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2003-03-10
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Germany, April 2003 1
Germany, April 2003 2
Important Important Legal DisclaimerLegal 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 Environnementmay 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 3
Table of Contents Table of Contents
1/ 2002 : A decisive year
2/ A strong business model
3/ Improving credit profile
Germany, April 2003 4
1/ 2002 : A 1/ 2002 : A decisive yeardecisive 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 5
“Shareholder”“Shareholder” : : the contagion risk has been removed by the the contagion risk has been removed by the completion of the “completion of the “spin off” spin off” from VUfrom VU
“Sector” “Sector” : : The Latin America risk and the crisis in the Energy sector The Latin America risk and the crisis in the Energy sector are 2 nonare 2 non--issues for the Group. As world leader in Environmental issues for the Group. As world leader in Environmental Services VE is able to generate FFO, even in a difficult economServices VE is able to generate FFO, even in a difficult economic ic climateclimate
“Liquidity” :“Liquidity” :CashCash--flow generation up significantlyflow generation up significantlyDecrease in net indebtedness : from 14.2 €Decrease in net indebtedness : from 14.2 €bnbn to 13.1 €to 13.1 €bnbnStrong improvement in [net debt / EBITDA] ratio from 4 to 3.4Strong improvement in [net debt / EBITDA] ratio from 4 to 3.4Strengthening of financial flexibility by better covenant levelsStrengthening of financial flexibility by better covenant levels, , elimination of all ratings triggers and improvement in liquidityelimination of all ratings triggers and improvement in liquiditypositionpositionPension schemes : no key issuePension schemes : no key issue
2002 : 2002 : thethe Group has Group has overcomeovercome 3 3 stress stress scenariosscenarios
Germany, April 2003 6
Strong Shareholder structureStrong ShareholderStrong Shareholder structurestructure
Identified investorsIdentified investors: :
NB : EDF NB : EDF ownsowns 34% of 34% of DalkiaDalkia
Vivendi Vivendi Universal Universal 20.4%20.4%
FloatFloat 49.0%49.0%
Identified investors Identified investors 30.6%30.6%
State Owned Companies (12,8%) Insurance Companies and others (10,7%) Relationship Banks (7,1%)
CDC Groupama BNP Paribas
Eurazeo
Electricité de France (EDF)
Groupe AXA Société Générale
Wasserstein Family Trust
Caisse Nationale des Caisses d'Epargne Assurances Générales de France Crédit LyonnaisGroupe CNP
Médéric Prévoyance Crédit Agricole IndosuezGenerali Crédit Mutuel CIC
DexiaNatexis
Germany, April 2003 7
2/ A 2/ A strong strong business model :business model :
Our Our strategy is clear and unchangedstrategy is clear and unchanged : VE : VE isis not a «not a « multimulti utilityutility » but » but remainsremains focussedfocussed on one business : on one business : environmentalenvironmental services. services.
