2008 Annual results

Investor Relations – 2008 Annual Results – March 6, 2009

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
forward looking statements are not guarantees of future performance Actual results may differ materially from the
performance.
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
project,
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
Environnement s
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 i f
Thi d t t i t i information relating t th valuation of certain of V li E i
ti l ti to the l ti f t i f Veolia Environnement’s recently
t’ tl
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
above.

2


Table of Contents

 Veolia Environnement overview
li i i

 Key figures

 2008 results

 Financing

 Growth

 2009 challenges and outlook

 Conclusion

3


Veolia Environnement overview

 Operating cash flow: €4,137m
 Slowdown in Veolia’s waste management operations
in the
i th 4th quarter
t
2008 operating performance:
 Sustained performance of other business lines and
In line with the most recent guidance strong growth in operating cash flow in Energy
(up15.5% at constant exchange rates)

 Improve profitability to the Group’s standard for
assets acquired in 2007 and 2008
Our priority:  Plan to adapt Veolia’s waste management division
to the current business climate: cost reduction plan
Profitability improvement of €100m in 2009
 2010 Efficiency Plan: €280m impact in 2009
2009,
including Veolia waste management adaptation plan

 Investments net of disposals: €2 billion in 2009
 Investment program adapted t th current
I t t d t d to the t
Our commitment:
economic environment
Positive Free Cash Flow in 2009 after  Strategic review of assets and countries
payment of the dividend  To generate internally the resources required to
fund f
f d future growth h

4


2008 key figures

Variation
2007
€m 2008 at constant
restated (1)
FX

Revenue 31,932 36,205 +15.8%
Operating cash flow
p g 4,164
, 4,137
, +2.0%
Recurring operating income before 2008 writedown of 2,455 2,346 (2) -1.4%
Veolia’s waste management division in Germany

Operating income 2,482 1,951 (3)

Recurring net income attrib. to equity holders of parent 926 703 (2)

before impact of 2008 writedown of Veolia’s waste
management division in Germany
Recurring net income attrib. to equity holders of parent 926 659
Net income attrib. to equity holders of parent 928 405 (3)

Net financial debt 15,125
, 16,528
,
Dividend per share €1.21 €1.21 (4)

(1) To ensure the comparability of financial years, the accounts at 31 December 2007 have been restated by the amount of income from the disposals in 2008 (in particular for Clemessy &
Crystal in the Energy division) according to IFRS 5 and are presented in the income statement in the line item “net income from discontinued operations”. The 2007 revenue for
Clemessy and Crystal was €696m.
(2) Before the writedown of intangible assets in Veolia’s waste management division in Germany: -€63m in recurring operating income and -€44m in net income (Group’s share).
(3) Impact of writedown of Veolia’s waste management division in Germany: -€406m on operating income (including -€343m impairment of goodwill);-€430m on net income.
(4) Subject to approval by the Annual Shareholders' Meeting on May 7, 2009.

5


Dividend policy

Following an average increase of 22% per year over the last 4 years,
the 2008 dividend is maintained as compared with 2007
2007.
€1.21 €1.21 (1)
€1.05

€0.85
€0.68
€0.55
€0 55 €0.55
€0 55 €0.55
€0 55

2001 2002 2003 2004 2005 2006 2007 2008

2008 dividend per share maintained at €1.21 (1)

(1) Subject to approval by the Annual Shareholders' Meeting on May 7, 2009

6


 2008 results

 Financing

 Growth

 2009 challenges and outlook

7


2008 key figures

2007 Variation
2008
€m restated (1) constant FX

Revenue 31,932 36,205 +15.8%
Operating cash flow 4,164 4,137 +2.0%
Recurring operating i
R i ti income b f
before 2008 writedown of
it d f 2,455
2 455 2,346
2 346 (2) -1.4%
1 4%
Veolia’s waste management division in Germany
Operating income 2,482 1,951 (3)

Recurring net i
R i t income attrib. t equity h ld
tt ib to it holders of parent
f t 926 703 (2)

before impact of 2008 writedown of Veolia’s waste
management division in Germany
Recurring net income attrib. to equity holders of p
g q y parent 926 659
Net income attrib. to equity holders of parent 928 405 (3)

Net financial debt 15,125 16,528
Net recurring income per share (non-diluted)
(non diluted) 2.15
2 15 1.44
1 44
Dividend per share €1.21 €1.21 (4)

(1) To ensure the comparability of financial years, the accounts at 31 December 2007 have been restated by the amount of income from the disposals in 2008 (in particular for Clemessy &
Crystal in the Energy division) according to IFRS 5 and are presented in the income statement in the line item “net income from discontinued operations”. The 2007 revenue for
Clemessy and Crystal was €696m
€696m.
(2) Before the writedown of intangible assets in Veolia’s waste management division in Germany: -€63m in recurring operating income and -€44m in net income (Group’s share).
(3) Impact of writedown of Veolia’s waste management division in Germany: -€406m on operating income (including -€343m impairment of goodwill);-€430m on net income.
(4) Subject to approval by the Annual Shareholders' Meeting on May 7, 2009.

