2013 general meeting
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2013 General Meeting Pierre-François RIOLACCI
Chief Finance Officer
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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.
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. .
The 2012 financial statements have been re-presented for the application of IFRS 10 & 11 standards from January 1, 2013.
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2012 Annual Results
Pierre-François RIOLACCI
Chief Finance Officer
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1st year of Transformation ahead of objectives
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
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Good resilience of activities
Δ Δ constant
FX Δ excl. FX and
scope
Water +1.3% -0.5% +1.0%
Environmental services +0.8% -2.2% -1.9%
Energy services +7.4% +7.0% +5.8%
Other +21.1% +19.2% +15.3%
Veolia +3.0% +1.2% +1.5%
29,439 28,576
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In €M
Water
Operations: revenue stable (-0.2% at constant scope and FX)
– France: revenue increased 1.3% at constant scope
• Continued contractual erosion: -1.6%
• Lower volumes: -1%
• Positive impact of price and construction activities: +3.9%
– Outside France: Revenue declined 1.1% at constant scope and FX
• Negative price impact related to Berlin contract
• Good performance in Central and Eastern Europe (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 sector
Adjusted operating cash flow declined 8.4% (-9.4% at constant FX) to €1,172M
+1.3%
+7.9%
-1.5%
Operations
Technologies & Networks
11,921 12,078
Revenue (in €M)
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Environmental Services
2012
Price and volume of recycled materials -1.9%
Waste volumes -
Service price increases +0.8%
Other (including construction revenue) -0.8%
Currency effect +3.0%
Consolidation scope -0.3%
– 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)
Adjusted operating cash flow increased 2.7% (-0.3% at constant FX) to €1,048M
Q4 2012: 1st quarter of positive organic revenue growth +3% Revenue of €9,083M: variation +0,8% and
-1.9% at constant scope & FX
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Energy Services
Revenue increased 7.4% (+5.8% at constant scope & FX) to €7,665M
– Higher energy prices: impact >€200M (mainly in France)
– 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 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 flow would have increased by 6.3%
Outside France
France
7,138 7,665 +7.4%
+6.2%
+8.6%
Revenue (in €M)
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Evolution of adjusted operating cash flow
In €M
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Reconciliation of adjusted operating cash flow to adjusted operating income
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In €M 2011
re-presented 2012
constant
FX
Adjusted operating cash flow 2,852.6 2,722.8 -4.6% -6.2%
Depreciation & amortization -1,388.9 -1,479.8
Net capital gains +77.1 +84.3
Provisions, fair value adjustment & others +17.0 -133.6
Adjusted operating income 1,557.8 1,193.7 -23.4% -24.5%
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Reconciliation of operating income to net income
2011 re-presented 2012
In €M Adjusted Adjustment Total Adjusted Adjustment Total
Operating income 1,558 -729 829 1,194 -99 1,095
Cost of net financial debt -758 - -758 -775 -47 -822
Income tax expense -337 -184 -521 -213 54 -159
Share of net income from associates 12 - 12 30 - 30
Net income from discontinued operations - 121 121 386 386
Non-controlling interests -280 107 -173 -176 40 -136
Net income attrib. to owners of Co. 195 -685 -490 60 334 394
Net income attrib. to owners of Co.
published 290 -780 -490 60 334 394
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Statement of cash flows
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In €M 2011 2012
Operating cash flow before changes in working capital 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 -547 -547
Others -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
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)
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By Geography By Division
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(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
Application of new IFRS 10-11-12 standards
Pierre-François RIOLACCI
Chief Finance Officer
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Scope concerned 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
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2012 adjusted operating cash flow bridge
Proforma 2012 adjusted operating cash flow of €1.9 billion
In €M -30%
* Including Other Europe & Middle East Water ‐€47M, Europe and China Environmental Services ‐€42M, and Dalkia France ‐€20M 16
2012 net financial debt bridge
Proforma 2012 net financial debt of €10.8bn (compared to €11.3bn published in 2012)
Adjusted net financial debt (less loans granted to joint ventures) of €7.8bn
* Net financial debt before application of IFRS 10-11-12 standards, and excluding loans granted to main joint ventures consolidated by proportionate consolidation for €417M
-28% In €bn
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2012 contributions of entities changing to equity method accounting from Jan.1st, 2013 (1)
In €M
2012
Revenue 6,200
Adjusted operating cash flow 804
Operating income 395
Net income (Group share) 8
Gross capex (2) 629
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Main companies concerned: Dalkia International, Berlin
Water (10 months), Tianjin, Shenzhen, Proactiva
(1) Following the 1st application of IFRS 10-11-12
(2) Industrial and financial investments and new operating financial assets
Impact of elimination of proportionate consolidation (PI) on 2013 objectives
NFD entities PI
(Investor Day)
In €bn
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In 2013, positive cash flow before financial divestments
2013 net financial debt (post PI and hybrid) between €8bn and €9bn*
2013 Adjusted net financial debt (post PI and hybrid) between €6bn and €7bn*
* Before closing exchange rates impact
From €16.5bn net financial debt at the end of 2008 to €6bn-€7bn adjusted net financial debt(1) by the end of 2013
In €bn
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2014
Leverage
objective
of 3.0x (3)
(1) Adjusted net financial debt excluding debt from JVs and post application of IFRS 10-11-12
(2) Net financial debt / (Operating cash flow before working capital + OFA Repayments)
(3) Adjusted net financial debt/ (Operating cash flow before working capital + OFA Repayments), ±5%
Conclusion
Pierre-François RIOLACCI
Chief Finance Officer
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Mid-term objectives confirmed
2012-2013:
Transformation
Period
• €6 billion in divestments (1)
• 2013 net financial debt, under new IFRS standards:
Net Financial Debt between €8bn and €9bn (2)
Adjusted Net Financial Debt between €6bn and €7bn (2)
• Cost reductions:
in 2013: €170M net impact (3)
• Extended dividend commitment of €0.70 (4) per share in 2013 (5) and 2014
Beginning in
2014:
New
Veolia
• Organic revenue growth > 3% per year (mid-cycle)
• Adjusted operating cash flow growth >5% per year (mid-cycle)
• Leverage ratio (6) of 3.0x (7) beginning in 2014
• Mid-term: Payout ratio in line with historic level
• Cost reductions in 2015: €750M net impact (3)
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(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 due to the new accounting treatment of joint ventures, ~80% will benefit adjusted operating income
(4) Subject to the approval of Veolia’s Board of Directors and the Annual General Shareholders Meeting
(5) In cash or shares
(6) Adjusted net financial debt/ (Operating cash flow before changes in working capital + OFA Repayments)
(7) ±5%