VE is not only one of the largest VE is not only one of the largest but also the only “pure” playerbut also the only “pure” player
Germany, April 2003 8
A key competitive advantage : 5 brands A key competitive advantage : 5 brands with a strong leadership on their marketswith a strong leadership on their markets
No.1 worldwide : No.1 worldwide : Municipal and industrial water and wastewater Municipal and industrial water and wastewater treatment and servicestreatment and servicesResidential and commercial treatment and servicesResidential and commercial treatment and services
Water
No. 1 in EuropeNo. 1 in EuropeNo. 3 worldwideNo. 3 worldwide
Collection and servicesCollection and servicesDisposal and treatment Disposal and treatment (solid, liquid, hazardous waste)(solid, liquid, hazardous waste)
Waste
No. 1 in Europe for heatingNo. 1 in Europe for heatingEnergy managementEnergy managementIndustrial utilitiesIndustrial utilitiesFacilities managementFacilities management
EnergyServices
No. 1 Private in EuropeNo. 1 Private in EuropePrivate and public passenger transportationPrivate and public passenger transportationRail, buses and othersRail, buses and others
Transport
Environmental services in Spain (FCC)Environmental services in Spain (FCC)Joint venture VE / FCC in Latin America Joint venture VE / FCC in Latin America ((ProactivaProactiva))
FCC
Germany, April 2003 9
Continued execution Continued execution of of strategystrategyConfirmed business model
The pure player in environmental servicesThe pure player in environmental services4 4 complementarycomplementary divisionsdivisions
WaterWaterWasteWasteEnergy servicesEnergy servicesTransportationTransportation
Secure geographical coverageSecure geographical coverageOver 95% of revenue generated in developed countries with Over 95% of revenue generated in developed countries with stable political and monetary systemsstable political and monetary systemsGrowth ensured by a balanced customer mix (municipalities Growth ensured by a balanced customer mix (municipalities ~65% of revenue; manufacturing and s~65% of revenue; manufacturing and service ervice customers ~35%)customers ~35%)Positions in highPositions in high--potential markets such as waterpotential markets such as waterRecurring future cash flows and undergoing growth: Recurring future cash flows and undergoing growth: strengthened additional order backlog (€strengthened additional order backlog (€30 30 billion in 2002)billion in 2002)Organic growthOrganic growth, no major acquisition , no major acquisition requiredrequired
Germany, April 2003 10
RevenueRevenueRevenue from core businessesRevenue from core businessesEBITDAEBITDAEBITDA from core businessesEBITDA from core businessesEBITEBITEBIT from core businessesEBIT from core businessesNet incomeNet incomeRecurring net incomeRecurring net incomeRecurring net income per share (in €)Recurring net income per share (in €)Dividend (in €) Dividend (in €) (1)(1)
Dividend pay out ratioDividend pay out ratioNet debt Net debt
In In €€ mm
2002 2002 keykey figuresfigures
Dec.31, 02Dec.31, 02 Dec. 31, 01Dec. 31, 01
(1)(1) excluding tax credit and subjectexcluding tax credit and subject to to thethe approvalapproval of of thethe ShareholdersShareholders Meeting on Meeting on AprilApril 3030
29,12729,12726,51326,513
3,7603,7603,4803,4802,0132,0131,8131,813
(2,251)(2,251)4204201.201.200.550.5546%46%
14,28314,283
30,07930,07928,07328,073
3,8873,8873,7273,7271,9711,9711,8471,847
3393394294291.161.160.550.5547%47%
13,06613,066
Number of shares: 405,070,459Number of shares: 405,070,459Average number of shares in 2002: 370,213,187Average number of shares in 2002: 370,213,187
+5.9%+5.9%
+7.1%+7.1%
+1.9%+1.9%
+7.2%+7.2%
+8.0%+8.0%
+3.2%+3.2%
2002/2001
Exchange rateCurrent Constant
