2004, First Half Results

H1, 2004 Results– Paris, September 17th 2004 – Financial Communication 1


DisclaimerVeolia 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 VeoliaEnvironnement'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.


First half 2004 highlights: Continued earnings improvement

Internal growthRamp-up in contracts signed over past few years

Impact of Veolia 2005 efficiency plan > €45m

EBIT: €975m, up 15% at constant exchange rates under the new

consolidation scope (1)

Recurring net income: €205m, up 54%

(1) Excluding FCC and US assets sold in 2003 or in the process of being sold: Surface Preparation, Everpure, Culligan, US Filiter equipment and short-term services bus inesses.


Execution of disposal program and debt reduction

Disposal of US non-core assets for over $2 bn, in line withthe stated targets (USF equipment and short-term services in Q3 and Culligan in Q4)

Sale of stake in B-1998 SL, the holding company controlling FCC: debt reduction of over €1.1 bn expected in the second half of the year


In €m

(*) Inc luding the reconsolidation of a €325m w ater securitization program and €378m deriv ing from the Berlin operating lease in accordance w ith the LSF (French Financial Security Act) of August 1, 2003.

13 066

11 804

10 000

10 500

11 000

11 500

12 000

12 500

13 000

13 500

Execution of disposal program and debt reduction

Target€10.5/11bn (*)

(*)

Dec. 31, 2002Dec. 31, 2002 Dec. 31, 2003Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2004 estimatedestimated

Change in net debtChange in net debt


-1600

-1100

-600

-100

400

Validation of the financial modelSubstantial improvement in free cash flowIn €m

Free cash flow (*) before dividend payment greater than €500 million at 30/06/2004

(*) Free cash f low = cash f low from operations +/- change in the w orking capital requirement - effect of the variation of the securitization and Dailly (i.e. receivables discounting) programs + asset disposals (excluding non-core asset disposals) - capital expenditures and f inancial investments +/- changes in the scope of consolidation.

+540+540

Improvement > €2bn

20022002

20032003 H1 2004H1 2004

--1 5251 525

+168+168


EBIT marginEBIT marginEBITEBIT

30/06/04

In €m

30/06/04

Strong profitability improvement:EBIT margin trends (1)

(1) Excluding US assets sold in 2003 or in the process of being sold..

30/06/03 30/06/03

∆ Constant exchange rate

30.06.04/30.06.03

Water

Waste

Energy Services

Transportation

Holding

FCC

385385

212212

200200

5757

--4040

132132

353353

179179

179179

4141

--3636

119119

7.7%7.7%

6.1%6.1%

7.5%7.5%

2.2%2.2%

n.sn.s

8.3%8.3%

8.3%8.3%

7.0%7.0%

7.8%7.8%

3.2%3.2%

n.sn.s

8.8%8.8%

+9.4%+9.4%

+22.1%+22.1%

+12.3%+12.3%

+41.6%+41.6%

n.sn.s

+10.3%+10.3%

Total (1) including FCC 945 836 +14.3% 7.0% 6.4%

Total (1) excluding FCC 813 716 +15.0% 6.8% 6.1%


Our commitment to sustainable development has been recognizedIn 2004, Veolia Environnement has been included in the 2 main international sustainability indexes

Veolia Environnement is included in the FTSE4Good, an index with rigorous standards, which selects companies having incorporated sustainable development as a true governance tool. Only 24 French companies are part of this index.

Veolia Environnement has again been included in the Dow Jones Sustainability Index


Outlook for 2004 confirmed

Double-digit growth in EBIT

Very strong increase in recurring net income

Significant reduction in net debt: €10.5bn - €11bn after asset disposals (1)

Positive free cash flow

Maintain ROCE (2) target of at least 8% after tax in 2005 despite the disposal of FCC

Significant increase in dividend

(1) Inc luding the reconsolidation of a €325m w ater securitization program and €378m deriv ing from the Berlin operating lease in accordance w ith the LSF (French Financial Security Act) of August 1, 2003.

(2) See 2003 Annual Report Form 20-F for a description of the methodology used to calculate ROCE.


Medium-term outlook: Strong visibility

Continued profitable growth Through the award of less capital-intensive long-termcontracts (operating and maintenance contracts, public-private partnerships, etc.)

