2005 Annual results

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

ANNUAL ACCOUNTS 2005


Disclaimer

Veolia Environnement is a corporation listed on the NYSE and Euronext Paris. This document contains "forward-looking statements" within the meaning of the provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including but not limited to: the risk of suffering reduced profits or losses as a result of intense competition, the risks associated with conducting business in some countries outside of Western Europe, the United States and Canada, the risk that changes in energy prices and taxes may reduce Veolia Environnement's profits, the risk that we may make investments in projects without being able to obtain the required approvals for the project, the risk that governmental authorities could terminate or modify some of Veolia Environnement's contracts, the risk that our long-term contracts may limit our capacity to quickly and effectively react to general economic changes affecting our performance under those contracts, the risk that Veolia Environnement's compliance with environmental laws may become more costly in the future, the risk that currency exchange rate fluctuations may negatively affect Veolia Environnement's financial results and the price of its shares, the risk that Veolia Environnement may incur environmental liability in connection with its past, present and future operations, as well as the risks described in the documents Veolia Environnement has filed with the U.S. Securities and Exchange Commission. Veolia Environnement does not undertake, nor does it have, any obligation to provide updates or to revise any forward- looking statements. Investors and security holders may obtain a free copy of documents filed by Veolia Environnement with the U.S. Securities and Exchange Commission from Veolia Environnement.

This document contains "non-GAAP financial measures" within the meaning of Regulation G adopted by the U.S. Securities and Exchange Commission under the U.S. Sarbanes-Oxley Act of 2002. These "non-GAAP financial measures" are being communicated and made public in accordance with the exemption provided by Rule 100(c) of Regulation G.


2005: Confirmation of a winning strategy

l Commitments met

l Position of leader in environmental services re-confirmed

l Strong growth in business in fast growing markets (revenue up 12.2%)

l Continuing improvement in profitability (recurring operating income up 17.5%)

l Launch of the single brand name: Veolia


2005: Confirmation of a winning strategy

l Substantial rise in recurring net income (up 33%) l Improved balance sheet

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

(1) Cash flow from operations before tax and interest expense, as defined by the Conseil National de la Comptabilité‛s (CNC) recommendation of October 27th, 2004.

(2) Subject to approval by the Annual Shareholders Meeting on May 11, 2006


0,0

500,0

1 000,0

1 500,0

2 000,0

0

100

200

300

400

500

600

700

2005 key figures (in €m and at current exchange rates)

0

5000

10000

15000

20000

25000

Consolidated revenue (1)

+12.2% 25, 245 22,500

0

1000

2000

3000

4000

Cash flow from operations (2)

+14.2% 3, 687 3,228 (3)

Recurring operating income

+17.5% 1 , 904 1,620

Recurring net income

+33.3% 627

471

2004 2004

2004 2004

2005 2005

2005 2005

(1) Revenue from ordinary activities under IFRS (2) See definition on page 4 (3) Excluding cash flow from discontinued operations sold in 2004


Strong dividend growth in line with commitments made

(1) Subject to approval by the Annual Shareholders Meeting on May 11, 2006

Net dividend for 2005 (1)

€0.85 per share (up 25%)

€0.85

€0.55 €0.68

0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9

2003 2004 2005

Growth in net dividend per share. 2005 pay-out ratio = 53%


Confirmation of the business model: Growth in after-tax ROCE

9.1% 8.3% 8.3%

7.0% 6.4%

0,0% 1,0% 2,0% 3,0% 4,0% 5,0% 6,0% 7,0% 8,0% 9,0%

10,0%

2002 2003 2004 2004 2005

Strong improvement in after-tax ROCE since 2002

French Gaap IFRS


Strong sales momentum: consolidated revenue (1)

up 12.2%

22,500

3,589 4,920

6,214 7,777

8,889

5,402

25, 245

6,604

4,350

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 000

22 000

24 000

26 000

31 /1 2/2004 31 /1 2/2005

At constant exchange rates

At current exchange rates

Waste

+5.5% +6.3%

Energy Services

+8.9% +9.8%

Transport

+20.4% +21.2%

Total

+11.4% +12.2%

€ million

Water

+13.5% +14.3%

(1) See definition on page 5


2, 298 1 , 985

8, 244 7, 044

1 2, 254 1 1 , 476

France Europe ex. France North America Asia/Pacific Rest of World

,

Consolidated revenue (1) at 31/12/05: €25.2bn

Regional breakdown of revenue (1)

