticals A wide rang of services Key priorities Focus on value-added Waste energy offerings Utility recuperation • Result based contracts production Process Energy • Technical value management UTILITIES PROCESS Select verticals • Food &
Slide 109: Reinforced partnership project with EDF: synergies at the core of our 3 activities
Reinforced partnership project with EDF: synergies at the core of our 3 activities Issues Objectives Development of CHP and district Increase value creation of local networks consistent with national energy vs global system energetic systems Leverage curtailed energy Coordination of centralized / th
Slide 110: 2012 Agenda
2012 Agenda Macro impact on activity should be limited • Expected resilience of energy prices is favorable to energy efficiency activity • Environmental bonus schemes could be more focused and volatile: required agility to capture opportunities In 2012, we will strengthen our results on: • Implement
Slide 111: Divisional update
4 3 Divisional update Industry – Denis Gasquet Water – Jean-Michel Herrewyn Environmental Services – Jérôme Le Conte Energy Services – Franck Lacroix Transport – Jérôme Gallot 111
Slide 112: Veolia Transdev key facts
Veolia Transdev key facts 13 transportation modes 3.3bn passenger trips/year 88% revenue with public authorities 1,900 rail vehicles, 985 LRT 110,000 employees(1) 60,000 bus and coaches Mostly blue collar (only 4.2% of executives) (1) Headcount post-merger, FTE data not available for Transdev 112
Slide 113: Veolia Transdev: geographic footprint
Veolia Transdev: geographic footprint 74% of revenue(1) in 4 countries North America: solid market position in Transit and on-demand. Growth on Transit conversion and On Europe (excluding France): solid market position in Benelux and demand. Germany. Growth benefiting from liberalization of rail mar
Slide 114: Veolia Transdev: change in shareholding
Veolia Transdev: change in shareholding in order to adapt to a market evolving quickly VTD has an ambitious transformation plan, which requires significant investment to support its growth strategy • Growing markets with more and more capex requests Rail On Demand • Impact of infrastructure need
Slide 115: Veolia Transdev: a transforming merger
Veolia Transdev: a transforming merger Closing on March 3rd, 2011 An ambitious industrial project, A merger going forward as with significant assets scheduled • Tramway / Bus Rapid Transit • Since closing: joint organization and • Rail IRP process • On-demand • May/June 2011: workshops on the • Digi
Slide 116: Priority goes to improve our profitability
Priority goes to improve our profitability Action plans with targeted savings of €190m within 3 years 1- Synergies €60m within 2 years Actions on 2- Performance and €80m within 3 years performance efficiency plans 3- Turnaround of non €50m within 3 years profitable contracts 116
Slide 117: Veolia Transdev strategy
Veolia Transdev strategy Improve performance in main countries and core businesses • Synergies • Performance Plans • Turnaround non profitable contracts Focused strategy on selected countries and businesses • Consolidate our 4 main key areas: France, the Netherlands, Germany, USA • Develop UK, Asia
Slide 118: Conclusion
5 3 Conclusion 118
Slide 119: Conclusion
Conclusion Transformation Accountability Realism A refocused, more reactive and efficient new Veolia, with enhanced financial flexibility and well positioned to capture highly profitable organic growth opportunities 119
Slide 120: Investor relations contact information
Investor relations contact information Ronald Wasylec, Directeur des Relations avec les Investisseurs et Actionnaires individuels Téléphone +33 1 71 75 12 23 e-mail ronald.wasylec@veolia.com Ariane de Lamaze Téléphone +33 1 71 75 06 00 e-mail ariane.de-lamaze@veolia.com 38 Avenue Kléber – 75116 Pari