2006 Annual results

Investor Relations – 2006 Annual Accounts – March 2007

2006 Annual Accounts


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 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
Veolia Environnement


2006: confirmation of Veolia’s profitable growth model

Growth and profitability above commitments
Confirmation of robust sales momentum (revenue +11.9%)
Further improvement in profitability (recurring operating income +16.7%)
Significant rise in recurring net income (+21.0%)
Sound balance sheet maintained with continuation of active asset management policy
(disposal of Southern Water and the transportation business in Denmark):
Net financial debt / (cash flow from operations + repayment of operating financial assets)
= 3.4x
Strong growth in free cash flow before major new projects (€901 million)
Significant improvement in return on capital employed: objective met one year ahead
of schedule, after tax ROCE on tangible and intangible assets: 10.8%
Further increase in dividend: +23.5% (1) to €1.05

(1) Subject to approval by the Annual Shareholders’ Meeting on May 10, 2007

3


2006 key figures (in €m and at current exchange rates)

(1) Excludes discontinued operations.

4500
30 000 28,620 4,282
25,570 +10.8%
25 000 22,792 4000 3,863
Repayment of operating
(1)
20 000 3,467 financial assets
3500 Cash flow from
operations
15 000

10 000 3000 +8.9%
5 000
2500
0 2004 2005 2006
2004 2005 2006
+11.9% Cash flow generation = Cash flow from operations
Consolidated revenue
+ Repayment of operating financial assets

2,222
1,904 762
2 000 1,629 800
700 630
600
500
477
1 000 400
300
200
100
0 0
2004 2005 2006 2004 2005 2006

Recurring operating income +16.7% Recurring net income +21%
4


Key performance indicators at December 31, 2006

(€ million) 12/31/05 12/31/06 Growth
adjusted

Cash flow from operations(1) 3,538 3,852 +8.9%

Operating income 1,893 2,133 +12.7%

Non-diluted net earnings per share (€) 1.59 1.93 +21.4%

Net income 622 759 +21.9%

Free cash flow before major new projects 555 901 +62.3%

Net financial debt 13,871 14,674 -

(1) Cash flow from continuing operations
5


Balanced contribution to growth from all 4 divisions

By division By geographic region

Rest of world 4%
Transportation 17%
Water 35% Asia-Pacific 6%

North America 10%

Energy
Services
22%
Europe
ex France
33% France
47%

Waste 26%

Consolidated revenue at December 31, 2006: €28,620m

6


Balanced contribution to growth from all 4 divisions

(€million)
Chg.
at constant
10,088 exchange rates

9,134
Water +10.3%
Waste +11.1%
7,463 Energy Services +11.5%
6,749 +17.6%
Transportation

6,118
5,463 VE Group +11.9%

4,224 4,951

12/31/2005 12/31/2006
adjusted


7


Strong presence in growing markets

(€ million)

Chg. at
constant FX
rates

13,403
France +7.7%
12,439
Europe ex France +14.4%
North America +23.1%
Asia-Pacific +16.6%
Rest of world +11.7%
9,498
8,253 VE Group +11.9%

2,325 2,817
1,475 1,702
1,078 1,200

12/31/2005 adjusted 12/31/2006

8


France: revenue up 7.7% to €13,403m

Saint-Omer
FRANCE Schenectady Europe
Valenciennes
Le Havre (transportation)
– Length: 6 years – Cumulative revenue: €200m Le Havre
Cergy-Pontoise
Valence (transportation)
- Length: 6 years – Cumulative revenue: €75m Sarcelles
Osilub
O-I group (Gironcourt site) (transportation) Saclay
- 1st private domestic rail freight contract Gironcourt
- Length: 5 years – Cumulative revenue: €13m
Nîmes-Garons (transportation) Angers
– Length: 5 years – Cumulative revenue: €25m
Acquisition of SNCM (transportation)
Saclay (energy services)
– Length: 15 years – Cumulative revenue: €45m Roanne
Cergy-Pontoise urban community (energy services)
Valenciennes hospital (energy services)
Sarcelles heating network (energy services) Valence
– Annual revenue: €8m
Bayonne-Anglet-Biarritz (waste) Nîmes-Garons
Osilub: Recycling of used oil in partnership
Bayonne-Anglet-Biarritz SNCM
with Total (waste) Narbonne
Narbonne (water)
Angers (construction) (water)
– Cumulative revenue: €21m
Contract start-up
Saint-Omer (water) – Length: 12 years – Cumulative revenue: €26m
Contracts won or renewed
Schenectady Europe in Béthune (multi-services)
– Length: 7 years – Cumulative revenue: €12m Company acquisitions
Roanne (transportation) – Length: 7 years – Cumulative revenue: €30m Partnerships with other companies
9