Strong presence in growing markets

(1) See definition on page 5 (2) At current exchange rates

€ million

31 /1 2/2004 31 /1 2/2005

+6.8% (2)

+17.0% (2)

+15.8% (2)

+28.7% (2)

+15.0% (2)

1 , 1 28 867

1 , 452 997

Group VE +12.2% (2)


l Water l Renewal of more than 250 public service contracts (Epernay: water and wastewater, Boulogne:

wastewater, SIAEP of the Pontault-Combault region: water …). Strong renewal rate in comparison with 2004, estimated cumulative revenue of over €885m

l Continued expansion of Veolia Water Solutions and Technologies (purification stations in Perpignan and Sables-d‛Olonne and water treatment plant in L‛Hay-les-Roses …)

l Waste l Renewal of collection contracts in Paris (for 600,000 residents)

for total revenue: €108m over 4 years; in Caen for total revenue of~€21m over 7 years; in Bourges for total revenue of €30m over 7 years; and in Nancy for total revenue of €105m over 7 yeears.

l “Biogas” electricity recovery contract won at Claye-Souilly –Total revenue: €160 m over 15 years (installation of 16 MW of electricity)

l Increase in the capacity of the hazardous waste treatment plant at Limay (Ile de France): opening of a 3 rd treatment unit of 50,000 additional tons

l Start of service of UIOM of Nîmes and Lasse: 220,000 tons of treatment capacity; total revenue of €380m over 20 years

l Renewal of the UTOM and MONTHYON DSP contract (total revenue of €170m over 13 years and 200,000 tons/year) and of BOURGOIN (€110m over 15 years and 180,000 tons/year)

l Pan-European contract for waste electrical and electric equipment recovery with Alcatel (7,000 tons per year)

l Energy Services l Contract won for Arjo Wiggins plant at Wizernes (Nord) - Total revenue: €127m over 12 years

l Transport l Full effect in 2005 of the Chambéry contract that was renewed in December 2004 – Total

revenue: €156m over 6 years l First private contracts for rail freight between Germany and France

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

(1) At constant exchange rates.


Contract start-up

Contracts won or renewed

Company acquisitions

United Kingdom Nottingham County (waste) – Length: 26 years

- Total revenue: €1.2bn -Veolia Environmental Services chosen as “preferred bidder”

n Blackpool (waste) – Length: 7 years – Total revenue: €34m l Shanks‛s “hazardous waste” business (waste) l Weir Techna., division of Weir (engineering in oil sector) (water) Diageo site (energy services)

- Length: 15 years – Total revenue: €45m Germany

Hradec Kralove (water) - Length: 30 years - Total revenue: €560m

Czech Republic

l ZEC Lodz (energy services) – Annual revenue: €167m Poland

Slovakia PSA Peugeot Citroën at Trnava (multi-services)

- In March 2005: Length: 8 years – Total revenue: €60m - In Dec 2005: Length: 8 years – Total revenue: €65m

Italy l p Acquisitions in Sicily and Calabra (water) Region of Liguria (energy services)

- Length: 10 years – Total revenue: €130m Norway l Acquisition of Helgelandske (transport)

Braunschweig (water) –Annual revenue: €350m Braunschweig (wastewater) - Length: 30 years

- Total revenue: €390m l Dortmunder Eisenbahn (DE) (transport) for half

- Annual revenue: €25m n Nordharz-Netz (Harz) (transport)

- Length: 12 years – Total revenue: €402m n The Marschbahn (transport)

- Length: 10 years – Total revenue: €500m

pCalabra

Sicily

pRegion of Liguria

Italy

Weir Techna

Blackpool

United Kingdom

Diageo

Shanks (hazardous waste)

Nottinghamshire

Romania n Crivina water treatment plant, near Bucharest (water)

Norway

Helgelandske

(1) At constant exchange rates

Europe: up 15.8% (1)

Dortmund

Germany

Braunschweig

Nordharz‐Netz

La Marschbahn

Trnava Slovakia

Poland

ZEC Lodz

Hradec Kralove

Czech. Rep.

