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- Finance
First half 2010 First half 2010 results Investor Relations, 2010 first half results ‐ 06/08/10 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 Environnement's 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 th iti could ld terminate t i t or modify dif some off Veolia V li Environnement's E i t' contracts, t t the th risk i k that th t our long‐term l t contracts t t may limit our capacity to quickly and effectively react to general economic changes affecting our performance under those contracts, the risk that acquisitions may not provide the benefits that Veolia Environnement hopes to achieve, the risk that Veolia Environnement's compliance with environmental laws may become more costly in the future, the risk that currency exchange rate fluctuations may negatively affect Veolia Environnement's financial results and the price of its shares, the risk that Veolia Environnement may incur environmental liability in connection with its past, past present and future operations, 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 This document contains certain information relating to the valuation of certain of Veolia Environnement’s recently announced or completed acquisitions. In some cases, the valuation is expressed as a multiple of EBITDA of the acquired business, based on the financial information provided to Veolia Environnement as part of the acquisition process. Such multiples do not imply any prediction as to the actual levels of EBITDA that the acquired businesses are likely to achieve. Actual EBITDA may be adversely affected by numerous factors, including those described under “Forward‐Looking Statements” above. 2 Investor Relations, 2010 first half results ‐ 06/08/10 Table of contents Table of contents Highlights 2010 first half results 2010 objectives 3 Antoine Frérot Chief Executive Officer Investor Relations, 2010 first half results ‐ 06/08/10 Overview of trends in activity (1) Overview of trends in activity (1) First half of 2010 Water: declining revenue in Works activities Water: declining revenue in Works activities • Continued lower Works activity mainly due to the completion of 3 large contracts in the Middle East • Good resilience of operations despite the end of the Paris contract G d ili f ti d it th d f th P i t t Environmental Services: market improvement • Strong rebound in prices of recycled raw materials and services pricing remain g p y p g at good levels • Improvement in volumes is fragile and uneven • Contract signature selectivity g y Energy Services: first half stable • Climate conditions more favorable at the beginning of the year / negative impact of energy prices impact of energy prices Transportation: good dynamics masked by the end of 3 contracts • Negative revenue impact of €350m related to the end of the Bordeaux, Melbourne and Stockholm contracts Melbourne and Stockholm contracts • Revenue growth of 8.8% excluding the impact of these contracts 5 Investor Relations, 2010 first half results ‐ 06/08/10 Overview of trends in activity (2) Overview of trends in activity (2) Near and mid‐term Reappearance of opportunities for organic growth in core targets Reappearance of opportunities for organic growth in core targets • For public collectivities • In all our specialties Interesting opportunities to exchange and optimize assets • Water in Central Europe Water in Central Europe Portfolio of United Utilities contracts in Europe Entry of IFC into the capital of Veolia Voda for 9.5% • Energy efficiency in the Czech Republic E ffi i i th C h R bli Divestment of 85% of Usti and 15% of Dalkia Ceska NWR Energy (industrial platform in Ostrava and Poland) Continued pursuit of asset portfolio redeployment 6 Investor Relations, 2010 first half results ‐ 06/08/10 Significant commercial and strategic advances Significant commercial and strategic advances SEDIF contract win for 12 years y Important commercial successes bring profitable growth • Water: La Réunion, Royan, Petrobras and Catalonia contracts W t L Ré i R P t b dC t l i t t • Environmental Services: High performance sorting and recycling in Nantes, Staffordshire, Angers’ biopôle, Waste‐to‐energy in Beauvais • Dalkia: Cogeneration by biomass in Lodz, Poznan as well as in France (7 Dalkia: Cogeneration by biomass in Lodz Poznan as well as in France (7 projects) • Transportation: Saxony, Bavaria, Rhine Westphalia, Boston, Phoenix • Multiple divisions: Renault in Tangier p g Signature of agreement for the merger of Veolia Transport / Transdev on May 5, 2010 y , 7 Investor Relations, 2010 first half results ‐ 06/08/10 Improvement confirmed Improvement confirmed Slight decline in revenue: ‐1.2% • Noticeable improvement in the second quarter in all divisions p q Operating cash flow growth of 2.7% Improvement in recurring operating income: +6.6% (operating income +11.2%) • Improvement in associated margins I ti i t d i Growth in recurring net income: +6.6%, (+69.9% growth in net income) 2010 Efficiency Plan: €132m in cost savings in H1 • Cost reductions proceeding in line with annual €250m target Strong growth in operating cash flow – net investments to €1,533m vs €850m (+80%) • Maintained discipline regarding gross investments: €1,333m ( Maintained discipline