2005 Annual results

ANNUAL ACCOUNTS 2005

Investor Relations – 2005, Annual Results – Paris – March 13th, 2006 1

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
Investor Relations – 2005, Annual Results – Paris – March 13th, 2006

2005: Confirmation of a winning strategy

l Commitments met
l Position of leader in environmental services re-confirmed
l Strong growth in business in fast growing markets (revenue
up 12.2%)
l Continuing improvement in profitability (recurring operating
income up 17.5%)
l Launch of the single brand name: Veolia

3

2005: Confirmation of a winning strategy

l Substantial rise in recurring net income (up 33%)
l Improved balance sheet
(economic net debt/cash flow from operations (1) =3x)
l Strong improvement in profitability: after-tax ROCE over 9%
l Strong dividend growth (up 25%) (2)

(1) Cash flow from operations before tax and interest expense, as defined by the Conseil National de la
Comptabilité‛s (CNC) recommendation of October 27th, 2004.
(2) Subject to approval by the Annual Shareholders Meeting on May 11, 2006
4

2005 key figures (in €m and at current exchange rates)
25, 245 3, 687
25000 22,500 +12.2% 4000 +14.2%
(3)
3,228
20000 3000

15000
2000

10000
1000
5000

0
0
2004 2004 2005
2005
Consolidated revenue (1) Cash flow from operations (2)

2 000,0 1 , 904 +17.5%
1,620 700 627 +33.3%
600
1 500,0 471
500

400
1 000,0
300

500,0 200

100

0,0 0
2004 2005 2004 2005
Recurring operating income Recurring net income
(1) Revenue from ordinary activities under IFRS
(2) See definition on page 4
(3) Excluding cash flow from discontinued operations sold in 2004
5

Strong dividend growth
in line with commitments made
Net dividend for 2005 (1)

€0.85 per share (up 25%)

0,9 €0.85
0,8 €0.68
0,7 €0.55
0,6
0,5
0,4
0,3
0,2
0,1
0
2003 2004 2005

Growth in net dividend per share.
2005 pay-out ratio = 53%
(1)
Subject to approval by the Annual Shareholders Meeting on May 11, 2006
6

Confirmation of the business model: Growth in
after-tax ROCE
Strong improvement in after-tax
ROCE since 2002

10,0% 9.1%
9,0% 8.3% 8.3%
8,0% 7.0%
7,0% 6.4%
6,0%
5,0%
4,0%
3,0%
2,0%
1,0%
0,0%
2002 2003 2004 2004 2005

French Gaap IFRS

7

Strong sales momentum: consolidated revenue(1)
up 12.2%
€ million
26 000
25, 245
24 000 22,500
31 /1 2/2004
31 /1 2/2005
22 000
20 000
18 000
16 000
14 000
12 000
8, 889
10 000
7,777 6, 604
8 000 6,214 5, 402
6 000 4,920 4, 350
3,589
4 000
2 000
0

Water Waste Energy Services Transport Total
At constant exchange rates +13.5% +5.5% +8.9% +20.4% +11.4%
At current exchange rates +14.3% +6.3% +9.8% +21.2% +12.2%

(1)
See definition on page 5
8

Strong presence in growing markets

Regional breakdown of revenue(1)
€ million

1 2, 254 France +6.8% (2)

1 1 , 476 Europe ex. France +17.0%
(2)

+15.8% (2)
North America
, (2)
Asia/Pacific +28.7%
+15.0% (2)
8, 244 Rest of World
7, 044 Group VE +12.2% (2)

1 , 985 2, 298
1 , 1 28 1 , 452
867 997

31 /1 2/2004 31 /1 2/2005
Consolidated revenue(1) at 31/12/05: €25.2bn
(1)
See definition on page 5
(2)
At current exchange rates
9