In Europe, in North America and in Asia (a few targeted countries, i.e. China, South Korea, Taiwan and Singapore)

Growth in positive free cash flow after increasing dividend

ROCE target of over 10% by 2008


Key figures at June 30, 2004

30.06.2004/30.06.2003change

30/06/04 30/06/03

(1)(1) Surface Preparation and Everpure, w hich w ere sold in 2003, as w eSurface Preparation and Everpure, w hich w ere sold in 2003, as w ell as Culligan, equipment and shortll as Culligan, equipment and short--term term services services

(2)(2) AfterAfter thethe aforementionedaforementioned disposalsdisposals andand the sale of FCC.the sale of FCC.

At constantAt current

In €m

Revenue 14,24314,243 14,04814,048 +1.4%+1.4% +2.8%+2.8%Excluding revenue from US assets sold in 2003 or in the process of being sold in 2004(1) 13,50713,507 13,14313,143 +2.8%+2.8% +3.7%+3.7%

Under new consolidation scope excl. FCC (2) 11,98911,989 11,68211,682 +2.6%+2.6% +3.6%+3.6%

EBITDA 1,8751,875 1,8241,824 +2.8%+2.8% +4.1%+4.1%Excluding EBITDA from US assets sold in 2003 or in the process of being sold in 2004 (1) 1,8061,806 1,7311,731 +4.3%+4.3% +5.3%+5.3%

Under new consolidation scope excl. FCC (2) 1,6081,608 1,5511,551 +3.7%+3.7% +4.7%+4.7%

EBIT 975975 884884 +10.2%+10.2% +11.6%+11.6%Excl. EBIT from US assets sold in 2003 or in the process of being sold in 2004 (1) 945945 836836 +13.1%+13.1% +14.3%+14.3%

Under new consolidation scope excl. FCC (2) 813813 716716 +13.6%+13.6% +15.0%+15.0%


From revenue to net income

30/06/0330/06/0330/06/0430/06/04In €m ∆30.06.04/30.06.03

Revenue 14,243 14,048 +1.4%EBITDAEBITDA 1,8751,875 1,8241,824 +2.8%+2.8%

Depreciation and long-term provisions (755) (790)Renewal expenses (145) (150)

EBIT 975 884 +10.2%Recurring financial expense (342) (370)Notional tax charge (224) (182)Recurring earnings of equity method companies 30 26Minority interests (143) (112)

Recurring net income before goodwill 296 246 +20.3%Recurring goodwill amortization (91) (113)

Recurring net income after goodwill 205 133 +54.4%NonNon--recurring income recurring income (1)(1) (24)(24) (2,233)(2,233)Net incomeNet income 181181 (2,100)(2,100)(1) See "2004 First Half Year Results" press release for reconci(1) See "2004 First Half Year Results" press release for reconciliat ion of recurring net income liat ion of recurring net income to net income.to net income.


Revenue at June 30 (excluding US assetssold in 2003 or in the process of being sold) (1)

4 592

2 9142 388

1 8211 429

4 634

3 0502 553

1 7821 489

13 50713 143

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

30/06/200430/06/2003

At const. exch. ratesWaste+6.8%+4.6%

Energy Svcs.+7.1%+6.9%

Transport-1.6%-2.1%

FCC+4.5%+4.2%

Total+3.7%+2.8%At current exch. rates

(1) Excluding Surface Preparation and Everpure sold in 2003 and Culligan, equipment and short-term services

In €m

Water+1.8%+0.9%


30/06/04In €m

EBITDA marginJune 30, 2004

+14.6%

+14.8%

+14.3%

+8.8%

+13.0%

+13.4%

Water

Waste

Energy Services

Transportation

FCC

Holdings

Total

679

451

366

157

194

-39

1 806

2.8%

6.9%

2.9%

13.0%

10.9%

+5.3%

At constant exch. rates

At current exch.rates

2.1%

4.4%

2.5%

12.4%

10.8%

+4.3%

EBITDA contribution (excluding US assets sold in 2003 or in the process of being sold) (1)

(1) Excluding Surface Preparation, Everpure sold in 2003 and Culligan, equipment and short-term services

∆ 30.06.04/30.06.03


Change in EBIT at June 30, 2004 (1)

41

945

132

57

200212

385353

179 179

119

836

0

100

200

300

400

500

600

700

800

900

1 000 30/06/200430/06/2003

A constant exch. rateWater+9.4%+8.9%

Waste+22.1% +18.5%

Energy Sces +12.3%+11.7%

Transportation+41.6%+40.5%

FCC+10.3%+10.6%

Total+14.3%+13.1%At current exch. rates

(1)(1) Excluding Surface Preparation and Everpure, w hich w ere sold in 2Excluding Surface Preparation and Everpure, w hich w ere sold in 2003, as w ell as Culligan, equipment 003, as w ell as Culligan, equipment and shortand short--term services. term services.

