2. Investor Relations – 2012 Annual Results
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
2
3. Investor Relations – 2012 Annual Results
Summary
1. 2012, 1st year of Transformation Antoine Frérot
2. 2012 annual results Pierre‐François Riolacci
3. Application of IFRS 10‐11‐12 standards Pierre‐François
Riolacci
4. 2013‐2015 objectives Antoine Frérot and François Bertreau
5. Appendices
3
5. Investor Relations – 2012 Annual Results
2012 : 1st year of Transformation ahead of objectives
Evolution of corporate governance and new organization
Asset divestments and restructuring
Reduction of net financial debt by €3.4bn to €11.3bn
Faster than expected cost reductions
Improvement in 2nd half adjusted operating cash flow
Commercial success
Veolia is on the right path
5
6. Investor Relations – 2012 Annual Results
New Company organization
Board of Directors
• 4 new members appointed at the 2012 Annual General Shareholders
Meeting: Maryse Aulagnon, Nathalie Rachou, Jacques Aschenbroich and
Groupama SA (represented by Georges Ralli)
• During the last quarter of 2012, resignation of Henri Proglio and
cooptation of Marion Guillou
Implementation of new Company organization
• Nomination of a new Chief Operating Officer, responsible for
standardization throughout the Company and reducing costs
6
8. Investor Relations – 2012 Annual Results
Geographic and business refocusing: 48 countries at the end of
2012*
Zoom
Europe
Geographic refocusing
Objective: 40 countries
at the end of 2013* Exit of activities
Business refocusing
8
*capital employed > €5M
9. Investor Relations – 2012 Annual Results
2012: Debt reduction ahead of our objectives
Reduction of net financial debt by €3.4bn in 1 year instead of 2 years
2012 leverage ratio of 3.26x(1)
Net financial debt amounted to €11.3bn at December 31, 2012, a reduction of
€3.4bn compared to the prior year
• €3.7bn in asset divestments
• Debt reduction of €1.4bn following the change in accounting for the Berlin
water contract to equity method as of October 31, 2012
• 68% of proceeds from asset divestments applied to debt reduction
• Good working capital management
• Control of industrial investments
Leverage of 3.26x (1) at December 31, 2012 versus 3.88x at December 31, 2011
• Favorable impact of timing of divestments
(1) Net financial debt/ (operating cash flow before changes in working capital + OFA repayments) = 11,283/ (3,085 + 371) = 3.26x
9
11. Investor Relations – 2012 Annual Results
2012: Improvement in 2nd half adjusted operating cash flow
despite a deteriorated environment
Q4 2012: 2nd consecutive quarter of Y‐Y increase in adjusted operating cash flow*
Fourth quarter adjusted operating cash flow increased 2.9%*
Volume impact: Good resilience in waste operations
Impact of savings plans exceeded objectives
Good contribution from growth platforms
*Excluding the impact of the deconsolidation of Berlin water contract for 2 months of ‐€31M. Variation of
Q4 adjusted operating cash flow not restated was ‐1.1%
11
** Q2 variation corrected for Italian receivables write down and other accrued charges of ‐€89M
12. Investor Relations – 2012 Annual Results
Continued commercial success
Water
• United States: performance and consulting contract award for optimization of New York city’s drinking
water and wastewater services‐ Cumulated revenue of $36M over 4 years
• United States: contract award for the management of water and wastewater systems in Rialto, California
– Cumulated revenue of $300M over 30 years
• India: contract award to upgrade drinking water network and operations in the city of Nagpur‐
Cumulated revenue of €387M over 25 years
• France: renewals /contract extensions >€850M (cumulated revenue, contracts > €10M)
Environmental Services
• United Kingdom: PFI contract award for the residual municipal waste treatment and recovery in the city
of Leeds – Cumulated revenue of £460M over 25 years
• China: concession contract awarded in partnership with a Chinese company, for a hazardous waste
treatment center in Changsha (Hunan province) ‐ Cumulated revenue of €320M over 25 years
• France: contract renewals at the end of December ~€200M (cumulated revenue)
• France: two new lines of recovery (used motor oil recycling and anaerobic digestion)
Energy Services
• Central & Eastern Europe: new contract signatures for €950M in cumulated revenue
• France: contract renewals at the end of December >€300M (cumulated revenue), within a more
challenging commercial context
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14. Investor Relations – 2012 Annual Results
2012: 1st year of Transformation ahead of our objectives
Good operational resilience in a difficult environment
Key Figures
2011 Δ
2011 constant
In €M re‐presented(1) 2012 (2) Δ FX
published
Revenue 29,647 28,576 29,439 +3.0% +1.2% (5)
Adjusted operating cash flow 3,152 2,853 2,723 ‐4.6% ‐6.2%
Adj. op. cash flow excluding Dalkia
2,853 2,804 ‐1.7% ‐3.3%
Italy write downs (6)
Adjusted operating income 1,700 1,558 1,194 ‐23.4% ‐24.5%
Adj. Op. income excluding Dalkia Italy
1,558 1,275 ‐18.1% ‐19.2%
write downs (6)
Operating income (3) 1,017 829 1,095 +32.1% +30.5%
Adjusted net income attributable to owners 290 195 60
of company
Net income attributable to owners of company ‐490 ‐490 394
Free Cash Flow (4) 438 438 3,673
Net financial debt 14,730 14,730 11,283
(1) See appendix 2
(2) The review of results by auditors is still in progress
(3) Non recurring items include impairment losses on goodwill recorded in respect of Company subsidiaries as of December 31, 2011 in Southern Europe and the United States and
impairment losses on non‐current assets recorded in the respect of Company subsidiaries mainly in Italy.
