2008, First Half Results

Veolia Environnement Investor Relations – First Half 2008 Results – 07/08/2008

FIRST HALF 2008 RESULTS

Veolia Environnement

DisclaimerInvestor Relations – First Half 2008 Results – 07/08/2008

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 of1995. Such forward-looking statements are not guarantees of future performance. Actual results may differmaterially from the forward-looking statements as a result of a number of risks and uncertainties, many of which areoutside our control, including but not limited to: the risk of suffering reduced profits or losses as a result of intenseoutside our control, including but not limited to: the risk of suffering reduced profits or losses as a result of intensecompetition, the risks associated with conducting business in some countries outside of Western Europe, the UnitedStates 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 theproject, 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 economicthe risk that our long-term contracts may limit our capacity to quickly and effectively react to general economicchanges affecting our performance under those contracts, the risk that Veolia Environnement's compliance withenvironmental laws may become more costly in the future, the risk that currency exchange rate fluctuations maynegatively affect Veolia Environnement's financial results and the price of its shares, the risk that VeoliaEnvironnement may incur environmental liability in connection with its past, present and future operations, as wellas the risks described in the documents Veolia Environnement has filed with the U.S. Securities and ExchangeCommission. Veolia Environnement does not undertake, nor does it have, any obligation to provide updates or torevise any forward-looking statements. Investors and security holders may obtain a free copy of documents filed byVeolia 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 financialmeasures" are being communicated and made public in accordance with the exemption provided by Rule 100(c) ofRegulation G.

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DisclaimerInvestor Relations – First Half 2008 Results – 07/08/2008

This document does not constitute an offer of securities in the United States or in any other jurisdiction. Securities maynot be offered in the United States without registration under the United States Securities Act of 1933 or an exemptionfrom registration. Veolia Environnement does not intend to register the offering described in this document or to

d bli ff i f i i i h U i d Sconduct a public offering of securities in the United States.

A French language prospectus relating to the French offering has been approved by the French Autorité des MarchésFinanciers under number 07-180. Copies of the French prospectus are available in France from Veolia Environnementor from authorized financial intermediaries. The French prospectus contains a section that describes certain risk factorsp pthat investors should take into account before making any investment decision.

The offer and sale of the securities described in this document may be restricted by law or regulation. No offer will bemade in any jurisdiction or to any person except under circumstances in which such offer may lawfully be made.

This document contains certain information relating to the valuation of certain of Veolia Environnement’srecently announced or completed acquisitions. In some cases, the valuation is expressed as a multiple ofEBITDA of the acquired business, based on the financial information provided to Veolia Environnement aspart of the acquisition process. Such multiples do not imply any prediction as to the actual levels of EBITDAth t th i d b i lik l t hi A t l EBITDA b d l ff t d bthat the acquired businesses are likely to achieve. Actual EBITDA may be adversely affected by numerousfactors, including those described under “Forward-Looking Statements” above.

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Strong growth in revenue. Increase in cash flow from operations and recurring operating income

Investor Relations – First Half 2008 Results – 07/08/2008

p g p g

Strong increase in revenue at €18,092m: +19.5% at constant exchangeStrong increase in revenue at €18,092m: 19.5% at constant exchange rates (+17% at current exchange rates)

Further robust internal growth: +11.1%

Contribution of acquisitions completed in 2007 and early 2008: +8.4%

Operating cash flow at €2 151m: +9 3% at constant exchange rates (+6 9%Operating cash flow at €2,151m: +9.3% at constant exchange rates (+6.9% at current exchange rates)

Recurring operating income at €1 300m: +7 6% at constant exchange ratesRecurring operating income at €1,300m: +7.6% at constant exchange rates (+5.2% at current exchange rates)

Recurring net income at €498m: +3.2%Recurring net income at €498m: +3.2%

Net earnings per share at €1.09 : -10% (1)

4

(1) Diluted by options


A volatile and uncertain economic environmentInvestor Relations – First Half 2008 Results – 07/08/2008

Change in EUR-GBPChange in EUR-USD

0,70000,72000,74000,76000,78000,80000,8200

1,370

1,420

1,470

1,520

1,570

1,620

0,64000,66000,6800

02/01

/2007

30/01

/2007

27/02

/2007

27/03

/2007

26/04

/2007

25/05

/2007

22/06

/2007

20/07

/2007

17/08

/2007

14/09

/2007

12/10

/2007

09/11

/2007

07/12

/2007

09/01

/2008

06/02

/2008

05/03

/2008

04/04

/2008

05/05

/2008

02/06

/2008

30/06

/2008

1,270

1,320

02/01

/2007

13/02

/2007

27/03

/2007

11/05

/2007

22/06

/2007

03/08

/2007

14/09

/2007

26/10

/2007

07/12

/2007

23/01

/2008

05/03

/2008

18/04

/2008

02/06

/2008

Price of Brent In $Growth in US GDP (as %)

100110120

130140150

2,50

3,25

4,00

4,75

607080

90100

01/06

/2007

29/06

/2007

27/07

/2007

24/08

/2007

21/09

/2007

19/10

/2007

16/11

/2007

14/12

/2007

15/01

/2008

12/02

/2008

11/03

/2008

09/04

/2008

07/05

/2008

04/06

/2008

02/07

/2008

-0,50

0,25

1,00

1,75

1-07

2-07

3-07

4-07

1-08

2-08,

Q1-0 Q2-0 Q3-0 Q4-0 Q1-0 Q2-0

Source : Bloomberg


Well-managed long-term growth (€m)Investor Relations – First Half 2008 Results – 07/08/2008

15,46218,092

2,1512,012

13 941

1,910

13,941

+9.3% (1)

+11.6% (1)+19.5%(1)

+5.6% (1)

Consolidated revenue (2) Operating cash flowConsolidated revenue Operating cash flow

498482

1,3001,2361,129

381

+26.6%+3.2%

+7.6% (1)

+9.8% (1)

6

(1) At constant exchange rates(2) Revenue from ordinary activities under IFRS

Recurring net incomeRecurring operating income


Revenue(1): Double-digit organic growth


-391(€m)1,709

1,31218,092

68

–60

281

765–229198–102

15,462 238

68

447353

6715,988

5,0855,221

W

4,049

4,196

WaterWasteEnergy servicesTransportation

2,7242,970

3,321

H1 2007 Internalgrowth

Externalgrowth

Foreignexch.

