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Transcript of 2007 Annual results
Veolia Environnement
2007 ANNUAL ACCOUNTS
Investor Relations – 2007 Annual Accounts – March 2008
Veolia Environnement
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 could terminate or modify some of Veolia Environnement's contracts, the risk that our long-term contracts may limit our capacity to quickly and effectively react to general economic changes affecting our performance under those contracts, the risk that 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, present and future operations, as well as the risks described in the documents Veolia Environnement has filed with the U.S. Securities and Exchange Commission. Veolia Environnement does not undertake, nor does it have, any obligation to provide updates or to revise any forward-looking statements. Investors and security holders may obtain a free copy of documents filed by Veolia Environnement with the U.S. Securities and Exchange Commission from Veolia Environnement.
This document contains "non-GAAP financial measures" within the meaning of Regulation G adopted by the U.S. Securities and Exchange Commission under the U.S. Sarbanes-Oxley Act of 2002. These "non-GAAP financial measures" are being communicated and made public in accordance with the exemption provided by Rule 100(c) of Regulation G.
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.
Investor Relations – 2007 Annual Accounts – March 2008
2
Veolia Environnement Investor Relations – 2007 Annual Accounts – March 2008
2007: another year of profitable growth, in line with objectives
Sustained business momentum: revenue up 14.9% (1)
Strong internal growth (+7.8%)Strategy of targeted external growth (+ 7.1%)
Further improvement in recurring operating income (+11.9% (1))Strong rise in net income (+22.3%) and net earnings per share (+13.7% (2) )
Capital position reinforced by a €2.6 billion capital increase in July 2007 [net financial debt/(cash flow from operations + repayment of operating financial assets)] = 3.3x
Free cash flow before new projects (€906 million in 2007) After-tax ROCE: 10.9%
Increase of 15.2% in the dividend from €1.05 per share to €1.21 per share (3)
To be paid on May 27, 2008
(1) At constant exchange rates(2) Non-diluted from options but diluted from the increase in capital completed on July 10, 2007(3) Subject to approval by the Annual Shareholders’ Meeting on May 7, 2008 3
Veolia Environnement
(1) Accounts at December 31, 2005 & at December 31, 2004 were restated, to ensure comparability between accounting periods in the application of the IFRIC12 interpretation relating to the accounting treatment of concessions and the results booked in 2006 under the IFRS5 standard and shown in the income statement in the “Net income from discontinued operations” line.
(2) At constant exchange rates4
Investor Relations – 2007 Annual Accounts – March 2008
2007 Key Figures(€m)
2500
3000
3500
4000
2004 (1) 2005 (1) 2006 20070
5 000
10 000
15 000
20 000
25 000
30 000
35 000
2004 (1) 2005 (1) 2006 2007
28,62032,628
25,570 3,844
3,542
0
500
1 000
1 500
2 000
2 500
2004 (1) 2005 (1) 2006 2007
2,2221,904
0
200
400
600
800
1 000
2004 (1) 2005 (1) 2006 2007
762630
Consolidated revenue +14.9% (2)
22,792
Cash flow from operations
4,219
+9.8%
3,336
Recurring operating income Recurring net income+11.9% (2) +22.5%
2,469 933
1,629477
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Key figures at December 31, 2007
(1) Non-diluted from options but diluted from the increase in capital completed on July 10, 2007
(€m) 12/31/06 12/31/07 Growth
Consolidated revenue 28,620 32,628 +14.0%
Cash flow from operations 3,844 4,219 +9.8%
Operating income 2,133 2,497 +17.1%
Net income 759 928 +22.3%
Net income per share (€) (1) 1.90 2.16 +13.7%
Net financial debt 14,675 15,125 -
Veolia Environnement
2001 2002 2003 2004 2005 2006 2007
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Investor Relations – 2007 Annual Accounts – March 2008
Further increase in the dividend
(1) Subject to approval by the Annual Shareholders Meeting on May 7, 2008
(2) After taking into account the dividend payment relative to the 2007 accounts.