regarding gross investments: €1,333m (‐12%) 12%) • Divestments: €766m vs. €268m • Stable free cash flow vs. H1 2009 including the 86% cash dividend payment Net financial debt amounted to €16bn Net financial debt amounted to €16bn • Unfavorable exchange rate effect: +€674m • Extension of debt maturity after the debt exchange in July 2010 8 Investor Relations, 2010 first half results ‐ 06/08/10 2010 objectives confirmed 2010 objectives confirmed • Recurring operating income improvement • Positive free cash flow after dividend payment(1) • €3bn of divestments over 2009 – 2010 – 2011 • €250m in cost reductions • Maintain ratio objective: net debt / (cash flow from operations + repayment of Operating Financial Assets) (1) Excluding the planned merger of Veolia Transport/Transdev 9 Pierre‐François Pierre‐François Riolacci Chief Financial Officer Investor Relations, 2010 first half results ‐ 06/08/10 2010 First half key figures 2010 First half key figures En €m H1 2009 Adjusted (1) Revenue Operating Cash Flow(3) Margin rate Recurring operating income Margin rate Operating Income Recurring net income attributable to equity holders of parent Net income attributable to equity Net income attributable to equity holders of parent (1) (2) (3) current FX rates constant FX rates ‐1.2% +2.7% ‐3.3% +0.2% 17,389.3 1,835.2(2) 10.6 % 1,011.5 5.8 % 1,011.5 17,177.3 1,885.4 11.0% 1,078.2 6.3% 1,125.2 +6.6% +3.5% +11.2% +7.9% 287.3 306.2 +6.6% 220.3 374.2 +69.9% Dec 31 2009 Net financial debt H1 2010 15,127 June 30 2010 16,027 FX Impact p +674 First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division; As of January 1, 2010, due to the application of the new amendment to IAS 7, operating cash flow for H1 2009 has been adjusted for renewal expenses by an amount of €148.3 m, of which €102.3m is within the Water division and €46.0m is within the Energy Services division. For detailed definition refer to 2009 Form 20-F page 74 11 Investor Relations, 2010 first half results ‐ 06/08/10 Impact of FX movements on H1 2010 accounts Impact of FX movements on H1 2010 accounts Euro depreciation H1 2010 / H1 2009 Average Rate Average Rate Closing Rate Closing Rate • Australian dollar • Czech koruna • Pound sterling • Polish zloty • U.S. dollar ll +27% +6% +3% +12% 0% +21% +1% +4% +7% +15% I Impacts on Group’s main figures G ’ i fi • Revenue • Operating cash flow Operating cash flow • Recurring operating income +€357m +€47m +€32m • Higher net debt (at end of period rates) +€674m 12 Investor Relations, 2010 first half results ‐ 06/08/10 Breakdown of consolidated revenue Breakdown of consolidated revenue By division Transportation €2,847m , Water , €5,901m 17% 34% Energy Services 22% €3,721m By geographic region Rest of the world Asia / Pacific €1,008m €1,271m North America €1 679m €1,679m 7% 10% 6% 40% 27% Environmental Services €4,708m 37% FFrance €6,903m Europe ex. France Europe ex. France €6,316m C Consolidated H1 2010 Revenue of €17,177m lid t d H1 2010 R f €17 177 13 Investor Relations, 2010 first half results ‐ 06/08/10 Revenue In €m (1) 17 389 17,389 + 357 H1 2009 adjusted (1) FX effect +2.1% - 384 - 185 17,177 External growth Internal growth H1 2010 -2.2% -1.1% -1.2% First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division 14 Investor Relations, 2010 first half results ‐ 06/08/10 Breakdown of revenue by division Breakdown of revenue by division In €m 17,389 17,177 6,235 4,502 (1) 3,713 3,721 2,939 2,847 H1 2009 adjusted (1) H1 2010 Current FX rates FX rates Constant FX rates FX rates Exc. Scope & FX & FX Water ‐5.4% ‐7.1% ‐5.7% Environmental Services 4.6% 1.9% 6.6% Energy Services 0.2% ‐1.6% 0.6% Transportation ‐3.1% ‐5.2% ‐5.2% VE Group VE Group ‐1.2% 1 2% ‐3.3% 3 3% ‐1.1% 1 1% 5,901 4,708 First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division 15 Investor Relations, 2010 first half results ‐ 06/08/10 An inflexion during second quarter in all divisions An inflexion during second quarter in all divisions Revenue in €m 1st Quarter 2009 2nd Quarter 2010 At constant FX 2009 2010 Water 3,143 , 2,923 , ‐7.8% 3,092 , 2,978 , Waste 2,188 2,204 ‐0.7% 2,314 Energy services 2,398 2,312 ‐4.9% Transportation 1,431 1,356 Group 9,160 8,794 Variation at current FX 1st Half 2009 2010 ‐6.4% 6,235 , 5,901 , ‐7.1% 2,504 4.3% 4,502 4,708 1,315 1,409 4.6% 3,713 3,721 ‐1.6% ‐6.2% 1,508 1,491 ‐4.4% 2,939 2,847 ‐5.2% ‐5.1% 8,229 8,383 ‐1.3% 17,389 17,177 ‐3.3% ‐4.0% 4 0% At constant FX +1 9% +1.9% At constant FX 1.9% ‐1.2% 1 2% 16 Investor Relations, 2010 first half results ‐ 06/08/10 Breakdown of revenue by geographic area Breakdown of revenue by geographic area In €m 17,389 6,962 6,177 (1) 17,177 6,903 6,316 1,611 1,324 1 315 1,315 1,679 1,271 1 008 1,008 H1 2009 adjusted (1) H1 2010 Exc. Scope & FX Current FX rates FX rates Constant FX rates FX rates France ‐0.8% ‐0.8% 1.4% Europe ex. France 2.3% ‐0.4% 1.6% North America 4.2% 2.9% 2.7% Asia / Pacific ‐4.0% ‐14.4% ‐15.2% Rest of world Rest of world ‐23.3% 23 3% ‐25.9% 25 9% ‐17.1% 17 1% Group VE ‐1.2% ‐3.3% ‐1.1% First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division 17 Investor Relations, 2010 first half results ‐ 06/08/10 Revenue : Veolia Water, down 5.4% Revenue : Veolia Water, down 5.4% Veolia Water Solutions & Technologies: ‐ 26.2% at constant scope and FX • Impact of the completion of large Design & Build contracts (Marafiq, Fujairah, Ras Laffan). Identical trend in first and second quarters • Backlog for D&B activity has stabilized Backlog for D&B activity has stabilized • Good activity in the « Solutions » business First half revenue (€m) 6,235 -5.4% 5,901 France : Revenue decline of 2.4% at constant scope • Decline Decline in Works (‐6.3%) in Works ( 6 3%) • Slight increase in operations activity (+3.4%) excluding impact of the end of the Paris contract Outside France: +1.1% at constant scope and FX Outside France: +1.1% at constant scope and FX • Europe (excl. France): +3.0% at constant scope and FX (United Kingdom, Northern Europe) • Africa / Middle East: +3.3% at constant scope and FX due to increased volumes and tariffs in 2009 • Asia Pacific: ‐4.9% at constant scope and FX due to end of construction of the Gold Coast desalination plant (Australia) 4,013 -1.3% 3,960 2 222 -12.6% 2,222 12 6% 1 941 1,941 S1 09 S1 10 Operations Works and E&C 18 Investor Relations, 2010 first half results ‐ 06/08/10 Revenue: Veolia Environmental Services: +4.6% Revenue: Veolia Environmental Services: 4.6% First half revenue (€m) Variation in revenue H1 2010 / H1 2009 +5% 4,502 +4.6% 4,708 Waste volumes ± 0% Price and volumes of recycled materials + 6% Rise in service prices + 1% FX effects FX effects + 3% + 3% Scope ‐ 5% H1 09 Breakdown of revenue by activity Breakdown of revenue by activity 2009 H1 2010 8% 8% 23% 8% H1 10 22% 8% Urban cleaning and collection Non hazardous industrial waste collection and services 6% 6% Hazardous industrial waste collection and services Sorting and recycling 13% Hazardous waste treatment Hazardous waste treatment 16% 24% 24% 18% Waste‐to‐energy from non hazardous waste Landfilling of non hazardous and inert waste 16% 19 Investor Relations, 2010 first half results ‐ 06/08/10 Veolia Environmental Services: Breakdown of revenue by geographic area revenue by geographic area France Germany % of H1 Δ at 2010 2010 constant revenue scope & FX 34% +7% Higher recycled raw materials prices Contract selectivity (municipal collection) Contract selectivity (municipal collection) Closure of 2 landfills Good activity for hazardous waste 12% +12% Higher recycled raw materials prices Higher recycled raw materials prices Competitive pressure on municipal, DSD contracts and industrial waste contracts United United Kingdom 16% +4% North America 14% +5% Rest of the Rest of the world 24% +6% Positive contribution of integrated contracts (PFI) Positive contribution of integrated contracts (PFI) Decline in industrial waste volumes and landfilled volumes during the first half, with stabilization in the second quarter Improvement in solid waste volumes in the second quarter Improvement in Industrial Services 20 Investor Relations, 2010 first half results ‐ 06/08/10 Revenue: Veolia Energy Services, stable, +0.2% Revenue: Veolia Energy Services, stable, 0.2% Lower energy prices Lower energy prices • impact of ‐€83m Favorable climate in the first half of 2010 primarily in France and Central Europe First half revenue (€m) 3,713 +0.2% 3,721 • impact of +€65m p 1 ,952 -1.9% 1,915 Stabilization in Works activities at constant scope 1,761 +2.6% 1,807 H1 09(1) H1 10 Outside France France (1) First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division 21 Investor Relations, 2010 first half results ‐ 06/08/10 Revenue: Veolia Transportation, down 3.1% Revenue: Veolia Transportation, down 3.1% Revenue down 5.2% at constant scope and FX rates • Non‐renewal in 2009 of the Bordeaux, Stockholm and Melbourne contracts (‐€350m) • Good commercial development Valenciennes, The Netherlands (Haaglanden), Germany, United‐States First half revenue (€m) 2,940 -3.1% 2,848 Revenue growth of 1.8% in France at constant scope Revenue decline of 9.7% outside France at constant scope and FX rates (impact of Stockholm and Melbourne ‐€300m) Stockholm and Melbourne ‐€300m) (1) H1 09(1) H1 10 First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division 22 Investor Relations, 2010 first half results ‐ 06/08/10 Operating cash flow Operating cash flow (1) In €m H1 2009 adjusted(2) Water Environmental Services l Energy Services Transportation Other Total Group (1) (2) 808 540 374 160 ‐47 1,835 H1 2010 current FX FX rates 788 ‐2.5% 627 +16.1% 386 +3.2% 159 ‐0.6% 0.6% ‐75 ‐ 1,885 +2.7% FX effect 16 15 11 5 ‐ 47 constant FX FX rates ‐4.4% +13.3% +0.1% ‐3.8% 3.8% +0.2% Operating Cash Flow = cash flow from continuing operations before tax and interest expense First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division As of January 1, 2010, due to the application of the new amendment to IAS 7, operating cash flow for H1 2009 has been adjusted for renewal expenses by an amount of €148.3 m, of which €102.3m is within the Water division and €46.0m is within the Energy Services division. 23 Investor Relations, 2010 first half results ‐ 06/08/10 Operating cash flow margin improvement Operating cash flow margin improvement (1) H1 2009 margin adjusted (1) H1 2010 margin Water Environmental Services Energy Services Transportation Other 13.0% 12.0% 10.1% 5.4% ‐ 13.4% 13.3% 10.4% 5.6% ‐ Total Group 10.6% 11.0% First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division . As of January 1, 2010, due to the application of the new amendment to IAS 7, operating cash flow for H1 2009 has been adjusted for renewal expenses by an amount of €148.3 m, of which €102.3m is within the Water division and €46.0m is within the Energy Services division. 