H1 2008

7+11.1% +8.4% -2.5% +17.0%(1) See definition p. 6.

impact


Consolidated revenue (1) for Veolia Water by activity (at current exchange rates)


5 000

5,500

6,000

in €m

5,221

5,988+14.7%

3 500

4,000

4,500

5,000

+6.4% 3,8953,660

2 000

2,500

3,000

3,500

+34 1%2,093

500

1,000

1,500

2,000 +34.1%1,561

0

Veolia Water - TotalH1 2007 H1 2008

Veolia Water - OperationsVeolia Water – Works & E&C

(1) See definition p. 6.


Breakdown of revenue (1) by geographic regionInvestor Relations – First Half 2008 Results – 07/08/2008

(€m)

+9.1%

(€m)

+9 1%

Δ atcurrent

FX

Δ at constant

FX

Internal growth

+6 8%9.1%+23.5%+23.0%+34.9%

9.1%+21.3%

+8.7%+29.7%

+6.8%+7.7%+8.5%

+25.4%+68.4%+64.6%

+19.5%VE Group

25.4%+66.9%

+11.1%+17.0%

1,002660

1,3001,086

H1 2007 H1 2008

Consolidated revenue (1) in H1 2008: €18,092m

9(1) See definition page 6

Consolidated revenue (1) in H1 2008: €18,092m


Impact of translating currencies into eurosInvestor Relations – First Half 2008 Results – 07/08/2008

The net impact at June 30, 2008, of variations in foreign exchange against the euro was:

Revenue, a negative impact of €391 million

against the euro was:

Operating cash flow, a negative impact of €49 million

Operating income, a negative impact of €30 million

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Impact of foreign exchange on revenue during the first half of 2008


Impact on revenue

Currencies concerned Main divisions impactedrevenue concerned

USD by -€195m Waste >50%, Transportation >25%, Water >20%

GBP by -€195m Waste >60%, Water >15%, Energy ~15%, Transportation < 5%

-€391m Non-€ European by +€79m Water ~30%, Waste ~20%, Energy >40%, Transportation <10%

Asian by -€52m Water ~60%, Waste >25%, Energy ~5%, Transportation >5%

Other countries by -€28m Water >60%, Waste >30%, Energy ~5%, Transportation <5%

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Water -€101m, Waste -€229m,Energy -€1m & Transportation -€60m


Impact of foreign exchange on operating cash flow in H1 2008


Impact on Operating cash

fCurrencies concerned Main divisions impacted

in H1 2008

USD by -€22m

flow

Primarily Waste

GBP by -€36m

y

Primarily Waste and Water

-€49m

Non-€ European by +€18m Primarily Energy

Asian and other countries by -€9m Primarily Waste and Water

Water -€16m, Waste -€44m,Energy +€12m & Transportation €1m

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Energy +€12m & Transportation -€1m


Impact of foreign exchange on operating income in H1 2008 Investor Relations – First Half 2008 Results – 07/08/2008

Impact on Operating Currencies concerned Main divisions impacted

Primarily Waste

income

USD by -€11m y

Primarily Waste and WaterGBP by -€26m

Primarily Energy

-€30m

Non-€ European by +€13m

Primarily Waste and WaterAsian and other countries by -€6m

Water -€11m, Waste -€29mEnergy +€9m & Transportation +€1m

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Energy +€9m & Transportation +€1m


Impact of rise in fuel costs on operating income: €36 mInvestor Relations – First Half 2008 Results – 07/08/2008

Coverage Mechanism & Commentary H1 08 cost

Net impact (e) H1 g y cost 08/H1 07

Water NS NS

Approx. 66% of costs are indexed or hedged. primarily impacting waste collection and transfer activities

€183m -€15m (1)

Around 2/3 of total costs benefited from indexation

Waste

waste collection and transfer activities.

Municipal Europe: contractual indexation formulas on either monthly, quarterly or annual basis

Industrial Europe: major LT industrial contracts indexed (particularly i UK) i ST i ll d b in UK); stronger impact on ST contracts partially compensated by fees

North America Solid Waste: fuel surcharge generally with 30 day delay

Energy NS NS

70% of costs are indexed

French passenger transportation: indexation on the majority of

€276m -€21m

Transport

contracts

Germany, Netherlands, Scandinavia (ex-Sweden), Pacific: Full or partial (e.g. Germany) indexation typically with annual revision

Sweden: no indexation

14

North America: managed by municipality or indexed by contract(1) Based on 2007 scope. Rise in fuel costs had around €5m impact on the division’s total acquisitions


Operating cash flowInvestor Relations – First Half 2008 Results – 07/08/2008

(€m)( )

H1 2008 Δ current FX

Δ constant FXH1 2007

Water 867 904 +4.3% +6.2%Waste 678 715 +5.5% +12.0%Energy services 359 432 +20.3% +16.8%T i 129 146 12 % 13 4%Transportation 129 146 +12.5% +13.4%Holding (21) (46) - -

T t l G 2 012 2 151 6 9% +9 3%Total Group 2,012 2,151 +6.9% +9.3%

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From recurring operating income to operating incomeInvestor Relations – First Half 2008 Results – 07/08/2008

(€m)

H1 2008 Δ current FX

H1 2007

( )

Δ constant FX

H1 08 margin

Water 574 597 +3.9% +5.8% 10.0%Waste 389 405 +4.0% +11.5% 8.0%E i 251 290 15 7% 11 9% 7 2%Energy services 251 290 +15.7% +11.9% 7.2%Transportation 48 63 +31.0% +29.9% 2.1%Holding -26 -55 - - -Holding 26 55Total Group recurringoperating income 1,236 1,300 +5.2% +7.6% 7.2%

N i it 36 6Non-recurring items +36 +6

Total Group Operating income 1,272 1,306 +2.7% +5.0% 7.2%

16

p g , ,


Growth in operating cash flow by divisionInvestor Relations – First Half 2008 Results – 07/08/2008