2007 dividend (1)
€1.21 per share (+15.2%)
2007 pay-out ratio = 59.5%
€0.55€0.68
€0.85€1.05
€0.55€0.55
€1.21(1)
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Consolidated revenue at December 31, 2007:
Balanced contribution to growth from all 4 divisions
Water 34%Transportation17%
By division By geographic zone
€32,628m
Energy Services21%
Waste 28%France
44%
Europe ex France 36%
Asia-Pacific7%
Rest of the world5%
NorthAmerica8%
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
+14.9%
Balanced contribution to growth from all 4 divisions
5,5904,951
6,8966,118
9,2147,463
10,92810,088
Water
Waste
Energy Services
Transportation
Chg. at constant exchange rates
12/31/2006 12/31/2007
(€m)
VE Group
Consolidated revenue at December 31, 2007: €32,628m
+7.9%
+7.5%
+7.9%
+8.1%
Internal growth
+7.8%
+9.0%
+25.5%
+12.5%
+14.0%
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
VE Group +14.9%
Chg. at constantexchange rates
+6.4%
+22.6%
+7.6%
+34.8%
+38.5%
12/31/2006 12/31/2007
Significant presence in growth markets
Consolidated revenue at December 31, 2007: €32,628m
(€m)
1,6311,2002,2691,702
2,7902,817
9,49811,682
13,403
14,256
France
Europe ex France
North America
Asia-Pacific
Rest of the world
Veolia Environnement
10
Investor Relations – 2007 Annual Accounts – March 2008
Solid growth in cash flow from operations (1)
(1) Cash flow from operations as defined by the Conseil National de Comptabilité’s (CNC) recommendation dated October 27, 2004
(2) Cash flow from operations
(€m) 12/31/06 12/31/07 Δ current FX rates
CFO margin (1) 12/31/07
Water (2) 1,814 1,851 +2.1% 16.9%
Waste (2) 1,190 1,461 +22.8% 15.9%
Energy Services (2) 611 657 +7.4% 9.5%
Transportation (2) 290 279 -3.8% 5.0%
Other (53) (27) - -
Total from continuing operations 3,852 4,221 +9.6%-
Discontinued operations (8) (2) - -
Total Group 3,844 4,219 +9.8% 12.9%
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Double-digit growth in recurring operating income: up 11.9% (1)
(1) At constant exchange rates. +11.1% at current change exchange rates
(€m)
12/31/06 12/31/07 Δ constant FX rates 12/31/06 12/31/07
Water 1,163 1,266 +9.3% 11.5% 11.6%
Waste 648 803 +26.4% 8.7% 8.7%
Energy Services 378 388 +1.8% 6.2% 5.6%
Transportation 100 115 +13.9% 2.0% 2.1%
Holding (67) (103) - - -
Total Group 2,222 2,469 +11.9% 7.8% 7.6%
Recurring operating
income margin
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Operating income up 17.9% (1)
(€m)Operating
income marginOperating income
(1) At constant exchange rates
12/31/06 12/31/07 Δ current FX rates 12/31/07
Water 1,160 1,268 +9.2% 11.6%
Waste 648 803 +23.9% 8.7%
Energy Services 378 399 +5.6% 5.8%
Transportation 14 130 +858.1% 2.3%
Holding (67) (103) - -
Total Group 2,133 2,497 +17.1% 7.7%
Veolia Environnement
Overview of year-over-year growth at half-year periods
H1 2007 H2 2007 2007
En M€
Consolidated revenue 15,462 17,166 32,628+10.9% +16.9% +14.0%
Cash flow from operations 2,009 2,210 4,219+5.2% +14.2% +9.8%
Recurring operating income 1,236 1,233 2,469+9.5% +12.8% +11.1%
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Investor Relations – 2007 Annual Accounts – March 2008
Veolia Environnement
14
Investor Relations – 2007 Annual Accounts – March 2008
Reconciliation of recurring operating income to operating income
12/31/06 12/31/07 Δ current FX rates
Recurring operating income 2,222 2,469 +11.1%
Non-recurring items
Provisions & write-downs booked in transportation in Germany (86) -
Transportation - +15
Other (incl. Energy Poland in 2007) (3) +13
Operating income 2,133 2,497 +17.1%
(€m)
Veolia Environnement
1,002
1,2681,160
650
750
850
950
1050
1150
1250
1350
31/12/2005 31/12/2006 31/12/2007
Satisfactory contribution of operations in France: decline in volumes due to the climate conditions during summer offset by the good level of contribution from the works business, new services, and improved productivity
In Europe, Very good operating performance in the Czech Republic and RomaniaPositive outcome of a litigation in Berlin Equity interest of the EBRD in Veolia Voda
Good improvement in results in North America: expansion of the Tampa Bay contractIn Asia, continued growth: In China, expansion of the Shenzhen contract and full-year effect of Kunming, Sinopec, Urumqi and Changzhou contracts)In the Africa-Middle East region, strong results overall despite circumstantial difficulties in Gabon
Technological Solutions: further growth in operating income
Water: Recurring operating income: €1,266m, +8.8%Operating income: €1,268m
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Investor Relations – 2007 Annual Accounts – March 2008
+9.2%
(€m)
Operating income
Veolia Environnement
544
648
803
500
600
700
800
31/12/2005 31/12/2006 31/12/2007
Waste: Recurring operating income: €803m, +23.9%Operating income: €803m
+23.9%(€m)
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Investor Relations – 2007 Annual Accounts – March 2008
In France, very good performance (development of higher value added services, increase in volumes treated in urban and industrial waste) and double-digit growth in operating income in hazardous waste
In Europe (ex-France), very strong improvement in contribution to operating income (+55% increase in operating income),
United Kingdom (+60%) thanks to internal growth and the full-year contribution from the acquisition of Cleanaway
Germany, integration of Veolia Umwelt Services (formerly Sulo) in the 2nd half
Good contribution of operations in Scandinavia and Central Europe
In North America, double-digit growth in operating income (very favorable impact due to the contributions from hazardous waste and industrial services )
In Asia-Pacific, robust performance particularly in Australia
Operating income
Veolia Environnement
315
378399
200
300
400
31/12/2005 31/12/2006 31/12/2007
+5.6%
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Investor Relations – 2007 Annual Accounts – March 2008
Energy: Recurring operating income: €388m, up 2.8%Operating income: €399m
Impact of mild weather
Smaller contribution of sales of excess CO2 quotas
France: Growth in contribution of specialized subsidiaries
Outside France: double digit growth in business and operating incomeVery strong increase in the contribution of the Central European zone (Czech Republic, Poland)
Continued good level of business activity in the Southern European zone
(€m)
Operating income
Veolia Environnement
117
14
130
0
100
31/12/2005 31/12/2006 31/12/2007
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Investor Relations – 2007 Annual Accounts – March 2008
Transportation: Recurring operating income: €115m, up 15%Operating income: €130m vs. €14m at December 31, 2006
In France, satisfactory increase in business and results, effect of the full-year consolidation of SNCM
In Europe:Favorable progression in Marschbahn and upturn in the contribution from Germany
Impact of the start-up of new contracts in the Netherlands
In North America, improved contribution from transit and increased results in transportation on demand
In Australia, further growth in business and results
(€m)
Operating income
+858%
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
€3,973m allocated to new projects & acquisitions
(€m)
Good control of maintenance capital spending (4.9% of revenue) 1,590
Further growth in existing operations 1,335
Increase in new projects and acquisitions 3,973
Total capital expenditures 6,898
Asset disposals (366)Minority interest impacts linked to new acquisitions (49)
Repayment of operating financial assets (395)
Net capital expenditures and investments 6,088
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Water 531 58 335 939 207 2,070
Waste 554 84 128 1,974 18 2,758
Energy Services 263 81 131 819 73 1,367
Transportation 226 35 97 223 36 617
Other 16 26 26 18 - 86
Total at 12/31/07 1,590 284 717 3,973 (1) 334 6,898
Total at 12/31/06 1,411 270 740 1,424 361 4,206
TotalFinancial
incl. change in
consolidationscope
Industrial Operating financial assets
NewprojectsMaintenance
capex
(€m)
(1) Of which €954m linked to internal growth and €3,019m related to acquisitions.