(4) Free Cash Flow represents cash generated (sum of operating cash flow before changes in working capital and principal payments on operating financial assets) net of the cash
component of the following items: (i) changes in working capital for operations, (ii) operations involving equity (share capital movements, dividends paid and received), (iii) investments
net of disposals, (iv) change in receivables and other financial assets), (v) net financial interest paid and (vi) tax paid .
(5) +1.5% at constant consolidation scope and exchange rates
(6) And accrued additional charges 14
15. Investor Relations – 2012 Annual Results
Breakdown of revenue by division
in €M
29,439
28,576
Δ Δ excl. FX
Δ constant and scope
FX
Water +1.3% ‐0.5% +1.0%
Environmental +0.8% ‐2.2% ‐1.9%
Services
Energy Services +7.4% +7.0% +5.8%
Other +21.1% +19.2% +15.3%
Veolia +3.0% +1.2% +1.5%
*See appendix 2 15
16. Investor Relations – 2012 Annual Results
Water: Revenue of €12,078M
Operations: Revenue stable (‐0.2% at constant scope
Revenue (in €M)
and FX)
• France: Revenue increased 1.3% at constant scope 11,921 12,078 +1.3%
Continued contractual erosion: ‐1.6%
Lower volumes: ‐1% +7.9%
Positive impact of price and construction activities:
+3.9%
• Outside France: Revenue declined 1.1% at 4 243 4 223
constant scope and FX
Negative price impact related to Berlin contract
Good performance in Central and Eastern Europe ‐1.5%
(higher prices)
China concessions: favorable price and volume effect
Technologies & Networks: Revenue increased
(+4.9% at constant scope and FX)
• Increase in industrial activity, particularly in the Oil & Gas Operations
sector
Technologies & Networks
* To ensure the compatibility of periods, the 2011 financial 16
statements have been re‐presented (see appendix 2)
17. Investor Relations – 2012 Annual Results
Water: Adjusted operating cash flow of €1,172M
Adjusted operating cash flow declined 8.4% (‐9.4% at constant FX) to
€1,172M
• France: contractual erosion and lower volumes (‐1%). Difficulties in
Guadeloupe.
• Germany: lower price and only 10 months consolidation of Berlin Water by
proportional integration
• Good progression in Central and Eastern Europe, and Asia Pacific
• Net impact of Efficiency and Convergence Plans of €106M (including €40M
for Convergence)
Adjusted operating income declined 22.5% (‐23.3% at constant FX) to
€674M
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18. Investor Relations – 2012 Annual Results
Environmental Services: stable revenue despite difficult
economic environment
Variation Revenue 2012 / 2011: +0.8% Q4 2012: 1st quarter of positive organic revenue growth +3%
and ‐1.9% at constant scope & FX
2012 Quarterly Y-Y Revenue Growth
5.8%
2012
3.0%
Price and volume of recycled materials ‐1.9% 0.7%
0.0%
Waste volumes ‐
1st quarter 2nd quarter 3rd quarter 4th quarter
Service price increases +0.8%
‐1.1%
Other (including construction revenue) ‐0.8% ‐3.1% ‐3.4%
Currency effect +3.0%
‐5.7%
Consolidation scope ‐0.3%
Growth rate Growth rate at constant scope & FX
Difficult macro‐economic context with lower industrial production indices for the second
consecutive quarter in Europe and the United States.