Germany, April 2003 11
55% of 55% of corecore revenue revenue outsideoutside France but France but low low exposure exposure to to emergingemerging countriescountries
AsiaAsia 2%
FranceFrance45%
Rest of Europe Rest of Europe 35%
North America North America 12%
≤ 10 % of revenue in countries rated ≤ A-
Latin America Latin America 2%
OtOtherher 2%AustraliAustraliaa 2%
Germany, April 2003 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 13
In In €€mm
2002 : VE has self2002 : VE has self--financed its growthfinanced its growthCash Cash flow generationflow generation up up significantlysignificantly : +36%: +36%
2001200120022002
2,4552,455(1,382)(1,382)
1,0731,073(2,670)(2,670)
598598(460)(460)
437437
(1,022)(1,022)411411
(484)(484)
(1,095)(1,095)(13,187)(13,187)(14,283)(14,283)
Cash flow from operations (FFO)Cash flow from operations (FFO) +13%+13%Maintenance capital expenditureMaintenance capital expenditure
Cash flow available before growth Cash flow available before growth ((operoper. FCF). FCF) +36%+36%Capital expenditure for growthCapital expenditure for growthDisposal of assetsDisposal of assetsChange in scope of consolidationChange in scope of consolidationChange in working capital requirementChange in working capital requirement
Cash flow before financial transactionsCash flow before financial transactionsChange in capitalChange in capitalImpact of exchange rate, dividends and otherImpact of exchange rate, dividends and other
Cash flow for the year after capital increaseCash flow for the year after capital increaseNet debt at start of year 2002Net debt at start of year 2002Net debt at end of year 2002Net debt at end of year 2002
2,7802,780(1,323)(1,323)
1,457 1,457 (2,415)(2,415)
1,7711,771(525)(525)(464)(464)
(176)(176)1,5541,554(161)(161)
1,2171,217(14,283)(14,283)
(13,066)(13,066)
(2)(2)
(1)(1) IncludesIncludes €223m €223m increase relatedincrease related to to thethe reductionreduction in in thethe French French securitization programsecuritization program(2)(2) IncludesIncludes €815m €815m reduction relatedreduction related to to thethe introduction of introduction of thethe French French andand US US securitization programsecuritization program
(1)(1)
Germany, April 2003 14
In €mIn €m
0
500
1000
1500
2000
2500
3000
20002000 20012001 20022002 20002000 20012001 20022002
Net debt / EBITDA (x)
+32%+92%
Profitable growth : FFO +32% in 2 years at 2.7 bn; Operating FCF (before growth) : 1.4 bnProfitable Profitable growth growth : FFO +32% in 2 : FFO +32% in 2 years at years at 2.7 bn; 2.7 bn; Operating FCF (Operating FCF (before growthbefore growth) : 1.4 bn) : 1.4 bn
FFO FFO Operating FCFOperating FCF
4
3.9
3.8
3.7
3.6
3.5
3.4
3.3
3.2
3.1
3.0
2002: 3.4 (x)2001: 3.8 (x)2000: 4.0 (x)2,1002,100
2,4552,455
2,7802,780
758758
1,0731,073
1,4571,457
Germany, April 2003 15
5,0%
5,5%
6,0%
6,5%
7,0%
7,5%
8,0%
8,5%
23 000 25 000 27 000 29 000 31 000 33 000 35 000 37 000
2002
CA 2005 : +4% CAGR
CA 2005 : +8% CAGR
Key indicator: ROCEKey indicator: ROCE
2005 2005 targetstargets for for growth andgrowth and ROCEROCE
Core Core business revenuebusiness revenue
RO
CE
RO
CE
In In €€mm
ROCE is a key indicator to « fine tune » balance between growth and FCFROCE ROCE isis a a keykey indicatorindicator to «to « fine tunefine tune » » balance balance between growth andbetween growth and FCFFCF
Germany, April 2003 16
Average revenue growth in core businesses of Average revenue growth in core businesses of 44––8% per year from 2002 to 20058% per year from 2002 to 2005
Improved profitability: increase in ROCE Improved profitability: increase in ROCE for for each each division, division, based on: based on:
Maturation of contracts signed since 1999Maturation of contracts signed since 1999Productivity improvement effortsProductivity improvement efforts