Growing markets: in France, +6.8% (1)

l Water
l Renewal of more than 250 public service contracts (Epernay: water and wastewater, Boulogne:
wastewater, SIAEP of the Pontault-Combault region: water …). Strong renewal rate in
comparison with 2004, estimated cumulative revenue of over €885m
l Continued expansion of Veolia Water Solutions and Technologies (purification stations in
Perpignan and Sables-d‛Olonne and water treatment plant in L‛Hay-les-Roses …)
l Waste
l Renewal of collection contracts in Paris (for 600,000 residents)
for total revenue: €108m over 4 years; in Caen for total revenue of~€21m over 7 years; in
Bourges for total revenue of €30m over 7 years; and in Nancy for total revenue of €105m over
7 yeears.
l “Biogas” electricity recovery contract won at Claye-Souilly –Total revenue: €160 m over
15 years (installation of 16 MW of electricity)
l Increase in the capacity of the hazardous waste treatment plant at Limay (Ile de France):
opening of a 3rd treatment unit of 50,000 additional tons
l Start of service of UIOM of Nîmes and Lasse: 220,000 tons of treatment capacity; total
revenue of €380m over 20 years
l Renewal of the UTOM and MONTHYON DSP contract (total revenue of €170m over 13 years
and 200,000 tons/year) and of BOURGOIN (€110m over 15 years and 180,000 tons/year)
l Pan-European contract for waste electrical and electric equipment recovery with Alcatel (7,000
tons per year)
l Energy Services
l Contract won for Arjo Wiggins plant at Wizernes (Nord) - Total revenue: €127m over 12 years
l Transport
l Full effect in 2005 of the Chambéry contract that was renewed in December 2004 – Total
revenue: €156m over 6 years
l First private contracts for rail freight between Germany and France
(1) At constant exchange rates.
10

Europe: up 15.8% (1)
United Kingdom
• Nottingham County (waste) – Length: 26 years
- Total revenue: €1.2bn -Veolia Environmental Services chosen as
“preferred bidder” Helgelandske
n Blackpool (waste) – Length: 7 years – Total revenue: €34m
l Shanks‛s “hazardous waste” business (waste)
l Weir Techna., division of Weir (engineering in oil sector) (water)
• Diageo site (energy services)
- Length: 15 years – Total revenue: €45m
Norway
Germany
• Braunschweig (water) –Annual revenue: €350m Weir Techna
• Braunschweig (wastewater) - Length: 30 years
- Total revenue: €390m La Marschbahn
l Dortmunder Eisenbahn (DE) (transport) for half Poland
- Annual revenue: €25m Blackpool Nordharz‐Netz
Diageo
n Nordharz-Netz (Harz) (transport) Nottinghamshire Braunschweig ZEC Lodz
- Length: 12 years – Total revenue: €402m Dortmund
United Kingdom
n The Marschbahn (transport)
- Length: 10 years – Total revenue: €500m Hradec
Shanks Kralove
Czech Republic (hazardous waste) Germany Czech. Rep. Slovakia
• Hradec Kralove (water) Trnava
- Length: 30 years - Total revenue: €560m
Poland
l ZEC Lodz (energy services) – Annual revenue: €167m
pRegion of Liguria Romania
Romania
n Crivina water treatment plant, near Bucharest (water)
Italy
Slovakia Crivina
• PSA Peugeot Citroën at Trnava (multi-services)
- In March 2005: Length: 8 years – Total revenue: €60m Contract start-up
- In Dec 2005: Length: 8 years – Total revenue: €65m Contracts won or renewed
Italy
Company acquisitions
l p Acquisitions in Sicily and Calabra (water)
• Region of Liguria (energy services) pCalabra
- Length: 10 years – Total revenue: €130m
Norway Sicily

l Acquisition of Helgelandske (transport) (1) At constant exchange rates 11

North America: up 14,9% (1) - Contribution from all 4 Divisions

North America
n Denver (transport)
- Length: each 5 years – Total revenue: €88m
n SCRRA, Los Angeles suburbs (transport)
since Jul. 2005 - Length: 5 years – Total revenue:€70m
n York (transport) - Length: 5 years – Total revenue: €62m
• Cle Elum (water) - Length: 10 years – Total revenue: €4m
• Gresham (water) - Length: 7 years – Total revenue: €16m Canada
• Fort Knox at Radcliff (water) - Length: 20 years
– Total revenue: €30m
• Moberly (Missouri) (waste) - Length: 20 years Cle Elum
- Total revenue: €23m Gresham Vasko York
• Cambridge (Massachusetts) (energy services) Denver Fort Cambridge
- Annual revenue: €7m as from 1st year Yellow Dodge
ATC
• Houston Galleria (energy services): commercial contract SCRRA Transportation Fort Knox
LLC Moberly
- Annual revenue: €1m
USA
l Yellow Transportation LLC (transport) Houston
l ATC (transport) - Annual revenue: €215m Galleria
l Vasko Disposal Solutions in St. Paul (Minnesota) (waste)
Contract start-up
Contracts won or renewed
Company acquisitions