Romania

Crivina


North America n Denver (transport)

- Length: each 5 years – Total revenue: €88m n SCRRA, Los Angeles suburbs (transport)

since Jul. 2005 - Length: 5 years – Total revenue:€70m n York (transport) - Length: 5 years – Total revenue: €62m Cle Elum (water) - Length: 10 years – Total revenue: €4m Gresham (water) - Length: 7 years – Total revenue: €16m Fort Knox at Radcliff (water) - Length: 20 years

– Total revenue: €30m Moberly (Missouri) (waste) - Length: 20 years

- Total revenue: €23m Cambridge (Massachusetts) (energy services)

- Annual revenue: €7m as from 1 st year Houston Galleria (energy services): commercial contract

- Annual revenue: €1m l Yellow Transportation LLC (transport) l ATC (transport) - Annual revenue: €215m l Vasko Disposal Solutions in St. Paul (Minnesota) (waste)

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

Contracts won or renewed Company acquisitions

Contract start-up

Yellow Transportation LLC

ATC

Denver York

Cle Elum Gresham

Fort Dodge

Fort Knox

Canada

USA

Cambridge

SCRRA

Vasko

Houston Galleria

Moberly



Asia – Pacific: up 23.6% (1)

China

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

n Southern suburbs of Sydney (transport) - Length: 7 years n Clyde – Woodlawn bioreactor (waste) l Adelaïde contract for up to 50% (water)

South Korea

Australia

Guangzhou‐Likeng

Urumqi

Handan

Kunming

Hohhot

Disneyland Hong Kong Dongjiang‐HuiZhou Foshan

ChangZhou Shanghaï‐Laogang

Lugouqiao

Qingdao

Zhuhaï

China

Japan

Showa (water treatment)

South Korea

Incheon

l Water treatment business of the Showa Denko company (water)

Japan

n Shanghaï-Laogang phase IV (waste) - Length: 20 years from Dec. 2003 - Total revenue: €260m

n Disneyland Hong Kong (waste) - Length: 5 years - Total revenue: €2m

Foshan (waste) - Length: 30 years - Total revenue: €270m

Dongjiang-HuiZhou (waste) - Length: 30 years - Total revenue: €255m over first 20 years

Guangzhou-Likeng phase I (waste) - Length: 10 years - Total revenue: €47m

Urumqi (water) - Length: 23 years – Total revenue: €260m Handan (water) - Length: 25 years – Total revenue: €5m ChangZhou (water) - Length: 30 years – Total revenue: €675m Kunming (water) - Length: 30 years – Total revenue: €1.1bn n Qingdao (water) - Length: 25 years – Total revenue: €110m n Lugouqiao (water) since 2005 - Length: 22 years

– Total revenue: €50m n Hohhot (water) - Length: 30 years – Total revenue: €600m n Zhuhaï (water) - Length: 30 years – Total revenue: €400m n Canton, university campus (energy services)

Contracts won or renewed Company acquisitions

Contract start-up

Sydney‐southern suburbs

Australia

Adélaïde Clyde‐Woodlawn



Successful bids for major industrial accounts

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

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

0

200

400

600

800

1000

2001 2002 2003 2004 2005

in € million


Revenue (1) 22,500 25,245 +12.2% Operating income 1,481 1,893 +27.8% § Cost of net financial debt -732 -713 § Other financial income and expenses +46 +30 § Tax -184 -423 § Equity in net income of affiliates +24 +15 § Minority interests -137 -179

Net income before discontinued operations 498 623 Net income/loss from discontinued operations -106 0 Net income 392 623 +59.1% Recurring net income 471 627 +33.3%

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

From revenue (1) to net income

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

(1) See definition on page 5.