Revenue remains supported by hazardous waste, which grew in all four quarters in 2012
(+6.6% organic growth for the year)
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19. Investor Relations – 2012 Annual Results
Environmental Services: Revenue of €9,083M (+0.8%) and
adjusted operating cash flow of €1,048M (+2.7%)
Revenue:
• Good resilience in France, revenue increased 1.4% at constant scope
• In the United Kingdom, revenue declined 2.1% at constant scope and FX with lower
landfill volumes and a slowdown in construction activity
• Significant revenue decline in Germany: ‐13.2% at constant scope, of which ‐8.8% related
to lower prices and volumes of raw materials. Competitive pressure within the industrial
and commercial sector
• Australia revenue grew 11.4% at constant scope and FX: increase in volumes, mainly in
Q4, as well as increased landfill tax and higher tariffs
Adjusted operating cash flow increased 2.7% (‐0.3% at constant FX) to €1,048M
• Unfavorable impact of raw material prices (‐€33M)
• Continued difficulty in recovering higher costs from clients
• Net impact of Efficiency and Convergence plans of €88M (including €28M from
Convergence)
Adjusted operating income declined 14.6% (‐17.1% at constant FX) to €356M
19
20. Investor Relations – 2012 Annual Results
Energy Services: Revenue of €7,665M
Revenue (in €M)
Revenue increased 7.4% (+5.8% at constant scope & FX) to
€7,665M 7,665 +7.4%
• Higher energy prices: impact >€200M (mainly in France) 7,138
• Favorable weather effect, mainly in France: impact >€100M
• Increase in construction activities in France (CRE projects)
Adjusted operating cash flow declined 7.6% (‐7.7% at 2 064
+6.2%
1 908
constant FX) to €544M
• France: negative impact of regulation changes (heating price and
electricity tariff from gas cogeneration)
• Contribution of Warsaw heating network: €36M
• Italy: receivables write down and accrued expenses of ‐€82M
Excluding the write down and accrued expenses, adjusted operating cash 1 857 +8.6%
flow would have increased by 6.3% 1 690
• Net impact of Efficiency and Convergence plans of €66M
(including €8M for Convergence)
Adjusted operating income declined 22.9% (‐22.5% at
constant FX) to €298M
• Excluding the receivables write down and accrued expenses in
Outside France
Italy, adjusted operating income would have declined by 1.8%
France
* To ensure the compatibility of periods, the 2011 financial
statements have been re‐presented (see appendix 2) 20
24. Investor Relations – 2012 Annual Results
Adjusted operating income
2011 Δ constant
In €M 2012 Δ
re‐presented(1) FX
Water 869.2 673.9 ‐22.5% ‐23.3%
Environmental Services 417.0 356.0 ‐14.6% ‐17.1%
Energy Services 387.0 298.5 ‐22.9% ‐22.5%
Others ‐115.4 ‐134.7 ‐16.7% ‐17.8%
Total Company 1,557.8 1,193.7 ‐23.4% ‐24.5%
Margin 5.5% 4.1%
Excluding the Energy Services write down and charges in Italy,
adjusted operating income declined by 19.2% at constant FX
(1) See appendix 2
24
25. Investor Relations – 2012 Annual Results
Reconciliation of adjusted operating income and operating
income
In €M 2011 2012
re‐presented (1)
Adjusted operating income 1,558 1,194
Goodwill and asset impairments Italy ‐446
Goodwill Impairment United States ‐153
Goodwill impairment Morocco ‐5
Goodwill impairment Spain ‐18
Other write downs and restructuring charges ‐29 ‐13
UK Non‐regulated Water impairment ‐57
Impairment SNCM ‐78
Goodwill impairment Baltic countries ‐26
Others ‐ ‐3
Total non‐recurring elements ‐729 ‐99
Operating income 829 1,095
(1) See appendix 2
25
26. Investor Relations – 2012 Annual Results
Net finance costs
In €M 2011 2012 Δ%
Cost of net financial debt published ‐748 (1) ‐759
Cost of net financial debt restated (2) ‐787 5.39% ‐750 5.25% ‐0.14%
Impact of active debt management and debt amortization ‐0.17%
Impact of change in interest rates ‐0.03%
Currency impact +0.04%
Other +0.02%
In €M Dec. 31, 2011 Dec. 31, 2012
(3)
Closing net financial debt 14,730 11,283 Evolution of cost of borrowing
(4)
Average net financial debt 14,600 14,292
Average gross debt 19,868 18,361
Gross cost of borrowing 4.32% 4.27%
Average cash 5,742 4,403
Rate 1.48% 1.13%
(1) €710M pro forma IFRS 5
(2) Including financial costs of discontinued operations and
excluding cost of debt repurchases in December 2012 (€47M
in 2012)
(3) Net financial debt represents gross financial debt (non‐
current borrowings, current borrowings and bank overdrafts
and other cash position items), net of cash and cash
equivalents and excluding fair value adjustments of
derivatives hedging debt
(4) Average net financial debt is the average of monthly net debt
during the period 26
27. Investor Relations – 2012 Annual Results
Debt management in 2012
Objective: Reduction of the cost of carrying cash, lengthening the average duration of debt
and management of required debt repayments
• Partial early redemption of bond issues in $ and in €: €649M and $560M
• Exchange offer with issuances offset by partial buybacks for €750M
• Amortization and repayments: €1,062M
Total repayments and buybacks net of issuances: €1,711M & $560M
• One time cost of €47M in 2012
Reduction of net financial debt by €3.4 billion, without further increase in liquidity
position
=> An optimized debt repayment schedule, without a peak repayment
1800
1600 € $ £ CNY 2010 buyback 2011 buyback 2012 buyback
1400
1200
1000
800
600
400
200
0
27
28. Investor Relations – 2012 Annual Results
Hybrid
Objectives of the issuance
• Reinforce our financial strength and support the Company’s transformation
• Take advantage of favorable rates and spreads
• Diversification of financing currencies
January 2013: Issuance of perpetual debt callable at par beginning
April 2018 in 2 tranches
• €1 billion @ 4.5%
• £400M @ 4.875%
• 100% Equity under IFRS
• 50% Equity for ratings agencies: until reimbursement for Moody’s and until
April 2018 for S&P
Improvement in credit ratios
28
29. Investor Relations – 2012 Annual Results
Taxes
After adjusting for one‐time items, the company tax rate at December 31, 2012
fiscal year was 39.2%.