(1) At constant exchange rates
12

Asia – Pacific: up 23.6% (1)

China
n Shanghaï-Laogang phase IV (waste)
- Length: 20 years from Dec. 2003 - Total revenue: €260m
Hohhot
n Disneyland Hong Kong (waste) - Length: 5 years
- Total revenue: €2m Urumqi
• Foshan (waste) - Length: 30 years Lugouqiao
- Total revenue: €270m
• Dongjiang-HuiZhou (waste) - Length: 30 years China Handan Qingdao
- Total revenue: €255m over first 20 years
• Guangzhou-Likeng phase I (waste) - Length: 10 years ChangZhou
- Total revenue: €47m Shanghaï‐Laogang
• Urumqi (water) - Length: 23 years – Total revenue: €260m Kunming
• Handan (water) - Length: 25 years – Total revenue: €5m Guangzhou‐Likeng
• ChangZhou (water) - Length: 30 years – Total revenue: €675m Foshan Dongjiang‐HuiZhou
• Kunming (water) - Length: 30 years – Total revenue: €1.1bn Disneyland Hong Kong
Incheon Zhuhaï
n Qingdao (water) - Length: 25 years – Total revenue: €110m
n Lugouqiao (water) since 2005 - Length: 22 years South
– Total revenue: €50m Japan
n Hohhot (water) - Length: 30 years – Total revenue: €600m
Korea
Showa
n Zhuhaï (water) - Length: 30 years – Total revenue: €400m (water
n Canton, university campus (energy services) treatment)

South Korea Australia
n Incheon (water) - Length: 20 years – Total revenue: €400m

Australia Clyde‐Woodlawn
n Southern suburbs of Sydney (transport) - Length: 7 years Adélaïde Sydney‐southern suburbs
n Clyde – Woodlawn bioreactor (waste)
l Adelaïde contract for up to 50% (water)
Contract start-up
Japan Contracts won or renewed
l Water treatment business of the Showa Denko company
(water) Company acquisitions
(1) At constant exchange rates 13

Successful bids for major industrial accounts

Over €900m in annual revenue from new business with
major industrial clients in Europe since 2001
in € million 1000

800

600

400

200

0
2001 2002 2003 2004 2005
Between 2001 and 2005:
l Average length of these contracts: 7 years, or a signed backlog of about €6.3bn
l A third of the contracts signed are multi-divisional: revenue of €305m
l Average length of multi-divisional contracts: 8.6 years, or a signed backlog of €2.6bn

14

From revenue (1) to net income

€ million % change
31/12/04 31/12/05 31.12.05/31.12.04

Revenue (1) 22,500 25,245 +12.2%
Operating income 1,481 1,893 +27.8%
§ Cost of net financial debt -732 -713
§ Other financial income and expenses +46 +30
§ Tax -184 -423
§ Equity in net income of affiliates +24 +15
§ Minority interests -137 -179
Net income before discontinued operations 498 623
Net income/loss from discontinued operations -106 0
Net income 392 623 +59.1%
Recurring net income 471 627 +33.3%

Recurring net earnings per share (in €) 1.19 € 1.61 € +35.3%

(1)
See definition on page 5.
15

Strong growth in cash flow from operations (1)

€ million

Cash flow from operations (1 ) % change at Cash flow from
current operations margin(1 )
exchange rates
31/12/04 31/12/05 2005/ 2004 31/12/04 31/12/05

Water 1,504 1,762 17.2% 19.4% 19.9%

Waste 986 1,047 6.2% 16.1% 16.0%

Energy services 471 581 23.3% 9.6% 10.8%
Transport 282 280 - 7.9% 6.4%
Others -16 17 - - -
(2)
Total 3,228 3,687 14.2% 14.3% 14.6%

(2) Excluding cash flow from discontinued operations
16

Recurring operating income: up 17.5% (1)