Europe (outside France): revenue up 14.4% (1) to €9,498m

UNITED KINGDOM
Nottinghamshire County (waste)
– Length: 26 years – Cumulative revenue: €1.2bn
The Netherlands
Dunn Line (transportation) – Annual revenue: €22m Germany
Cleanaway UK (waste) – 2005 revenue: €684m Limburg
Hastings Borough Council (waste) – Length: 7 years Braunschweig
Biffa Belgium
– Cumulative revenue: €27m Prostejov
Belgium
Vodafone (energy services) – Length: 5 years – Cumulative revenue: €43m
Slany Poprad
BELGIUM Augsburg
Czech Banska Bystrica
Biffa Belgium (waste) – 2005 revenue: €85m Pforzheim Republic Slovakia
GERMANY
Dunn Line
Braunschweig (wastewater) (water)
– Length: 30 years – Cumulative revenue: €390m Nottinghamshire
Augsburg (transportation) United Kingdom
– Length: 11 years – Cumulative revenue: €13m in 2009 Vodafone Romania
Pforzheim (transportation) Cleanaway UK
– Length: 10 years – Cumulative revenue: €200m Hastings Buzau

THE NETHERLANDS Ploiesti
Limburg (transportation) - Length: 10 years – Cumulative revenue: €1.2bn Cona
Rettagliata & Caroli
CZECH REPUBLIC
Prostejov (water) - Length: 25 years - Cumulative revenue: €139m Careggi
Slany (water) – Length: 15 years – Cumulative revenue: €26m Italy
SLOVAKIA
Banska Bystrica (water ) - Length: 30 years - Cumulative revenue: €1.4bn
Poprad (water) – Length: 30 years – Cumulative revenue: €566m

ROMANIA
Buzau (construction) (water) – Cumulative revenue: €10m Contract start-up
Ploiesti (energy services) – Length: 1 year – Cumulative revenue: €5m Contracts won or renewed
ITALY Company acquisitions
Cona & Careggi hospitals (energy services)
- Length: 30 & 15 years - Cumulative revenue: €211m (1) At constant exchange rates
Rettagliata & Caroli (energy services)
10


North America: revenue up 23.1% (1) to €2,817m

NORTH AMERICA

Mesa (transportation)
Atlanta- Gwinnett County (transportation)
Rockland County (water)
Atlanta- Fulton County (water) Canada
Vancouver (water)
Orange County (transportation) Vancouver
Gaz Métro
Antelope Valley (transportation) United States
– Length: 5 years SuperShuttle Biogen
New York
€40m of industrial contracts won (waste) for oil rigs Orange County Rockland County
in the Gulf of Mexico Mesa
Antelope Valley Atlanta
Industrial contract won (waste) in the pharmaceutical field
New York city (waste)
Shuttleport
Biogen (energy services) Industrial contracts
Partnership with Gaz Métro (energy services) Contract start-up
Shuttleport (transportation) – Annual revenue: €45m Contracts won or renewed
Company acquisitions
SuperShuttle (transportation) – 2005 revenue: €55m
Partnerships with other companies

