2. Important Legal 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
risk that changes in energy prices and taxes may reduce Veolia Environnement's profits, the risk
that governmental authorities could terminate or modify some of Veolia Environnement's 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.
Germany, April 2003 2
3. Table of Contents
1/ 2002 : A decisive year
2/ A strong business model
3/ Improving credit profile
Germany, April 2003 3
4. 1/ 2002 : A decisive year
Successful finalisation of the spin off from VU :
A new corporate governance will be subject to approval of
shareholder meeting of April 30, 2003
Solid results despite a difficult environment
Germany, April 2003 4
5. 2002 : the Group has overcome 3 stress scenarios
“Shareholder” : the contagion risk has been removed by the
completion of the “spin off” from VU
“spin
“Sector” : The Latin America risk and the crisis in the Energy sector
are 2 non-issues for the Group. As world leader in Environmental
non-
Services VE is able to generate FFO, even in a difficult economic
economic
climate
“Liquidity” :
Cash-
Cash-flow generation up significantly
Decrease in net indebtedness : from 14.2 €bn to 13.1 €bn
€bn €bn
Strong improvement in [net debt / EBITDA] ratio from 4 to 3.4
Strengthening of financial flexibility by better covenant levels,
levels,
elimination of all ratings triggers and improvement in liquidity
position
Pension schemes : no key issue
Germany, April 2003 5
6. Strong Shareholder structure
Identified investors 30.6% Vivendi Universal 20.4%
Float 49.0%
Identified investors:
investors:
State Owned Companies (12,8%) Insurance Companies and others (10,7%) Relationship Banks (7,1 %)
CDC Groupama BNP Paribas
Groupe CNP Groupe AXA Société Générale
Caisse Nationale des Caisses d'Epargne Assurances Générales de France Crédit Lyonnais
Médéric Prévoyance Crédit Agricole Indosuez
Electricité de France (EDF) Generali Crédit Mutuel CIC
Eurazeo Dexia
Wasserstein Family Trust Natexis
NB : EDF owns 34% of Dalkia
Germany, April 2003 6
7. 2/ A strong business model :
Our strategy is clear and unchanged : VE is not a « multi utility » but
remains focussed on one business : environmental services.
VE is not only one of the largest
but also the only “pure” player
Germany, April 2003 7
8. A key competitive advantage : 5 brands
with a strong leadership on their markets
Water
No.1 worldwide :
Municipal and industrial water and wastewater
treatment and services
Residential and commercial treatment and services
Waste No. 1 in Europe
No. 3 worldwide
Collection and services
Disposal and treatment (solid, liquid, hazardous waste)
Energy No. 1 in Europe for heating
Services
Energy management
Industrial utilities
Facilities management
Transport No. 1 Private in Europe
Private and public passenger transportation
Rail, buses and others
FCC
Environmental services in Spain (FCC)
Joint venture VE / FCC in Latin America
(Proactiva)
Proactiva)
Germany, April 2003 8
9. Continued execution of strategy
Confirmed business model
The pure player in environmental services
4 complementary divisions
Water
Waste
Energy services
Transportation
Secure geographical coverage
Over 95% of revenue generated in developed countries with
stable political and monetary systems
Growth ensured by a balanced customer mix (municipalities
~65% of revenue; manufacturing and service customers ~35%)
service
Positions in high-potential markets such as water
high-
Recurring future cash flows and undergoing growth:
strengthened additional order backlog (€30 billion in 2002)
(€30
Organic growth, no major acquisition required
growth,
Germany, April 2003 9
10. 2002 key figures
In € m 2002/2001
Exchange rate
Dec.31, 02 Dec. 31, 01 Current Constant
Revenue 30,079 29,127
Revenue from core businesses 28,073 26,513 +5.9% +7.2%
EBITDA 3,887 3,760
EBITDA from core businesses 3,727 3,480 +7.1% +8.0%
EBIT 1,971 2,013
EBIT from core businesses 1,847 1,813 +1.9% +3.2%
Net income 339 (2,251)
Recurring net income 429 420
Recurring net income per share (in €) 1.16 1.20
Dividend (in €) (1) 0.55 0.55
Dividend pay out ratio 47% 46%
Net debt 13,066 14,283
Number of shares: 405,070,459
Average number of shares in 2002: 370,213,187
(1) excluding tax credit and subject to the approval of the Shareholders Meeting on April 30
Germany, April 2003 10
11. 55% of core revenue outside France but low
exposure to emerging countries
Australia
Australia 2% Other
Other 2%
Asia 2%