€m€2 012m (2)

€2,151m (2)

€1,726m (2)

€1,910m (2)

€2,012m

+6 2%

904

867

Water

+6.2%867826

767Waste

Energy

Transportation+12 0%715

767

562 678 +12.0%

507562 678

(1) Compound annual growth rate

+16.8%

+13 4%

432

146

359393321

129150147

17

H1 2005 H1 2006 H1 2007 H1 2008(2) Veolia Environnement’s operating

cash flow, incl. holdings

+13.4% 146129150147


Growth in recurring operating income by divisionInvestor Relations – First Half 2008 Results – 07/08/2008

€m€1 236m (2)

€1,300m (2)

€955m (2)

€1,129m (2)

€1,236m

+5 8%597

Water

€955m ( ) +5.8%574

527463 Water

Waste

Energy

T i405

463

Transportation+11.5%389307

247

(1) Compound annual growth rate

+11.9%

+29 9%

290

63

251

4874

267224

60

18

H1 2005 H1 2006 H1 2007 H1 2008(2) Veolia Environnement’s recurring

operating income, incl. holdings+29.9% 63487460


Operating performance by divisionInvestor Relations – First Half 2008 Results – 07/08/2008

The market trend of the past 18 months continued: strong growth in new projects for the construction of facilities: wastewater treatment plants, desalination plants, recycling facilities

In France, rise in operating income: good contribution of works and continued ti l ff t i d t d i t th t t i h d th i ioperational efforts aimed at reducing costs that outweighed the erosion in

volumes recorded in distribution.

In Europe the wastewater treatment plant in Brussels began operations FirstIn Europe, the wastewater treatment plant in Brussels began operations. First year of integration of unregulated business interests in the United Kingdom (former Thames). In Germany, growth in the contribution of the Braunschweig contract.contract.

Veolia Water Solutions & Technologies: significant increase in operating results in-line with the growth in revenue.

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In France: slight increase in operating income in the sorting/recycling andincineration business lines despite a downward trend in volumes treated, inparticular in industrial non-hazardous waste Also contributing was theparticular in industrial non-hazardous waste. Also contributing was theintegration of Bartin Recycling.

In Europe: the United Kingdom continued to perform well (new integratedIn Europe: the United Kingdom continued to perform well (new integratedcontracts, West Berkshire, Shropshire and Southwark), very good contributionof Scandinavian countries and the Czech Republic. In Germany, integrationunderway of Veolia Umwelt Services (ex-Sulo).u de ay o eo a U e t Se ces (e Su o)

United States: good performance of the solid waste business, thanks to thefavorable impact of pricing despite lower volumes; excellent performance ofp p g p pindustrial services and hazardous waste.

Asia-Pacific: significant increase in results in the region (full-year impact of the

20

Taiwan contract) and very good performance in Australia.



In France, double-digit growth in operating income: positive impact stemming f th i i i li htl f bl th ditifrom the increase in energy prices, slightly more favorable weather conditions than in 2007 and satisfactory commercial development in the thermal business as well as in specialized subsidiaries.

Outside France: favorable weather effect in Central Europe and impact of the contribution of recent acquisitions, primarily TNAI in the United States and Praterm in Poland.

Slightly positive contribution of sales of surplus CO2 emission rights quotas, although significantly lower than in 2007.

21



Recurring operating income significantly improved despite the impact of the risein fuel prices and the impact of the end of reduced social/wellfare charges inp p gFrance

High level of performance was maintained in France in urban and inter-urbantransportationSignificant increase in the contribution from outside France:

Germany: turnaround continued, operational optimization and growth momentumGermany: turnaround continued, operational optimization and growth momentum(Bremen, impact 2011)United States: further profitable development of transport on demand, improvedprofitability in transit business, extension of the Boston (MBCR) contract, the LasV t t h b t d d 3Vegas contract has been extended 3 yearsFurther improvement in profitability in Australia (Melbourne contracts as well ascontracts in New South Wales and West Australia)Netherlands: turnaround is under way thanks to operational optimization and

22

y p prenegotiations, impact in H2 2008 and 2009


Strategic positions taken in the European waste market over the past 2 years


Cleanaway UK in June 2006: acquisition on

UNITED KINGDOM

the basis of £595m enterprise value and market share doubled in the United Kingdom (15% versus 7% before the transaction)

S l ( h ll dFRANCE

GERMANY

Bartin Reycling Group in February 2008 for €190m in enterprise value: N°3 in ferrous and non-ferrous metals

Sulo (unchallenged specialist in paper and plastics recycling as well as organic recycling) in July 2007: acquisition forand non ferrous metals

recovery & recycling in France2007: acquisition for €1,308m in enterprise value (after disposal of container manufacturer) and position strengthened in Germanystrengthened in Germany (11%)

VSA Tecnitalia (ex-TMT) in October 2007: acquisition for €338m based on a 100% i l i l

ITALY

2323

100% enterprise value equivalent; larger market share in Italy (28% of incineration market vs. 6%)


Integration and performance of Sulo, German unchallenged specialist in paper and plastics recycling


July 2007:July 2007:

Acquisition of Sulo, for a total amount of €1,450m in enterprise value

Immediate divestment of the container business for €142m

First half of 2008: contrasting market developments in Germany

Non-renewal of contract in DSDNon renewal of contract in DSD

Decline in margins in industrial non-hazardous waste

Continued strength in the paper market

Shortfall ~€40m in EBITDA on a full year basis in comparison withacquisition business plan

2008-2010 action plan:

acquisition business plan

Cost reduction plan: merging of commercial agencies,

Increase profitability in industrial waste sorting centers (MRFs)

Development of an integrated offering for household packaged waste and

24

Development of an integrated offering for household packaged waste and industrial on-site


Overview of main acquisitions (2007 – YTD)Investor Relations – First Half 2008 Results – 07/08/2008

H1 2008 revenue: €965mH1 2008 operating cash flow: €89m

Acquisition Date of 1st Consolidation and Description Revenue H1 2008

WaterThames non-regulated water

Consolidated Nov. 28, 2007. Expands non-regulated water activities in the UK

€80mWater regulated water

activities (UK)regulated water activities in the UK

VSA Tecnitalia (formerly TMT)

Consolidated Oct. 3, 2007. Largest private operator in thermal waste treatment market. Full projects online in 2011 (expected revenue of

€38m

Waste Bartin Recycling

p j ( p€200m in 2011).