Implementation of synergiesImplementation of synergiesSelective investment policySelective investment policyActive management of asset portfolioActive management of asset portfolio
Industrial flexibility is strong : VE can afford to balance growth / FCF
Germany, April 2003 17
3/ 3/ Improving creditImproving credit profileprofile
Success in 2002:Strengthening of financial flexibility
2003 Target:To extend debt maturityusing the bond markets
Germany, April 2003 18
DecreaseDecrease of Gross of Gross Debt andDebt and Net Net DebtDebt
In €m
BondsOther LT debt
Short term debt
Gross Debt
LT financial assetsST financial assetsMarketable securities
Cash
Net Debt
2002
5 6347 2793 796
16 709
512488
2612 382
13 066
2001
5 1947 9405 576
18 710
342986
3242 776
14 287
Variation
440- 661
- 1 780
- 2 001
170- 497
- 63- 394
- 1 217
(1) Total : 2 643 €m(1) Total : 2 643 €m
(1)(1)
(1)(1)
Germany, April 2003 19
20032003268268
268268
LT LT debt schedule debt schedule 31/12/200231/12/2002Average debt maturity ~ 4 years
0
500
1000
1500
2000
2500
3000
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
> 2014
In € mIn € mBondsBonds 5.7 billion €5.7 billion €LT LT Bank Debt Bank Debt 7.4 billion €7.4 billion €
BondsBonds
Syndicated LoansSyndicated LoansBerlin Berlin ContractContractOthersOthersTotalTotal
200420041818
1 5201 520645645
3943942 5772 577
200520052 0352 035
227227
4184182 6792 679
20062006140140746746
4434431 3291 329
200820082 0002 000
3743742 3742 374
201220121 0001 000
3423421 3421 342
Germany, April 2003 20
Financial flexibility improved :Financial flexibility improved :1- Ratios / Covenants
Strong improvement Strong improvement of of covercover ratiosratios
5.15.13.43.4
4.84.83.83.8
20012002
3.73.74.04.0
2000
EBITDA/EBITDA/financial expensefinancial expense (x)(x)Net Net debtdebt/EBITDA (x)/EBITDA (x)
Interest coverageInterest coverage ratio (x)ratio (x)Debt payoutDebt payout ratio (x)ratio (x)
5,7 (>4)5,7 (>4)3,5 (<4,25)3,5 (<4,25)
Successful renegotiations Successful renegotiations Same ratios in all the documentation (Bank loans and US PP) :Elimination of all ratings triggersHigher flexibilityNo spread increase at current level
Covenants (Bank Definition)Covenants (Covenants (Bank DefinitionBank Definition))
Germany, April 2003 21
Financial flexibility improved: 2- Improvement of the liquidity position
Multi Purpose Facilities 1 750 1 750
Bank Facilities
Syndicated Loans 4 415 2 615
Cash immediately available 1 822
Total 6 420
Liquidity increaseLiquidity increase by 90% by 90% over the past two yearsover the past two years
December 2002
Total Available
1 300 1 300
423
4 415 2 149
1 681
5 553
March 2003
Total Available
233
1 200
4 564 0
1 541
2 941
December 2000
Total Available
200
1 200
Other cash/Marketable securities
Grand Total 7 382 6 515 3 424
962 962 483
In € m
(E)(E) (1)(1)
(1)(1)
(1) Total : 2 643 €m(1) Total : 2 643 €m
Germany, April 2003 22
EUR 68%EUR 68%USD 22%USD 22%
OthersOthers 10%10%
Fixed Fixed rates 51%rates 51%FloatingFloating rates 49%rates 49%
Structure of Structure of the debtthe debt
Currency Type of rate(after hedging)
VE VE strategy strategy : To : To hedge hedge FX FX and interest risksand interest risks (FFO in (FFO in currenciescurrencies, , contracts indexed contracts indexed on inflation)on inflation)
Based Based on on gross debtgross debt
Germany, April 2003 23
Diversification of Diversification of fundingfunding sourcessources
Syndicated loans24%
Océanes10%
Bonds3%
Commercial paper 4%
Bilateral facilities 52%
C/C VU7%
DecDec. 2000. 2000
Bank Debt : 76%All Bonds : 17%
Syndicated loans19%
Océanes9%
Commercial paper7%
Bilateral facilities 39%
Bonds26%
DecDec. 2002. 2002
Bank Debt : 58%All Bonds : 42%
Germany, April 2003 24