24 Investor Relations, 2010 first half results ‐ 06/08/10 Efficiency Plan: Cost reduction progressing in line with annual €250m objective line with annual €250m objective Efficiency Plan €m H1 2009 (Reminder) H1 2010 37 25* 21 15 38 43 31 18 3 2 101 132 Water Environmental Services Energy Services Transportation Other Total Group 53 % of the annual objective realized during the first half * Excluding the Environmental Services Division’s separate Plan of Adaptation in 2009 25 Investor Relations, 2010 first half results ‐ 06/08/10 Recurring operating income increased 6.6% Recurring operating income increased 6.6% In m€ H1 2009 adjustéd (1) Current H1 2010 FX rates FX effect Constant FX rates Water Environmental services 596 134 590 251 ‐1.0% 86.6% 13 8 ‐3.3% 80.7% Energy services 256 268 4.8% 8 +1.6% Transportation 81 48 ‐40.7% 3 ‐43.8% ‐56 56 1,011 ‐79 79 1,078 +6.6% 32 +3.5% ‐18 ‐33 Holding Recurring operating income Of which change in fair value of provisions for landfill rehabilitation p f f (1) First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division 26 Investor Relations, 2010 first half results ‐ 06/08/10 Recurring operating income margin improvement Recurring operating income margin improvement Recurring g operating p g income margins In €m adjusted (1) H1 2010 margin i Water Environmental services Energy services 9.6% 3.0% 6.9% 10.0% 5.3% 7.2% Transportation 2 8% 2.8% 1 7% 1.7% ‐ ‐ 5.8% 6.3% Holding Total Group Total Group (1) H1 2009 margin g First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division 27 Investor Relations, 2010 first half results ‐ 06/08/10 Net income increased 70% Net income increased 70% H1 2009 (1) In €m Recurring Operating income Non‐ recurring H1 2010 Total Recurring Non‐ recurring Total 1,011 ‐ 1,011 1,078 47 1,125 Cost of net financial debt Cost of net financial debt (2) ‐406 406 ‐ ‐406 406 ‐443 443 ‐ ‐443 443 Corporate Tax Expense ‐198 ‐ ‐198 ‐188 ‐ ‐188 7 ‐ 7 9 ‐ 9 ‐ ‐68 ‐68 ‐ 43 43 ‐127 1 ‐126 ‐149 ‐22 ‐171 287 ‐67 220 306 68 374 Share in net income of associates N ti Net income from discontinued f di ti d operations Net income attributable to non‐ controlling interests Net income attributable to equity holders of parent (1) (2) First half 2009 results have been adjusted in order to assure the comparability of periods for the reclassification into «net income from discontinued operations” of UK operations in the Transportation division and the Eolfi activities in the Energy Services division Including «other financial income and expenses », of which -€37m in unwinding discounts on provisions in 1H 2010 28 Investor Relations, 2010 first half results ‐ 06/08/10 Cost of borrowing Cost of borrowing In €m H1 2009 Cost of net financial debt ‐379 H1 2010 Δ30/06/10 30/06/09 ‐408 ‐29 Impact of change in average debt +15 Impact of change in interest rates Impact of change in interest rates ‐38 38 Other ‐6 In €m 17 000 16 819 16 827 16 500 16 000 15 500 16 027 15 902 15 377 15 127 Average net financial debt: €15,542m at June 30, 2010 versus €16,888m at June 30, 2009 15 000 14 500 Cost of borrowing stood at 14 000 5.06% versus 4.76% in 2009 Marc. 31, June 30, Setp. 30, Dec. 31, Marc. 31, June 30, 09 09 09 09 09 09 (4.47% at H1 2009 and 5.07% at H2 2009) 29 Investor Relations, 2010 first half results ‐ 06/08/10 Completed Divestments in H1 2010 Completed Divestments in H1 2010 In €m Industrial and financial divestments H1 2010 Industrial and financial divestments H1 2010 (1) Mature assets 766 766 396 • Of which Montenay Of which Montenay ‐ Dade (Environmental Services), Dade (Environmental Services) Usti nad Labem (Dalkia) Non‐strategic assets g 106 • Of which Mediterranea delle Acque (Water); Brazil, Ireland Korea (Environmental Services) Development partnerships 192 • Of which IFC in Veolia Voda, CEZ in Dalkia Ceska Republica Industrial Divestments (1) 72 Including capital increase subscribed by minority shareholders, net financial debt of divested companies and partial divestments between non-controlling shareholders (with no change in consolidation scope) 30 Investor Relations, 2010 first half results ‐ 06/08/10 Maintained discipline on net investments: €352m Maintained discipline on net investments: €352m In €m H1 2009 H1 2010 710 458 4.1% 2.7% Investments in growth/existing operations (ex. operating financial assets) 316 392 Financial investments in growth (1) 248 324 New operating financial assets 242 159 1,516 1,333 ‐183 Industrial and financial divestments (2) ‐268 ‐766 +498 Repayment of operating financial assets Repayment of operating financial assets ‐263 263 ‐215 215 985 352 Maintenance capital expenditures As % of consolidated revenue Gross investments Net investments (1) (2) ‐633 Including partial acquisitions between non-controlling shareholders (with no change in consolidation scope) and net financial debt from acquired entities Including capital increase subscribed by minority shareholders of €108m in H1 2010 and €57m in H1 2009, net financial debt of divested companies and partial divestments