€3,973m allocated to new projects & acquisitions
Growth
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
4 significant acquisitions made in 2007
GermanyVeolia Umwelt Services (formerly Sulo), the n°2 waste treatment company
Consolidation date: July 2, 2007 – Contribution to Veolia’s 2007 revenue : €628m
Enterprise value: €1,310m (estimated amount after the disposal of Sulo Technology (a container manufacturer) to Plastic Omnium)
Disposal on July 29, 2007 of Sulo Environmental Technology to Plastic Omnium (revenue of around €200m)
ItalyVSA Tecnitalia (Veolia Servizi Ambientali Tecnitalia) (formerly TMT), the largest private operator in the Italian thermal waste treatment market (estimated revenue in 2011: €200m)
Consolidation date: October 3, 2007 – Contribution to Veolia’s 2007 revenue : €26m
Enterprise value: €338m
North AmericaTNAI, the largest portfolio of district heating and cooling networks in the United States
Consolidation date: December 31, 2007 – No contribution to Veolia’s 2007 revenue
Entreprise value: $788m
United KingdomSeveral unregulated businesses of Veolia Water Outsourcing Ltd (former Thames Water)
Consolidation date: November 28th, 2007 – Contribution to Veolia’s 2007 revenue: €15m
Enterprise value: €233m
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
By division By geographic zone
More than €3.9bn allocated to new projects or acquisitions
Water 24% (1)
Transportation 6% (4)
(1) Including Lanzhou, Haikou, Tianjin Shibei (China), Oman Sûr (Sultanate of Oman), Hynix (South Korea), non-regulated water businesses at ThamWater (U-K)
(2) Including integrated contracts (United Kingdom), certain assets of Allied Waste Industries, Marisol (United States), Cleanaway Asia (China), TMT (Italy) and Sulo (Germany)
(3) Including Pannon Power & Sinesco (Hungary), Kolin (Czech Rep.), Varna (Bulgaria), Harbin & Jiamusi (China), TNAI (North America),(4) Including People Travel Group (Sweden), SNCM ship (France)
Asia-Pacific14%
North America21%
Waste50% (2)
es
EnergyServices 20% (3)
Rest of the World2%
Europe63%
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Revenue 28,620 32,628 +14.0%Operating income 2,133 2,497
Cost of net financial debt (701) (817)Other financial income (expenses) (34) +1Tax (410) (420)Equity in net income of affiliates +6 +17
Net income from continuing operations 994 1,278 +28.5%Net income attributable to minority interests (236) (327)
Net income from continuing operations 758 951
Net income 759 928 +22.3%Recurring net income 762 933 +22.5%
From revenue to net income
Δ12/31/0712/31/06
12/31/06 12/31/07
(€m)
Veolia Environnement
Cost of net financial debt (701) (817) (116)Impact from the variation in the average debt - - (35)Impact from the variation in interest rates - - (59)Impact from the revaluation of non-hedging derivative instruments (22)
12/31/06 12/31/07
In €m
Δ12/31/0712/31/06
Cost of borrowing: 5.49% vs. 5.07% in 2006
Change in cost of borrowing
24
Investor Relations – 2007 Annual Accounts – March 2008
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
From recurring net income to net income
(€m)2007
Recurring net income 933
Non-recurring operating income impact +28
Disposal of discontinued operations (Transport in Denmark…) (23)
Non-recurring tax +11
Other (including minority interests on items above) (21)
Net income 928
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Change in net financial debt (NFD) at December 31, 2007
NFD at Dec. 31, 2006 NFD at Dec. 31, 2007
14 88914,675
(157)
Cash flow generated
by the operations
Disposals
Investments excl. new projects
Interest paid
New projects
Dividends paid
Currency effect
& otherCapital
increase excl. VE & other
14,675 15,125VE S.A. capital
increases(2)
(3,635)2,925
786
3,973
(2,852) 564(329)
(366)
(221)
(395) (1)
Repayment of operating
financial assets
(€m)
Free cash flow before new projects = €906m
(1) Including the recovery by the municipality of the Orvade financing contract for €34m(2) Including the €2.6 billion capital increase completed on July 10, 2007.