In €m


Continued commercial successExamples of contracts won or renewed in 2004

Eastern Moravia (V.A.K. Zlin) 30 yrs Czech Republic 360Zun Yi (Guizhou province) 35 yrs China 210Rennes 10 yrs France 150US Virgin Islands 20 yrs USA 110St. Petersburg (construction) - Russia 52Fernwasser 40 yrs Germany 40Johnson Matthey (industrial) 10 yrs UK 21Beijing 20 yrs China 20Grand Paroisse 10 yrs France 19MD Papier GmbH 12 yrs Germany 15

Water Waste Energy Services Transportation

Estimated cumulative revenue

Sheffield 5 yrs UK 450Lao Gang 20 yrs China 260Pontiac, Michigan 20 yrs USA 205Dunkerque 11 yrs France 66Marseille Provence Métropole 5 yrs France 42La Rochelle 8 yrs France 33Ku Ring Gail 10 yrs Australia 32BP (Industrial) 3 yrs USA 25SAFI 7 yrs Morrocco 20Abu-Dhabi 5 yrs United Arab Emirates 20

Multi-services

In €m


Continued commercial successExamples of contracts won or renewed in 2004

Melbourne 5 yrs Australia 1 500 Nice 7 yrs France 595St Etienne 8 yrs France 345Toulon 8 yrs France 314Appeldoorn 6 yrs The Netherlands 210Göthenburg 7+3 yrs Sweden 90Denver 5 yrs USA 55Koper - Slovenia 50

PSA Peugeot Citroën 10 yrs France 1 000Visteon Deutschland GmbH 10 yrs Germany 60

Lyon Villeurbanne 25 yrs France 500Poznan -- Poland 75/yrDruskininkai 30 yrs Lithuania 110Richter Gedeon Rt (industrial) 6 yrs Hungary 80Montluçon 20 yrs France 62Brezno 20 yrs Slovakia 50CHU Nancy 10 yrs France 31Prince Charles Hospital 25 yrs Wales 20Heinz (industrial) 15 yrs UK (near Manchester) 18

Water Waste Energy Services Transportation Multi-services

Estimated cumulative revenueIn €m


Divisional EBIT contributions

Good level of contribution from France despite high level of comparison (heatwave effect in June 2003)Excellent performance in Europe, strong increase in margins not only in Germany but also in Eastern Europe and MorroccoNorth America: new organization of the continuing businessAsia: strong increase in contracts signed over the past few yearsSignificant profitability improvement from VWS

Water: €385m, +10% at constant exchange rates Water: €385m, +10% at constant exchange rates (1)(1)

Strong effect of restructuring measures and productivity improvement in France, in particular in the incineration and urban waste business (1 point increase in margins) Strong increase from Scandinavia and the UK which continue to grow both economically and commercially. Good performance in Asia –volume effect in Hong Kong – and growth in the USA, despite difficult competitive environment for hazardous waste and industrial services

Waste: €212m,Waste: €212m, +22% at constant exchange rates+22% at constant exchange rates

(1) Excluding US assets sold in 2003 or in the process of being sold: Surface Preparation and Everpure sold in 2003 and Culligan and the equipment and short-term services businesses; and excluding water activities of Proactiva


Divisional EBIT contributions (continued)

Double-digit growth in French business activities despite unfavorable pricing (recovery of engineering activities)

Outside France, good contribution from the UK, very good growth in income in Southern Europe due to the integration of Giglio and sustained internal growth, as well as a good level of contribution from Eastern Europe

Energy Services: €200m, +12% at constant exchange ratesEnergy Services: €200m, +12% at constant exchange rates

Transportation: €57m ,+42% at constant exchange ratesTransportation: €57m ,+42% at constant exchange rates

In France, significant growth in income and commercial success with the renewal of contracts (Nice, Saint-Etienne, Toulon)