between non-controlling shareholders (with no change in consolidation scope) 31 Investor Relations, 2010 first half results ‐ 06/08/10 Strong cash generated from operations Strong cash generated from operations In €m Cash Flow From Operations h l i (1) Repayment of Operating Financial Assets Total cash generation Total cash generation Gross investments Divestments Cash generated from operations Variation WCR Taxes paid Taxes paid Interest expense Dividend (2) Other (3) Free Cash Flow (1) (2) (3) H1 2009 H1 2010 1,836 263 2,099 ‐1,516 268 851 ‐114 ‐218 ‐347 ‐402 73 ‐157 1,878 215 2,093 ‐1,333 766 1,526 ‐382 ‐197 ‐352 ‐709 ‐19 ‐133 Of which financial cash flow and cash flow from discontinued operations ((€2m) in H1 2010 et (€6m) in H1 2009) Dividend paid to shareholders and minority shareholders and other movements Includes in particular changes in receivables and other financing assets totaling (€27m) in H1 2010 and €62m in H1 2009 32 Investor Relations, 2010 first half results ‐ 06/08/10 Change in net financial debt Change in net financial debt In €m Net financial debt at January 1st Free cash flow FX ff t FX effects Other Net debt at June 30 Change in net debt H1 2009 ‐16,528 ‐157 ‐30 30 ‐112 ‐16,827 ‐299 H1 2010 ‐15,127 ‐133 ‐674 674 ‐93 ‐16,027 ‐900 Strong liquidity position : €9.7bn at the end of June 2010 Pursuing active debt management • Average maturity of net debt of 9.9 years following the debt swap in July 2010 related to bonds due in 2012 and 2013 (average maturity of 9.5 years at June 30, ( g y y 2010 and 10 years at the end of December 2009) Ratings • Moody Moody’ss : P : P‐2 2 / A3 negative outlook (confirmed on July 8, 2010) / A3 negative outlook (confirmed on July 8 2010) • Standard & Poor’s : A‐2 / BBB+ Stable outlook (April 21, 2010: ratings confirmed & outlook revised from negative to stable) 33 Investor Relations, 2010 first half results ‐ 06/08/10 2010 objectives confirmed 2010 objectives confirmed • Recurring operating income improvement • Positive free cash flow after dividend payment(1) • €3bn of divestments over 2009 – 2010 – 2011 • €250m in cost reductions • Maintain ratio objective: net debt / (cash flow from operations + repayment of Operating Financial Assets) (1) Excluding the planned merger of Veolia Transport/Transdev 34 First half 2010 First half 2010 results Sommaire Appendices Investor Relations, 2010 first half results ‐ 06/08/10 Table of contents of appendices Table of contents of appendices Currency movements Impact of FX rates on H1 2010 operating cash flow p p g Gross investments by division Debt management I Impact of foreign currency on net debt t ff i t d bt VE SA bond redemption schedule Consolidated balance sheet Main contracts won or renewed in 1H10 Accounting treatment for renewal expenditures (IAS 7) Veolia ‐ Transdev: calendar Veolia ‐ Transdev: calendar Appendix 1 Appendix 2 pp Appendix 3 Appendix 4 A Appendix 5 di 5 Appendix 6 Appendix 7 Appendix 8 Appendix 9 Appendix 10 Appendix 10 37 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 1: Currency movements Appendix 1: Currency movements Main currencies (1 unit of foreign currency = €…) H1 2010 H1 2009 H1 2010 U.S. U S dollar Average rate Closing rate 0.7507 0.7075 0.7528 0.8149 +0.3% +15.2% Pound sterling Average rate Closing rate 1.1187 1.1736 1.1494 1,2233 +2.7% +4.2% Korean won Average rate Closing rate 0.0006 0.0006 0.0007 0.0007 +17.2% +20.2% Australian dollar Average rate Closing rate 0.5322 0.5761 0.6730 0.6943 +26.5% +20.5% Czech koruna Average rate Closing rate 0.0368 0.0386 0.0389 0.0389 +5.5% +0.7% / H1 2009 The average rate applies to the income statement and cash flow The closing rate applies to the balance sheet 38 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 2: Impact of FX rates on H1 2010 operating cash flow operating cash flow H1 2008 (1) 2008 Currency H1 H1 2009 2010 Local currency (in millions) Change Δ H1 €/X H1 2010/ 2010 H1 2009 U.S. dollar zone (USD) 209 Pound sterling zone (GBP) 209 1.328 174 164 +0.3% 0.870 ‐6% 3,725 Korean won zone (KRW) 39,252 (1) 255 +28% Czech koruna zone (CZK) Australian dollar zone Australian dollar zone (AUD) Polish zloty zone (PLN) 203 3,593 3,331 25.734 46,253 30 1,532.27 51 217 +4 +14.7% 1 486 1.486 +70% 211 +6 +5.2% +31% 47 +5 +2.7% ‐7% 35,319 H1 2010/ H1 2009 264 +11 +20.9% 4.003 +22% Impact on H1 2010 op. cash flow h fl (€m) +1 +7 +10.6% 2008 figures have not been restated for activities that are expected to be divested 39 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 3: Gross investments by division Appendix 3: Gross investments by division Growth In €m Water Environmental Services Environmental Services Energy Services Transportation Other Total H1 2010 Total H1 2009 Financial incl. Δ in Maintenance consolidation scope 116 107 189 33 40 181 103 2 10 1 458 324 710 248 Industrial capex 197 74 73 39 9 392 316 New operating financial assets 110 12 19 18 0 159 242 Total 530 308 313 162 20 1,333 1,516 40 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 4: Debt management Appendix 4: Debt management Ratings • Moody’s : • Standard & Poor’s : P‐2 / A3 negative outlook (confirmed July 8, 2010) A‐2 / BBB+ stable outlook (April 21, 2010) Bond redemption: €23m in H1 2010 Average maturity of net debt : 9.5 years at June 30, 2010 vs. 10 