8


Revenue: internal growth of nearly 10%

(778)
36,205
€m 1,978

3,073
31,932

2007 Internal External Impact of foreign
p g 2008
restated (1) growth growth exchange
+9.6% +6.2% -2.4% +13.4%
(1) To ensure the comparability of financial years the accounts at 31 December 2007 have been restated by the amount of income from the
years,
disposals in 2008 (in particular for Clemessy & Crystal in the Energy division) according to IFRS 5 and are presented in the income statement
in the line item “net income from discontinued operations”. The 2007 revenue for Clemessy and Crystal was €696m.

9


Breakdown of revenue by geographic zone

36,205
€m
€  current  constant Internal
31,932 FX rates FX rates growth
■ France +6.9% +6.9% +4.7%
14,523
■ Europe ex France
p +13.0% +16.1% +6.5%
13,587 ■ North America +16.3% +23.5% +10.3%
■ Asia/Pacific +19.3% +26.2% +18.5%
■ Rest of the world +57.0% +61.0% +59.8%

VE Group +13.4% +15.8% +9.6%
13,175
11,658

3,243
2,790
2,269
2 269 2,708
1,628 2,556
2007 restated (1) 2008
(1) To ensure the comparability of financial years the accounts at 31 December 2007 have been restated by the amount of income from the
years,

10


Breakdown of revenue by division

€m 36,205
36 205  current  constant Internal
FX rates FX rates growth
31,932 ■ Water +14.9% +16.7% +13.4%
12,558 ■ Waste +10.1% +14.6% +4.5%

10,928 ■ Energy services +20.1% +20.7% +12.0%
■ Transportation +8.3% +10.6% +7.9%

VE Group +13.4% +15.8%
+13 4% +15 8% +9.6%
+9 6%
10,144
9,214

6,200 7,449

5,590 6,054

2007 restated (1) 2008
(1) To ensure the comparability of financial y
p y years, the accounts at 31 December 2007 have been restated by the amount of income from the
y

11


Veolia’s waste management division consolidated revenue

2008 revenue by activity

8%  Urban collection and cleaning
8% 21% services
 Non-haz industrial waste collection
2007 2008 6%
and related services
 Industrial services and haz waste
(€m) (€m)
collection
 Sorting-Recycling-Trade
9,214 10,144 15%
 Haz waste treatment
23%  Incineration of non-haz waste
 Non-haz and inert waste
landfill
19%
2008/2007 variation +10.1%
Internal growth +4.5% 2008 quarterly internal growth
External growth +10.1% 12%

10%
+9.1%
Impact of foreign -4.5%
+7.7%
+7.1%
exchange 8%

6%

4%

2% Q4 2008
/ Q4 2007
0%
Q1 2008 Q2 2008 Q3 2008
-2%
/ Q1 2007 / Q2 2007 / Q3 2007
-4%

-6%
-4.5%

12


Operating cash flow (1)

2007 2008
FX Impact  constant
restated
€m FX rates
€m €m

Water 1,851 1,821 (41) +0.6%
Waste 1,461 1,362 (76) -1.6%
Energy services 642 (2) 755 14 +15.5%
p
Transportation 279 292 ( )
(4) +5.7%
Other (69) (93) - -
Total Group 4,164 (2) 4,137 (107) +2.0%

(1) Operating cash flow = cash flow from continuing operations before tax and interest expenses
( )
(2) Operating cash flow restated to exclude €15m in cash flow from discontinued operations (Clemessy & Crystal in particular)

13


What occurred in 2008?

Main impacts to operating cash flow
Transpor-
T
€m Water Waste Energy
tation
Other Total

Impact of foreign exchange (41) (77) 14 (3) (107)

Economic conditions (37) (1) (89) 32 (28) (122)
Acquisitions 30 50 79 11 170
Structural and development
(27) (35) (20) (23) (105)
costs
Berlin (41) (41)

Growth and Productivity 86 51 8 33 178

Total Group (30) (100) 113 13 (23) (27)

2008 operating cash flow: €4,137m versus €4,164m in 2007

(1) Impact of volume distributed
14


Impact of foreign exchange on 2008 operating cash flow

2007 2008

Currency Local Currency Exchange Impact on
(in millions) €/X 2008 2008
Oper.
Oper Cash
Variation Variation
2008/2007 2008/2007 Flow (€m)