1,762

1,047

581

280

17

3,687

19.9%

16.0%

10.8%

6.4%

-

14.6%

Cash flow from operations margin (1 )

Cash flow from operations (1 )

31/12/04

€ million

31/12/05

% change at current

exchange rates 2005/ 2004

Water

Waste

Energy services

Transport

Others

Total

1,504

986

471

282

-16

3,228

19.4%

16.1%

9.6%

7.9%

-

14.3%

17.2%

6.2%

23.3%

-

-

14.2%

Strong growth in cash flow from operations (1)

31/12/04 31/12/05

(1) See definition on page 4 (2) Excluding cash flow from discontinued operations

(2)


15.8%

14.5%

23.3%

11.0%

-

16.0%

11.3%

8.2%

6.1%

2.6%

-

7.5%

1,002

541

332

114

-85

1,904

Marked improvement in profitability Recurring operating

income margin Recurring operating

income

€ million

Recurring operating income: up 17.5% (1)

% change at constant exchange

rates 31/12/05/31 /1 2/04

Water

Waste

Energy services

Transport

Holdings

Total

855

468

264

101

-68

1,620

11.0%

7.5%

5.4%

2.8%

-

7.2%

(1) At current exchange rates

31/12/04 31/12/05 31/12/04 31/12/05


Recurring operating income: contribution by division

l In France, the regions performed well in the water distribution business, as a result of introducing best practices into all the operating units.

l A significant increase in the contribution from Europe (the consolidation of BVAG and particularly the increasing maturity of contracts in the Czech Republic, as well as the positive effects of the five-year price review plan in the United Kingdom)

l Start-up of new contracts and good performances from the existing contracts in Asia (improved results from Shenzhen and the start-up of Incheon)

l Marked improvement in the results from Veolia Water Solutions and Technologies

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

Margin: 11.3% versus 11.0%



l Further improvement in margin, in spite of the impact of higher fuel costs (€13m)

l Continuing productivity gains in France (particularly increased profitability in the landfill and hazardous waste businesses)

l Marked improvement in margins in the United Kingdom for all businesses, and, more specifically, on integrated contracts, as well as in other European countries

l Improved profitability in North America, in spite of the impact of higher fuel costs

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




l In France, increase in operating income driven by the service businesses in the networks and by the productivity program

l Outside France, strong growth in operating income: continuing profitable growth in Central and Northern Europe and a very good performance in Southern Europe (Italy and Iberian Peninsula)

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




l Operating income resilient, in spite of the impact of higher fuel costs (€17m)

l In France, operating income rose strongly, both in urban and inter-urban transportation

l Outside France, recovery under way in the Scandinavian countries, and progress in North America (positive contribution from the Los Angeles contract and the acquisition of ATC) and in the Asia-Pacific region (full year impact of the Melbourne contract)

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



From recurring operating income to operating income

Recurring operating income 1,620 1,904 17.5%

Non-recurring items -139 -11 Of which: Provisions for Berlikomm -55 -

Revaluing the Transportation business to market value -70 -

Operating income 1,481 1,893 27.8%

€ million

2004 2005 % change

2004/2005


§ Re- valuation of non- hedging derivative instruments +8 +1 2

Cost of net financial debt

Net cost of financial debt -732 -713

€ million

Cost of borrowing: 5.12% versus 5.04% in 2004

31/12/04 31/12/05

§ Early repayment of the 2008 - - 26 loan

§ Other +8 +5

Gross cost of borrowing -748 -704


Net capital expenditures & investments: €2,932 million

Gross capital expenditures & investments 3,464

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

Total net capital expenditures & investments 2,932

€ million


Water 584 32 328 174 - 521 1,639

Waste 532 57 73 3 126 67 858

Energy Services 171 28 81 85 - 173 538

Transport 128 58 60 7 - 145 398

Others 22 1 8 - - - 31

Total 1,437 176 550 269 126 906 3,464

Cumulative 1,437 2,163 2,558 3,464

Value-creating capital expenditures and investments: €3,464m (1) at December 31, 2005