Outside France, growth in Europe (Germany and Netherlands), the USA (very positive impact from the Boston contract) and in Australia (increased effect of the new Melbourne contract)


Veolia 2005 efficiency plan: Target of €300m in recurring savings for 2006

In €m

0,0

50,0

100,0

150,0

200,0

250,0

300,0

350,0

H1 2004 Target2004

Target2005

Target2005

OperationsSupport functionsAssetsPurchasing

€45m€45m

€100m€100m

€200m€200m

€300m€300m


Veolia 2005 efficiency plan: over €45 m in recurring savings accounted for during the first half of 2004

Operations• Operational processes• Risks/Insurance• WCR

Purchasing• Group-wide purchases• Business-line

purchases

Supports functions• Structures• Financial and tax

optimization• Information system

savings

Assets• Real estate• Business portfolio

€13.1m

€7.4m

€14.0m

€10.9m

Diagnostic analysis and optimization of e fficiency from Onyx France's incinerators/Use of new technologies to optimize mobilerepresentative route planning at Dalkia and in the Water divisionGroup-wide redefinition and negotiation of property and casualty insurance premiumsOptimization of billing and collection processes at Onyx and in the Water division

Implementation of 50 framework agreements that were renegotiated by the Veolia Environnement group paving the way for the pooling of volumes.e.g. temporary staffing, fixed-line and mobile telephony, car rental, chemical products

Optimization of head office costs (Communications, Marketing, Tax and Legal, Administration and Finance)Optimization of financing and liquidtiyStreamlining of investments and IT development

Streamlining of real estate portfolio by increasing the office occupancy rateClean-up of Onyx France's waste collection contract portfolio

H1 04 Savings

Examples of projects underway


Veolia 2005 efficiency plan Target: more than €100 m in savings during 2004

The Veolia 2005 plan includes over 300 individualprojects

The results for the first half of 2004 and the most current outlook confirm the minimum targets of:

€100m in recurring savings in 2004

€300m in recurring savings in 2006


Change in financial expense

Net financial expense

Cost of financing

In €m

(304)

16

June 30, 2004 June 30, 2003

Average interest rate: stable at 4.3%

Provisions and other • USFilter assets - (72)• Amortization of Océane premium (15) (15)• Treasury stock 2 (10)• Foreign exchange gains/(losses) - (16)• Capital gains on sale of mktble sec. 52 -• Other (23) (24)

(288)(288) (451)(451)

(314)

(137)o/w


Control of capital expenditures and investments

Water 310

Waste 110

Energy Services 67

Transportation 45

FCC + Proactiva 60

Growth

193193

162162

136136

5050

7979

503

272

203

95

139

Total capexTotal capex//investments 592investments 592 620620 1,212 1,212

Maintenance Total30/06/04

Brussels, The Hague

Major projects in France and the UK

Poland (Poznan)

Other projects in Other projects in Germany, Denmark, Germany, Denmark, AustraliaAustralia

Total at June 30, 2003 Total at June 30, 2003 597597 663663 1,260 1,260

In €m


Cash flow from operations at June 30, 2004

1 346+ 0.6

+ 1 471

+ 141

- 3.7 - 13.5

1 200

1 250

1 300

1 350

1 400

1 450

1 500

Cash f low from ops 30/06/2003

Impact disposals

Impact Interest Rates

Impact Exchange Rate

Performance Cash f low from ops 30/06/2004

In €m

+9%+9%


Strong increase in positive free cash flow

Cash flow from operations +1,471 +1,346 +9%

Capital expenditures / investments (1,212) (1,260)

Impact of changes in consolidation scope (33) +33

Change in the WCR (1) +159 (57)

Disposal of assets +155 +109

30/06/2004 30/06/2003

Free cash flow before disposals ofnon-core assets +540 +171 X 3

∆30.06.04/30.06.03

In €m

(1)(1) Not including the change in the securit izationNot including the change in the securit ization and receivables discounting programsand receivables discounting programs


Strong increase in positive free cash flow

Cash flow from operations +1,471 +1,346 +9%

Capital expenditures / investments (1,212) (1,260)

Impact of changes in consolidation scope (33) +33

Change in the WCR (1) +159 (57)