US Dollar zone (USD) 416 496 1.475 -20
+19% +7%
Pound Sterling zone (GBP) 353 401 0.804 -85
+14% +17%
Czech Crown zone (CZK) 6 315 6 193 25.083
25 083 +23
-2% -10%
Korean Won zone (KRW) 76 295 93 653 1,634.427 -16
+23% +28%
Polish Zloty zone (PLN) 287 331 3.5456 +5
+15% -6%

15


Writedown of intangible assets and goodwill in Veolia’s
waste management division in Germany
 Efforts launched to restructure the business…
 New management team
 Two regional offices have been closed
 Restructuring plan
 …to offset operational problems…
 Administrative shutdown of a landfill in April 2008
 Substantial market share losses in 2008 during the renewal of waste collection contracts
(DSD)
 …due to the severe deterioration in the economic environment…
 Downturn in the industrial waste market in the first half of 2008 which gathered pace at
g p
the end of the year
 Paper and cardboard prices have dropped since October and volumes have contracted
 …have failed to achieve the value creation expected at the time of the acquisition
 Assets have had to be written down
Impact
Writedown of intangible assets (€63m) Recurring operating income
Writedown of goodwill
g (
(€343m)
) Non-recurring operating income
g p g
Tax impact on writedowns +€18m
Deferred tax asset writedown Tax expense
linked to the revised business plan (€42m)
Total impact on net income (€430m)

16


Recurring operating income by division

€m 2007 FX impact  constant
2008
restated (1) (€m) FX rates

Water 1,266 1,196 (33) -2.9%
Waste (ex. €63m writedown of 803 703 (52) -6.0%
intangible assets in German waste)
Energy services 374 425 +9 +11.3%
Transportation 115 130 +2
2 +10.9%
10.9%
Holding (103) (108) - -
Recurring operating income ex. 2,455 2,346 (74) -1.4%
impact from the writedown in
German waste
Writedown of intangible assets ex. - (63)
goodwill
Recurring operating income 2,455 2,283 (74) -4.0%

(1) T ensure the comparability of financial years, the accounts at 31 December 2007 h
To h bili f fi i l h D b have bbeen restated b the amount of i
d by h f income f
from the
h
disposals in 2008 (in particular for Clemessy & Crystal in the Energy division) according to IFRS 5 and are presented in the income statement in
the line item “net income from discontinued operations”.

17


From operating income to net income

2007 restated (1) 2008

€m Recurring Non- Total Recurring Non- Total
recurring recurring

Operating income 2,455 +28 2,483 2,283 (332) 1,951

Cost of net financial debt (819) - (819) (925) - (925)
Other financial income & expense
p +9 ( )
(5) +4 ( )
(51) - ( )
(51)

Corporate tax expense (429) +11 (418) (427) (42) (469)

Equity in net income of affiliates +17 - +17 +19 - +19
Net income from discontinued - (12) (12) - +184 +184
operations
Net income attributable to minority (307) (20) (327) (240) (64) (304)
interests
Net income – attrib. to equity holders of parent 926 2 928 659 (2) (254) 405
(1) To ensure the comparability of financial years, the accounts at 31 December 2007 have been restated by the amount of income from the
disposals i 2008 (i particular f Cl
di l in (in ti l for Clemessy & C t l i th E
Crystal in the Energy di i i ) according t IFRS 5 and are presented i th i
division) di to d t d in the income statement
t t t
(2) €703m before the writedown of Veolia’s waste management operations in Germany.

18


Cost of borrowing

31/12/08
€m 2007 2008
31/12/07

Cost of net financial debt -819 -925 -106
Impact from variation of the average debt -86
Impact from variation on interest rates -16
16
Impact from variation of the revaluation -4
of non-qualified hedging derivative
instruments

Cost of borrowing at 5 61% (1)
5.61%
as compared with 5.49% at December 31, 2007

(1) Adjusted for the impact of the unwinding of hedging transactions, the cost of borrowing stood at 5.78% at December 31, 2008
as compared with 5.53% at December 31, 2007

19


Tax

%
70
+12% -15%
15%
60
+16%
50 48%
40 +10%
30 25%
20

10

0
2007 actual Change in tax Non-activated Goodwill Planning and 2008 actual
(1) (1)
tax rate law tax losses and writedown risks tax rate
deferred tax
asset prov.

The normalized rate increased to 33% in 2008 from 28% in 2007

(1) Actual tax rate: relationship between the tax expense and the net income from continuing operations, restated by the same tax expense
and income from affiliates.