(1) At constant exchange rates
11


Asia – Pacific: revenue up 16.6% (1) to €1,702m

CHINA
Lanzhou (2) (water)
- Length: 30 years – Cumulative revenue: €1.6bn
Sinopec (water)
Liuzhou (water)
Chongqing (energy services) South Korea
- Length: 20 years – Cumulative revenue: €20m Urumqi
Qingdao & Jinan (waste) Sinopec
Jinan
Foshan (waste)
China Qingdao
Lanzhou Kumho Rubber & Resin
Kunming (water) Changzhou
- Length: 30 years – Cumulative revenue: €1.6bn
Chongqing
Changzhou (water) Kunming Japan
Urumqi (water) Liuzhou Foshan Saitama
– Length: 23 years – Cumulative revenue: €260m Ilan County Hiroshima
TAIWAN
Taiwan
Ilan County (waste) Singapore
SOUTH KOREA Showa Denko
Kumho Resin (water) – Length: 15 years – Cumulative revenue: €53m
Kumho Rubber (water) – Length: 15 years – Cumulative revenue: €38m
SINGAPORE
Showa Denko (water) – Length: 6 years – Cumulative revenue: €53m Australia
Queensland –WCRW prg
AUSTRALIA Queensland & Gold Coast
Bayswater (water) – Length: 7 years – Cumulative revenue: €43m Industrial contract
Queensland & Gold Coast (water) – Length: 10 years – Cumulative revenue: €210m TDU
Queensland –WCRW prg (water) Bayswater
Industrial contract won (waste) in the field of chemicals Contract start-up
- Length: 5 years – Cumulative revenue: €37m Contracts won or renewed
TDU (energy services) – 2005 revenue: €76m
Company acquisitions
JAPAN
(1) At constant exchange rates
2 contracts to operate wastewater treatment plants in Hiroshima & Saitama
(water) - Length: 3 years each – Cumulative revenue: €23m (2) 12
Signed in January 2007


Middle East: a new source of growth in the medium term

SULTANATE OF OMAN Kingdom of Bahrain
Muscat (water)
Bahrain
- Length: 5 years
- Cumulative revenue: €11m
Sur (1) (BOO) (water)
– Length: 22 years
– Cumulative revenue: €434m Pearl GTL
Ajman
Qatar
UNITED ARAB EMIRATES Abu Dhabi

Ajman (water) Israel United Arab Emirates
– Length: 27 years Muscat
– Cumulative revenue: €151m Delek Group
Abu Dhabi (waste) – Length: 5 years – Cumulative revenue: €42m Sur

KINGDOM OF BAHRAIN Sultanate of Oman

Bahrain-Al Hidd (construction) (water)
- Cumulative revenue: €275m

QATAR

Pearl GTL (construction) (water)

ISRAEL

Delek Group – Ashkelon site (energy services) Contracts won or renewed
Contract start-up
(1) Signed in January 2007 13


Growth boosted by contract wins for large industrial
clients

Backlog of contracts signed in 2006
with major industrial clients: €2,189m
€27m
€165m

€741m
€624m

€632m
W at er Mult i divisions Energy Services W ast e Transport at ion

14


Contracts for major industrial clients: growth in new contracts
awarded since 2001

(€ million)

1,400
1,200
1,000
800
600
400
200
0
2001 2002 2003 2004 2005 2006

In the period 2001 – 2006:
Total new contracts signed with large European industrial clients:
€1,286m in annual revenue.
Average length of contracts: 6.5 years, i.e. a backlog of around €8.5bn.
One-third of contracts signed are multi-division, generating €440m in annual revenue.

15


Growth in cash flow from operations (1)

(€ million)

12/31/05 12/31/06 ∆ current FX CFO Margin (1)
adjusted rates 12/31/06

Water (2) 1,641 1,814 +10.5% 18.0%
Waste (2) 1,055 1,190 +12.7% 15.9%
Energy Services (2) 578 611 +5.7% 10.0%
Transportation (2) 272 290 +6.8% 5.9%
Other (8) (53) - -

Total from continuing operations 3,538 3,852 +8.9%

Discontinued operations 4 (8)

Total Group 3,542 3,844 +8.5% 13.4%

(1) Cash flow from operations before tax & interest expenses, as defined by the Conseil National de Comptabilité’s
(CNC) recommendation dated October 27, 2004
(2) Cash flow from continuing operations
16


Recurring operating income: up 16.7% (1)

(€ million)
Recurring operating income margin

12/31/05 12/31/06
∆ current 12/31/05 12/31/06
adjusted FX rates adjusted

Water 997 1,163 +16.7% 10.9% 11.5%
Waste 554 648 +17.1% 8.2% 8.7%
Energy Services 321 378 +17.6% 5.9% 6.2%
Transportation 117 100 -14.3% 2.8% 2.0%
Holding (85) (67) - - -

Total 1,904 2,222 +16.7% 7.4% 7.8%

(1) At current exchange rates

17


From recurring operating income to operating income

(€ million)