Marked improvement in profitability
€ million
Recurring operating Recurring operating
% change at income margin
income
constant exchange
rates
31/12/04 31 /1 2/05/31 /1 2/04
31/12/05 31/12/04 31/12/05

Water 855 1,002 15.8% 11.0% 11.3%
Waste 468 541 14.5% 7.5% 8.2%
Energy services 264 332 23.3% 5.4% 6.1%
Transport 101 114 11.0% 2.8% 2.6%
Holdings -68 -85 - - -

Total 1,620 1,904 16.0% 7.2% 7.5%

(1)
At current exchange rates
17

Recurring operating income: contribution by division

Water: €1,002m, up 17.2% at current exchange rates
(up 15.8% at constant exchange rates)
Margin: 11.3% versus 11.0%

l In France, the regions performed well in the water distribution
business, as a result of introducing best practices into all the
operating units.
l A significant increase in the contribution from Europe (the
consolidation of BVAG and particularly the increasing maturity of
contracts in the Czech Republic, as well as the positive effects
of the five-year price review plan in the United Kingdom)
l Start-up of new contracts and good performances from the
existing contracts in Asia (improved results from Shenzhen and
the start-up of Incheon)
l Marked improvement in the results from Veolia Water Solutions
and Technologies
18


Waste : €541m, up 15.6% at current exchange rates
(up 14.5% at constant exchange rates)

l Further improvement in margin, in spite of the impact of higher
fuel costs (€13m)
l Continuing productivity gains in France (particularly increased
profitability in the landfill and hazardous waste businesses)
l Marked improvement in margins in the United Kingdom for all
businesses, and, more specifically, on integrated contracts, as
well as in other European countries
l Improved profitability in North America, in spite of the impact
of higher fuel costs

19


Energy Services: €332m, up 25.7% at current exchange
rates (up 23.3% at constant exchange rates)

l In France, increase in operating income driven by the service
businesses in the networks and by the productivity program
l Outside France, strong growth in operating income: continuing
profitable growth in Central and Northern Europe and a very
good performance in Southern Europe (Italy and Iberian
Peninsula)

20


Transport: €114m, up 12.5% at current exchange rates
(up 11% at constant exchange rates)

l Operating income resilient, in spite of the impact of higher
fuel costs (€17m)
l In France, operating income rose strongly, both in urban
and inter-urban transportation
l Outside France, recovery under way in the Scandinavian
countries, and progress in North America (positive
contribution from the Los Angeles contract and the
acquisition of ATC) and in the Asia-Pacific region (full year
impact of the Melbourne contract)

21

From recurring operating income to operating income

€ million
% change
2004 2005 2004/2005

Recurring operating income 1,620 1,904 17.5%

Non-recurring items -139 -11
Of which: Provisions for Berlikomm -55 -
Revaluing the Transportation
business to market value -70 -

Operating income 1,481 1,893 27.8%

22

Cost of net financial debt

€ million 31/12/05
31/12/04

Gross cost of borrowing -748 -704
§ Re- valuation of non- hedging
derivative instruments +8 +12
§ Early repayment of the 2008 - - 26
loan
§ Other +8 +5

Net cost of financial debt -732 -713

Cost of borrowing: 5.12% versus 5.04% in 2004

23

Net capital expenditures & investments: €2,932 million

€ million

Gross capital expenditures & investments 3,464

l Disposals -348
l Repayment of financial receivables (IFRIC4) -184

Total net capital expenditures & investments 2,932

24

Value-creating capital expenditures and investments:
€3,464m (1) at December 31, 2005
Growth
Other developts Projects undertaken
before 2005 Projects &
Mainte- Financial
acquisitions
Total
nance Financial Industrial Excl. financial undertaken in
receivables
(2) receivables 2005 (3)

Water 584 32 328 174 - 521 1,639

Waste 532 57 73 3 126 67 858

Energy Services 171 28 81 85 - 173 538

Transport 128 58 60 7 - 145 398

Others 22 1 8 - - - 31

Total 1,437 176 550 269 126 906 3,464
Cumulative 1,437 2,163 2,558 3,464
(1) Total investments of €3,464m = investments of €2,289m + new I4 receivables of €269m + new projects and acquisitions undertaken in
2005 of €906m
(2) Mainly connected to BOT‛s in Water (Brussels, The Hague, Weinan, Baoji, Incheon) and to cogeneration projects, in France and Italy, in
Energy Services (treated according to IFRIC4)
(3) BVAG, ChangZhou, Kunming, Hradec Kralove, Weir Techna, and Sicily, Calabra in Water, Foshan qnd Shanks in Waste, Lodz in Energy
Services, and Helgelandske, industrial market and ATC in Transport
25