20


Cash flow statement

€m 2007 2008

Net financial debt at opening (14,675) (15,125)
Operating cash flow from continuing operations 4,164 4,137
Financial cash flow & operating cash flow from discontinued operations 55 41
Cash flow from operations 4,219 4,178
Tax paid (417) (348)
Change in operating WCR (167) (80)
Total cash flows generated from the businesses 3,635 3,750
Gross i
G investments (1)
t t (6,936)
(6 936) (4,701)
(4 701)
Repayment of operating financial assets 395 358
Industrial and financial divestments, net of the debt of divested companies 453 761
Change in receivables & other financial assets (30) (312)
Total net cash flows from investments (6,118) (3,894)
Dividends paid (2) (564) (753)
Net interest expenses paid (786) (849)
Capital increase (VE & minority interests) 3,058 (3) (77)
Currency impacts & other 325 420
Change in net financial debt
g (
(450)
) ( ,
(1,403)
)
Net financial debt at closing (15,125) (16,528)
(1) Including net financial debt from acquired companies.
(2) €420m in 2007 and €553m in 2008 for VE
(3) Including €2.6bn for the capital increase completed as of July 10, 2007
21


Gross investments

€m 2007 2008

Maintenance capital expenditures 1,590 1,860
As % of consolidated revenue 5.0% 5.1%

Investments in growth/existing operations (ex 1,039 1,169
operating financial assets)
New operating financial assets 334 336
New projects 3,973 1,336
Total investments (including net financial debt 6,936 4,701
from discontinued operations)( )
(1)

(1) +€38m in 2007 and -€72m in 2008.

22


Divestments completed

€m 2007 2008

Industrial divestments 213 330
Financial divestments 202 503
Total divestments 415 833
(Cash) / debt of divested companies +38
38 (72)
Total divestments, net of the net financial debt of
453 761
divested companies

23


Veolia Environnement has a sound financial structure

 Confirmed, undrawn lines of credit of
Liquidity exceeding €7.6bn nearly €4 billion, without any disruptive
at D
December 31, 2008
b 31 covenants
 Net liquidity of €3,980 million versus
€3,876 million at December 31, 2007

 Bonds: 68% of net debt
Debt with a long maturity profile,
primarily i b d
i il in bonds  Average maturity of net debt: 9.3 yrs

 No significant debt repayments until
2012

 €2.6 billion capital increase in July
Acquisitions had been refinanced in 2007 2007 for the major acquisitions
completed for approximately €2.4
billion (Veolia waste in Germany, TMT in
Italy d
It l and TNAI in th USA)
i the

25


Within the framework of long-term contracts, Veolia Environnement
may finance certain infrastructures for its clients

 Industrial outsourcing contracts (IFRIC4)
€ Bl
Bln Counterparty
C
and concession contracts comprising a
public services obligation/BOT Water-Berlin 2.8 Land of Berlin
(IFRIC12), with the transfer of volume
and price risks t th client
d i i k to the li t Cogenerations 0.5
05 EDF
France
 Assets treated as financial receivables: Waste-UK 0.3 Municipalities
operating financial assets (OFA)
Water-Belgium 0.3
03 City of Brussels
 The most significant give rise to
dedicated external funding Other 1.9
Total 5.8

Average return at market conditions
(2008 average return): 7.0%

Repayment of principal: €358m in 2008

26


What finances our debt?

Financing Op. Fin.
Op Fin Assets (OFA) Net debt - OFAs Total net debt
+ =
€5,751m €10,777m €16,528m

Cash flows Revenue (interest EBITDA(1) Cash flow from ops: €4,178m
from ops income): €400m + =
€3,778m +
OFA Repayment: €358m
Repayment of
OFA flows principal: €358m €4,536m

= =
2.9x
2 9x EBITDA (1)
( ) 3.6x
3 6x

Objective: 3.5 to 4x

(1) EBITDA = Cash flow from operations excluding operating financial assets

27


Which growth model?

 Bringing up to par the external growth
Veolia Environnement has an developments f
d l t from th past 3 years (
the t (more
embedded improvement in profits than €5 billion in revenue)
resulting from already financed  Internal growth from existing contracts
growth
 Reduction of costs and shared services

 Presence in non-priority countries which are
non priority
Veolia Environnement has significant
attractive for local operators
leverage from the sale of non-
strategic assets or from possible  Strategic positions allowing us to establish
partnerships (€2 2 billion)
(€2.2 development partnerships

Veolia Environnement does not  Service contracts
intend to finance the majority of  Partnerships
infrastructures on behalf
of its clients

29


Our challenge: To bring the profitability of past and already
refinanced growth developments to the Group’s profitability standard

Change in after-tax ROCE from 2007 to 2008

%
13
Example: Pre-tax ROCE for
10.8 Veolia waste in the UK
11 -0.6
10.2 -0.4
-1.4
10.0
2008 Main
9 business acquisitions
i iti
8.4 %
in 2008 Main 15.7
13.1
7 acquisitions
in 2007 10.1

5

3
2007 2008 ROCE 2008 Medium- 2006 2007 2008
ROCE (1) before main ROCE term
acquisitions in objective
2007 and 2008
(1) To ensure the comparability of financial years, the accounts at 31 December 2007 have been restated by the amount of income from the
disposals in 2008 (in particular for Clemessy & Crystal in the Energy division) according to IFRS 5 and are presented in the income statement in
the line item “net income from discontinued operations”.