12/31/05 12/31/06 ∆ current
adjusted FX rates

Recurring operating income 1,904 2,222 +16.7%

Non-recurring items
(in 2006, -€86m related to provisions and impairment charges
in transportation in Germany) (11) (89)

Operating income 1,893 2,133 +12.7%

18


Water: Revenue up 10.4% to €10,088m
Recurring operating income: up 16.7% to €1,163m

(€ million)
1,163
10,088
9,134 997
7,977
854

12/31/2004 12/31/2005 12/31/2006 12/31/2004 12/31/2005 12/31/2006

Revenue Recurring operating income

All geographical zones contributed to the strong growth in operating income.
Very good contribution from France (distribution and works).
In Europe, double-digit growth in operating income (in the United Kingdom, in Germany and in Central
Europe).
In North America, satisfactory performance (industrial contracts and works).
In Asia, significant improvement in results in China (up by more than 30%, start-up of Kunming and
Changzhou contracts).
Increasing contribution from Africa & Middle East (Morocco and full-year contribution from Ashkelon in
Israel).
Further excellent contribution from Veolia Water Solutions & Technologies.
19


Waste: Revenue up 10.6% to €7,463m
Recurring operating income up 17.1% to €648m

(€ million)
648

7,463 554
6,749 481
6,381

12/31/2004 12/31/2005 12/31/2006 12/31/2004 12/31/2005 12/31/2006


Further improvement in profitability in France: increase in municipal collection volumes, strong
performance at incinerators and control of structural costs.
In Europe, the United Kingdom’s contribution grew by more than 30%, driven by the very good
performance on integrated contracts (Hampshire, start-up of the new Sheffield incinerator) and the
consolidation of Cleanaway in the fourth quarter of the year.
In North America, good performance of the solid waste (with volumes and prices holding up well),
industrial services and waste-to-energy businesses.

20


Energy Services: revenue up 12% to €6,118m
Recurring operating income: up 17.6% to €378m

(€ million)
378

321
6,118
5,463 253
4,975

12/31/2004 12/31/2005 12/31/2006 12/31/2004 12/31/2005 12/31/2006


In France, the margin remained stable despite unfavorable weather conditions in the fourth quarter.
Outside France, significant increase in the contribution from Central Europe (Poland and Czech
Republic).
Positive contribution from sales of surplus CO2 emission rights.

21

Transportation: Revenue up 17.2% to €4,951m
Recurring operating income down 14.4% to €100m
Operating income: €14m

(€ million)
117
4,951 101 100
4,224

3,460

12/31/2004 12/31/2005 12/31/2006
12/31/2004 12/31/2005 12/31/2006


In France, robust growth in urban transportation while the contribution from SNCM was in line with the
business plan
Outside France: good performances in Benelux, the Czech Republic and Australia, rapid development of
business in North America, while the turnaround plan was further implemented in Nordic countries
(restructuring of the division in Denmark: its disposal is being considered and it is treated as a
discontinued operation from an accounting point of view). In Germany, start-up costs and an exceptional
provision (€86 million) was booked for the Marschbahn contract

22


From revenue to net income

(€ million) 12/31/05 12/31/06 ∆12/31/06
adjusted 12/31/05

Revenue 25,570 28,620 +11.9%
Operating income 1,893 2,133
Cost of net financial debt (711) (701)
Other financial income (expenses) 28 (34)
Tax (422) (410)
Equity in net income of affiliates 7 6

Net income from continuing operations 795 994 +25.0%
before minority interests
Net income attributable to minority interests (173) (236)

Net income from continuing operations 622 758
Net income 622 759 +22.0%
Recurring net income 630 762 +21.0%

23


Control of financing costs

(€ million)

12/31/05 12/31/06
adjusted

Cost of gross financial debt (696) (709)
Revaluation of non-hedging
derivative instruments 10 6
Early redemption of 2008 bond (26) -
Other 1 2

Cost of net financial debt (711) (701)

Cost of borrowing: 5.07% stable vs. 2005

24


From recurring net income to net income

(€ million)

Recurring net income 762

Disposal of stake in Southern Water 53

Transport division in Denmark put up for sale (52)

Provisions booked in transportation in Germany (86)

Restructuring of US tax group 86

Other (4)

Net income 759

25


Growth supported by well targeted capital
expenditures: €4,206m at December 31, 2006

Growth
Financial
(€ million) investments Operating
Major new
Maintenance incl. Industrial projects financial Total
change in
scope assets

Water 498 67 353 164 262 1,344
Waste 519 44 154 945 20 1,682
Energy Services 200 72 118 64 63 517
Transportation 179 80 98 251 16 624
Other 15 7 17 - - 39

Total at 12/31/06 1,411 270 740 1,424 361 4,206
(1)
Total at 12/31/05 1,212 177 657 906 513 3,465

(1) Growth capital expenditures have been restated in accordance with the definitive application of the IFRIC 12 standard.