Disposal of assets +155 +109

30/06/2004 30/06/2003

Free cash flow before disposals ofnon-core assets +540 +171 X 3

∆30.06.04/30.06.03In €m

(1)(1) Not including the change in the securit izationNot including the change in the securit ization and receivables discounting programsand receivables discounting programs


Change in net debt during the first half 2004 30/06/2004

Net debt at start of period 11,804Change in receivablesChange in receivables discounting programdiscounting program +262+262

Reclassification of securitization & special purpose entitiesReclassification of securitization & special purpose entities +703+703

Net debt after above changes in receivables disc. program and reclassification during the 1st half-year 2004 (1) 12,769

Cash flow Cash flow available before disposal of nonavailable before disposal of non--corecore activitiesactivities --540540

Disposal of nonDisposal of non--corecore activitiesactivities --6666

Dividend paymentsDividend payments +315+315

Impact of foreign exchange andImpact of foreign exchange and otherother +248+248

Net debt at end of the 1st half 2004 12,726

In €m

(1) Inc luding changes in receivables discounting program and reclassif ication impact of the LSF (French Financial Security Act)


Disposal of North American Water activities in 2003 and 2004Target met

EverpureEverpure USD 215mUSD 215m

Farmlands in CaliforniaFarmlands in California USD 77mUSD 77m

USF equipment & USF equipment & short term services short term services (1)(1) USD 993mUSD 993m

Culligan Culligan (2)(2) USD 610mUSD 610m

SubSub--totaltotal USD 1,895mUSD 1,895m

Surface Preparation Surface Preparation (3)(3) USD 130mUSD 130m

Total USD 2,025m

i.e.: €1,550m 1,550m (4)(4)

Sale price

(1)(1) Received on August 2, 2004Received on August 2, 2004(2)(2) To beTo be receivedreceived dur ingdur ing the 2nd halfthe 2nd half

i.e.: €1,656m (4)

(3)(3) Sold dur ing the 3rd quarter of 2003Sold dur ing the 3rd quarter of 2003(4)(4) Based on verage exchange rate in H1 2004 usedBased on verage exchange rate in H1 2004 used


Disposals completed in 2003 and in progressduring 2004

Total disposals in the USTotal disposals in the US

FCC FCC (1)(1)

Other disposals in 2003 Other disposals in 2003 (2)(2)

Disposal of operating assetsDisposal of operating assets during H1 2004during H1 2004

Total Total

€1,656m€1,656m€916m€916m€408m€408m€155m€155m

€3,135m

Sale price

(1)(1) Received in the 2nd half of 2004Received in the 2nd half of 2004(2)(2) Total 2003 assetTotal 2003 asset disposals: €720m (retreated for the sale of Everpure of €191m indisposals: €720m (retreated for the sale of Everpure of €191m in December December

2003 and of Surface Preparation for €121m in September 2003)2003 and of Surface Preparation for €121m in September 2003)


First-half contribution of activities sold sincethe beginning of 2004

Revenue Revenue 736736 1,4891,489 2,225

EBITDA 68 194 262

EBIT 29 132 161

Capital expend. / investments 30 129 159

Cash flow from operations 60 165 225

North American Water activities

FCC (1) Totalin €m

(1)(1) Not including the 50% interest in Proactiva ow ned by FCC: ProactNot including the 50% interest in Proactiva ow ned by FCC: Proactiva is to be consolidated proportionately once iva is to be consolidated proportionately once the sale of FCC becomes effective during the second half of 2004the sale of FCC becomes effective during the second half of 2004..


11.712.0Consolidated revenue (€bn)June 30, 2003June 30, 2004

OutlookScope of consolidation at June 30, 2004 after disposals in US (1) and sale of FCC (2)

Water39%

Waste 25%

Energy Serv. 21%

Transportation 15%

Breakdown of revenue at June 30, 2004 by division after disposals in US and

sale of FCC

Breakdown of revenue at June 30, 2004 by region after disposals in US and sale

of FCC

France 55%

Rest of Europe 29%

North America8%

Asia/Pacific 4% RoW 4%

(1) Excluding the North A merican businesses sold during 2003 (Surface Preparation and Everpure) or in the process of being sold (Culligan, equipment and short-term services).