Centralized debt Centralized debt management management
84%Vivendi Environnement 62%
Vivendi Environnement
Subsidiaries12%
Proportional consolidation (PC*) and Project Finance Structures
26%
Subsidiaries16%
Group VE (bn € 13,1)Group VE (bn € 13,1)Group VE (bn € 13,1) VE global (bn € 9.7)(excluding PC and PFS : non recourse debt)
VE global (bn € 9.7)VE global (bn € 9.7)((excluding excluding PC PC and and PFS : non PFS : non recourserecourse debtdebt))
Based Based on net on net debtdebt
* PC * PC include essentiallyinclude essentially FCC, FCC, Dakia Dakia International International and and Berlin Berlin WasserWasser
Germany, April 2003 25
Benefit obligation (928)
Fair value of plan assets 903
Funded status of plan
(973)
766
(207) (25)
Pension plan and other cost retirement benefitsPension plan Pension plan and other cost and other cost retirement retirement benefitsbenefits
20012002
(*)(*)
In € m
(*) France : legal retirement obligation : ~ € 120 mUK : ~ € 60 mOthers : ~ € 27 m
~ € 207 m
US : all pension plans are based on defined contribution scheme
(*) France : (*) France : legal legal retirement obligation : retirement obligation : ~ € 120 m~ € 120 mUK : UK : ~ € 60 m~ € 60 mOthersOthers : : ~ € 27 m~ € 27 m
~ € 207 m~ € 207 m
US : all pension plans are US : all pension plans are basedbased on on defineddefined contribution contribution schemescheme
Germany, April 2003 26
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 “.
Off-balance SheetPut FCCOffOff--balance balance SheetSheetPut FCCPut FCC
Net Debt / Ebitda
Year 2002
3,4
After excercising the put
3,3
After public offer3,7
After selling non-core
3,3
If put exercised :
FCC Revenue 2002 : FCC Revenue 2002 : € 5 317 m€ 5 317 m SOP € 4 508 m (1)SOP € 4 508 m (1)ServiciosServicios 31%31% SOP € 1 703 m (1)SOP € 1 703 m (1)CementosCementos 39%39%ConstrucciónConstrucción 16%16%Servicios urbanosServicios urbanos 12%12%OtrosOtros 2%2% (1) (1) Schroder SalomonSmithBarney Schroder SalomonSmithBarney 25/02/0325/02/03
SOP € 2 805 m (1)SOP € 2 805 m (1)
Germany, April 2003 27
LT Ratings : S&P LT Ratings : S&P BBB+ / O sBBB+ / O sMoody’sMoody’s Baa1 / O 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 triggersRemoval of all ratings triggers
Easing of covenant levelsEasing of covenant levels
Extension of the average debt maturityExtension of the average debt maturity
BBB+ rating stableBBB+ rating stable
Germany, April 2003 28
LT Ratings : S&P LT Ratings : S&P BBB+ / O sBBB+ / O sMoody’sMoody’s Baa1 / O 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 The negative outlook was the result of the XdefaultXdefault of of VivendiVivendiUniversal, cleared up in August 2002Universal, cleared up in August 2002
The last press release on March 3rd states : “ The last press release on March 3rd states : “ VE has made VE has made significant progress in 2002 in improving the financial arrangemsignificant progress in 2002 in improving the financial arrangements of ents of facilities by removing all rating triggers that could lead to acfacilities by removing all rating triggers that could lead to acceleration celeration and by increasing headroom under its financial covenants.and by increasing headroom under its financial covenants.The negative outlook reflects The negative outlook reflects Moody’sMoody’s views regarding the needs for views regarding the needs for further strengthening in areas including liquidity, increasing tfurther strengthening in areas including liquidity, increasing the he availability and maturity profile of its financing arrangements,availability and maturity profile of its financing arrangements, and and reducing the growth trends in its underlying capital expenditurereducing the growth trends in its underlying capital expenditure levels.”levels.”