Latin America 2%
France
North America 12% 45%
Rest of Europe 35%
≤ 10 % of revenue in countries rated ≤ A-
Germany, April 2003 11
12. 2002 : A sharp improvement of cash flows in
a secured low risk market
High predictability in cash flows
Secured by a total backlog of more than 10 years revenue
Low risk profile
Sensitivity to trade cycles further reduced through 2002
disposals
No exposure to electricity prices and power cycles
No energy trading activity
Low customer risk
Low country risk
Germany, April 2003 12
13. 2002 : VE has self-financed its growth
Cash flow generation up significantly : +36%
In €m 2002 2001
Cash flow from operations (FFO) +13% 2,780 2,455
Maintenance capital expenditure (1,323) (1,382)
Cash flow available before growth (oper. FCF) +36%
oper. 1,457 1,073
Capital expenditure for growth (2,415) (2,670)
Disposal of assets 1,771 598
Change in scope of consolidation (525) (460)
Change in working capital requirement (464) (1) 437 (2)
Cash flow before financial transactions (176) (1,022)
Change in capital 1,554 411
Impact of exchange rate, dividends and other (161) (484)
Cash flow for the year after capital increase 1,217 (1,095)
Net debt at start of year 2002 (14,283) (13,187)
Net debt at end of year 2002 (13,066) (14,283)
(1) Includes €223m increase related to the reduction in the French securitization program
(2) Includes €815m reduction related to the introduction of the French and US securitization program
Germany, April 2003 13
15. ROCE is a key indicator to « fine tune »
balance between growth and FCF
Key indicator: ROCE
2005 targets for growth and ROCE
8,5%
CA 2005 : +4% CAGR
8,0%
7,5%
7,0%
ROCE
6,5% 2002
CA 2005 : +8% CAGR
6,0%
5,5%
5,0% In €m
23 000 25 000 27 000 29 000 31 000 33 000 35 000 37 000
Core business revenue
Germany, April 2003 15
16. Industrial flexibility is strong : VE can afford to
balance growth / FCF
Average revenue growth in core businesses of
4–8% per year from 2002 to 2005
Improved profitability: increase in ROCE for each
division, based on:
Maturation of contracts signed since 1999
Productivity improvement efforts
Implementation of synergies
Selective investment policy
Active management of asset portfolio
Germany, April 2003 16
17. 3/ Improving credit profile
Success in 2002:
Strengthening of financial flexibility
2003 Target:
To extend debt maturity
using the bond markets
Germany, April 2003 17
18. Decrease of Gross Debt and Net Debt
In €m
2002 2001 Variation
Bonds 5 634 5 194 440
Other LT debt 7 279 7 940 - 661
Short term debt 3 796 5 576 - 1 780
Gross Debt 16 709 18 710 - 2 001
LT financial assets 512 342 170
ST financial assets 488 986 - 497
(1)
Marketable securities 261 324 - 63
(1)
Cash 2 382 2 776 - 394
Net Debt 13 066 14 287 - 1 217
(1) Total : 2 643 €m
Germany, April 2003 18
20. Financial flexibility improved :
1- Ratios / Covenants
Strong improvement of cover ratios
2002 2001 2000
EBITDA/financial
EBITDA/financial expense (x) 5.1 4.8 3.7
Net debt/EBITDA (x)
debt/EBITDA 3.4 3.8 4.0
Successful renegotiations
Same ratios in all the documentation (Bank loans and US PP) :
Elimination of all ratings triggers
Higher flexibility
No spread increase at current level
Covenants (Bank Definition)
(Bank Definition)
Interest coverage ratio (x) 5,7 (>4)
Debt payout ratio (x) 3,5 (<4,25)
Germany, April 2003 20
21. Financial flexibility improved:
2- Improvement of the liquidity position
Liquidity increase by 90% over the past two years
March 2003 December 2002 December 2000
In € m Total Available Total Available Total Available
Multi Purpose Facilities 1 750 1 750 1 300 1 300 1 200 1 200
Bank Facilities 233 423 200
Syndicated Loans 4 415 2 615 4 415 2 149 4 564 0
(1)
(E)
Cash immediately available 1 822 1 681 1 541
Total 6 420 5 553 2 941
(1)
Other cash/Marketable securities 962 962 483
Grand Total 7 382 6 515 3 424
(1) Total : 2 643 €m
Germany, April 2003 21
22. Structure of the debt
Currency Type of rate
(after hedging)
Others 10%
Floating rates 49%
USD 22%
Fixed rates 51%
EUR 68%
VE strategy : To hedge FX and interest risks (FFO in
currencies,
currencies, contracts indexed on inflation)
Based on gross debt
Germany, April 2003 22
23. Diversification of funding sources
Bank Debt : 58% Bank Debt : 76%
All Bonds : 42% All Bonds : 17%
Commercial paper Bonds Commercial
Bonds 7% 3% paper 4%
26% Océanes C/C VU
10% 7%
Bilateral facilities
39%
Océanes Syndicated loans
9% 24% Bilateral facilities
52%
Syndicated loans
19%
Dec.