years in 2009 Group liquidity: €9.7bn, including €4.6bn in undrawn confirmed credit lines( without any disruptive covenants) Net Group liquidity: €6.3 bn Net financial debt after hedges at June 30, 2010 Currencies (gross debt after hedges) at June 30, 2010 Other 19% Fixed rate: 62% (1) o/w Euro: 80% o/w USD: 52% Euro 61% GBP 10% o/w GBP: 42% USD 10% Variable rate: 38% Variable cap-rate: 6% (1) o/w RMB 4% and HKD 3% 41 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 5: Impact of foreign currency on net debt Appendix 5: Impact of foreign currency on net debt Net debt at December 31, 2009 N t d bt t D b 31 2009 Net debt at June 30, 2010 €15,127m €15 127 €16,027m • Change Change €900m • Of which the impact of FX Of which the impact of FX €674m US dollar Pound sterling Hong Kong dollar Chinese renminbi yuan €283m €151m €92m €73m 42 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 6: VE SA bond redemption schedule after the bond exchange completed July 1, 2010 the bond exchange completed July 1, 2010 1800 €0.02bn CZK €0.8bn GBP €1 8b €1.8bn USD EURO €10.3bn Average maturity of net debt moved from 9.5 years to 9.9 years after bond exchange completed July 1, 2010 y g p y , 1600 1400 Total €12.9bn 1200 1000 800 600 400 200 0 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 43 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 7: Consolidated balance sheet Appendix 7: Consolidated balance sheet In €m In €m Intangible assets (concessions) Property, plant & equipment Oth Other non‐current assets t t Operating financial assets (current and non‐current) Cash & cash equivalents Other current assets Total Assets p (including minorities) Capital Financial debt (current and non‐current) Other non‐current liabilities Other current liabilities Other current liabilities Total Liabilities & Shareholders Equity 12/31/09 / / 3,625 9,382 11 313 11,313 5,652 5,614 14,231 49,817 10,131 , 21,086 4,381 14 219 14,219 49,817 06/30/10 / / 4,114 9,903 12 306 12,306 5,723 5,058 13,744 50,848 10,739 , 21,715 4,868 13 526 13,526 50,848 44 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 8: Main contracts won or renewed since the beginning of 2010 since the beginning of 2010 INTERNAL GROWTH SMICTOM ‐ Renewals: Flandres Morinie 70 main contracts renewed in France during the 1st half 2010 in Water (o/w 36 in drinking water & 34 in wastewater), 108 in Waste (o/w 52 from local authorities & 56 from companies), 2 in Transportation & 85% of Lens contracts due to expire during the 1st half 2010 renewed in Energy contracts due to expire during the 1st half 2010 renewed in Energy SEDIF (Syndicat des Eaux d’Ile de France) (water) Public service concession based on the useful innovation on the following performances: Oise ‐ technological : single control center « ServO », water traceability, Carré de Réunion third‐generation remote meter reading ; GIMD ‐ environmental : « Zero carbon service » ; Caisse des ‐ social: social program called « Water for all » ; Dépôts SEDIF – Length: 12 years – Length: 12 years – Cumul. rev.: €3bn Cumul rev : €3bn Lanester Rennes ‐ Outsourcing / Privatization: Orléans « Biopôle » waste recovery center from the Angers Loire metropolitan area (1st VES mechanical Biopôle biological treatment facility with composting & anaerobic digestion located in France) (waste) – Length: 6 years – Cumul. rev.: €46m Ancenis Angers Tours SMICTOM Flandres Morinie (waste) – Length: 8 years – Cumul. rev.: €40m Bayonne (transportation) Bayonne (transportation) – Length: 7 years Length: 7 years – Cumul. rev.: €140m Cumul. rev.: €140m Antibes (transportation) – Length: 5 years – Cumul. rev.: €55m Montluçon Oise semipublic mass transit authority – Integrated services system for the Oise transit hub (transportation) – Length: 12 years – Cumul. rev.: €29m Limoges Montluçon – Energy performance contract (energy) – Length: 10 years ‐ Engineering / Design & Build: The « Grand Prado » from the Reunion North Interdistrict Community (CINOR) (BOT) (water) The « Grand Prado » from the Reunion North Interdistrict Community (CINOR) (BOT) (water) – Length of contract: 20 years – Cumul. rev.: €270m incl. €75m for construction Carré de Réunion in Versailles (D&B) (water) – Cumul. rev.: €48m CRE 3 (construction & operation of 7 new biomass cogeneration plants in Rennes, Strasbourg, Orléans, Tours, Angers, Lens & Limoges) (energy) Bayonne Town of Lanester (Morbihan) (DBO contract for a biomass heating network) (energy) – Operating length: 24 years Antibes Grand Prado PARTNERSHIPS Agreements between Veolia Environnement & Caisse des Dépôts relative to the Veolia Transport‐Transdev merger (1) (50/50 before the new group’s IPO) (transportation) Partnership between Veolia Environnement & the Groupe Industriel Marcel Dassault (GIMD) Partnership between Veolia Environnement & the Groupe Industriel Marcel Dassault (GIMD) with the undertaking by GIMD to maintain its 5% holding of the stock & voting rights of Veolia Environnement for a period of 5 years Strasbourg Renewals Outsourcing / Privatization Engineering / Design & Build Partnerships with other companies (1) Signature of the definitive agreements announced on May 5, 2010 45 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 8: Main contracts won or renewed since the beginning of 2010 