Consolidated Feb. 13, 2008. #3 in France in ferrous and non-ferrous metals recycling.

€136m (4 ½ months)

SuloRecycling business with low level of capital intensity/depreciation.

First consolidation, July 2, 2007. German N°2, specialized in packaged waste.

€523m

C 00

Energy

TNAI

Praterm

Consolidated Dec. 2007. Largest portfolio of district heating and cooling networks in the US. In-line with acquisitions business plan in US$.

Consolidated February 1, 2008. Expands heating network activities in Poland.

€172m

€16m(5 months)

25

network activities in Poland. (5 months)


From revenue (1) to net incomeInvestor Relations – First Half 2008 Results – 07/08/2008

(€m)

Revenue 15,462 18,092

H1 2007 H1 2008

( )

Revenue 15,462 18,092Operating income 1,272 1,306

Cost of net financial debt (392) (426)Other financial income (expenses) (11) (9)( ) ( ) ( )Tax (235) (227)Equity in net income of affiliates 10 9Net income attributable to minority interests (143) (150)

Net income from continuing operations 501 503

Income from divested operations (8) (2)Income from divested operations (8) (2)

Net income 493 501Recurring net income 482 498

26

(1) See definition page 6


Cost of borrowingInvestor Relations – First Half 2008 Results – 07/08/2008

(€m) H1 2007 H1 2008

Average net financial debt 14,900 15,614

Cost of gross financial debt 392 422

C t f b i 5 27% 5 41%Cost of borrowing 5.27% 5.41%

Cost of borrowing:Cost of borrowing: 5.41%(1) vs. 5.49% at December 31, 2007

27

(1) Adjusted for the favorable impact of the unwinding of hedging transactions, the cost of borrowing stood at 5.66% at June 30, 2008


InvestmentsInvestor Relations – First Half 2008 Results – 07/08/2008

Growth

TotalFinancial

incl.chge in

consolidationscope

IndustrialOperating financial assets

Newprojects(1)Maintenance

(€m)

Water 293 19 186 195 77 770

Waste 367 35 49 357 2 810

Energy services 100 28 81 176 35 420

Transportation 149 22 26 74 2 273

Other 3 (2) 25 17 - 43

Total at 06/30/08 912 102 367 819 116 2,316

Total at 06/30/07 742 93 304 444 132 1 715Total at 06/30/07 742 93 304 444 132 1,715

(1) Of hi h i il th i iti f Bi th (S l ti d T h l i ) d i d ti i ti i th A hk l

28

(1) Of which primarily the acquisition of Biothane (Solutions and Technologies) and an increased participation in the Ashkelon project in Israel in Water; the acquisition of Bartin Recycling Group and other investments in Europe in Waste; the acquisition of Praterm in Energy services and the acquisition of Rail4Chem in Transportation.


Free cash flow before new projectsInvestor Relations – First Half 2008 Results – 07/08/2008

(€m)06/30/2008

(1)

H1 2007 H1 2008

Cash flow from operations (1) 2,009 2,163Repayment of operating financial assets 176 194Total cash generation 2 ,185 2,357g , ,

Maintenance capital expenditures (742) (912)New operating financial assets (132) (116)Change in operating WCR (246) (249)Change in operating WCR (246) (249)Tax paid (140) (168)Interest paid (320) (369)

(2)Rights issue reserved for minority shareholders 15 (126)Investments in current growth and development (397) (469)Asset disposals 181 261

(2)

Other 9 9Free cash flow before new projects = 413 = 218

29(

(1) Cash flow from operations = EBITDA(2) Includes the reduction in capital linked to the terms for the repayment of “drainage” receivables (in the Berlin contract)

in the Water division.


Changes in net financial debt at June 30, 2008Investor Relations – First Half 2008 Results – 07/08/2008

H1 2008H1 2007

Net financial debt at January 1st 14,675 15,125

(€m)

Free cash flow (413) (218)

Investments in new projects 444 819Investments in new projects 444 819

Dividends paid 501 726

Impact of foreign exchange and other (7) (120)

Net financial debt at June 30 15,200 16,332

30


Debt ratios (1)


(€bn)17 4(€bn)

16

16,5 16.3

14,5

15

15,5

3.5x

15.2 15.1

13

13,5

14

3.3 x

3.4 x

12

12,5

13

June 30 2007 Dec 31 2007 June 30 20083

Net financial debt_ Net financial debt/(Cash flow from operations + Repayment of operating

financial assets)

June 30, 2007 Dec 31, 2007 June 30, 2008

31

(1) 12-month moving average ratios


Debt management: very solid financial stabilityInvestor Relations – First Half 2008 Results – 07/08/2008

RatingsMoody’s: A3/P-2 Stable (confirmed in April 2008)Standard & Poor’s: BBB+/A-2 Stable (confirmed in April 2008)Standard & Poor s: BBB+/A-2 Stable (confirmed in April 2008)

2008 bond issues (total of €1.7bn, maturity ranging from 5 to 30 years)2008 bond redemption: €1.2 bn, o/w €1bn already redeemed in H1. 2009: €102m2009: €102mAverage maturity: 9.6 years [vs. 9.2 years in 2007]

Group liquidity: €7.8bn of which €4.0bn in undrawn syndicated credit with a 2012 maturity

(gross debt after hedges)

CurrenciesNet financial debt after hedges

GBP 9%

Other 15%

g g

Euro 66%

Fixed rate: 64%o/w Euro: 72%

/ US D ll 39%

(1)

USD 10%Floating rate:36%

o/w US Dollar: 39%o/w GBP Sterling: 84%

32

USD 10%


OUTLOOK AND ACTION PLAN


2008 objectives


Assumption: economic and monetary conditions as observed in the first half of the year

currency parities fuel costs climateeconomic situation in the United States and in Europe