Growth Other developts

Financial Industrial

Projects & acquisitions

undertaken in 2005 (3)

Mainte- nance

Projects undertaken before 2005

Financial receivables

(2)

Excl. financial receivables

Total

(1) Total investments of €3,464m = investments of €2,289m + new I4 receivables of €269m + new projects and acquisitions undertaken in 2005 of €906m

(2) Mainly connected to BOT‛s in Water (Brussels, The Hague, Weinan, Baoji, Incheon) and to cogeneration projects, in France and Italy, in Energy Services (treated according to IFRIC4)

(3) BVAG, ChangZhou, Kunming, Hradec Kralove, Weir Techna, and Sicily, Calabra in Water, Foshan qnd Shanks in Waste, Lodz in Energy Services, and Helgelandske, industrial market and ATC in Transport


More than €900m invested in new projects in 2005

By division

Water 58% Transport 16%

Waste 7%

Energy services 19%

By region

Continental Europe 73%

Asia-Pacific 11% North America 10%

United Kingdom 5%


Cash flow from operations

Tax paid

Interest paid

Changes in I4 receivables (new receivables : -€269m; repayment of receivables: +€184m)

Capital expenditures &financial investments

Change in working capital requirement

Asset disposals

Change in scope of consolidation and increase in minorities‛ capital & dividends received

= Free cash flow before new large projects and acquisitions New large projects and acquisitions undertaken in 2005

Dividends paid

Capital increase

Impact of exchange rates and other

= Change in debt

Net financial debt at December 31 , 2004

Net financial debt at December 31 , 2005

Cash flow statement at December 31, 2005

€ million 3,687 339

739

85

2,290

52

+348

+25

= 555 906

374

+73

160

= 812

13,059

13,871


739

906

374

13,871 13,059 2, 290

62

(3, 296)

(1 84)

269

(348)

IFRIC4 receivables

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

NFD at end 2004 NFD at end 2005

€ million

Cash flow generated by

operating activities

Disposals and repayment of

IFRIC4 receivables

Investments and new IFRIC4 receivables

Interest paid

Large projects

Dividends paid

Impact of exchange rates and

other


NFD at December 31, 2004 -13,059

l Free cash flow +555

l Investments in new large projects and acquisitions -906

l Dividends paid -374

l Impact of exchange rates and other -87

Net financial debt at December 31,2005 -13,871

LT & ST financial receivables and marketable securities 2,775

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

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

€ million


13.9 13.5 13.1

15.4

10.3

13.0

11.1 10.9 3.0 x

3.2 x 3.2 x

3.5 x

8

9

1 0

1 1

1 2

1 3

1 4

1 5

1 6

31 Dec. 2003 31 Dec. 2004 30 Jun. 05 31 Dec. 2005

Marked improvement in debt ratios (1)

Further improvement to the balance sheet

(1) Ratios on a 12-month moving basis (2) Incl. US businesses sold and FCC

€ billion

§ Net financial debt § Economic net debt _ Economic net debt/Cash flow

from operations

(3)

2.5

3.25

4


Continued optimization of our financing

l Current ratings: l Moody's

A3 / P-2 Outlook stable / upgraded rating (27/06/2005)

l Standard & Poor's BBB+ / A-2 Outlook stable

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

credit over 1 year


Veolia 2005 Efficiency Plan

l Impact of €168m on operating income in 2005 l Impact of €284m on operating income over 2 years l Impact of €20m on the financial result and corporate

income tax over 2 years l Total expected impact of plan by end of 2006: €400m

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

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

permanent and continuous improvement



l Extension of the program to optimize the performance of incinerators in France

l Continuation of the program to optimize maintenance in Energy Services

l Deployment of projects on bringing best operating practices to all the Water regions in France

l Consolidation of the administrative structures at the regional level within Energy Services in France

l Rationalization of Waste‛s structure in France l Re-organization of Transportation‛s structures

abroad (Germany, Sweden, and Denmark)