26


More than €1.4bn allocated to new projects

By division By geographic region

Continental Asia-Pacific 7%
Transportation 18% (4) Water 12% (1)
Europe
19%
Energy Services
4% (3)
North
America 10%

Waste 66% (2)
United Kingdom 64%
Of which Cleanaway = 61%

(1) o/w Poprad & Banska Bystrica (Slovakia), Prostejov & Slany (Czech Republic), Kunming & Liuzhou (China)
(2) o/w Cleanaway UK (United Kingdom) for €871m, Biffa (Belgium)
(3) o/w Rettagliata & Caroli (Italy), TDU (Australia)
(4) o/w SNCM (France), Dunn Line (United Kingdom), Shuttleport & SuperShuttle (United States)
27


Net investments & capital expenditures: €3,413m

(€ million)

Gross investments & capital expenditures 4,206

Disposals (355)
Repayment of operating financial assets (438)

Total net investments & capital expenditures 3,413

28


Significant growth in free cash flow before major new projects

(€ million)
2005 ∆ 12/31/06
adjusted
2006 12/31/05 adj.

Cash flow from operations (1) 3,542 3,844 +8.5%

Repayment of operating financial assets 321 438

Total cash generation 3,863 4,282 +10.8%

Investments excluding major projects (2,559) (2,782)
Change in WCR (39) (112)
Asset disposals 343 355
Rights issue reserved for minority shareholders 8 82
Tax paid (339) (343)
Interest paid (739) (596)
Other 17 15
= Free cash flow before major new projects = 555 = 901 +62.3%

(1) o/w cash flow from discontinued operations: €4m in 2005 and -€8m in 2006

29


Change in net financial debt

(€ million) 2005
adjusted 2006

Net financial debt at January 1st 13,059 13,871

Free cash flow (555) (901)
Investments in major new projects 906 1,424
Dividends paid 374 479
Capital increase (73) (165)
Impact of exchange rates and other 160 (34)

Net financial debt at December 31st 13,871 14,674

Change in debt 812 803

30


Debt ratios

15 4
14.7

14.5 3.9 x
3.6 x

14 13.9 3.50 x
3.4 x

13.5 3.25
13.1
13

12.5

12 2.5
In € bn 12/31/2004 Adjusted 12/31/2005 Adjusted 12/31/2006 (x)
Net financial debt
_ Net financial debt / (Cash flow from operations + repayment of operating financial
assets)

Debt ratio target: between 3.5 x and 4 x

31


Significant increase in dividend

2006 net dividend (1)
€1.05 per share (+23.5%) €1.05
€0.85
€0.68
€0.55 €0.55 €0.55

2001 2002 2003 2004 2005 2006 (e)

2006 (e) pay-out ratio = 54%

(1) Subject to approval by the Annual Shareholders Meeting on May 10, 2007
32


Veolia 2005 Efficiency Plan

Results: €406m in recurring positive impact on income
in 3 years (versus the initial €300m objective)

€102m in additional and recurring positive impacts in 2006
Of which €84m in operating income (€368m in 3 years)

The program has mobilized all the Group’s business units
Direct involvement of more than 1,000 contributors

More than 700 efficiency projects in all areas (operational efficiency,
optimization of structures, purchases and asset management)

Systematic identification of synergies among divisions

33


Veolia 2005 Efficiency Plan

Outlook: build on the plan’s results and move into a continuous
improvement program

Continued mobilization of all business units via a company-wide Continuous Improvement
Program (so-called PACT)

Wider deployment of the best efficiency-improving operating practices achieved in the
Veolia 2005 plan

Launch and expansion of new cross-cutting initiatives to increase synergies among
divisions and accelerate the integration of new businesses (sharing of some support
functions, standardization of practices and tools, etc.)