The effective tax rate at December 31, 2012 is derived:
Income
Tax base Tax rate
In €M expense before
taxes
Adjusted for one‐time items ‐232 591 39.2%
Goodwill impairment and asset write downs 12 ‐191
Dalkia Italy‐ Receivables write down* 7 ‐82
Reintegration of TNAI flow 54 ‐
Provisions and expenses for tax risks ‐35 ‐
Rate and regulatory changes 21 ‐
Other elements 14 ‐45
Effective ‐159 273 58.3%
* And accrued expenses 29
30. Investor Relations – 2012 Annual Results
Results from discontinued operations
In €M 2011 2012
UK Regulated Water 65 275
Of which net capital gain 233
US Solid Waste US 43 306
Of which net capital gain 208
Other contributions 13 ‐195
Of which Citelum* ‐11 ‐68
Of which Eolfi* ‐10 ‐60
Of which Morocco Water* ‐45 ‐38
Net income from discontinued operations 121 386
* Including fair value adjustments
30
31. Investor Relations – 2012 Annual Results
Reconciliation of operating income to net income
2011 re‐presented (1) 2012
In €M Adjusted Adjustment Total Adjusted Adjustment Total
Operating income 1,558 ‐729 (3) 829 1,194 ‐99 (3) 1,095
Cost of net financial debt (2) ‐758 ‐ ‐758 ‐775 ‐47 ‐822
Income tax expense ‐337 ‐184 ‐521 ‐213 54 ‐159
Share of net income from
12 ‐ 12 30 ‐ 30
associates
Net income from discontinued
‐ 121 121 386 386
operations
Non‐controlling interests ‐280 107 ‐173 ‐176 40 ‐136
Net income attrib. to owners
195 ‐685 ‐490 60 334 394
of Co.
Net income attrib to owners of
290 ‐780 ‐490 60 334 394
Co. published
(1) See appendix 2
(2) Including other financial revenue and expense
(3) See details slide 25
31
32. Investor Relations – 2012 Annual Results
Statement of cash flows
In €M 2011 2012
Operating cash flow before changes in working capital (1) 3,353 3,085
Reimbursement of operating financial assets 441 371
Total cash generation 3,794 3,456
Gross investments ‐3,134 ‐3,282
Variation working capital ‐41 103
Taxes paid ‐368 ‐336
Interest expense ‐771 ‐774
Dividend (2) ‐547 ‐547
Others (3) ‐39 ‐46
Divestments 1,544 5,099
Free cash flow 438 3,673
Impact of exchange rates ‐64 ‐148
Others 114 ‐78
Net financial debt 14,730 11,283
Change in net financial debt ‐488 ‐3,447
(1) Including financial cash flows and operating cash flow from discontinued operations
(2) Dividend paid to shareholders and non‐controlling interests
(3) Including mainly changes in receivables and other financial assets of re‐presented ‐€53M in 2011 and ‐€85M in 2012
32
34. Investor Relations – 2012 Annual Results
Review of asset divestments since 2009: €9bn in divestments
completed at high multiples
In a post financial crisis context
Multiples achieved by division and by geography since 2009 (1) (2)
By Geography By Division
(1) On transactions greater than €50m since January 2009 : 23 operations utilized, excluding Berlin Water, representing €6bn of EV, or 78% of the divestments
completed between 2009 and 2012
(2) Calculated EV/EBITDA multiples calculated as a weighted average: EBITDA of year n‐1 (of year n if the transaction was at the end of the year)
Multiples restated for divestments having the highest and lowest multiples
34
35. Investor Relations – 2012 Annual Results
Cash Flows 80% allocated to debt
reduction
In €M
Positive cash
flow before
net
divestments
&
dividend(1)
(1) Cash flow before financial divestments and after payment of financial expense and taxes represents the sum of adjusted operating cash flow and operating cash flow from financing activities,
principal payments on operating financial assets, changes in working capital for operations and industrial investments and industrial divestitures, excluding net industrial investments of
discontinued operations
* Operating cash flow before changes in working capital minus capex of discontinued operations: Operating cash flow from discontinued operations: €337M. Net industrial investments: €576M
(Eolfi €186M, US Solid Waste €92M, UK Regulated Water €32M, Morocco Water €26M) 35
** Before changes in receivables and other financial assets
37. Investor Relations – 2012 Annual Results
Presentation of new IFRS standards
Today Tomorrow
IAS 27 – Consolidated and Separate IFRS 10 – Consolidated
IFRS 12 – Disclosure of Interests in Other
Financial Statements Financial Statements
SIC 12 – Consolidation – Special IAS 27 – Separate Financial
Purpose Entities Statements
Entities
IAS 28 – Investments in Associates IAS 28 – Investments in
Associates and Joint
Ventures
IAS 31 – Interests in Joint Ventures
SIC 13 – Jointly Controlled Entities –
Non‐monetary Contributions by
IFRS 11 – Joint Arrangements
Venturers
Retrospective application from January 1, 2013
37
38. Investor Relations – 2012 Annual Results
Scope concerned (1/2)
All of the company’s partnerships including “Joint Ventures” according to
IFRS 11, of which the China Water entity, Dalkia International and Dalkia
Investment will now be accounted for by the equity method, in the
absence of any change in elements that assess control
Some exceptions concerning construction activities (Division T&N) with
consortia, Investments in joint venture companies in France and their
foreign equivalents for which “Joint Operations” will be accounted
(amount non significant)
38
39. Investor Relations – 2012 Annual Results
Scope concerned (2/2)
Which treatment for each entity?