Veolia Environnement
27
Investor Relations – 2007 Annual Accounts – March 2008
Debt ratio and ratings
(1) 3.83 x before taking into account the capital increase announced on June 12, 2007
Moody’s A3/P-2 Stable (cf. October 2007 report)Standard & Poor’s BBB+/A-2 Stable (cf. June 2007 report)
12/31/2004Adjusted
12/31/2005Adjusted
12/31/2006 12/31/2007
Net financial debt/(cash flow from operations ex operations + Repayment of operating financial assets)
(1)3.3 x
Debt ratio target: between 3.5 x and 4 x
3.4 x
3.6 x
3.9 x
3.5x
4x
3x
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Strong improvement in after-tax ROCE since 2002
Further increase in after-tax ROCE
6.4%
7.0%
8.3% 8.3%
9.1%
10.2%10.8%
2002 2003 2004 2004 2005 2005 2006 2007
French GAAP IFRS standards withapplication of IFRIC 12
on concessions
IFRS standards beforeapplication of IFRIC 12
on concessions
10.9%
Veolia Environnement Investor Relations – 2007 Annual Accounts – March 2008
STRATEGY & OUTLOOK
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Veolia Environnement: A compelling business model
Leadership in integrated environmental services across all businesses
Complementary services with strong synergies among the four divisions
Commitment to sustainable development in all of our operationsImproved environmental and economic efficiency, conservation and reuse, recycling and recovery, reduction of greenhouse gas emissions and other harmful environmental impacts
Long-term contracts demonstrating long-term and secure visibility of cash flows
Customer base = 67% municipal; 33% industrial and commercial Geographic presence in regions which represent strong growth opportunities in environmental services with limited or well managed risk: Europe, North America and select countries in the Asia-Pacific region and the Middle East
Outlook continues to point to robust and profitable growth
Veolia Environnement
Lafarge Ciments
SNCM
Leslys
Socata
Mâcon
Abbeville
Ste- Maxime
Gonesse
Lille
Charleville-Mézières
ST Micro
Cap d'Agde
Nice
Claye-Souilly
DunkirkHydropale
Bartin Recycling Gp
Grand Ouest WEEE
Morbihan
Achères
SIOM ChevreuseValley
FRANCE
Leslys (transportation) - Length: 30 years – Cumul. revenue: €459mMorbihan departmental council (transportation)– Length: 7 years – Cumul. revenue: €143mLafarge Ciments (transportation)- Freight train between Bordeaux & Toulouse - Length: 4 years – Cumul. revenue: €10mSNCM (transportation) - Length: 6.5 years – Cumul. revenue: €1bnTram in Nice (transportation) - Length: 7 years – Cumul. revenue: €595mBartin Recycling Group (1) (waste) – 2006 revenue: €249m Dunkirk waste-to-energy plant (waste) – Length: 11 years – Cumul. revenue: €50mHydropale (port of Dunkirk) – Marpol waste treatment plant (waste)Grand Ouest WEEE recovery plant (waste)New equipment (additional 16 MW) of the « « Biomass Biogas » project in Claye-Souilly (waste) – Length: 15 years – Cumul. revenue: €160mSIOM Chevreuse Valley (waste) – Length: 5 years – Cumul. revenue: €25mGreater Mâcon region (water & wastewater) (water) - Length: 10 years – Cumul. revenue: €59mAbbeville (water) – Length: 15 years – Cumul. revenue: €22mGonesse (water) – Length: 15 years – Cumul. revenue: €27mSainte-Maxime (water) – Length: 12 years – Cumul. revenue: €32mAchères nitrogenous pollution treatment plant (water)Lille urban community –Organic recovey center – Séquedin (energy)– Length: 11 years – Cumul. revenue: €7mSTMicroelectronics - Crolles (energy) - Length: 6 years – Cumul. revenue: €27mCharleville-Mézières – DSP (energy) - Length: 20 years – Cumul. revenue: €41mCap d'Agde – DSP (energy) - Length: 18 years – Cumul. revenue: €41mSocata (EADS)- Tarbes site (multi-services)- Length: 3 years – Cumul. revenue: €10mRenault – Ile-De-France sites (multi-services)– Length: 5 years – Cumul. Revenue: €600m
Contract start-upContract won or renewedCompany acquisition
(1) Finalized in Feb. 2008
France : revenue up 6.4% to €14,256m
Renault
Veolia Environnement
United United KingdomKingdomLondon Boroughof LambethSouthwark
Shropshire
Thames Water’s unregulated business
United Utilities
SinescoPannon Power
HungaryHungary
NorwayNorway
Finnmark
Rogaland
LucenecBratislava
SlovakiaSlovakiaGermanyGermany
SULO
Bautzen
De Lijn (transportation) – Length: 5 years – Cumul. revenue: €165m
Veolia Environnement
GERMANY
Finnmark (transportation) – Length: 8 years – Cumul. revenue: €168m Rogaland (transportation) – Length: 5.5 years – Cumul. revenue: €226m
NORWAY
SLOVAKIA
TMT (waste) – 2008 estimated revenue: €140mSTMicro – Agrate (energy) – Length: 6 years – Cumul. revenue: €20m
SULO (waste) – 2008 estimated revenue: €1.2bnLandkreis Bautzen (waste) – Length: 7 years – Cumul. revenue: €17m
(1) At constant exchange rates(2) Announced in Feb. 2008
BELGIUM
NETHERLANDSThe Hagues – Harnaschpolder plant (DBFO) (water)- Global operating period: 30 years – Global cumul. revenue: €1.2bn Brabant (transportation) – Length: 8 years – Cumul. revenue: €480m
Contract start-upContract won or renewedCompany acquisition
HUNGARYPannon Power - biomass (energy) – Rev. from acquired contracts: €600mSinesco (energy) – 2007 revenue: €31m
Espool - Lucenec & Rekotak – Bratislava (energy)- Espool : length of acquired contracts: 30 years – Cumul. revenue: €300m- Rekotak : length of acquired contracts: 29 years – Cumul. revenue: €160m
BULGARIAToplofikacja Varna EAD (energy) – Annual revenue: €8m
SPAINCampo de Dalias (DBO) (water)– Operating period: 15 years – Cumul. revenue: €78m (incl. construction)