34


10.8% after-tax ROCE on tangible and intangible assets:
objective met one year ahead of schedule

Strong improvement in after-tax 10.8%
ROCE since 2002
10.2%

9.1%

8.3% 8.3%

7.0%

6.4%

2002 2003 2004 2004 2005 2005 2006

French GAAP IFRS standards before IFRS standards with
application of IFRIC 12 application of IFRIC 12
on concessions on concessions

35


STRATEGY
AND
OUTLOOK


How can Veolia Environnement meet the industrial
challenge?

Through sustainable growing markets due to solid fundamentals:

Growth in urban population and health risks

Climate change and environmental protection

Increasingly stringent environmental regulations… (new European
directive on recycling, adoption of the Water Bill in France -102 Articles on
resource preservation, on water supply and wastewater services, etc.)

37


How can Veolia Environnement meet the industrial
challenge?

A leadership position strengthened by:
Undisputed technical leadership: seawater desalination, sludge treatment
and recovery at each stage of the process, wastewater recycling, taste of
water improvement, etc.

New regional zones of development (Asia, Middle East, etc.)

Operation of new and essential processes: materials recycling (treatment
of used/dirty oil, electronics recycling, dismantling, pollutant removal, etc.)

Development of renewable energy sources and the worldwide curbing of
greenhouse gases, proposed by the Kyoto Protocol

Heightened efforts in R&D for new processes (automated recycling,
methanization, optimization of assets managed – waste treatment and
recovery/recycling centers)

38


2007: a renewed commitment to achieve profitable
growth backed by…

The ongoing maturation of existing contracts (United Kingdom, Central
Europe, China, etc.)
The full effect of acquisitions made in 2005 and 2006: Cleanaway, ATC,
SNCM
The turnaround of the Transportation division
The implementation of efficiencies and the exchange of best practices

… and by

Ongoing sales momentum since the beginning of this year with the signature
of several contracts:
In transportation in France (Lyon St-Exupéry),
In water in Lanzhou (China), Oman (Middle East) and Limerick (Ireland),
In waste in the United States (Pinellas County),
In energy services in the Czech Republic and Hungary.

39


2007 objectives

Annual revenue growth of between 8% and 10%

Maintain current level of after-tax ROCE on tangible and intangible assets
while continuing to grow revenue

Further increase recurring operating income and recurring net income

Maintain commitment to a sound balance sheet: Net financial debt/(Cash flow
from operations + repayment of operating financial assets) ranging between
3.5 x and 4 x

Increase dividend per share by at least 10%

40


In the medium term: a development model based on
profitable growth

Continued growth and development of the company in each of its businesses

Annual revenue growth of between 8% and 10% supported by:
Natural growth in existing contracts
New contracts awards in fast-growing markets in priority geographic regions:
Europe, North America, some countries in Asia-Pacific and the Middle East
Targeted and value-creating acquisitions in the Group’s business lines

Stringent investment policy to be maintained consistent with the IRR ≥ WACC
+3% profitability criterion

41


Veolia Environnement: a value-creating growth model

A clear and consistent strategy

2006: another year of excellent performances

Leadership in environmental services for municipalities as well as industry and
service sector clients

Long-term contracts synonymous with sustainable cash flow generation

Geographic balance founded on zones enjoying robust growth: Europe, North
America and some countries of the Asia-Pacific zone and the Middle East

42


APPENDICES


Recap

Revenue = Income from Ordinary Activities under IFRS

2004 and 2005 accounts have been restated:
for the impact of IFRIC 12 on concessions.
for the transportation business in Denmark & Southern Water, now
presented as discontinued operations in compliance with IFRS 5

45


France: a solid growth trend, up 7.7%

(€ million)
Chg. at current
FX rates

4,802
4,459
Water +7.7%

Waste +4.1%
3,112
2,990
Energy Services +8.6% (1)

Transportation +12.7%
3,257 3,536
VE Group in France +7.7%
1,733 1,953

12/31/2005 12/31/2006
adjusted

Consolidated revenue in France at December 31, 2006: €13,403m
(1) Up 3% excluding increase in energy costs.
46