2008 objectives

economic situation in the United States and in Europe

Increase in total revenue above 12% at current exchange rates

Increase in cash flow from operations of approx 6% at current exchange ratesIncrease in cash flow from operations of approx. 6% at current exchange rates

Continued increase in the dividend per share: +10% (1)

34

p %

(1) To be paid in 2009 for the 2008 fiscal year. Subject to approval of the May 7, 2009 Annual Shareholders Meeting


Results to-date of the 2007-2009 plan Investor Relations – First Half 2008 Results – 07/08/2008

2007 actual 2008 estimatedOverview of 2007-2009 objectives

Average annual revenue growth > 10% +14.0% >+12%

Total amount of allocated investments range between €15bn and €20bn €6.9bn ~€5bn

After-tax ROCE: 10% (ex potential effect of timing of acquisitions) 10 9% 9-9 5%(ex potential effect of timing of acquisitions) 10.9% 9-9.5%

35


Evolution of the Company’s organizationInvestor Relations – First Half 2008 Results – 07/08/2008

Geographic organization has been strengthened with a focus on 4 i (E /N th A i /A i /Middl E t)4 regions (Europe/North America/Asia/Middle East)Leadership position consolidated: development of our capabilities, our expertise, our capacity to innovate and our p , p , p yinvestments in research and development Transversal links and bridge ways set up to take full advantage of our size (institutional representation commercial coordinationour size (institutional representation, commercial coordination, shared services and functions, etc.)

36


Momentum for business growth confirmedInvestor Relations – First Half 2008 Results – 07/08/2008

Strong organic growth in the periodHi h b f t t l ( F )High number of contract renewals (e.g. France)Significant commercial successes in the area of privatizations and outsourcing contracts gStrong growth in engineering, design and constructionStrong organic growth in the industrial and tertiary sectorsg g g y

37


Cost savings plan: "Efficiency 2010”plan” Savings to be doubled in 2 years


In the past 5 years, the Group has launched an efficiency drive and achieved recurring cumulative savings of around €580m in operating incomerecurring cumulative savings of around €580m in operating income

Veolia 2005: €368m saved over 3 years (2004-2006) PACT (Continual Cross Improvement Plan): >€200m over 2 years (2007 – 2008E)

Implementation of an "Efficiency 2010” plan aimed at saving €400m over 2 years (2009-2010): €180m in 2009, €220m in 2010, thus €400m in cumulative savings in full year 2011cumulative savings in full year 2011

Action plan covering various fields and having a significant impact (purchasing, operations, assets, support functions)

Mobilization of all managerial lines in France and outside France (management, dedicated team, backing by local network)

Steering organization in line with the plan’s goals (objectives in terms of savings, )monitoring tools, reporting)

Implementation of best practices on a wider scope

Implementation cost of plan: €60 - €80m

38

Implementation cost of plan: €60 €80m


Acceleration of the asset rotation programInvestor Relations – First Half 2008 Results – 07/08/2008

Objective: €1bn in disposals completed or committed in 2008 (compared with recurring annual disposal value ranging between €300m and €500m)recurring annual disposal value ranging between €300m and €500m)

At least €1.5bn in disposals in the 2008-2009 period

Criteria and approaches chosen:ppBusinesses making a marginal contribution

Companies or contracts operating in mature markets, with the prospect of l fit bilitlower profitability

Non-strategic operational units that have been turned around

Development of partnershipsDevelopment of partnerships

Non-operational assets

39


Control of investmentsInvestor Relations – First Half 2008 Results – 07/08/2008

2008: gross capital spending of around €5bno/w ~ €1.9bn in maintenance capital expenditures

o/w ~ €1.9bn in internal growth investments

o/w ~ €1.2bn in external growth investments

2009: gross capital spending of around €4.5bnThus a total of between €16bn - €17bn over the 2007-2009 period

Heightened control of working capital requirements

40


2008-2010 Action PlanInvestor Relations – First Half 2008 Results – 07/08/2008

Priority given to improving ROCE: 10% net at the end of 2010

Productivity improvementProductivity improvement

Improvement in the contribution of recent acquisitions

Implementation of the 2010 Efficiency Plan: €400m in full year 2011

I i f h fl

Asset rotation: €1.5bn in disposals committed or completed in the period 2008-2009

Increasing free cash flow

Heightened control of new investments. Criteria of IRR ≥ WACC +3% maintained.

2009 capex target: €4.5bn

41

Strengthen geographic organization in order to increase commercial synergies


APPENDICESAPPENDICES


AppendixInvestor Relations – First Half 2008 Results – 07/08/2008

First half impacted by moves in currencies Appendix 1

91% of VE’s consolidated revenue at 06/30/08 is in OECD member countries Appendix 2

Breakdown of revenue by division Appendix 3

Operating cash flow margins Appendix 4Operating cash flow margins Appendix 4

Recurring operating income margins Appendix 5

From recurring net income to net income Appendix 6

“Efficiency 2010” Veolia Environnement Efficiency plan Appendix 7

Liquidity Appendix 8

Overview of Operating Financial Assets Appendix 9

Business momentum confirmed Appendix 10

Definition of ROCE Appendix 11Definition of ROCE Appendix 11

Stability of Veolia Environnement’s long-term shareholder base Appendix 12

43


Appendix 1: First half impacted by moves in currencies Investor Relations – First Half 2008 Results – 07/08/2008

H1 2007 H1 2008 Δ H1 2008/H1 2007Main currencies(foreign currency 1 = € …)

US dollarAverage rate 0.7496 0.6475 -13.6%Closing rate 0.7405 0.6344 -14.3%

(foreign currency 1 € …)

Closing rate 0.7405 0.6344 14.3%

GBP sterlingAverage rate 1 4802 1 2828 -13 3%Average rate 1.4802 1.2828 -13.3%Closing rate 1.4837 1.2622 -14.9%

Czech crownCzech crownAverage rate 0.0354 0.0398 +12.4%Closing rate 0.0348 0.0419 +20.4%

Korean wonAverage rate 0.0008 0.0007 -12.5%Closing rate 0.0008 0.0006 -25.0%

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The average rate applies to the income statement and cash flow statementThe closing rate applies to the balance sheet