30


A 2010 Efficiency Plan underway

2009 2010 Total Criteria
■ Savings to recurring
Purchasing 45 55 100 operating income on
the basis of n-1 net
Operations 65 65 130 of non-recurring
OPEX costs
O
Support functions 50 70 120 ■ Overall 2008
consolidation scope
Assets 20 30 50 to be taken into
account
■ Share of
Water 60 73 133 consolidated savings

Energy 41 49 90 ■ Excluding business
climate adaptation
Waste 49 60 109 plan for Veolia waste
management
Transportation 30 38 68 division: €100
million in 2009

€180m €220m €400m

31


Veolia Environnement increases its disposal program to
nearly €3 billion between 2009 and 2011

 Total assets on the balance  Non-strategic assets or possible
sheet as of December 3131, partnerships
2008
€2.2 billion divested over 3 years
€49.2 billion
 And recurring industrial disposals
 Capital employed as of (€250 million/yr)
December 31, 2008
 Thus nearly €3 billion total over
€18.9 billion the 3 year-period
 In addition to €761 million
already completed in 2008

32


2009 challenges and outlook

Veolia Water Veolia ES (Waste)
 Capture growth embedded within the  Recovery of Veolia waste management
existing p
g portfolio of contracts operations in Germany
p y
 Obtain price increases  Plan to adapt division to new business
 Stringent refocusing of growth combining conditions
selection of geographic region,
technological content and value of projects
Group
 Intense selectivity of investments
 Cost-cutting l
C t tti g plan
 Asset disposal plan

Veolia Energy Veolia Transport
 Response to the increased demand for  Pursuit of “full potential” plan: refocusing
services, relative to on countries with large presence and
- The volatility of energy prices reduction of overhead expenses
- Needs of cost optimization  Improvement in results in key countries
- And the reduction of CO2 abroad (Netherlands)
 Growth in partnerships  Increased profitability in the USA
 Priority given to the strengthening of  Development in Asia: RATP partnership
service contracts  Priority given to free cash flow

34


Veolia’s waste management division: Measures aimed
at adapting to the current economic conditions
 Industrial investments reduced to the strict minimum
 Reduction in fixed costs
 R id curtailing of our resources to meet the reduction i b i
Rapid ili f h d i in business

France - Central and Southern
UK - Northern Europe North America
Europe

 France  UK  US
 Optimization of industrial assets  Restructuring of C&I business  Price increases in recyclable
 Shared services - Pooling (change from 4 to 3 regions
regions, waste collection, for Industrial
collection
 Internalization of tonnages overhaul of technical Services and Hazardous Waste
department)  Reduction in maintenance costs
 Germany
 Assets to be regrouped (landfills  Reduction in overheads
 Restructuring plan and regional
gp g around London etc.)
London, etc )
reorganization (reduction in positions with
 Reduction in overheads (offices hiring and pay freeze,
 Recovery of the industrial to be pooled, fees, etc.) communication, consulting
segment
& legal fees, etc.)

2009 Additional Cost Reduction: €100 million

35


Veolia’s waste management division adapting to economic
conditions and improving it strategic positioning

 Strategic review of countries and assets and refocusing the
teams on th markets and b i
t the k t d business li
lines offering th b t
ff i the best
outlook
— Continental Europe
p
— Great Britain
— North America
— Australia
 Reduction in fixed costs
 Presence throughout the value chain

Through these reorganization efforts and its unique strategic
positioning, Veolia’s waste management division will be in a
position to strongly rebound once the economy begins to improve

36


Measures to improve cash flow generation in 2009
versus 2008

€m
2008 Actual 2009 Objective

Scenario 1 Scenario 2

Gross investments 4,701
4 701 3,400
3 400 3,800
3 800

Divestments (inc. Industrial) 761 1,000 1,400

Repayment of operating 358 400 400
financial assets
Net investments 3,582
3 582 2,000
2 000 2,000
2 000

Decrease in net i
D i t investments b €1 600 million
t t by €1,600 illi

Freeze of €400 million in growth investments until
completion of di
l ti f divestment program
t t

37


2009 objectives

Positive free cash flow after payment of the dividend

How do we achieve this?