More than €900m invested in new projects in 2005

Transport 16% Asia-Pacific 11%
Water 58% North America 10%

United Kingdom
Waste 7% 5%

Energy services 19%
Continental Europe 73%

By division By region

26

Cash flow statement at December 31, 2005

€ million
Cash flow from operations 3,687
Tax paid 339
Interest paid 739
Changes in I4 receivables (new receivables : -€269m; repayment of receivables: +€184m) 85
Capital expenditures &financial investments 2,290
Change in working capital requirement 52
Asset disposals +348
Change in scope of consolidation and increase in minorities‛ capital & dividends received +25
= Free cash flow before new large projects and acquisitions = 555
New large projects and acquisitions undertaken in 2005 906
Dividends paid 374
Capital increase +73
Impact of exchange rates and other 160
= Change in debt = 812
Net financial debt at December 31 , 2004 13,059
Net financial debt at December 31 , 2005 13,871

27

Change in net financial debt (NFD) at December 31, 2005

€ million 62
374 Impact of
exchange
Dividends rates and
906
paid other

Large
739
269 projects

(3, 296) Interest
paid
1 3, 871
1 3, 059
2, 290

Cash flow (348)
generated by (1 84)
operating
activities Investments and
Disposals and new IFRIC4
repayment of receivables
IFRIC4
receivables

NFD at end 2004 NFD at end 2005
IFRIC4 receivables

28

Change in net financial debt (NFD) at December 31, 2005

€ million

NFD at December 31, 2004 -13,059

l Free cash flow +555
l Investments in new large projects and acquisitions -906
l Dividends paid -374
l Impact of exchange rates and other -87

Net financial debt at December 31,2005 -13,871
LT & ST financial receivables and marketable securities 2,775

Economic net debt at December 31, 2005 -11, 096

29

Marked improvement in debt ratios (1)
€ billion Further improvement to the balance sheet
16 15.4 4
15
13.9
14 3.5 x 13.5
13.1
13
13.0
12 3.2 x 3.2 x 3.25
10.9 11.1
11
3.0 x
10
10.3
9

8
2.5
(3)
31 Dec. 2003 31 Dec. 2004 30 Jun. 05 31 Dec. 2005

§ Net financial debt
(1) Ratios on a 12-month moving basis
§ Economic net debt
(2) Incl. US businesses sold and FCC
_ Economic net debt/Cash flow
from operations
30

Continued optimization of our financing

l Current ratings:
l Moody's
A3 / P-2 Outlook stable / upgraded rating
(27/06/2005)
l Standard & Poor's
BBB+ / A-2 Outlook stable

l Active debt management (bank and bond)
l Average maturity of debt: ~7 years
l 74% of debt fixed-rate, or with a capped floating rate
l 75% of gross debt in euros
l Liquidity position: €7.4bn including €4.8bn in undrawn lines of
credit over 1 year

31

Veolia 2005 Efficiency Plan
Target for 2006 achieved in 2005: more than €300m
of recurring savings to income in two years

l Impact of €168m on operating income in 2005
l Impact of €284m on operating income over 2 years
l Impact of €20m on the financial result and corporate
income tax over 2 years
l Total expected impact of plan by end of 2006: €400m

Beyond then, we shall move from a one-off
program savings philosophy to a system of
permanent and continuous improvement

32

Main projects

Operations
35% l Extension of the program to optimize the
• Operating processes
• Risks / Insurance performance of incinerators in France
l Continuation of the program to optimize
maintenance in Energy Services
l Deployment of projects on bringing best
operating practices to all the Water regions in
France

Support
functions 26%
l Consolidation of the administrative structures at the
• Overheads
regional level within Energy Services in France
• IT savings
l Rationalization of Waste‛s structure in France
l Re-organization of Transportation‛s structures
abroad (Germany, Sweden, and Denmark)