Dec. 2002 Dec.
Dec. 2000
Germany, April 2003 23
24. Centralized debt management
Proportional consolidation (PC*)
Subsidiaries
and Project Finance Structures
16%
26%
Subsidiaries 84%
12% 62% Vivendi Environnement
Vivendi Environnement
Group VE (bn € 13,1) VE global (bn € 9.7)
(excluding PC and PFS : non recourse debt)
(excluding debt)
Based on net debt
* PC include essentially FCC, Dakia International and Berlin Wasser
Germany, April 2003 24
25. Pension plan and other cost retirement benefits
In € m 2002 2001
Benefit obligation (973) (928)
Fair value of plan assets 766 903
Funded status of plan (207)(*) (25)
(*) France : legal retirement obligation : ~ € 120 m
UK : ~ € 60 m
Others : ~ € 27 m
~ € 207 m
US : all pension plans are based on defined contribution sche me
Germany, April 2003 25
26. Off-balance Sheet
Off-balance
Put FCC
Under the terms of the option agreement, Ms. Koplowitz has a put option to sell to VE
at any time before October 6, 2008, her 51% stake in B 1998 SL (…).
During the last analyst meeting, Henri Proglio has mentionned that for VE this put is
less a risk than an opportunity. Esther Koplowitz reply is very clear :
“ Esther Koplowitz wishes to express her commitment to remain in the company…
and to dispel any misunderstanding, she denies any intention to exercise her option
to sell this interest “.
If put exercised :
Year 2002 After excercising After public After selling
the put offer non-core
Net Debt / Ebitda 3,4 3,3 3,7 3,3
FCC Revenue 2002 : € 5 317 m SOP € 4 508 m (1)
Servicios 31% SOP € 1 703 m (1)
Cementos 39%
Construcción 16%
SOP € 2 805 m (1)
Servicios urbanos 12%
Otros 2% (1) Schroder SalomonSmithBarney 25/02/03
Germany, April 2003 26
27. LT Ratings : S&P BBB+ / O s
Moody’s Baa1 / O -
ST Ratings confirmed A2 (S&P), P2 (M)
One success : withdrawal from S&P “credit cliff list ” in
December 2002
Removal of all ratings triggers
Easing of covenant levels
Extension of the average debt maturity
BBB+ rating stable
Germany, April 2003 27
28. LT Ratings : S&P BBB+ / O s
Moody’s Baa1 / O -
One disappointment : Moody’s retains a negative outlook
despite the elimination of the Shareholder risk
The negative outlook was the result of the Xdefault of Vivendi
Universal, cleared up in August 2002
The last press release on March 3rd states : “ VE has made
significant progress in 2002 in improving the financial arrangements of
arrangements
facilities by removing all rating triggers that could lead to acceleration
acceleration
and by increasing headroom under its financial covenants.
The negative outlook reflects Moody’s views regarding the needs for
further strengthening in areas including liquidity, increasing the
the
availability and maturity profile of its financing arrangements, and
reducing the growth trends in its underlying capital expenditure levels.”
Germany, April 2003 28
29. Our targets for 2003 - 2004
Further improvement of cover ratios
2003 : positive free cash- flows after disposals and
cash-
growth capex
≥ 2004 : positive free cash-flows
cash-
No Debt increase :
Stabilization or even reduction
Extension of duration by using bond markets
Rating :
Maintain or even improve our LT and ST ratings
Germany, April 2003 29
31. History of Vivendi Universal’s stake in Vivendi
Environnement’s equity capital
December 1999 Formation of Vivendi Environnement (VE),
100% owned by Vivendi Universal (VU)
July 20, 2000 IPO
VU owns 72.3%
December 17, 2001 VU sells 9.3%
VU owns 63%
June 28, 2002 VU sells 15.5%
VU owns 47.5%
August 2, 2002 1.5 billion euro capital increase for VE
VU owns 40.8%
December 24, 2002 VU sells 20.4%, +20.4% call option
exercisable at 26.5 euros per share at any
time until December 2004. VU owns 20.4%
Germany, April 2003 31
32. Covenants (Bank Definition)
Interest coverage ratio (x) 5,7 (>4)
Debt payout ratio (x) 3,5 (<4,25)
In €m
EBITDA = + EBIT 1 971,3
+ Operational amortization 1 699,3
+ Valuations allowances relating to LT assets 0,0
+ Profit sharing 39,0
3 709,6
Financial expense = + Net interest expenses 680,9
+ Other financial profits - 32,1
648,8
Germany, April 2003 32
33. Securitization Programs
In €m
2002 2001 Variation
1. Securitization 379 883 - 504
Water France 379 713 - 334
USF 0 170 - 170
2. Facturing 767 656 + 111
3. Cogevolt 739 859 - 120
(future receivables)
Total 1 885 2 398 - 513
Germany, April 2003 33