Operations • Operating processes • Risks / Insurance

Support functions

• Overheads • IT savings

35%

26%

Main projects



l Continuation of program to rationalize real estate portfolio of offices and sites l Closure of loss-making foreign subsidiaries

l Further deployment of framework agreements l Introduction of an initiative to optimize the

purchases of local sub-contracting

Purchasing • Multi- divisional • Divisional

Assets • Real estate • Business portfolio

21 %

1 8%

Main projects


11.0%

10.0%

8.3%

6.4%

9.1%

10.3%

9.7%

7.5%

7.2%

8.3%

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

7,378

4,540

2,184

1,144

15,338

l Water

l Waste

l Energy services

l Transport

Total

Change in after-tax ROCE

ROCE (in %)

2004 2005 2004 (2) 2005

Average capital employed (in €m)

An improvement in profitability

WACC (1) = 6%

6,956

4,279

1,985

1,126

14,767


STRATEGY AND OUTLOOK


A confirmed strategy

Value creation through the optimization of the resource

A model which applies to each of our businesses


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

l Becoming a benchmark in our industry due to: l Our technical know-how supported by important R&D expertise

(development of solutions for sludge management, integrated management of wastewater systems, recycling of process water, seawater desalination)

l Our customer know-how (implementation of quality standards, environmental awareness programs, training in water conservation and usage)

l Creating value: implementation and exchange of best practices



l Waste l A fundamental role in the area of recycling “materials”, 7 million tons

recovered per year l 6.3 MWh of energy produced per year, coming from the combustion from

incinerators and recovered biogas l 2.2 million tons of CO 2 prevented

l Energy Services l Optimization of the choice of combustibles: reduction of greenhouse gas

emissions (biomas, geothermic, solar-thermic). Natural gas and renewable energy represent over 70% of the primary energy used by the division

l Optimization of energy consumption by consumers: in Ile de France, reduction of 8% of the primary energy consumption within a housing complex.

l Optimization of returns from installations and development of cogeneration.

l Initial projects to reduce greenhouse gas emissions l Transport

l Reduction of greenhouse gas emissions: the opening of the tramway in Saint-Etienne has reduced CO 2 emissions by an estimated 120 tons



l Multi-service offerings for industrial clients l Commercial coordination across the 4 divisions:

development of cross-selling and reduced commercial costs

l Research & Development: pooling of scientific and technical expertise in the four divisions to promote multi-divisional research programs l Example: the treatment of sludge through a joint

project between R&D experts working for the Water and Waste divisions

l Another example: preventing legionella with the help of the service skills of the Energy Services and Water divisions.

l Training: pooling the funds allocated for training (example: The Veolia Environnement Campus and its extensions abroad)

A common approach by our four divisions


2006: the continuation of profitable growth

l Revenue growth of between 6% and 8% l Growth in operating income higher than that of revenue l Positive free cash flow before new large projects l Delivering balance sheet commitments: economic net debt /

cash flow from operations (1) ratio below 3.5x l Increase in the after-tax ROCE l Dividend growth of at least 15%

(1) See definition on page 4

Targets:


Medium-term objectives

l Benefit from the fast growing markets in which the company operates

l Revenue: average annual growth of 6% and 8%

l Priority to value creating growth IRR ≥ WACC +3%

l Maintain balance-sheet commitments

l After-tax ROCE: 10% in 2007

Targets:


Veolia Environnement: A confirmed profitable business model

l Clear and consistent strategy

l 2005: a year of strong performance

l Confirmed leadership in environmental services for municipal and industrial customers

l Long-term contracts with recurring cash-flows

l Global presence in growing regional markets:

l Europe, North America and select countries in the Asia-Pacific region

l Selective investments and further improvement to the balance- sheet


APPENDICES


IFRIC (1)

Interpretations D12/D13/D14

l Assets concerned: l Assets related to a public service, which are returned to the

concession grantor at the end of the contract l A large number of different contracts: analysis of the

“substance” of the contracts l Main scope of assets: assets linked to concession contracts