(2) FCC w as consolidated proportionately until June 30, 2004


Veolia Environnement today : a group

Refocused on its strategic businesses in targeted geographic zones

Offering long and sustained visibility

With a strengthened financial situation (control of indebtedness and generation of free cash flow)

A steady rise in profitability founded upon rigorous management (Veolia 2005)


2000-2004Review of four years of

transformation


Changes in the business portfolio

Major commercial success

Contracts renewed on the same, if not better business terms

Strategic contracts awarded

Positions consolidated in Central Europe

Major presence being established in Asia


China (Baoji, Beijing, Guangzhou, Lao Gang, Pudong/Shanghai, Shenzhen, Tianjin, Zuhai …), Singapore, Taichung(Taiwan)…

Asia

Auckland, Melbourne, Woodlawn…

Australia/New Zealand

Indianapolis, Atlanta, Boston, Pontiac (Michigan), Tampa, Oklahoma City, Washington DC, US Virgin Islands …

US

Czech Rep. (Prague, Moravia). Lithuania, Poland (Poznan), Slovenia, Estonia

Central and Eastern EuropeBrussels, Camden, Dublin, East Sussex, Gera, Marne, Lyon, Metz, Rennes, The Hague, Weisswasser (Saxony) Westminster…

Western Europe

Africa & Middle EastAl exandria, Jerusalem, Rabat …

Strategic contracts won around the worldPrincipal municipal outsourcing contracts won and renewed since 2001


And highly successful in the development of industrial outsourcing contracts…

Hynix, Michelin, Petronas…

Asia BP, ConocoPhilips, Ford, General Motors, Kerr McGee, 3M…

US

Setuza (Czech Rep.), Richter Gideon Rt (Hungary) …

Central and Eastern Europe

Arcelor, ATM Milan, BP Lavera, L’Oréal, Manuli Films, Novartis, PSA Citroën, Pigna, Renault, Visteon…

Western Europe



Strategic contracts awarded: Prague, Budapest, Bucharest, Baltic countries, Sheffield, Indianapolis, Boston, Shanghai, Shenzhen, Melbourne, etc.

Industrial investmentsMajor expansion plans launched

Water BOTs: The Hague, Brussels, Chengdu, AshkelonIncinerators in France and the UK

AcquisitionsSignificant success through targeted acquisitions in line with the Group’s strategy: Pacific Waste, Siram, Verney


1331 1 382 1 323 1 325591

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Heightened control over investments(in €m)

Total investment

Of which maintenance capex

1 212

2 973

3 7394 052

2001 2002 2003 H1 20042000

3 538


540

-3171

-854-672

-1 008-1 221

-1 384-2000

-1500

-1000

-500

0

500

1000

2000 H1 2001 H2 2001 H1 2002 H2 2002

H1 2003 H2 2003 H1 2004

(in €m)

Very favorable trend reversal since the beginning of 2003

Free cash flow after investments and changes in the WCR, before dividends and non-core asset disposals


Strategic management of the business mix

€5 billion in strategic asset disposalsUS Filter disposals

2000-2004: $3.5 billionExit from the equipment and short-term services activities, retail and commercial activities

Sale of FCC stake2004: €1.1 billionPartnership terminated owing to strategic differences

Stake in Dalkia sold to EdF for €1.1 billionPartnership with a primary energy producer

And over €1 billion in “recurring” disposalsSale of minority shareholdings: PSC 2002, UKAsset disposals: Barraqueiro 2000, Wyuna 2003Optimization of industrial assets


Estimated 2004 revenueAfter announced US disposals and sale of FCC

~€24 billion


Balanced revenue contribution from divisions

51%

17%

12%

11%

9%

Pro forma 1999 revenue €23.2 billion

(including 1999 US acquisitions on a full year basis)

WaterWasteEnergy serv icesTra nsportationFCC

39%

21%

15%

25%

€11.8 billion (1)

€4 billion

€2.8 billion

€2.5 billion

€2.1 billion

(1) incl. 42% in the US


8%8%

55%29%

23%

4%

42%

31%

incl. 4% in Asia-Pacific


Pro forma 1999Estimated 2004

After announced US disposals and sale of FCCFrance

Rest of EuropeUSARoW

incl. 1% in Asia-Pacific

USA: strategic refocusingUSA: strategic refocusingEurope: consolidation of a domestic marketEurope: consolidation of a domestic marketAsia: startAsia: start--up of activitiesup of activities


10

11

12

13

14

15

16

17

Financial structure strengthened(in € bn)