London Borough of Lambeth (waste) – Length: 7 years – Cumul. revenue: €156mSouthwark council (2) (waste) – Length: 25 years – Cumul. revenue: €900mShropshire (waste) – Length: 27 years – Cumul. revenue: €1bnUnited Utilities (construction) (water) – Cumul. revenue: €62mThames Water’s unregulated business (water) – 2008 estimated revenue: €149m
UNITED KINGDOM
VarnaBulgariaBulgaria
Campo de Dalias
SpainSpain
ITALY
TMT
ItalyItaly
ST Micro
Novartis (multi-services) – Length: 7 years – Annual revenue: €140m SWITZERLAND
SwitzerlandSwitzerland
Novartis
Europe (outside France): revenue up 22.6%(1) to €11,682m
BelgiumBelgium
De Lijn
NetherlandsNetherlands
BrabantThe Hague
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Investor Relations – 2007 Annual Accounts – March 2008
Veolia Environnement
CanadaCanada
United StatesUnited States
PinellasTampa Bay
Marisol
Enpar
TNAI
Assetsof Allied Waste Industries
Greentree
Milwaukee
Las Vegas
Boston
North America: revenue up 7.6%(1) to €2,790m
Contract start-upContract won or renewedCompany acquisitionPartnership with other company
Milwaukee Metropolitan Sewerage District (water)– Length: 10 years – Cumul. revenue: €272m
Tampa Bay (DBO) (water)- Operating period: 13 years– Cumul. revenue: €108m (incl. construction)
Partnership with Enpar technologies (water)
Pinellas county (waste)- Length: 17 years – Cumul. revenue: €356m (incl. works)
Assets (solid waste) of Allied WasteIndustries, Inc. (waste)
Marisol (waste) – 2006 revenue: €18m
Greentree landfill (Pennsylvania) – biogas collection & treatment (waste)
Thermal North America, Inc. (energy) – 2007 revenue: $368m
Boston (2) (transportation) – Length: 3 years
Las Vegas(2) (transportation) – Length: 2 years
(1) At constant exchange rates(2) Announced in Jan. 2008
NORTH AMERICA
Investor Relations – 2007 Annual Accounts – March 2008
33
Veolia Environnement
JapanJapan
Chiba
AustraliaAustralia
Transit First
Brookers
Sydney
MelbourneContract won or renewedCompany acquisition
Tianjin-Shibei (water)– Length: 30 years – Cumul. revenue: €2.5bnLanzhou (water)- Length: 30 years – Cumul. revenue: €1.6bn Haikou (water)- Length: 30 years – Cumul. revenue: €776mJiamusi (energy)- Length: 25 years – Cumul. revenue: €650mHarbin (energy) – 2007 revenue: €5mJiujiang (BOT) (waste)– Length: 29 years – Cumul. revenue: €92mCleanaway Asia (waste)– Length of acquired contracts: 22 years – Cumul. revenue: €200m
Asia – Pacific: revenue up 34.8%(1) to €2,269m
(1) At constant exchange rates
CHINA
Bali – Taipei County (waste)- Length: 15 years – Cumul. revenue in JV: €154m
TAIWAN
Seoul (transportation) – Length: 10 years – Cumul. revenue: €460mSoonchunhyang teaching hospital (energy)– Length: 5 years – Cumul. revenue: €11m
SOUTH KOREA
Sydney (DBO) (water)– Operating period: 20 years – Cumul. revenue: €540m (incl. construction) Melbourne (transportation) – Length: 1 year – Cumul. revenue: €422mTransit First & Brookers (transportation) – 2007 overall revenue: €11m
AUSTRALIA
Chiba (water)– Length: 3 years – Cumul. revenue: €18m
JAPAN
Cleanaway Asia (waste)– Length of acquired contracts: 22 years – Cumul. revenue: €715mNational Environmental Agency (waste) – Length: 5 years – Cumul. revenue: €28m
SINGAPORE
Taiwan
Bali
South South KoreaKorea
SeoulSoonchunhyang
Haikou
ChinaChina
Jiamusi
Harbin
Lanzhou
Cleanaway Asia
Tianjin
Jiujiang
SingaporeSingapore
Cleanaway AsiaNational
EnvironmentalAgency
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Investor Relations – 2007 Annual Accounts – March 2008
Veolia Environnement
Delek Group
IsraelIsrael
SaudiSaudi ArabiaArabia
Marafiq
SultanateSultanate of Omanof Oman
Sûr
Fujairah F2 O&M Cy
United United ArabArab EmiratesEmiratesFujairah
Palm JumeirahBurj Dubai Tower
KingdomKingdom of of BahrainBahrain
Arcapita
Sûr (BOO) (water)– Length: 22 years– Cumul. revenue: €434m (incl. construction)
SULTANATE OF OMAN
SAUDI ARABIA
Partnership with Arcapita (energy)
KINGDOM OF BAHRAIN
Marafiq – Jubail & Yanbu (construction) (water)– Cumul. revenue: €647m
Contract start-upContract won or renewedPartnership with other company
UNITED ARAB EMIRATES
Fujairah (construction) (water)– Cumul. revenue: €547m
Fujairah F2 O&M Company (water) – Length: 12 years – Cumul revenue: €71m
Palm Jumeirah (1) (construction) (water) - Cumul. revenue: €12m
Burj Dubai Tower (1) (DBO)(water)– Length: 3 years (excl. construction) – Cumul. revenue: €10m
ISRAEL
Delek Group – Cogeneration plant on the Ashkelon site (energy)– Length: 23 years– Cumul. revenue: €83m
(1) Announced in Jan. 2008
Middle East: a new source of growth in the medium term
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Investor Relations – 2007 Annual Accounts – March 2008
Water: global leadership position supported by…
Long-term Public-Private-Partnership (concession) type contractsContinued trend toward outsourcing (less than 20% of the European market and less than 10% of the US market are privatized while operations of private companies are not yet significant given the size of markets in Asia and the Middle East)
Increasingly stringent environmental standards
Concentration of the population in urban zones
Strong technological positioningVeolia Water Solutions and Technologies: average revenue growth of around 20% per year between 2003-2007
Wide range of technological offerings (re-use, scarcity of water as a resource)
Technological offerings to meet demand for (thermal & membrane) desalination
Technological offerings minimizing environmental impact (zero discharge: Z.L.D.)