since the beginning of 2010 Vesteralen INTERNAL GROWTH ‐ Renewals: Westminster (waste) – Length: 7 years (7‐year option) – Cumul. rev.: €298m excl. option Medway Council Medway Council (1) (waste) – Length: 7 years Length: 7 years – Cumul. rev.: €125m Cumul. rev.: €125m Kristianstad/Skane County (transportation) – Length: 8 years (2‐year option) – Cumul. rev.: €74m excl. option E4 (interregional line) (transportation) – Length: 8 years – Cumul. rev.: €69m Frankfurt (transportation) – Length: 6 years – Cumul. rev.: €57m Lofoten (transportation) – Length: 7 years (3‐year option) – Cumul. rev.: €31m excl. option Vesteralen (transportation) V t l (t t ti ) – Length: 7 years (3‐year option) – L th 7 (3 ti ) Cumul. rev.: €30m excl. option C l €30 l ti ‐ Outsourcing / Privatization: Staffordshire County Council (1) (waste) ‐ Length: 25 years – Cumul. rev. for the County Council : £1bn incl. third party waste & sale of electricity ‐ Engineering / Design & Build: Construction Construction of 2 boilers wholly dedicated to biomass in Lodz & Poznan (energy) of 2 boilers wholly dedicated to biomass in Lodz & Poznan (energy) – Additional yearly rev. : €364m Construction & operation of a set of solar photovoltaic fields in the region of Pouilles (energy) – Operating length: 20 years – Cumul. rev.: €160 m for construction Lofoten Highlands Moray Tay Scottish Water Solutions Sweden Norway E4 Kristianstad Tallinn Poznan United Kingdom United Kingdom Westminster Medway EXTERNAL GROWTH Acquisition Acquisition (2) of several United Utilities activities in Europe (water): of several United Utilities activities in Europe (water): ‐ 58% stake in Sofiyska Voda (water & wastewater for the city of Sofia in Bulgaria) ‐ 26% stake in AS Tallinna Vesi (water & wastewater for the Tallinn in Estonia) ‐ 33% stake in Aqua SA (water & wastewater for the city of Bielsko Biala in Poland) ‐ portfolio of outsourcing, industrial engineering & infrastructure contracts in UK ‐ minority stakes in 3 PFI contracts in Scotland (Tay, Moray & Highlands) Germany Francfurt NWR Energy CEZ IFC Czech Rep. Italy Lodz od Bielsko Biala Bulgaria Sofia Acquisition Acquisition of NWR Energy (leader in Czech Rep. In the mining & industrial sector) of NWR Energy (leader in Czech Rep. In the mining & industrial sector) from the NWR group (energy) Renewals Pouilles Outsourcing / Privatization Engineering / Design & Build Interests acquisitions in others companies Partnerships with other companies Partnerships with other companies PARTNERSHIPS Partnership between Veolia Energy‐Dalkia & CEZ (1er company in the Czech energy market) (energy): ‐ disposal by Dalkia International of its 15% stake in Dalkia Ceska Republica’s shares to CEZ ‐ disposal by Dalkia Ceska Republica of its 85% stake in Dalkia Usti Nad Labem to CEZ Partnership between CREED (Veolia’s Waste management & Energy Research Center), P hi b CREED (V li ’ W &E R hC ) the company Dalkia & Lodz Technical University (energy) Partnership between Veolia Voda & the IFC (International Financial Corporation – World Bank) (water) ‐ 9.5% stake acquisition via a rights issue in Veolia Voda by IFC Partnership between Veolia Water & Scottish Water with the new JV establishment « Scottish Water Solutions » (backed notably by Veolia Water UK) dedicated to delivering the Scottish Water investment program over the 2010‐2015 period, one of the largest in the UK water industry (water) Estonia Poland Staffordshire (1) (2) Signature announced on July 2010 Transaction subject notably, to the competition authorities & to the EBRD’s approval for Continental Europe (excl. Poland) 46 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 8: Main contracts won or renewed since the beginning of 2010 since the beginning of 2010 INTERNAL GROWTH ‐ Renewals: Boston (transportation) – Length: 2 years – Cumul. rev.: €486m York (Bus Rapid Transit) (transportation) ‐ Length: 5 years – Cumul. rev.: €71m Canada ‐ Outsourcing / Privatization: Phoenix (transportation) – Length: 5 years – Cumul. rev.: €314m York (bus & transport of people with special needs) (transportation) – Length: 5 years (5‐year option) – Cumul. rev.: €80m excl. option York Cleantech Savannah (transportation) Boston United States Group – Length: 5 years (5‐year option) – Cumul. rev.: €61m excl. option Baltimore Phoenix cooling network Boston (trigeneration for 6 hospitals) (energy) ( g p )( gy) – Length: 10 years – Cumul. rev.: $70m $ Savannah Suburbio hospital under PPP (Public‐Private Partnership) in the State of Bahia (energy) – Operating length: 20 years – Cumul. rev.: €107m ‐ Engineering / Design & Build: g g/ g (1) Petrobras P63 & Tupi (D&B) (water) – Cumul. rev.: €41m Brazil EXTERNAL GROWTH S b rbio Hospital Suburbio Hospital Acquisition of a cooling network in Baltimore (energy) PARTNERSHIPS Partnership between Veolia Environnement & Cleantech Group (leading global innovation network of start‐ups (leading global innovation network of start ups & investors in & investors in clean technologies) with the program « Veolia Innovation Accelerator » (VIA) with the objective to boost cleantech innovation by cooperating with the most innovative start‐ups Renewals Outsourcing / Privatization Engineering / Design & Build Interests acquisitions in other companies Interests