(€5.6 bn at 31/12/2005)

l Classification of assets by nature in 3 categories l Tangible assets l Intangible assets l Financial assets

l Provisional calendar l Interpretations from IFRIC expected in the second half of 2006 l Application by Veolia Environnement in 2006

(1) See Veolia IFRS workshop of February 4th, 2005


IFRIC 4 financial receivables

Water 45%

Energy Services 38%

Waste 13% Transport 4%

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



213 158 190 137 153** 116

Average domestic consumption in l/d /per capita

0.68 1.30 2.32 2.56 2.89 4.45

Average price * of a m 3 of water in € (incl. taxes)

Italy Spain Sweden France United Kingdom Germany

**141 l/d per capita for those with a meter * For drinking water and wastewater

Data concerning water consumption and price


Some examples of value creation by optimizing network management

82% 68% RABAT-SALE

70% 59% PRAGUE

94% 78% PARIS RD

Now On award of contract Network yield



Central Bohemia: Kladno Melnik Moravia: Zlin

1998

2000

1996

2001

Pilsen

VOSS Sokolov

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

Prague I – 66%

2002 Prague II – 34%

4 million people served

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

Year of contract

1999

2004

2005

2006

Hradec Kralove (E. Bohemia) Slavos Slany (Central Bohemia) Prostejov (Moravia)


ROCE (%)

0

100

200

300

400

500

600

700

1996 2001 2002 2003 2006 2016 0,0%

2,0% 4,0%

6,0%

8,0% 10,0%

12,0%

14,0% 16,0%

18,0%

Revenue

Operating income

Net profit

ROCE

J curve trending upward Example: Czech Republic

€ million

l Model of a group of operating contracts with limited investment (initial entry + other contractual investments)

l Customer payments based on an adjusted cost + fee basis (adjusted for increases in inflation with the ability to retain productivity gains)


ROCE, a key indicator

l Why deduct provisions?

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

Capital employed = fixed assets + goodwill (2)

+ investments accounted for using the equity method + working capital requirement (3)

– provisions – other debts

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

Average capital employed for the year

(1) Excluding the proceeds from the capitalization of tax loss carry forwards arising on disposals in North America and related restructuring measures

(2) Under IFRS, elimination of amortization of goodwill

(3) Including net deffered tax


Tangible, other intangible assets & « assets related to concessions » 13,523 13,523

Goodwill 4,863 4,863

Investments accounted for using the equity method 201 201

Inventories and work in progress 646 646

Accounts receivable 10,112 10,112

Accounts payable -10,374 -10,374

Net deffered tax 3 3

Tax related to disposals in North America & related restructuring measures -117

Working capital requirement 387 270

Provisions -2,387 -2,387

Other liabilities -362 -362

Capital employed 16,108

2005 capital employed

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

(€ million)

(*) Official report for the French market authorities


Average 2005 capital employed

2005 At December 31 At December 31

(€ million) 2004

Capital employed 16,108 14,568

Average capital employed in 2005 15,338


Calculation of 2005 ROCE

At 31/12/2005 (€ million)

ROCE after tax 9.1% After-tax ROCE 9.1%

Recurring operating income 1,904

Income tax -423

Tax loss related to disposals in North America and related restructuring measures 21

Total tax expense -402

Equity in net income of affiliates 15

Income linked to financing operations for 3rd parties -126

Results of operations, net 1,391

Average capital employed in 2005 15,338


l Nathalie PINON, Head of Investor Relations 38 Avenue Kléber – 75116 Paris - France

Telephone +33 1 71 75 01 67 Fax +33 1 71 75 10 12

e-mail nathalie. pinon@veolia. com

l Brian SULLIVAN, Vice President, US Investor Relations 700 E. Butterfield Road -Suite 201

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

Fax +1 (630) 282 0423 e-mail brian. sullivan@veoliaes. com

Web site l http://www. veolia- finance. com

Investor Relations contact information

mailto:[email protected]

mailto:[email protected]

2005 Annual results

Business

annual results paris

investor relations

annual accounts

actual results

annual shareholders

exchange commission

euronext paris

confirmedl strong growth