Appendix 2: 91% of Veolia Environnement’s consolidated revenue at June 30, 2008 is in OECD member countries


N. America (OECD) 9%

Other Europe (OECD) 18%

Germany 9%Other Europe (Non-

OECD) 1%

(OECD) 9%Asia / Pacific (OECD) 5%

UK 8%S. America 1%Other Asia (Non-

OECD) 2%

Middle East 2%

France 42%

Africa 3%

OECD member countries ~ 91% of Veolia Environnement’s revenueNon-OECD countries ~ 9% of Veolia Environnement’s revenue

45


Appendix 3: Breakdown of revenue (1) by divisionInvestor Relations – First Half 2008 Results – 07/08/2008

(€m)

5,988

5,221+14 7% +16 6%

Δ currentFX

Δconstant FX

Internalgrowth

+12 8%

5,0854,196

Water

Waste

Energy Services

+14.7%

+21.2%

+21.9%%

+16.6%

+26.7%

+21.9%%

+12.8%

+8.5%

+13.4%+8 7%

4,0493,321

,Transportation +9.0% +11.2%

VE Group +19.5%

+8.7%

+11.1%+17.0%

2,9702,724

H1 2007 H1 2008

€18,092mConsolidated revenue (1) in H1 2008:

H1 2007 H1 2008

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€18,092mConsolidated revenue (1) in H1 2008:

(1) See definition page 6


Appendix 4: Operating cash flow marginsInvestor Relations – First Half 2008 Results – 07/08/2008

In m€

Operating cash flow margins

H1 2008 H1 2007MarginH1 2007

Water 867 904 16.6% 15.1%

H1 2008Margin

Water 867 904 16.6% 15.1%

Waste 678 715 16.1% 14.1%

Energy Services 359 432 10.8% 10.7%

Transportation 129 146 4.8% 4.9%

Holding -21 -46 - -

Total Group 2,012 2,151 13.0% 11.9%Total Group 2,012 2,151 13.0% 11.9%

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Appendix 5: Recurring operating income marginsInvestor Relations – First Half 2008 Results – 07/08/2008

In m€

Recurring operating income margins

H1 2007 H1 2008H1 2008H1 2007

Water 574 597 11.0% 10.0%

H1 2007 Margin

H1 2008 margin

Waste 389 405 9.3% 8.0%

Energy Services 251 290 7.6% 7.2%

T t ti 48 63 1 8% 2 1%Transportation 48 63 1.8% 2.1%

Holding -26 -55 - -

Total Group 1,236 1,300 8.0% 7.2%

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Appendix 6: From recurring net income to net incomeInvestor Relations – First Half 2008 Results – 07/08/2008

(€m) H1 2008H1 2007

Recurring net income 482 498

( ) H1 2008H1 2007

Income from discontinued operations (8) (2)

Miscellaneous 19 5

N t i 493 501Net income 493 501

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Appendix 7: “Efficiency 2010”: Veolia Environnement Efficiency Plan, €400m in recurring savings in 2 years (2009-2010)


A strong mobilization company wide

A dedicated « Efficiency 2010» teamto pilot the Plan

Within the Synergies Department directly reporting to the

Chairman & CEO

Mobilization of the full executiveCommittee at the

corporate and divisional level…and with the committment of all managerial lines of the Company

Identified savings objectives A single tool to follow and alidate projects and sa ingsRegular reporting of the savings Buy-in and execution by

A stearing organization aligned with the objectives of the Plan

Identified savings objectivesby division and by country validate projects and savings

(controlled)Regular reporting of the savings

achieved (at half-year)Buy in and execution by

local network

And action plan on structured areas offering a significant impact (in France and abroad)

Purchasing

« Actions on cross families and deployment of contracts»

Assets

« Réduction of loss-making contracts»

Support Functions

« Reductions and Pooling»

Operations

« Strenghtened business line process optimizations »

The mobilization of all lines of management should allow us to achieve €400 m in recurring cost savings benefitting operating income over 2 years (2009 -2010)savings benefitting operating income over 2 years (2009 2010)

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Appendix 7: “Efficiency 2010”: Veolia Environnement Efficiency Plan, €400m in recurring savings in 2 years (2009-2010)


Breakdown f i M i f i i iC t Examplesof savings

(%) Main areas of cost optimizationCategory

25 35%Reduce structural costsContinue and step up the deployment of SSCs

Support Deployment of SSCs in 5 main countries(2009-2010)

Examples

Step up optimization drives by business line processWater France: Deployment of 14 “Best Practices” for the core business (2006/2010)

25 - 35% Continue and step up the deployment of SSCsOptimize head office functionsfunctions Consolidation of headquarter offices

(2009-2010)

25 - 35%Step up optimization drives by business line processEnhance and develop assessment of operating performance

Operations( )

Optimization of routes (Collection(Waste), Heavy Loads (Transportation), “Intervention vehicules(Water / Dalkia) (2009-2010)

20 - 30%Renegotiate and widen/globalize agreement on

transversal areasAccelerate the deployment of agreements

PurchasingReorganization of the Purchasing function (2010)Specific and cross framework agreements to be rolled out by more than 80% (2010)

10 - 15%Launch plans aimed at restoring margins(Specific efficiency plans in regions where margins are insufficient,

discontinue operations, sale/termination of certain contracts)Assets

Plan aimed at restoring margins(Proxiserve) (2008)Closure of loss-making subsidiaries (2009)

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Appendix 8: LiquidityInvestor Relations – First Half 2008 Results – 07/08/2008

Veolia Environment

December 31, 2007

H1 2008(€m)

Syndicated loan 4,000 4,000 (1)

Bilateral credit lines 1,025 1,024 Cash and cash equivalents 1 551 1 090Cash and cash equivalents 1,551 1,090TOTAL Veolia Environment 6,576 6,114

SubsidiariesCash and cash equivalents 1,565 1,673TOTAL Subsidiaries 1,565 1,673

TOTAL Group 8,141 7,787

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(1) April 2012 maturity


Appendix 9: Overview of operating financial assets


(€m)31/12/07 H1 2008

Balance sheet (current and non-current operating financial assets): recorded at amortized costs on balance sheet with