Dalkia International: joint venture owned 75% by Dalkia and 25% by EDF, with
an economic interest of 50% => change to equity method at 50%
VTD: change from proportionate consolidation at 50% to equity method at
50%
Proactiva Group: joint venture with FCC owned at 50% => change from
proportionate consolidation at 50% to equity method at 50%
Shenzhen: joint venture owned at 45%, with 25% economic interest => change
to equity method at 25%
Tianjin: joint venture owned at 49% => change from proportionate
consolidation at 49% to equity method at 49%
Recall BWB (Berlin water contract): RWE sold its stake to the Land of Berlin:
Veolia no longer has joint control => change to equity method at 25% from October
31, 2012
39
41. Investor Relations – 2012 Annual Results
Accounts which will presented differently (2/2)
Impact on net financial debt
• Inter‐company loans granted to joint ventures are not deducted from net
financial debt
• Adjusted Net Financial Debt, (AND) excludes debt from these financings
Veolia may be required to participate in the financing of partnerships, but accounting
under the equity method implies that inter‐company loans may no longer be eliminated.
A receivable is recognized in the amount of the loan, but is not deducted from net financial debt
The debt incurred by the Company for these financings remains a part of net financial debt
No modification of the actual definition of net financial debt
But, presentation of an additional new metric: Adjusted Net Financial Debt (AND), which
includes loans granted by the Company to joint ventures
Additional information to be provided within notes to financial statements
related to controlled subsidiaries, partnerships and investments in
associates
41
42. Investor Relations – 2012 Annual Results
2011 adjusted operating cash flow bridge
2011 adjusted operating cash flow after IFRS 5 adjustments, excluding Berlin water contract
and post elimination of proportionate consolidation of €1.9bn
In €M
‐32%
42
* Including Other Europe and Middle East Water ‐€62M, Environmental Services Europe and China ‐ €47M, & Dalkia France ‐€24M Non‐audited figures
43. 2/27/2013 Investor Relations – 2012 Annual Results
2011 net financial debt bridge
2011 re‐presented net financial debt of €12.7bn (versus €14.7bn published at 2011 end)
2011 Adjusted net financial debt excluding joint venture loan receivables would be €9.2bn
‐36% In €bn
* Net financial debt before the application of IFRS 10‐11‐12 and excluding debt loaned to joint ventures consolidated by proportionate 43
consolidation of €442M Non‐audited figures
45. Investor Relations – 2012 Annual Results
2/27/2013
Strong capex reduction related to Transformation
Increasing capex control
End of a long, heavy investment cycle
In €M
3,256 3,282
3,134
Buyback
minorities…
Net of industrial divestments and OFA repayments,
CAPEX of €1.4bn, or ~5.6% of revenue 45
48. Investor Relations – 2012 Annual Results
Summary of objectives communicated during the December
2011 Investor Day updated for new accounting framework
Before After
• Divestments: €6 billion(5)
• Divestments: €5 billion • 2013 Adjusted net financial debt:
• 2013 Net financial debt: <€12 bn(1) between €6bn and €7 bn(1)
• Cost reductions 2013: €120M (2) • Cost Reductions 2013: €170M (2),(6)
impact on operating income
• Cost reductions 2015: €420M (2)
• Cost Reductions 2015: €470M (2), (6)
• 2014 leverage (3): 3.0x (4) impact on operating income
• Mid‐cycle organic revenue growth: • 2014 adjusted leverage (7): 3.0x (4)
+3%
• Mid‐cycle organic revenue growth:
• Mid‐cycle adjusted operating cash +3%
flow growth: +5%
• Mid‐cycle adjusted operating cash
flow growth: +5%
(1) Before closing exchange rate impact
(2) Net of implementation costs
(3) Net financial debt/ (Operating cash flow before changes in working capital + OFA Repayments)
(4) 5%
(5) Including the debt reduction of €1.4 billion related to the change to equity method accounting for the Berlin Water contract and repayment of
loans to joint ventures
(6) Of which ~20% associated with joint ventures
(7) Adjusted net financial debt / (Operating cash flow before changes in working capital + OFA Repayments)
48
50. Investor Relations – 2012 Annual Results
2013: 2nd year of Transformation: ambitious objectives in
order to harness strong potential
A significant source of productivity: Transformation and cost
reductions
A deleveraged and flexible Company
Growth: deployment of new business models
50
51. Investor Relations – 2012 Annual Results
A company with strong potential
Presence in markets with strong growth
Size of the Company
Need to leverage the associated benefits
Leading technical know‐how
Need to standardize and disseminate
Global presence