Operating cash flow

-
Net investments (1)

=
~€2 billion (2)

(1) Gross investments – [disposals + repayment of operating financial assets]
(2) At constant exchange rates

38


Markets with very strong growth potential linked to
urban development
The environmental challenges will crystallize in and around cities which have
undergone significant growth over the past century and in which population will
increase 27% in the next 30 years.

2007: 19 megapoles with more than 10m inhabitants, including 6 with more than 15m

2025: 26 megapoles with more than 10m inhabitants, including 13 with more than 15m
Megapoles more than:
15 m inhabitants
10 m inhabitants 40


High growth potential markets: water

+27 %

+25 %

+41 %

Wastewater recycling capacity throughout the world:
+10-12% per year by 2015 (55 million m3 per day)

Seawater desalination: from 51 million m3 to 109 million m3
per day by 2016. Potential market: €5bn per year
41


High growth potential markets:
waste treatment, recycling and recovery

Generation of household waste:
• OECD countries: from 500 kg p.a. per capita currently to 650 kg by 2020
• Rest of the world: from 770 million tons p.a. to 2,000 million tons in 15
years

Recycling rate of household waste in France: from 18% in 2007 to 35% in
2015

Europe: 90% of electronic waste (14 kg p.a. per capita) is not recycled,
although regulations are stringent

42


High growth potential markets: energy efficiency and
the outsourcing of services

Hospitals / outsourcing of non-medical activities: €8 5B market in 2008 (Europe:
non medical €8.5B
5.1 / other countries: 3.4), reaching €13.6B in 2020 (9.4/4.2)

Management of Energy Demand for buildings: between now and 2020, reduction of
38% in energy consumption from existing buildings (France).
Potential markets: €6.4B in France, €51B in Europe

Industrial services in Europe: €13.5B market in 2008 and €21B in 2020.
Outsourcing rate increasing from 20-30% to 40%
g g

Urban heating networks :
• Russia: upgrading existing networks, local electric production
•China: growth potential linked to development and urbanization of the country
China:
• Central and Eastern Europe and Germany: complementary privatizations and
biomass: €2.6B
43


High growth potential markets: mobility

USA: Total market of $15B for transit (including $3B currently to
the private market) and $18B for passenger rail. A « conversion »
movement trend in cities.

Asia: Adapted regulation, enormous urban development
•China: metro lines built between now and 2015 larger in km than rest of the world
•South Korea: project of 54 metro lines (740 km)

Privatization of rail in Europe:
•France: opening of competition underway: regional rail (€3B) and l
F i f ii d i l il d long distance
di
(€6.8B)
•Privatized regional rail market in Germany: from €1.6 to €3.2B by 2014
44


Veolia Environnement is the best positioned group to
respond to growing markets

 Adapted to two types of clients:
The only comprehensive and Municipalities/Industrials
consistent response  Offering synergies between business
lines

 N°1 in France in its 4 business lines
 In the top 3 in all the other key
Leadership in its markets
markets

The Group p
p possesses true and  High contract renewal rate
recognized contractual and
technological know-how

45


Heightened financial discipline for long-term, profitable
growth

 Bring the profitability of the past
2 years growth developments to
the correct level
The Group has many internal  Simplification of structures/
revenue and profit growth drivers. .
drivers.…. Shared Service Centers
 Technological innovation
 Contractual innovation

 More than 70% of contracts are
… with a secure base of cash flows…
with municipalities…
municipalities

…that will enable the Group to
p  Our priority: improved
p y p
weather this crisis with confidence profitability and cash flow
while remaining prudent

46


Table of Contents of Appendices

 Full-year impacted by moves in currencies Appendix 1
 Veolia Water’s consolidated revenue Appendix 2
pp
 Investments by division Appendix 3
 Main contracts won or renewed in 2008 Appendix 4
 Veolia Environnement in North America Appendix 5
 Operating cash flow margins Appendix 6
 Recurring operating income margins
g p g g Appendix 7
pp
 Impact of the rise in fuel costs on operating income Appendix 8
 Debt ratios Appendix 9
 Debt characteristics Appendix 10
 Bond maturities Appendix 11
 Net Liquidity
q y Appendix 12
pp
 Overview of operating financial assets Appendix 13
 Definition of ROCE Appendix 14
 Change of pre-tax ROCE by division Appendix 15

48


Appendix 1: Moves in currencies

Main currencies
2007 2008  2008 / 2007
(1 unit of foreign currency = €…)
US dollar
Average rate 0.7248 0.6782 -6.4%
Closing rate 0.6793 0.7185 +5.8%

Pound sterling
Average rate 1.4550 1.2433 -14.5%
Closing rate 1.3636 1.0499 -23.0%