Simultaneous development of D&B and Technological Solutions (breakdown: 60%/40%)
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Waste: making waste into a resourceLeadership position across the full value chain
Acceleration of development in major integrated contracts (PFI type, Shropshire, Southwark, etc.) Well-managed external growth strategy
Example: United Kingdom - Cleanaway: a successful integration (~15% market share, etc.)
Strengthened operations in the fast growing recycling business lineIn France, in metals with the acquisition of Bartin Recycling Group
In Germany, in paper and plastics with the acquisition on July 2, 2007 of Veolia Umwelt Services (formerly Sulo)
Accelerated development in waste recovery (biogas, biofuels, recycling of oily waste)Balanced contribution of operations, well managed risk profile
Example: in the United States: 40% of revenue in solid waste, 30% in industrial services, 20% in toxic waste and 11% in Waste-to-Energy (incineration)
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Energy: a development model based on energy & environmental efficiency and an excellent fit with the global offering of solutions
Leadership position in Europe and North America in energy services
An answer to environmental challenges based on the optimization of local energy management and the diversification of energy sources, including renewables
An important complement to the Group’s range of global offerings
A balanced client mix: municipal customers (58% of revenue)
industry and service sector customers (42% of revenue)
Geographic coherence: significant operations in France, Western, Southern and Central Europe, North America and developing markets in China and Australia
Strong contribution to multi-service contracts
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Transportation: a key player in a growing market
An answer to a crucial environmental challenge and to the needs of large urban areas
Leading position in the global public transportation market (€460bn (1)) that is still in the early stages of outsourcing (15%)
An offering of multi-modal and international services
Tailored delegated management contracts (transportation on demand, etc.)
Development of value added services for the client combined with greater efficiency
(1) 2008 estimated ex Russia, Africa and Middle East
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Solid fundamentals to meet the cyclical uncertainties prevailing in 2008
A development model primarily based on long-term contracts synonymous with ongoing cash flow generationA positive evolution in the business and geographic mix in the last few years (disposal of water equipment businesses in the United States in 2002 and 2003) Balanced geographic exposure
44% of revenue in France, 36% in Europe outside France, nearly 10% in North America (including the contribution from TNAI in 2007 proforma full-year revenue)Growing importance of new development zones (Africa, Middle East, Asia-Pacific)
Significant evolution of waste operations:Accelerated geographic diversification:
Consolidation in the United Kingdom, acquisition in GermanySignificant development of new and stable value-creating business lines Balance between the various business lines (examples: solid waste, industrial services, etc.):
Integrated contracts, biogas and waste-to-energy operations, recycling, with a strong position in paper and metalsIn the United States, diversification of the client base, with municipal customers, the oil industry and the military/civil service.