31/12/07

5,627.6 5,636.3

H1 2008

)corresponding liability in Veolia’s consolidated net financial debt

Income statement: Remuneration (i.e. interest payments) are a sub-line to revenue “o/w revenue from operating financial assets”

d th l t f th ti h fl b f h i 345 1 181 4and thus also part of the operating cash flow before changes in working capital (EBITDA)

Cash flow statement (inflow): Principal repayments associated with the operating financial assets are not part of the income

345.1

360.7

181.4

193.7with the operating financial assets are not part of the income statement but recorded within “cash flow from investing activities” on the cash flow statement

Cash flow statement (outflow): “new operating financial assets” 404 1 203 0( ) p gwhich is current year’s capital spending associated with operating financial assets and also recorded within “cash flow from investing activities” on the cash flow statement

404.1 203.0

5353


Appendix 10: Business momentum confirmed


INTERNAL GROWTH

- Renewals:77 main renewed contracts in France since 2008 in Water (o/w 40 in drinking

Bazancourt

Beauvais-TilléJersey

Cergy

( gwater & 37 in wastewater), 61 in Waste collection (o/w 17 from local authorities & 44 from companies), 14 in TransportationCergy Pontoise area (water) – Length: 18 years – Cumul. rev: €242m Extension of the Jersey public transportation contract (transportation)– Length: 3 years – Cumul. rev:: €18mSchool bus transportation contract for Sarthe District (transportation) Seine Aval

Seine Grésillons

CergySchool bus transportation contract for Sarthe District (transportation)– Length: 7 years – Cumul. rev.: €42m

- Outsourcing / Privatization:Beauvais-Tillé airport services (transportation)– Length: 15 years – Cumul. rev.: €630m in partnership with the CCI of Oise dptRoyan (urban network + school bus scolaires + TOD) (transportation) Nantes

Metropole

Sarthe

Epernay

TavauxBartin Recycling Gp

Royan (urban network school bus scolaires TOD) (transportation)– Length: 10 years – Cumul. rev. : €40mUrban transportation networks in Epernay (transportation)– Length: 7 years – Cumul. rev.: €16m

- Engineering / Design & Build:Contract for the wastewater authority for the Paris area (SIAAP), Seine Aval plant i A hè ( t ti ) ( t ) C l €135

Metropole

Royan

Biganos

in Achères (construction) (water) – Cumul. rev.: €135mContract for the SIAAP, Seine Grésillons plant in Triel sur Seine (construction) (water) – Cumul. rev. : €89mNantes Metropole, the Nantes urban authority (construction) (water) – Cumul. rev.: €14m

- Industry & services:

y

Outsourcing / PrivatizationRenewals

- Industry & services:3 projects to build, supply & operate biomass plants (energy)– Length: 20 years – Cumul. rev.: €1.7bn - Facture plant in Biganos (69 MW capacity); - Solvay chemicals and plastics site in Tavaux (30 MW); - Bazancourt agro-industrial site (C5D project) (22 MW)

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Outsourcing / Privatization

Company acquisition

EXTERNAL GROWTH

Bartin Recycling Group (waste) – 2006 rev.: €249m Engineering / Design & BuildIndustry & services

Veolia EnvironnementVeolia Environnement



INTERNAL GROWTH- Renewals:

Novartis (1) (multi services) Length: 7 years Cumul rev : €980m

PolandPolandCzajka

PratermBremen

Novartis (1) (multi-services) – Length: 7 years – Cumul. rev.: €980mS-Bahn (RER), in Leipzig East (transportation) – Length: 3 years – Cumul. rev: €70mLondon Borough of Croydon (waste) – Length: 4 years – Cumul. rev.: €81m

- Outsourcing / Privatization:Southwark Council (waste) – Length: 25 years – Cumul. rev.: €900mWest Berkshire Council (waste) Length: 25 years Cumul rev : €667m

SwedenSweden

Setra

United KingdomUnited KingdomGermanyGermany

Westphalia

Rail4Chem

Leipzig

BundeswehrBremenWest Berkshire Council (waste) – Length: 25 years – Cumul. rev.: €667m

Bundeswehr, German Army (transportation)– Length: 2 years – Cumul. rev.: €12mRail contract in North Rhine – Westphalia (transportation)– Length: 16 years – Cumul. rev.: €520mS-Bahn in Bremen (transportation)– Length: 11 years – Cumul. rev.: €560m

( ) C €

IrelandIreland

Mullingar

SwitzerlandSwitzerland

Novartis

SouthwarkDiageoWest Berkshire

GermanyGermanyBilbao (transportation) – Length: 8 years – Cumul. rev.: €305mMarienbad networks (energy) – Cumul. rev.: €6m

- Engineering / Design & Build:Czajka (construction) (water) – Cumul. rev.: €148mMullingar (construction & operation) (water) – Length: 22 years – Cumul. rev.: €46m

Czech Rep.Czech Rep.Marienbad

Skanska

LondonBoroughof Croydon

BulgariaBulgariaVarna

Bilbao

Figueruelas rooftopsolar power station

PortugalPortugal

Artenius

- Industry & services:Artenius, La Seda de Barcelona subsidiary (multi-services) – Length: 15 years – Cumul. rev.: €850mBulgaria’s largest shopping mall, in Varna (energy)– Length: 6 years – Cumul. rev.: €1mSk k ( ) L th 15 C l €150

SpainSpainArtenius


Skanska (energy) – Length: 15 years – Cumul. rev.: €150mSetra (energy) – Length: 10 years – Cumul. rev.: €30mDiageo (energy) – Length: 15 years – Cumul. rev.: £60mFigueruelas (2) rooftop solar power station, near Zaragoza (construction) in partnership with General Motors Europe, Clairvoyant & the Government of Aragon (multi-services)

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(1) Renewed in Dec. 2007(2) Announed in July 2008

g

Company acquisition

Engineering / Design & BuildIndustry & servicesRail4Chem (transportation) – 2007 rev.: €80m