33

Main projects

Purchasing
• Multi- divisional
21 % l Further deployment of framework agreements
l Introduction of an initiative to optimize the
• Divisional
purchases of local sub-contracting

Assets
• Real estate
1 8%l Continuation of program to rationalize real estate
• Business portfolio portfolio of offices and sites
l Closure of loss-making foreign subsidiaries

34

Change in after-tax ROCE

An improvement in profitability

WACC (1) = 6% Average capital ROCE (in %)
employed (in €m)

2004 (2) 2005 2004 2005

l Water 6,956 7,378 10.3% 11.0%
l Waste 4,279 4,540 9.7% 10.0%
l Energy services 1,985 2,184 7.5% 8.3%
l Transport 1,126 1,144 7.2% 6.4%
Total 14,767 15,338 8.3% 9.1%

(1) After tax and on the basis of the analysts‛ consensus.
(2) Excluding capital employed of businesses that have been sold
35

STRATEGY AND OUTLOOK


A confirmed strategy

Value creation through the optimization
of the resource

A model which applies to each of our businesses

37


l In the area of Water, controlling consumption by optimizing
network management is a fundamental trend:

l Becoming a benchmark in our industry due to:
l Our technical know-how supported by important R&D expertise
(development of solutions for sludge management, integrated
management of wastewater systems, recycling of process water,
seawater desalination)
l Our customer know-how (implementation of quality standards,
environmental awareness programs, training in water conservation
and usage)

l Creating value: implementation and exchange of best practices

38


l Waste
l A fundamental role in the area of recycling “materials”, 7 million tons
recovered per year
l 6.3 MWh of energy produced per year, coming from the combustion from
incinerators and recovered biogas
l 2.2 million tons of CO2 prevented
l Energy Services
l Optimization of the choice of combustibles: reduction of greenhouse gas
emissions (biomas, geothermic, solar-thermic). Natural gas and renewable
energy represent over 70% of the primary energy used by the division
l Optimization of energy consumption by consumers: in Ile de France,
reduction of 8% of the primary energy consumption within a housing
complex.
l Optimization of returns from installations and development of
cogeneration.
l Initial projects to reduce greenhouse gas emissions
l Transport
l Reduction of greenhouse gas emissions: the opening of the tramway in
Saint-Etienne has reduced CO2 emissions by an estimated 120 tons

39

A common approach by our four divisions

l Multi-service offerings for industrial clients
l Commercial coordination across the 4 divisions:
development of cross-selling and reduced commercial
costs
l Research & Development: pooling of scientific and technical
expertise in the four divisions to promote multi-divisional
research programs
l Example: the treatment of sludge through a joint
project between R&D experts working for the Water
and Waste divisions
l Another example: preventing legionella with the help
of the service skills of the Energy Services and Water
divisions.
l Training: pooling the funds allocated for training
(example: The Veolia Environnement Campus and its
extensions abroad)
40

2006: the continuation of profitable growth

Targets:

l Revenue growth of between 6% and 8%
l Growth in operating income higher than that of revenue
l Positive free cash flow before new large projects
l Delivering balance sheet commitments: economic net debt /
cash flow from operations (1) ratio below 3.5x
l Increase in the after-tax ROCE
l Dividend growth of at least 15%


41

Medium-term objectives

Targets:

l Benefit from the fast growing markets in which the
company operates
l Revenue: average annual growth of 6% and 8%
l Priority to value creating growth
IRR ³ WACC +3%
l Maintain balance-sheet commitments
l After-tax ROCE: 10% in 2007

42

Veolia Environnement:
A confirmed profitable business model

l Clear and consistent strategy
l 2005: a year of strong performance
l Confirmed leadership in environmental services for municipal
and industrial customers
l Long-term contracts with recurring cash-flows
l Global presence in growing regional markets:
l Europe, North America and select countries in the
Asia-Pacific region
l Selective investments and further improvement to the balance-
sheet