Veolia Environnement
2008 objectives
Double-digit growth in net income
Confirmation of at least 10% revenue growth
Double-digit growth in cash flow from operations
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Investor Relations – 2007 Annual Accounts – March 2008
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Investor Relations – 2007 Annual Accounts – March 2008
Medium-term objectives
Average annual revenue growth of 8% to 10%
After-tax ROCE : 10% (ex potential effect related to timing of acquisitions)
Continued commitment to balance sheet objectives: net financial debt/(cash flow from operations + repayment of operating financial assets) to range between 3.5x and 4x
Dividend policy to be maintained : payout to range between 50% & 60% of recurring net income
Robust growth to be maintained
Veolia Environnement Investor Relations – 2007 Annual Accounts – March 2008
APPENDICES
Veolia Environnement
FINANCIAL APPENDICES
Investor Relations – 2007 Annual Accounts – March 2008
Veolia Environnement
2007
(1) o/w cash flow from discontinued operations: (€2m) in 2007 & (€8m) in 2006(2) o/w the recovery by the municipality of the Orvade financing contracts for €34m
= 901= Free cash flow before new projects+15Other
(596)Interest paid
(343)Tax paid
+82Rights issue reserved for minority shareholders
+355Asset disposals
(112)Change in WCR
(2,782)Investments ex. new projects4,282Total cash generation+438Repayment of operating financial assets
3,844Cash flow from operations (1)
2006
+15(786)(417)+206+366(167)
(2,925)4,614
+395 (2)
4,219
= 906
Cash flow
(€m)
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Net financial debt at January 1st 13,871 14,675
Free cash flow (901) (906)Investments in new projects +1,424 +3,973Dividends paid +479 +564Capital increase - VE (165) (2,852) (1)
Impact of exchange rates and other (33) (329)
Net financial debt at December 31 14,675 15,125
Change in debt +804 +450
Changes in net financial debt
2006 2007(€m)
(1) Including €2.6 bn capital increase completed as July 10, 2007
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Debt management: the Group has further strengthened its financial stability
RatingsMoody’s: A3/P-2 Stable
Standard & Poor’s: BBB+/A-2 Stable
Elimination of the structural subordination status
2007 bond issues:February: €200m maturity August 2008
May: €1bn maturity 2022 (15 years)
October: £500m maturity 2037 (30 years)
Further extension of average maturity:gross debt (€18.2bn): 7.7 years [vs. 6.6 years in 2006]
net financial debt (€15.1bn): 9.2 years [vs. 7.8 years in 2006]
74% of net debt is at a fixed rate or a capped floating rate
66% of gross debt (after swaps) is denominated in euros (10% in USD and 10% in GBP)
Group liquidity: €8.1bn including €5.0bn in undrawn credit lines
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
By interest rate
Structure of debt
Floating rate 26%
Fixed rate 74%Euro 66%
USD 10%
GBP 10%
Other 14%
(net financial debt after hedges) (gross debt after hedges)
By currency
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
2006 20072007
4,905
4,729
2,395
1,310
18.6%
12.4%
14.1%
7.4%
Water
Waste
Energy Services
Transportation
Pre-tax ROCE (%)
2006
Average capital employed (€m)
Pre-tax ROCE by division
5,688
5,890
3,013
1,505
18.1%
12.5%
11.7%
7.6%
Veolia Environnement
APPENDICES: OPERATIONAL
Investor Relations – 2007 Annual Accounts – March 2008
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Significant operations in fast growing desalination market
New major desalination references More than 100 years experience in desalination Construction and/or operation of around 13% of the world’s seawater desalination capacity (1,600 plants with 5.3 million m3/d) capacity *Chosen to design & build one of the largest desalination plants that uses Multiple Effect Distillation (MED) for the city of Jubail and the Eastern province of Saudi Arabia (800,000 m3//d )Construction and operation of the world’s largest seawater reverse osmosis (SWRO) plant in Ashkelon, Israel (capacity of 320,000 m3/d)An estimated 80% market share in Multiple Effect Distillation (MED)
*Estimation of global desalination capacity: Global Water Intelligence “Desalination Markets 2007”
Demonstrating technological leadershipLeader in thermal and reverse osmosis desalination processes
Focused on technological programs (e.g. ARAMIS –Veolia’s Membrane Center of. Expertise (choice of the appropriate solution via the characterization of performances of the membranes in the market, identification of deposits and proposition of solutions in terms of pretreatment)
And proactive in a growing market Robust growth expected in global production capacity, up from 39.9 million m3/day in 2006 to 97.5 million m3 per day by 2015*
Gulf countries account for about 46% of today’s production capacity
Saudi Arabia and the United Arab Emirates are currently the 2 largest markets, followed by the United States, Spain and China
Steady trend towards desalination plants with increasingly large production capacity, both in membrane and thermal processes
Main competitors: Doosan (South Korea), Impreglio (Italy), GE, Suez and Abengoa/Befesa (Spain)
Ashkelon desalination plant
Veolia Environnement
Water Recycling and Reuse
More than 3 million m3/day of total installed capacityMore than 140 references worldwideMF/UF/RO membrane technologies/dedicated technologies
Australia, Kwinana :Water Recycling : 16,700 m3/d Membrane technologies
Singapore, Kranji plant :Water Recycling : 40,000 m3/dMembrane technologies
South Africa, Durban :Industrial Reuse : 40.000 m3/dDedicated filtration steps
Spain, Barcelona : Water Reuse for irrigation and aquifer recharge : 302,400 m3/d Dedicated filtration technology Actidisk®
Actidisk®
Membranes
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Veolia Environnement North AmericaProviding leadership in environmental management
• Market leadership in water services through municipal Public-Private Partnerships, industrial outsourcing and design-build solutions and technologies
Revenue: $850 million
Fully integrated waste management company and a leader in industrial waste services with key market positions across the entire waste management chain
Revenue: $2 billion
• Leading energy services company, including the largest portfolio of heating and cooling systems in the US and comprehensive energy and facility management for buildings and industrial operationsRevenue: $400 million*
• Leading private transportation operator in North America, including bus and rail commuter services, shuttle, paratransit and customized transportation on demandRevenue: $1.1 billion
2007 Revenue: Approximately $4.4 billion*
31,000Total Employees
* Includes full-year 2007 contribution from TNAI acquisition on a proforma basis.