Praterm (energy) – 2008 estimated rev.: €55m

EXTERNAL GROWTH




INTERNAL GROWTH

- Renewals:Las Vegas urban contract (transportation) Extended from 2 to 3 years Additional rev : €59m– Extended from 2 to 3 years – Additional rev.: €59m

Customized transportation services in San Francisco (transportation)– Length: 2 years – Cumul. rev.: €24mOCTA contract in California (transportation)

– Length: 3 years – Cumul. rev.: €75mBoston rail commuter contract (transportation)

CanadaCanadaBoston rail commuter contract (transportation)

– Extended from 2 to 3 years – Additional rev.: €137m Orange County (waste) – Length: 7 years – Cumul. rev.: €31mPalm Beach (waste) – Length: 5 years – Cumul. rev.: €10m

- Outsourcing / Privatization:Oklahoma (water) Seattle

United StatesUnited StatesPacific Liners

Oklahoma (water)– Length: 4 years – Cumul. rev.: €29m

New London (Connecticut) (water)– Length: 10 years – Cumul. rev.: €37m

Radcliff (water) – Length: 17 years – Cumul. rev.: €27m

f

New London

Seattle

San F i

Boston

MTA bus service in the suburbs of Los Angeles (transportation) – Length: 5 years – Cumul. rev.: €32m

Customized transportation services in Seattle (transportation)– Length: 5 years – Cumul. rev.: €72m

- Engineering / Design & Build:

OklahomaRadcliffLos Angeles

Golden Touch Transportation

of New York

Las VegasFranciscoOCTA

MexicoMexicoCalvert

Palm Beach

Orange County

Calvert –TK (Alabama) (construction & operation) (water) – Cumul. rev.: €54m

- Industry & services:PPP for hospital in Tamaulipas (energy)– Length: 25 years – Cumul. rev.: €200m

R l

Tamaulipas

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EXTERNAL GROWTH

Pacific Liners (waste) – 2007 rev.: $21m

Golden Touch Transportation of New York (transportation)– Annual rev.: €22m


Company acquisition

Renewals

Industry & servicesEngineering / Design & Build




INTERNAL GROWTH

I diI di

JapanJapan

Nishihara Environment T h l D i Ni E

Yamagata Kangyo Engineering

- Renewals:

Sydney tram & monorail (transportation)– Length: 5 years – Cumul. rev.: €43m

IndiaIndia

Nagpur

Technology Dai Nippon Eco Engineering

Nichijo- Outsourcing / Privatization:

Nagpur (DBO) (water)

TaiwanTaiwanYongKang

– Operating period: 15 years – Cumul. rev.: €24m (incl. construction)

YongKang (waste)Length: 20 years Cumul rev : €59m

AustraliaAustralia

EXTERNAL GROWTH

Nishihara Environment Technology (water) 2007 rev : €38m

– Length: 20 years – Cumul. rev.: €59m

AustraliaAustralia

Sydney

– 2007 rev.: €38m

Dai Nippon Eco Engineering (water) – 2008 estimated rev.: €8m

Yamagata Kangyo Engineering (water)

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Company acquisition

Yamagata Kangyo Engineering (water)– 2007 rev.: €4m

Nichijo (water) – 2006 rev.: €7m




INTERNAL GROWTH

- Outsourcing / Privatization:

Riyadh (contract on the basis of an incentive QatarQatarRas Laffan

Riyadh (contract on the basis of an incentive system linked to performance & savings achieved) (water)– Length: 6 years – Cumul. rev.: €40m

QatarQatar

- Engineering / Design & Build:

Ras Laffan (construction) (water)– Cumul. rev.: €304m

United Arab Emirates United Arab Emirates

Abu Dhabi Al AinRiyadh

Burj Dubai Tower Palm Jumeirah Island

Palm Jumeirah Island (construction) (water) – Cumul. rev.: €12m

B j D b i T (DBO) ( t )

Saudi ArabiaSaudi Arabia

Burj Dubai Tower (DBO) (water)– Operating period: 3 years (excl. construction) – Cumul. rev.: €10m

Abu Dhabi & Al Ain (1) (BOT) (water)

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Engineering / Design & Build

Abu Dhabi & Al Ain ( ) (BOT) (water)– Operating period: 22 years – Cumul. rev.: €364m (incl. construction)


(1) Announced in July 2008


Appendix 11: Definition of ROCEInvestor Relations – First Half 2008 Results – 07/08/2008

ROCE = Average capital employed during the year

Net income from operations

Net income from operations = Recurring operating income + Share of net income of associates – Income tax expense – Revenue from operating financial assets + Income tax expense allocated to operating financial assets

Average capital employed during the year

Capital employed = Intangible assets and property, plant and equipment, net + Goodwill, net of impairment+ Investments in associates + Operating and non-operating working capital requirements, net + Net derivative instruments – Provisions - Other non current debt

Average capital employed : The average of the opening and closing capital employed

Capital employed are capital « earning » a return: equity capital, minority interests, netCapital employed are capital « earning » a return: equity capital, minority interests, net financial debt les operating financial assets.

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Appendix 12: Stability of Veolia Environnement’s long-term shareholder base


Shareholders by key geography 30 June 2008 vs. 31 March 2008

as %50

43,439,6

40

50

Stable postion among the top 50 shareholders

12 8

28,426,0

9 9

13,620

30« Top 50 » shareholders which held 73% of shares at 31 March 2008 held

6,51,4

12,89,98,9 7,8

1,7

0

10

31 March 2008, held 69% at 30 June 2008

0France N. America UK Switzerland,

Germany,Netherland,

Norway

Japan Rest ofWorld

31/03/2008 30/06/2008

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Investor Relations contact informationInvestor Relations – First Half 2008 Results – 07/08/2008

Nathalie Pinon, Head of Investor Relationsand Financial Communicationand Financial Communication

38 Avenue Kléber – 75116 Paris - FranceTelephone +33 1 71 75 01 67

Fax +33 1 71 75 10 12e-mail [email protected]

Brian Sullivan, Vice President, US Investor Relations700 E. Butterfield Road -Suite 201

Lombard, IL 60148 - USATelephone +1 (630) 371 2749

Fax +1 (630) 282 0423( )e-mail [email protected]

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

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