An asset, but need to be more focused
But a sub‐optimal organization
51
52. Investor Relations – 2012 Annual Results
Key areas of improvement
IT Human
Real Estate Resources
SIZE
Purchasing
Internalization Mutualization
R&D
GLOBAL
Process PRESENCE
TECHNICAL standardization
KNOW‐HOW Commercial Best practices
synergies
170
Capex management
52
53. Investor Relations – 2012 Annual Results
Improve commercial performance
Create a Sales and Marketing Group
• Design modular offerings/ Standardization
Create Key Account Managers
• Systematic selling to large industrial clients
Empower Country Delegates
• Cross selling
Research and Development, a differentiating factor
53
54. Investor Relations – 2012 Annual Results
Improve operational performance
Establish an Operations leadership for each division
Standardization of operating processes
• Definition of comparable business lines
• Benchmarks/ Best practices
Rationalization of R&D programs
A change in culture
170
54
55. Investor Relations – 2012 Annual Results
Improve support function performance
Geographic mutualization
• Transactional activities: accounts payable, general accounting, payroll, IT infrastructure…
• Expertise activities: Treasury, Tax, Risk & Insurance, Purchasing, Communication, Real Estate,
Legal, HR (training…)
Establish global back office management
• Nomination of a Director of Veolia Global Support Services
“Quick Wins”: data centers, vehicle fleet, real estate management,
insurance, fees
Reference cost base: €1.3bn
Identified savings
2015 objective – Dec. 2011 Investor Day
€80M
€65M
80% already identified
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56. Investor Relations – 2012 Annual Results
Sources of productivity: IT
Phase 1: Short term actions
• 70% of savings announced at the Investor Day already identified
Hosting, servers
Reform the French network + international backbone
Optimization of support services
Google Apps
2nd portion of IT Plan: Infrastructure rationalization
• Mutualization at the country level Reference cost base: €550M
• Limited number of shared service centers
• Functional reorganization
• Internalization of key competencies
• Sourcing optimization
€60M
Global optimization plan: New IT 2.0
• Worldwide network optimization €43M
• Rationalization of legacy applications
Savings identified
2015 objective – Dec. 2011 Investor Day 56
57. Investor Relations – 2012 Annual Results
Sources of productivity: Purchasing
€14bn(1) in purchases per year:
• €9bn(1) adressable
Today:
• Operations significantly decentralized
• 20% of purchases centralized
Action plans
• Systemizing purchasers’ utilization, with evaluation of requirements
• Centralized purchasing by country
Depending on categories,
170
potential gain of more than 5%
(1) Before elimination of proportionate consolidation
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60. Investor Relations – 2012 Annual Results
A deleveraged Company with the ability to self‐finance
operations
Regained financial strength
Positive cash flow before net financial divestments(1)
Sustainable resources to appropriately invest in our growth platforms
while complying with an objective of positive cash flow before net
financial divestments
Dividend stable during the transformation period
• Dividend payable in 2014 in respect of the 2013 fiscal year: €0.70 per share
(1) Cash flow before financial divestments and after payment of financial expense and taxes represents the sum of adjusted operating cash flow and operating cash flow
from financing activities, principal payments on operating financial assets, changes in working capital for operations and industrial investments and industrial divestitures,
excluding net industrial investments of discontinued operations 60
61. Investor Relations – 2012 Annual Results
Reliance on the Company’s growth platforms
Water: Central & Eastern Europe Energy Services: Central & Eastern
€M Variation
Europe Variation
2009 2012 2009/2012 €M 2009 2012 2009/2012
Revenue 875 1,115 +27.4% Revenue 1,241 1,631 +31.4%
Adj. Op. Adj. Op.
Cash Flow 141 195 +38.3% Cash Flow 289 307 +6.2%
Water: China Environmental Services: PFI in the
Variation United Kingdom Variation
€M 2009 2012 2009/2012 €M 2009 2012 2009/2012
Revenue 531 867 +63.3% Revenue 370 583 +57.6%
Adj. Op. Adj. Op.
Cash Flow 92 128 +39.1% Cash Flow 102 163 +59.8%
Environmental Services: Hazardous
waste Variation
€M 2009 2012 2009/ 2012
Revenue 603 782 +29.7%
Adj. Op.
Cash Flow 99 142 +42.6%
Adjusted operating cash flow improvement of roughly €210 M in 3 years
+29% in 3 years 61
62. Investor Relations – 2012 Annual Results
Growth: deployment of new business models
Concentrate on large‐scale markets with significant environmental
issues...