43

APPENDICES


IFRIC (1)
Interpretations D12/D13/D14

l Assets concerned:
l Assets related to a public service, which are returned to the
concession grantor at the end of the contract
l A large number of different contracts: analysis of the
“substance” of the contracts
l Main scope of assets: assets linked to concession contracts
(€5.6 bn at 31/12/2005)
l Classification of assets by nature in 3 categories
l Tangible assets
l Intangible assets
l Financial assets
l Provisional calendar
l Interpretations from IFRIC expected in the second half of 2006
l Application by Veolia Environnement in 2006
(1)
See Veolia IFRS workshop of February 4th, 2005
45

IFRIC 4 financial receivables

Transport 4%
Waste 13%

Water
45%

Energy Services 38%

In 2005: €2,065m
Main change related to BOT‛s in Water (Brussels, etc…)

46


Data concerning water consumption
and price

United
Germany France Sweden Spain Italy
Kingdom
Average price
* of a m3 of
4.45 2.89 2.56 2.32 1.30 0.68
water in €
(incl. taxes)
Average
domestic
consumption 116 153** 137 190 158 213
in l/d /per
capita
* For drinking water and wastewater
**141 l/d per capita for those with a meter

47


Some examples of value creation by optimizing
network management

Network yield On award of contract Now

PARIS RD 78% 94%

PRAGUE 59% 70%

RABAT-SALE 68% 82%

48

J curve trending upward
Example: Czech Republic (group of contracts)

Year of contract

1996 Pilsen
4 million people served
1998 VOSS Sokolov

1999 SCVK (N. Bohemia)
1.JVS (S. Bohemia)
AQUA Příbram
VODOSPOL Klatovy
2000 SMV (Moravia)

2001 Prague I – 66%

2002 Prague II – 34%

2004 Central Bohemia: Kladno Melnik
Moravia: Zlin
2005 Hradec Kralove (E. Bohemia)
Slavos Slany (Central Bohemia)
2006 Prostejov (Moravia)

49

J curve trending upward
Example: Czech Republic
€ million ROCE (%)
700 18,0%

600 16,0%
14,0%
500
12,0%
400 10,0%
300 8,0%
6,0%
200
4,0%
100 2,0%
0 0,0%
1996 2001 2002 2003 2006 2016 Revenue
Operating income
Net profit
ROCE

l Model of a group of operating contracts with limited investment (initial
entry + other contractual investments)
l Customer payments based on an adjusted cost + fee basis (adjusted for
increases in inflation with the ability to retain productivity gains)
50

ROCE, a key indicator

(Recurring operating income – tax expense for the company(1 ) + equity in net
income of affiliates – income linked to financing operations for 3rd parties
ROCE =
Average capital employed for the year

Capital employed = fixed assets + goodwill(2)
+ investments accounted for using the equity method + working capital requirement (3)
– provisions – other debts

(1) Excluding the proceeds from the capitalization of tax loss carry forwards arising on
disposals in North America and related restructuring measures
(2) Under IFRS, elimination of amortization of goodwill
(3) Including net deffered tax

l Why deduct provisions?
l Capital employed is the capital that earns a return, i.e.
shareholders‛ equity, minority interests, net financial debt

51

2005 capital employed

At December 31, 2005 At December 31, 2005
(€ million) Reference document(*)

Tangible, other intangible assets &
« assets related to concessions » 13,523 13,523
Goodwill 4,863 4,863
Investments accounted for using the equity method 201 201
Inventories and work in progress 646 646
Accounts receivable 10,112 10,112
Accounts payable -10,374 -10,374
Net deffered tax 3 3
Tax related to disposals in North America
& related restructuring measures -117
Working capital requirement 387 270
Provisions -2,387 -2,387
Other liabilities -362 -362
Capital employed 16,108
(*) Official report for the French market authorities
52

Average 2005 capital employed

At December 31 At December 31
(€ million) 2005 2004

Capital employed 16,108 14,568

Average capital employed in 2005 15,338

53

Calculation of 2005 ROCE

(€ million) At 31/12/2005

Recurring operating income 1,904
Income tax -423
Tax loss related to disposals in North America and related
restructuring measures 21
Total tax expense -402
Equity in net income of affiliates 15
Income linked to financing operations for 3rd parties -126
Results of operations, net 1,391
Average capital employed in 2005 15,338
ROCE after tax 9.1%
After-tax ROCE 9.1%

54

Investor Relations contact information

l 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

l 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
l http: //www. veolia- finance. com
55

2005 Annual results

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2005 Annual results