Changes in each division’s pre-tax ROCE on tangible
and intangible assets

Improvement in return

Average tangible and intangible
Pre-tax ROCE (%)
assets (€ m)

2005 2006 2005 2006

Water 4,391 4,905 17.5% 18.6%

Waste 4,124 4,729 12.1% 12.4%

Energy Services 2,188 2,395 12.7% 14.1%

Transportation 1,119 1,310 9.9% 7.4%

47


Return on tangible and intangible assets and operating
financial assets

WACC (1) = 6% 2005 2006

Return on tangible and intangible assets
Average capital employed (€ bn) 12.1 13.6
After-tax ROCE 10.2% 10.8%

Return on operating financial assets

Average operating financial assets (€ bn) 5.3 5.5
Pre-tax return on financial assets 6.2% 6.4%

(1) After tax and on the basis of the analysts’ consensus.
48


A key indicator: ROCE

Net results of operations
ROCE =
Average capital employed
Net results of operations = Recurring operating income less Income tax(1)
plus Equity in net income of affiliates less revenue from financing on behalf of third parties
plus Tax expense allocated to financing on behalf of third parties

Capital employed = Tangible and intangible assets plus Goodwill plus Investments accounted
for using the equity method plus Working capital requirement (2) plus Net derivative financial instruments (3)
less Provisions and Other long-term debt

Average capital employed : the average of the capital employed at the beginning and end of the period
(1) Excluding income arising on recognition as assets of carryforward tax losses connected with disposals in North America and related
restructurings and excluding exceptional tax income connected with recognition of carryforward tax losses in the USA in 2006
(2) Including deferred tax, net
(3) Excluding derivative instruments hedging the fair value of debt

Why are provisions deducted?
Capital employed is the capital on which a “return” is paid: equity
attributable to the parent company's shareholders and to minority
interests, net financial debt less operating financial assets
49


2006 Capital employed

In €m
12/31/05 12/31/06

Tangible & intangible assets, net 10,259 11,644
Goodwill 4,752 5,705
Investments accounted for using the equity method 202 241
Inventories and work in progress 635 732
Accounts receivable 10,083 10,969
Accounts payable (10,370) (11,269)
Net deferred tax (70) (149)
Tax on asset disposals in North America
& related restructurings (117) (85)
Working capital requirement 161 198
Derivative financial instruments, net (67) 27
Provisions (2,402) (3,023)
Other long-term debt (204) (207)

Capital employed 12,701 14,585
50


2006 Average capital employed

In €m

12/31/05 12/31/06

Capital employed 12,701 14,585

2006 average capital employed 13,643

51


2006 Calculation of ROCE

In €m 12/31/06

Recurring operating income 2,222
Income tax (410)
Tax loss related to disposals in North America
& to related restructurings 33
Exceptional tax income connected with recognition
of carryforward tax losses in the USA (86)
Total tax expense (463)
Equity in net income of affiliates 6
Revenue from financing on behalf of third parties (351)
Tax expense allocated to financing on behalf of third parties 55
Net results of operations 1,469

52


2006 ROCE Calculation

In €m 12/31/06

Net results of operations 1,469

2006 average capital employed 13,643

Post-tax ROCE 10.8%

53


Active debt management policy

Ratings
Moody’s
A3/P-2 Outlook stable (cf. report dated July 2006)
Standard & Poor’s
BBB+/A-2 Outlook stable (cf. report dated October 2006 )

Active bond and bank debt management
Average maturity of debt:
gross debt : ~6.6 years
Net financial debt: ~7.8 years
74% of net debt is at a fixed rate or a capped floating rate
71% of gross debt (after swaps) is denominated in euros
Group liquidity: €7.8bn including €4.9bn in undrawn lines of credit with
a maturity of more than 1 year.

54


Investor Relations contact information

Nathalie PINON, Head of Investor Relations
38 Avenue Kléber – 75116 Paris - France
Telephone +33 1 71 75 01 67
Fax +33 1 71 75 10 12
e-mail nathalie.pinon@veolia.com

Brian SULLIVAN, Vice President, US Investor Relations
700 E. Butterfield Road -Suite 201
Lombard, IL 60148 - USA
Telephone +1 (630) 371 2749
Fax +1 (630) 282 0423
e-mail brian.sullivan@veoliaes.com

Web site
http://www.veolia-finance.com
55

2006 Annual results

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