... Where we can bring differentiated expertise, and be
compensated in a profitable manner
Increase our revenue from industrial clients
from ~35 % today to more than 50 %
Move toward the most dynamic geographies
Evolve our business models
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63. Investor Relations – 2012 Annual Results
Concentrate on large‐scale markets with significant
environmental issues‐ Ex.: Dismantling of nuclear plants
A market with strong potential… … in which Veolia has
a unique position
France is n 1 worldwide in the Veolia already has recognized
electronuclear cycle expertise
CEA ‐ AREVA – EDF •ANDRA : storage management of
weakly radioactive waste
•CEA Saclay : operation of the effluent
A market potential in France of ~ pre‐treatment facility
€32bn1 for the dismantling of •Fukushima : emergency
nuclear plants management with Areva and the CEA
Veolia has the expertise and the
necessary critical mass in order to
pursue development of this market
Veolia is committed to developing specialized solutions for the
dismantling and remediation of nuclear plants
1. Source Cour des Comptes 2012 63
64. Investor Relations – 2012 Annual Results
Increase revenue with industrial clients
Ex.: Shale gas: initial contracts in the USA and Central Europe
8
5 8
4 7
8
1 6
2 8 8
3 8
1 Mobile water treatment (evaporation) → discharge / reuse 5 Water treatment for odor control
2 Water treatment (evaporation & crystallization) → discharge / reuse 6 Vacuum truck service for liquid waste
3 Water treatment (reverse osmosis) → discharge / reuse 7 Soil remediation
64
4 Mobile water treatment → reuse 8 Solidification
65. Investor Relations – 2012 Annual Results
Evolve our business models
STRONG AXES OF CHANGE …TRANSLATES IN A CONCRETE MANNER
FOR OUR BUSIENESSES… FOR OUR CLIENTS
Collection incentive
Reinvent our historical businesses Biomass
Smart metering
To serve the operator, rather than be
Evolve our business models the operator
Profit sharing
Solutions compatible with municipal
Better serve our customers operations
Reduced costs for our customers
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66. Investor Relations – 2012 Annual Results
Mid‐term objectives confirmed
• €6 billion in divestments (1)
• 2013 net financial debt, under new IFRS standards:
2012‐2013: Net Financial Debt between €8bn and €9bn(2)
Transformation Adjusted Net Financial Debt between €6bn and €7bn(2)
Period • Cost reductions:
in 2013: €170M net impact(3) on operating income
• Extended dividend commitment of €0.70 (4) per share in 2013(5) and
2014
• Organic revenue growth > 3% per year (mid‐cycle)
Beginning in • Adjusted operating cash flow growth >5% per year (mid‐cycle)
2014: • Leverage ratio(6) of 3.0x(7) beginning in 2014
New • Mid‐term: Payout ratio in line with historic level
Veolia • Cost reductions in 2015: €470M net impact(3) on operating income
(1) Including the debt reduction of €1.4 billion related to the change to equity method accounting for the Berlin Water contract
and repayment of loans to joint ventures
(2) Before closing exchange rate impact
(3) Net of implementation costs, of which ~20% associated with joint ventures
(4) Subject to the approval of Veolia’s Board of Directors and the Annual General Shareholders Assembly
(5) In cash or shares
(6) Adjusted net financial debt/ (Operating cash flow before changes in working capital + OFA Repayments)
(7) 5% 66
68. Investor Relations – 2012 Annual Results
Summary of appendices
Currency movements Appendix 1
Principal 2011 re‐presented figures Appendix 2
Revenue by geography Appendix 3
Quarterly revenue Appendix 4
Main contracts won or renewed in 2012 Appendix 5
Environmental Services revenue by geography Appendix 6
Environmental Services revenue by activity Appendix 7
Environmental Services: Revenue vs. Industrial Production Appendix 8
Environmental Services: Raw materials prices Appendix 9
Gross investments by division Appendix 10
Completed divestments Appendix 11
Efficiency Plan and Convergence 1 Appendix 12
Debt characteristics Appendix 13
Net liquidity Appendix 14
Management of liquidity Appendix 15
Operating financial assets Appendix 16
Balance sheet Appendix 17
ROCE Appendix 18
Composition of Board of Directors and Executive Committee Appendix 19 68
69. Investor Relations – 2012 Annual Results
Appendix 1: Currency movements
Main currencies
1 unit foreign currency = x€
2011 2012 Δ 2012 vs.