(*) Inc luding consolidation of €325m for w ater securitizations and €378m of special purpose entit ies (application of French Financial Security Act)

Significant reduction in consolidated net debt

Pre-IPO (July 2000)

June 30, 2001

TargetTarget€10.5 €10.5 -- 11.0 bn11.0 bn

Dec. 31, 2004eJune 30, 2002 June 30, 2003 June 30, 2004

12.713.1

14.815.0

16.6

0,7 (*)0,7 (*)


Solid cash flow from operations in spite of asset disposals and currency effects

(in €m)

1 953

2455

2780 2701

22.9%

21.3%

17.2%

14.8%

1 0001 200

1 400

1 600

1 8002 000

2 200

2 400

2 6002 800

3 000

31/12/2000 31/12/2001 31/12/2002 31/12/200312%

14%

16%

18%

20%

22%

24%

26%

Cash flow from operations (€m) Cash flow/Net debt (% )


2223

21

18

7.0%

6.4%

10

12

14

16

18

20

22

24

5%

6%

7%

8%

9%

10%

Average capital employed (€m) ROCE Group (in %)

(in €bn)

Financial structure strengthened

Profitability improvement

2001 2002 2003 2004 target .

/18.5/18.5


Appendices


IFRS progress report: : Migration program in progress since 2003

IFRS-compliant financial statements are to be published from 2005 with comparative figures for 2004The IFRS project was launched with the identification of the principal differences between the French and international standards based on the experience gained when US GAAP were adopted in 2001

Implementation of a Steering Committee led by the Sr. Exec VP and a 16-person IFRS working group devoting 100% of its time to the transition to IAS/IFRS;

Training was held during the first half of 2004 for over 1,200 employees at the Veolia Campus for an average of two days varying according to the audience: Finance department, accountants, lawyers, sales teams. Accounting principleshandbook made available on VE's intranet portal;

IT-based consolidation system adapted to IFRS: reporting system adjusted to produce the 2004 and 2005 financial statements.

Uncertainty of the interpretation of IFRS standards as they relate to the treatment of concessions. Publication of an IFRIC interpretation expected in the first quarter of 2005.


1st quarter2nd quarter 3rd quarter 4th quarterFirst quarter

FTA (1) v1

Reported on 14/06/04

2003 2004 2005

Identification of differences

between French GAAP/IFRS

Review with auditors

IRFS training for over 1,200 employees

FTA v2

10/09/04 reviewed by

auditors

Presentation of 2004 financial

statements

IFRS project schedule

Quantified impact of

FTA

FTA v3

…/../04 reviewed by

auditors

(1) FTA : First Time Adoption. Reconstitution of the consolidated balance sheet at January 1, 2004


IFRS project report update: principal restatements

Revenue from ordinary activities IAS18 Exclusion of amounts collected on behalf of third parties from revenue and cost of revenue

Standards Restatements carried out

Financial debt IAS39 Consolidation of Veolia Water's securitization programs and of receivables discounting

Valuation of financial IAS 32-39 Valuation already completedinstruments (FAS133). Option chosen

Jan. 1, 2004

Employee benefits IAS 19 Accounting treatment of retirement commitments already in line with IAS 19, especially retaining the corridor approach. Actuarial differences set to zero.

Intangible assets and IAS 38 Reclassification of some deferred charges business assets

Adjustment of provisions IAS 37


Debt structure

Ratings Standard & Poor's BBB+ / Stable / A2Moody's Baa1 / Stable / P2

Average maturity for reclassified debt (1): ~ 6.5 years

64% of gross debt denominated in euros, 23% of gross debt in US dollars

Fixed/variable interest rate (after hedging) : 48% / 52%

73% of net debt excluding Project financing debt concentrated at VE level

Liquidity: €8.5bn (Cash : €3.1bn / Credit lines not drawn down: €5.4 bn)

(1) Gross debt (1) Gross debt –– (marketable securit ies + cash and equivalence) (marketable securit ies + cash and equivalence)


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 [email protected]

Brian SULLIVAN, Vice President, US Investor Relations

1605 Main Street, Suite 710, Sarasota, FL 34236- USA

Telephone (941) 362-2435

Fax (941) 362-2499

e-mail [email protected]

Web sitehttp://www.veoliaenvironnement-finance.com

Financial Communication

Economy & Finance

2004, First Half Results