acquisitions in other companies Partnerships with other companies (1) Announced on Aug. 2010 P63 & Tupi p Petrobras 47 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 8: Main contracts won or renewed since the beginning of 2010 since the beginning of 2010 INTERNAL GROWTH China ‐ Renewals: l Rockingham – Manudrah (transportation) – Length: 10 years – Cumul. rev.: €150m Shenzhen Baoan ‐ Engineering / Design & Build: / Shenzhen Baoan Sludge (D&B) (water) – Cumul. rev.: €17m Australia Rockingham Renewals Engineering / Design & Build 48 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 8: Main contracts won or renewed since the beginning of 2010 since the beginning of 2010 INTERNAL GROWTH ‐ Engineering / Design & Build: Khenifra (D&B) (water) Khenifra (D&B) (water) – Cumul. rev.: €16m Cumul. rev.: €16m PARTNERSHIPS Renault plant Partnership Partnership between Veolia Environnement & the Qatari Diar between Veolia Environnement & the Qatari Diar fund with the undertaking by the sovereign fund to maintain its 5% holding of the stock & voting rights of Veolia Environnement for a period of 3 years with a common ambition to work together on infrastructure & utilities projects in the Middle East & North Africa f Partnership between Veolia Environnement, Renault & the Kingdom of Morocco to build the Renault’s Tangier plant which emits zero carbon & zero industrial liquid discharges (multiservices) Khenifra Morocco Qatari Diar Qatar Engineering / Design & Build Partnerships with other companies 49 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 9: Accounting treatment of renewal expenditures according to p y g p the new amendment specifying the implementation conditions of IAS7 Veolia Environnement is generally subject to the obligation of maintaining and repairing assets of facilities it manages under public service contracts. In accounting terms, this obligation is reflected by h bl fl db renewal expenses (for assets covered by public‐private partnership service contracts in France). In application of the new amendment specifying the li i f h d if i h implementation conditions of IAS7 Statement of Cash Flow, renewal expenditures are booked as operating expenses as of January 1, 2010 whereas they were previously treated as maintenance 2010, whereas they were previously treated as maintenance expenditures. As a consequence, during reconciliation, in the cash flow statement between “Net statement, between Net income attrib. to equity holders of income attrib to equity holders of parent” and “Net cash flow from operating activities”, renewal expenses are no longer eliminated, as of January 1, 2010, in the “Depreciations, provisions and operating value impairments” item. The deduction of renewal expenditures from the operating cash flow and maintenance costs, has no impact on the cash position, net income, or shareholders’ equity. 50 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 9: Accounting treatment of renewal expenditures according to p y g p the new amendment specifying the implementation conditions of IAS7 €m Revenue 4,105 Recurring operating income 2,275 Maintenance capex 1,860 €m Revenue (2) Renewal expenditures 2008 adjusted (1) and adjusted for IAS 7 35,765 Operating cash flow Operating cash flow(2) ‐ net investments (1) 2008 adjusted (1) 35,765 ‐ 390 2,275 ‐ 390 601 2009 published 3,956 Recurring operating income 1,932 Maintenance capex 1,632 Operating cash flow(2) ‐ net investments 2,357 1,470 601 Renewal expenditures 34 551 34,551 Operating cash flow 3,715 2009 adjusted for IAS 7 34 551 34,551 ‐ 361 3,595 1,932 ‐ 361 1,271 2,357 To ensure the comparability of financial years, 2008 financial statements have been adjusted: - by the divestment of Freight operations in the Transportation division in December 2009 and of Waste-to-Energy operations in the Waste Division in the United States in August 2009; which are presented in the income statement in the line item “net income from discontinued operations” according to IFRS 5; - by the reclassification into “net income from discontinued operations” of UK operations in the Transport division and of the Eolfi activities in the Energy Services division; Including the operating cash flow from discontinued operations 51 Investor Relations, 2010 first half results ‐ 06/08/10 Appendix 10: Veolia ‐ Transdev: Calendar Appendix 10: Veolia Transdev: Calendar May 5, 2010: Signature of definitive agreement for merger of Veolia Transport with Transdev g p Joint notification to competition authorities / oversight of economic concentration procedure Closing: after closing unresolved conditions and notably after approval from competition authorities h h f l k d IPO within 12 months of closing, market conditions permitting Investor Relations, 2010 first half results ‐ 06/08/10 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 [email protected] Xavier d Xavier d’Ouince Ouince Téléphone +33 1 71 75 19 34 e‐mail xavier.d‐[email protected] 38 Avenue Kléber – 38 A Kléb 75116 P i France 75116 Paris ‐ F Fax +33 1 71 75 10 12 Terri Anne POWERS, Director of North American Investor Relations 200 East Randolph Street Suite 7900 Chicago, IL 60601 Tel +1 (312) 552 2890 Tel +1 (312) 552 2890 Fax +1 (312) 552 2866 e‐mail [email protected] http://www.veolia-finance.com 53