2011
U.S. dollar
Average rate 0.7184 0.7776 +8.2%
Closing rate 0.7728 0.7582 ‐1.9%
U.K. pound sterling
Average rate 1.1521 1.2330 +7.0%
Closing rate 1.1976 1.2255 +2.3%
Australian dollar
Average rate 0.7418 0.8058 +8.6%
Closing rate 0.7862 0.7868 +0.1%
Czech koruna
Average rate 0.0407 0.0398 ‐2.2%
Closing rate 0.0388 0.0398 +2.6%
The average rate applies to the income statement and cash flow statement
The closing rate applies to the balance sheet
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70. Investor Relations – 2012 Annual Results
Appendix 2: Main 2011 re‐presented figures for IFRS 5 (1)
2011
In €M 2011
published re‐presented
for IFRS5 (1)
Revenue 29,647 28,576
Adjusted operating cash flow 3,152 2,853
Adjusted operating income 1,700 1,558
Operating income (2) 1,017 829
Adjusted net income, Group share 290 195
Free cash flow (3) 438 438
(1) To ensure the comparability of period, the 2011 financial statements have been re‐presented to include:
‐ the impact of the reclassification into “net income from discontinued operations” of operations in the process of being sold such as the Moroccan activities in the Water
division and the Renewable energies activities partially sold as of December 31,2012;
‐ the impact of the reclassification into “net income from discontinued operations” of divested activities in 2012 such as the regulated activities in the United Kingdom in
the Water division and Solid waste activities in the United States in the Environmental Services division.
The 2011 financial statements have also been re‐presented for the reclassification into ‘continuing operations’ since March 3rd, 2011 of the activities of the group Société
Nationale Maritime Corse Méditerranée (SNCM) consolidated within the Transportation Division which was reclassified into “net income from discontinued operations”
as of December 31, 2011. The divesture process of the SNCM was interrupted during 2012 1st semester.
(2) Non recurring items include impairment losses on goodwill recorded in respect of Company subsidiaries as of December 31,2011 in Southern Europe and the United
States and Impairment losses on non‐current assets recorded in the respect of Company subsidiaries mainly in Italy.
(3) Free Cash Flow represents cash generated (sum of operating cash flow before changes in working capital and principal payments on operating financial assets) net of the
cash component of the following items: (i) changes in working capital for operations, (ii) operations involving equity (share capital movements, dividends paid and
received), (iii) investments net of disposals, (iv) change in receivables and other financial assets), (v) net financial interest paid and (vi) tax paid. 70
71. Investor Relations – 2012 Annual Results
Appendix 3: Revenue by geography
in €M
29,439
28,576
Δ Δ excl.
Δ constant scope &
FX FX
Central & Eastern Europe +10.1% +12.1% +6.8%
France +3.5% +3.5% +3.8%
Europe, excl. France and ‐4.2% ‐6.3% ‐3.6%
Central & Eastern Europe
United States +7.4% ‐0.8% ‐0.4%
Asia Pacific +8.4% ‐0.2% ‐0.2%
Rest of the world +7.6% +6.4% +5.8%
Total +3.0% +1.2% +1.5%
(1) see Appendix 2
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72. Investor Relations – 2012 Annual Results
Appendix 4: Quarterly revenue
1st quarter 2nd quarter 1st half
2011 2012 Δ excl. 2011 2012 Δ excl. 2011 2012 Δ excl.
Re‐ scope & Re‐ scope Re‐ scope &
In €M FX & FX FX
presented(1) presented(1) presented(1)
Water 2,823.8 2,957.1 +5.1% 2,986.7 3,013.7 ‐0.3% 5,810.4 5,970.8 +2.3%
Environ. Services 2,196.3 2,197.0 ‐1.1% 2,357.3 2,284.9 ‐5.7% 4,553.6 4,481.9 ‐3.5%
Energy Services 2,286.6 2,502.6 +6.2% 1,311.2 1,418.0 +5.6% 3,597.8 3,920.6 +5.9%
Other 94.2 131.8 +21.4% 123.7 147.4 +16.0% 217.9 279.2 +18.3%
Company 7,400.9 7,788.5 +3.8% 6,778.9 6,864.0 ‐0.8% 14,179.7 14,652.5 +1.6%
Δ at current scope & +5.2% +1.3% +3.3%
FX
3rd quarter 4th quarter Full year ended December 31
In €M 2011 2012 Δ excl. 2011 2012 Δ excl. 2011 2012 Δ excl.
Re‐ scope & Re‐ scope & Re‐ scope &
presented(1) FX presented(1) FX presented(1) FX
Water 2,955.8 3,001.1 ‐ 3,155.1 3,106.3 ‐0.6% 11,921.3 12,078.2 +1.0%
Environ. Services 2,252.5 2,268.9 ‐3.4% 2,204.7 2,332.1 +3.0% 9,010.8 9,082.9 ‐1.9%
Energy Services 1,179.4 1,260.6 +3.4% 2,361.0 2,483.4 +6.8% 7,138.2 7,664.6 +5.8%
Others 149,8 173.4 +12.3% 138.5 160.2 +13.8% 506.2 612.8 +15.3%
Company 6,537.5 6,704.0 ‐0.3% 7,859.3 8,082.0 +2.9% 28,576.5 29,438.5 +1.5%
Δ at current scope & +2.5% +2.8% +3.0%
FX
(1) See Appendix 2 and IFRS 8 reclassifications detailed in section 2.1 “Operational Sectors” of the 2012 Operating & Financial Review 72