Korean won
Average rate 0.0008 0.0006 -21.7%
Closing rate 0.0007 0.0005 -25.1%

Australian dollar
Average rate 0.6110 0.5691 -6.8%
Closing rate 0.5968 0.4932 -17.3%

Czech crown
Average rate 0.0361 0.0399 +10.6%
Closing rate 0.0376 0.0372 -0.9%
The average rate applies to the income statement and cash flow statement
The closing rate applies to the balance sheet

49


Appendix 2: Veolia Water’s consolidated revenue

€m

+14.9%
12,558 VEOLIA WATER Total
 Annual variation +14.9%
10,928 — Internal growth +13.4%
+13 4%
— External growth +3.3%
— Impact of foreign exchange -1.8%

+8.6%
+8 6% 7,720
7 720 Operations
7,110

+26.7%
4,838 Works and E&C
3,818
3 818

2007 2008

50


Appendix 3: Investments by division

Growth
Financial New
€m incl. change
Industrial New operating
Maintenance in Total
investments projects (1) financial
consolidation
assets
scope
Water 536 32 409 399 214 1,590

Waste 731 63 135 489 - 1,418

Energy services 278 70 237 240 111 936

Transportation 294 95 48 123 11 571

Other 21 10 70 85 - 186

Total 2008 1,860 270 899 1,336 336 4,701
Total 2007 1,590 322 717 3,973 334 6,936

(1) Including the acquisition of a complementary stake in Ashkelon in Israel, in Tianjin Shibei in China & the acquisition of Biothane (Solutions
and technologies in Water, of the Bartin Recycling Group in France and other investments in Europe in Waste, that of Praterm in Poland and
of Rail4Chem in Germany & the complementary stake in SNCM in France in Transportation

51


Appendix 4: main contracts renewed or won in 2008
INTERNAL GROWTH
- Renewals:
 175 main contracts renewed in France in 2008 in Water (o/w 86 in drinking water & 89 in
wastewater), 133 in Waste collection (o/w 59 from local authorities & 74 from companies), Lille
18 in Transportation
 Cergy Pontoise area (water) – Length: 18 years – Cumul rev : €242 m
Cumul. rev.:
Beauvais-Tillé
 Extension of the Jersey public transportation contract (transportation)
– Length: 3 years – Cumul. rev.: €18 m Jersey
Cergy Bazancourt
 School bus transportation contract for Sarthe District (transportation)
– Length: 7 years – Cumul. rev.: €42 m Seine Aval
Oise
- Outsourcing / Privatization: Seine Grésillons
 B Beauvais-Tillé airport services (t
i Tillé i t i (transportation)
t ti )
Air France
– Length: 15 years – Cumul. rev.: €630 m in partnership with the CCI of Oise district Sarthe (TGV)
 Lille-Lesquin & Merville airport services (transportation) – Length: 10 years Nantes
– Cumul. rev.: €308 m in partnership with the CCI of Grand Lille & Sanef Métropole
 Regional système, Oise district (transportation)
– Length: 12 years – Cumul. rev.: €333 m
Bartin Tavaux
 Veloway Nice (transportation)
Veloway,
– Length: 15 years – Cumul. rev.: €45 m Recycling Gp
 Hauts de Garonne waste-to-energy plant & heating network (energy)
- Engineering / Design & Build:
 Contract for wastewater authority for the Paris area (SIAAP), Seine Aval plant in Achères
Hauts de
(construction) (water) – Cumul rev : €135 m
Cumul. rev.: Garonne
Biganos
 Contract for the SIAAP, Seine Grésillons plant in Triel sur Seine (construction) (water)
– Cumul. rev.: €89 m
 Nantes Métropole, the Nantes urban authority (construction) (water) – Cumul. rev.: €14 m
- Industry & services:
 3 projects to build, supply & operate biomass plants (energy) Nice
–LLength: 20 years – C
th Cumul. rev.: €1 7 b
l €1.7 bn
- Facture plant in Biganos (69 MW capacity);
- Solvay chemicals & plastics site in Tavaux (30 MW);
- Bazancourt agro-industrial site (C5D project) (22 MW)  Renewals
EXTERNAL GROWTH  Outsourcing / Privatization
 Bartin Recycling Group (waste) – 2008 revenue: €247 m (10 ½ months)
y g p( ) ( )  Engineering / Design & Build
g g g
 Industry & services
PARTNERSHIP
 Company acquisition
 Partnership with Air France to launch private high-speed TGV trains in France (transportation)  Partnership with another company
52