34. 2003 : A new governance and a new name as a
result of the new shareholder structure *
A CEO and a new Board of Directors (14 members) :
Board of Directors
Henri Proglio (Chairman of Board of Directors)
Jean Azéma Arthur Laffer
Daniel Bouton Francis Mayer
Jean-Marc Espalioux Serge Michel
Jacques Espinasse Georges Ralli
Paul-Louis Girardot Baudouin Prot
Philippe Kourilski Louis Schweitzer
Murray Stuart
The Two Board committees should be maintained :
Audit, Transaction and Commitment Committee
Selection and Compensation Committee
An Ethical Chart has been approved
(* subject to approval of shareholders meeting of April 30, 2003)
2003)
Germany, April 2003 34
35. Significant items by Division
Water France Good trend for both revenue and earnings
Revenue € 11 288 m Increase in water distribution
EBIT margin 7.4% Return to profit for Vivendi Water Systems
USA Stable performance for core businesses and continued
slowdown in sales of non- core equipment
non-
Consumer business stable
RoW Increased contribution from Central Europe, and start-up of
start-
major contracts in Asia (Hynix, Chengdu)
(Hynix, Chengdu )
Waste France Partial impact of restructuring measures in progress
Revenue € 6 139 m
UK Revenue growth of 14%
EBIT margin 6.4% EBIT x 1.5 (positive impact of recovery plan, Sheffield
and Bromley)
USA Weakness in "industrial services" and upturn for "toxic
waste”
waste ” activities
Asia Excellent performance from PWM: 10% rise in revenue
and further improvements in margin
Germany, April 2003 35
36. Significant items by Division
Energy services France Strong growth in cogeneration and service contracts
Revenue € 4 571 m Impact of business mix on margin
EBIT margin 7.1%
Europe Revenue growth in Southern and Central Europe
EBIT x 4 in Italy due to integration of Siram
Good contribution from Estonia and Poland
Transportation France Contribution from Verney (acquisition)
Revenue € 3 422 m UK Difficult market, decline in passenger numbers
EBIT margin 3.2%
Other (Europe/USA) Full impact of new contracts in Northern and
Central Europe
Start-
Start-up of new contracts
FCC Double-digit
Double-digit increase:
Revenue € 2 653 m - in services: rise in demand for waste
management services
EBIT margin 9.3% - in cement business
Germany, April 2003 36
37. Strengthened financial situation through an
active financing policy in 2002
Active debt management
Total independence of financing (elimination of cross-default with
cross-
Vivendi Universal in August 2002)
Currency coverage of assets
Extension of average debt maturity
Elimination of all ratings triggers
Financial flexibility
Improvement in liquidity
Easing of covenant levels
No ring-fencing for core business
ring-
Low level of minority interests in Water & Waste (all major
subsidiaries are 100% controlled)
controlled)
Germany, April 2003 37
38. Off-balance Sheet
Off-balance
Put Southern Water
Main features
-Sale to SWC (a subsidiary of Royal Bank of Scotland) of 80,1% of Southern
Water
-VE to retain a 19,9% equity interest for £10m and to invest £150m in
preference shares
-Third party investor to invest £ 110m, in prefered shares, with a five year put
option on VE at par
Advantages :
-Reduced exposure (existing put option of £ 374m)
-No execution risk :
-Clearance received from UK authorities,
-Completion expected by mid-may
-Refinancing risk transferred to Royal Bank of Scotland
-Consolidation under the equity method ensures limited impact on ratios
Germany, April 2003 38
39. Structural Subordination within VE
1) No impact on financial ratios : EBITDA generation and net
debt well balanced
Group VE PC * + PFS VE global
Net debt / EBITDA (x) 3.36 3.24 3.40
FFO / Net debt (x) 0.21 0.19 0.22
* PC include essentially FCC, Dakia International and Berlin Wasser
Germany, April 2003 39
40. Structural Subordination within VE
2) Balance of external debt of VE SA with downstream loans
to subsidiaries
Downstream External
Net
Loans (*) Debt (**)
In € m 9 517 9 080 437
In case of default of VE, creditors would step in VE’s position not only as a
shareholder of the subsidiaries but also as a creditor fully supported and
unforceable.
Documented and structured internal loans protect
VE creditors against structural subordination.
(*) Net of loans and debt to subsidiaries (**) External debt net of cash
Germany, April 2003 40