Germany, April 2003 29
Our targets for 2003 - 2004
Further improvement of cover ratiosFurther improvement of cover ratios
2003 : positive free cash2003 : positive free cash--flows after disposals and flows after disposals and growth growth capexcapex≥≥ 2004 : 2004 : positive free cashpositive free cash--flowsflows
No Debt increase : No Debt increase :
Stabilization or even reductionStabilization or even reduction
Extension of duration by using bond marketsExtension of duration by using bond markets
Rating : Rating :
Maintain or even improve our LT and ST ratingsMaintain or even improve our LT and ST ratings
Germany, April 2003 30
AppendixAppendix
Germany, April 2003 31
History of Vivendi Universal’s stake in Vivendi Environnement’s equity capital
December 1999December 1999 Formation of Formation of Vivendi EnvironnementVivendi Environnement (VE), (VE), 100% owned by owned by VivendiVivendi Universal (VU)Universal (VU)
July 20, 2000July 20, 2000 IPOIPOVU owns VU owns 72.3%
December 17, 2001December 17, 2001 VU sells 9.3%VU sells 9.3%VU owns VU owns 63%
June 28, 2002June 28, 2002 VU sells 15.5%VU sells 15.5%VU owns VU owns 47.5%
August 2, 2002August 2, 2002 1.5 billion euro capital increase for VE1.5 billion euro capital increase for VEVU owns VU owns 40.8%
December 24, 2002December 24, 2002 VU sells 20.4%, +20.4% call option VU sells 20.4%, +20.4% call option exercisable at 26.5 euros per share at any exercisable at 26.5 euros per share at any time until December 2004. VU owns time until December 2004. VU owns 20.4%
Germany, April 2003 32
Covenants (Covenants (Bank DefinitionBank Definition))
Interest coverageInterest coverage ratio (x)ratio (x)
Debt payoutDebt payout ratio (x)ratio (x)
5,7 (>4)5,7 (>4)
3,5 (<4,25)3,5 (<4,25)
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
In €mIn €m
Germany, April 2003 33
Securitization ProgramsSecuritization Programs
In €m
1. SecuritizationWater France
USF
2. Facturing
3. Cogevolt (future receivables)
Total
2002
379379
0
767
739
1 885
2001
883713
170
656
859
2 398
Variation
- 504- 334
- 170
+ 111
- 120
- 513
Germany, April 2003 34
A CEO and a new Board of Directors (14 members) :A CEO and a new Board of Directors (14 members) :
The Two Board committees should be maintained :The Two Board committees should be maintained :Audit, Transaction and Commitment CommitteeAudit, Transaction and Commitment CommitteeSelection and Compensation CommitteeSelection and Compensation Committee
An Ethical Chart has been approvedAn Ethical Chart has been approved(* subject to approval of shareholders meeting of April 30, 2003(* subject to approval of shareholders meeting of April 30, 2003))
2003 : A new governance and a new name as a 2003 : A new governance and a new name as a result of the new shareholder structure *result of the new shareholder structure *
Board of Directors
Arthur Laffer Francis Mayer Serge Michel Georges Ralli Baudouin Prot Louis Schweitzer Murray Stuart
Henri Proglio (Chairman of Board of Directors)Jean Azéma Daniel Bouton Jean-Marc Espalioux Jacques Espinasse Paul-Louis Girardot Philippe Kourilski
Germany, April 2003 35
Significant Significant items by Divisionitems by Division
WaterWaterRevenue Revenue €€ 11 288 m11 288 mEBIT EBIT marginmargin 7.4%7.4%
WasteWasteRevenue Revenue €€ 6 139 m6 139 mEBIT EBIT marginmargin 6.4%6.4%
France Good trend for both revenue and earningsGood trend for both revenue and earningsIncrease in water distributionIncrease in water distributionReturn to profit for Return to profit for VivendiVivendi Water SystemsWater Systems
USA Stable performance for core businesses and continued Stable performance for core businesses and continued slowdown in sales of nonslowdown in sales of non-- core equipmentcore equipmentConsumer business stableConsumer business stable
RoW Increased contribution from Central Europe, and startIncreased contribution from Central Europe, and start--up ofup ofmajor contracts in Asia (major contracts in Asia (HynixHynix, , ChengduChengdu))
France Partial impact of restructuring measures in progressPartial impact of restructuring measures in progress