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Veolia Water North America – North American Water Industry Leader 2007 Revenue: $850 million
Market leader with 34% share* of Public-Private Partnership (PPP) marketServing 600 communities in 38 states, including management of largest PPP water distribution (Indianapolis) and wastewater (Milwaukee: start-up in March ‘08) contracts Approximately 300 facilities operatedNearly 6,000 miles of water distribution lines and 4.500 miles of wastewater lines30 effluent reuse & 5 biosolids facilitiesHigh-security federal facilities
Market leader in industrial outsourcing with 70% market share* 100+ industrial facilities managed for various Fortune 500 companies and largest global manufacturers, including Air Products, BP-Amoco, Cargill, General Motors, IBM, Nestle, PepsiCo, US Steel, Valero, Exxon Mobil, Marthon Oil etc.300+ MGD daily flowAll facets of water and wastewater management for multiple industries
* Source: Public Works Financing, March 2007
Municipal leadership Industrial leadership
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Hazardous Waste - 19% of RevenueServices:
Hazardous Waste Disposal, Environmental Program Management, Incineration, Fuels Blending and Solvent Recovery, Electronics Recycling, Lab Packing, Emergency and Special Waste, Low Level Radioactive Waste
Market:1,700 Employees
45 Service Locations15 Transfer, Storage, Disposal Facilities (TSDF’s)Bringing innovative services and technologies to customers that turn over 200,000 tons of waste into a resource
Solid Waste – 39% of RevenueServices:
Collection, Transfer, Recycling, Disposal, On-Site Management
Market:3,730 Employees and Locations in 12 US states, the Bahamas and Quebec
32 Landfills
511 municipal solid waste contracts and serving most major industries
Veolia Environmental Services North America - An Integrated Offering 2007 Revenue: $2 billion
Industrial Services – 31% of RevenueServices:
Industrial Cleaning, Mechanical Services, Sewer Cleaning and Inspection, Dredging and Dewatering, Tank and Basin Cleaning, Emergency Response 24/7, Marine Services
Market:US Market Leader for Industrial Services5,090 Employees and Over 100 LocationsServing most major industries, including clients such as Bayer, Exxon Mobil and Innovene
Waste-To-Energy – 11% of RevenueServices:
Waste Combustion, Energy Recovery, Facility Operation, Facility Maintenance, Design, Retrofit, Construct
Market:630 Employees and 10 WTE Plants with a capacity of over 14,000 tons per day
Operates Largest Refuse Derived Fuel (RDF) facility in the world - Miami-Dade
Electrical Generation for 350,000 households
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Veolia Energy North America - Providing leadership in Energy Services 2007 Revenue (proforma*): Approx. $400 million
Owns and operates the largest portfolio of energy distribution networks (steam, hot water, chilled water, electricity) in the USA
Steam capacity of 11 million pounds/hourChilled water capacity of 169,000 tonsElectric generating capacity of over 1,100 MW
Facilities in 11 states, serving more than 1,200 customers in 31 States and the District of ColumbiaKey Capabilities:
Operation of heating and cooling networksCogenerationCentral plant maintenance and operationsMulti-technical maintenance and services Comprehensive building and facility management (Houston Galleria, Caesar’s Palace, Copley Place Boston, Biogen-Idec in Cambridge)Management of complex energy issues and planning in areas related to power generation, transmission and distribution
Committed to Sustainable DevelopmentIn San Diego, CA, operate 25 MW biomass “wood” generating stationIn Baltimore, 60% of steam is delivered from a Waste-to-Energy plantOperate trigeneration (chilled water, steam and electrical power) in Oklahoma City and Tulsa operationsRecognized by the EPA and other agencies for greenhouse gas reduction and energy efficiency
* Includes full-year 2007 contribution from TNAI acquisition on a proforma basis.
Veolia Environnement
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Investor Relations – 2007 Annual Accounts – March 2008
Veolia Transportation North America – Leading private transportation provider in North America 2007 Revenue: $1.1 billion
Operating over 10,000 vehicles across more than 130 contracts
Operations in 22 States and 2 Canadian provinces
Services include bus operations (fixed route and express/commuter buses), BRT (bus rapid transit), commuter rail, para-transit, airport shuttle and taxi.
Operate the largest contracted fixed-route bus service in North America (Las Vegas)
Operate the largest contracted commuter rail system (Boston)
Operations include SuperShuttle, the largest U.S. airport shuttle company (transportation-on-demand), serving 27 leading airports and over 8 million passengers per year
Veolia Environnement
Water Multi Services Energy Services Waste Transportation
€1,264m
€924m
€612m
€109m€251m
Growth supported by the success of the company’soffering to industrial clients
Backlog of signed contracts in 2007with large industrial accounts: €3,160m
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Investor Relations – 2007 Annual Accounts – March 2008
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Industrial offering: business growth since 2001
2001 – 2007:Cumulative total of new contracts signed with large European industrial accounts:
€1,683m in annual revenue.Average duration of contracts: 6.9 years, with a backlog of around €11.6bn.One third of the contracts signed are multi-divisional contracts: €503m in annual revenue.
0200400600800
10001200140016001800
2001 2002 2003 2004 2005 2006 2007
€m
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Investor Relations – 2007 Annual Accounts – March 2008
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Investor Relations – 2007 Annual Accounts – March 2008
Investor Relations contact information
Nathalie Pinon, Head of Investor Relationsand Financial Communication
38 Avenue Kléber – 75116 Paris - FranceTelephone +33 1 71 75 01 67
Fax +33 1 71 75 10 12e-mail [email protected]
Brian Sullivan, Vice President, US Investor Relations700 E. Butterfield Road -Suite 201
Lombard, IL 60148 - USATelephone +1 (630) 371 2749
Fax +1 (630) 282 0423e-mail [email protected]
Web sitehttp://www.veolia-finance.com