INTERNAL GROWTH

- Renewals:
 Novartis (1) (multi-services) – Length: 7 years – Cumul. rev.: €980 m
 S-Bahn (RER), in Leipzig East (transportation)
– Length: 3 years – Cumul rev €96 m
Cumul. rev.
 Lightrail, Dublin (transportation) – Length: 5 years – Cumul. rev.: €175 m Poland
 London Borough of Croydon (waste) – Length: 4 years – Cumul. rev.: €80 m Sweden
Czajka
- Outsourcing / Privatization: Praterm
Setra
 Southwark Council (waste) – Length: 25 years – Cumul. rev.: €700 m Brehmen
 West Berkshire Council (waste) – Length: 25 years – Cumul rev : €533 m
Cumul. rev.: Castlebar
 Bus system, Haaglanden (transportation) Lightrail
– Length: 8 years – Cumul. rev.: €280 m Mullingar
 Rail contract in North Rhine – Westphalia (transportation) Leipzig
Ireland Westphalia
– Length: 16 years – Cumul. rev.: €520 m United Kingdom
 S-Bahn (RER) in Brehmen (transportation) Netherlands
Germany
– Length: 11 years – Cumul. rev.: €500 m Southwark
 Bilbao (transportation) – Length: 8 years – Cumul rev : €305 m
Cumul. rev.: West B k hi
W t Berkshire
 Marienbad networks (energy) – Cumul. rev.: €6 m Diageo Haaglanden Czech Republic
London
 Mafra (water) – Length: 15 years – Cumul. rev.: €93 m Borough Marienbad
of Croydon Novartis
Skanska
- Engineering / Design & Build: Switzerland

 Czajka (construction) (water) – Cumul. rev.: €150 m
 Mullingar (construction & operation) (water) – Length: 22 years – Cumul rev : €48 m
Cumul. rev.:
 Castlebar (construction & operation) (water) – Length: 22 years – Cumul. rev.: €26 m Bilbao
Bulgaria
Portugal
- Industry & services: Figueruelas rooftop Varna
Mafra
 Artenius, La Seda de Barcelona subsidiary (multi-services) solar power station
Artenius
– Length: 15 years – Cumul. rev.: €850 m Spain
 Bulgaria’s largest shopping mall in Varna (energy)
Bulgaria s
 Skanska (energy) – Length: 15 years – Cumul. rev.: €150 m
 Setra (energy) – Length: 10 years – Cumul. rev.: €30 m
 Diageo (energy) – Length: 15 years – Cumul. rev.: £60 m
 Figueruelas rooftop solar power station near Zaragoza (construction) in partnership  Renewals
with General Motors Europe, Clairvoyant & the Government of Aragon  Outsourcing / Privatization
(multi-services)
( lti i )
 Engineering / Design & Build
(1) Renewed in December 2007
EXTERNAL GROWTH  Industry & services
 Praterm (energy) – 2008 revenue: €37 m (11 months)  Company acquisition
53


INTERNAL GROWTH

- Renewals:
 Las Vegas urban contract (transportation)
– Extended to 3 years – Additional rev.: €59 m
Customized transportation services i S F
C t i d t t ti i in San Francisco (t
i (transportation)
t ti )
Paratransit, Baltimore (transportation)
Boston (1) rail commuter contract (transportation)
– Extended to 3 years – Additional rev.: €137 m
y
Customized transportation services in Seattle (transportation) Canada
Orange County (waste) – Length: 7 years – Cumul. rev.: €35 m
Palm Beach (waste) – Length: 5 years – Cumul. rev.: €10 m
Ridgeline
- Outsourcing / Privatization: Energy
E Seattle
S l
 Oklahoma (water)
United States New London
 New London (Connecticut) (water)
– Length: 10 years – Cumul. rev.: €42 m Boston
 Radcliff (water) – Length: 17 years – Cumul rev : €31 m
Cumul. rev.: San Baltimore
Francisco
F i Las Vegas Golden Touch
 MTA bus service in the suburbs of Los Angeles (transportation) Los Angeles Radcliff
Transportation
– Length: 5 years – Cumul. rev.: €72 m Orange County Phoenix Oklahoma of New York
 Airport Shuttle, Phoenix (transportation) Calvert
– Length: 10 years – Cumul. rev.: €123 m Mexico Palm Beach
- Engineering / Design & Build:
 Calvert –TK (Alabama) (construction & operation) (water) – Cumul. rev.: €61 m Tamaulipas
- Industry & services:
 PPP for hospital in Tamaulipas (energy)
– Length: 25 years – Cumul. rev.: €200 m  Renewals
 Outsourcing / Privatization
EXTERNAL GROWTH
 Engineering / Design & Build (1) Renewed in December 2007
 Golden Touch Transportation of New York (transportation)  Industry & services
– Annual revenue: €22 m  Company acquisition
 Ridgeline Energy (windmill projects) (energy) 54

2008 Annual results

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2008 Annual results