UK Revenue growth of 14% Revenue growth of 14% EBIT x 1.5 (positive impact of recovery plan, SheffieldEBIT x 1.5 (positive impact of recovery plan, Sheffieldand Bromley)and Bromley)
USA Weakness in "industrial services" and upturn for "toxicWeakness in "industrial services" and upturn for "toxicwastewaste”” activitiesactivities
Asia Excellent performance from PWM: 10% rise in revenueExcellent performance from PWM: 10% rise in revenueand further improvements in marginand further improvements in margin
Germany, April 2003 36
EnergyEnergy servicesservicesRevenue Revenue €€ 4 571 m4 571 mEBIT EBIT marginmargin 7.1%7.1%
France Strong growth in cogeneration and service contractsStrong growth in cogeneration and service contractsImpact of business mix on marginImpact of business mix on margin
Europe Revenue growth in Southern and Central EuropeRevenue growth in Southern and Central EuropeEBIT x 4 in Italy due to integration of EBIT x 4 in Italy due to integration of SiramSiramGood contribution from Estonia and PolandGood contribution from Estonia and Poland
TransportationTransportationRevenue Revenue €€ 3 422 m3 422 mEBIT EBIT marginmargin 3.2%3.2%
France Contribution from Contribution from Verney Verney (acquisition)(acquisition)UK Difficult market, Difficult market, declinedecline in in passenger numbers passenger numbers Other(Europe/USA) Full impact of new contracts in Northern andFull impact of new contracts in Northern and
Central EuropeCentral EuropeStartStart--up of new contractsup of new contracts
FCCFCCRevenue Revenue €€ 2 653 m2 653 mEBIT EBIT marginmargin 9.3%9.3%
DoubleDouble--didigitgit increase:increase:-- in services: rise in demand for waste in services: rise in demand for waste
management servicesmanagement services-- in cement businessin cement business
Significant items by DivisionSignificantSignificant items by Divisionitems by Division
Germany, April 2003 37
Strengthened financialStrengthened financial situation situation throughthrough an an active active financing policy financing policy in 2002in 2002
Active debt managementActive debt management
Total independence of financing (elimination of Total independence of financing (elimination of crosscross--default with default with Vivendi Vivendi Universal in August 2002)Universal in August 2002)Currency coverage of assetsCurrency coverage of assetsExtension of average debt maturityExtension of average debt maturityElimination of all ratings triggersElimination of all ratings triggers
Financial Financial flexibilityflexibility
Improvement in liquidityImprovement in liquidityEasing of covenant levelsEasing of covenant levelsNo ringNo ring--fencing fencing for for core core businessbusinessLow level Low level of of minority interests minority interests in in WaterWater & & WasteWaste (all major (all major subsidiaries subsidiaries are 100% are 100% controlledcontrolled))
Germany, April 2003 38
Off-balance SheetPut Southern WaterOffOff--balance balance SheetSheetPut Put Southern WaterSouthern 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 39
Structural Subordination Structural Subordination withinwithin VEVE
Net Net debtdebt / EBITDA (x)/ EBITDA (x)FFO / Net FFO / Net debt debt (x)(x)
3.403.400.220.22
3.363.360.210.21
VE globalGroup VE PC * + PFS
3.243.240.190.19
1) No impact on financial ratios : EBITDA generation and net debt well balanced
* PC * PC include essentiallyinclude essentially FCC, FCC, Dakia Dakia International International and and Berlin Berlin WasserWasser
Germany, April 2003 40
Structural Subordination Structural Subordination withinwithin VEVE
(*) Net of loans and debt to subsidiaries(*) Net of (*) Net of loans and debt loans and debt to to subsidiariessubsidiaries
2) Balance of external debt of VE SA with downstream loans to subsidiaries
(**) External debt net of cash(**) (**) External debt External debt net of cashnet of cash
DownstreamLoans (*)
ExternalDebt (**)
Net
9 517 9 080 437In € m
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.