q1 earnings transcript (310312)

7/31/2019 Q1 Earnings Transcript (310312)

1/13

Company Name: Veolia Environnement

Company Ticker: VIE FP

Date: 2012-05-04

Event Description: Q1 2012 Sales and Revenue Call

Market Cap: 5,443.36

Current PX: 10.475

YTD Change($): +2.006

YTD Change(%): +23.686

Bloomberg Estimates - EPS

Current Quarter: N.A.

Current Year: 0.692

Bloomberg Estimates - Sales


Current Year: 29398.000

Page 1 of 13

Q1 2012 Sales and Revenue Call

Company Participants Pierre-Franois Riolacci

Other Participants Vincent P. Gilles

Emmanuel P. Turpin

Eric J. Lopez

Martin C. Young

Julie T. Arav

Vincent De Blic

Bertrand Lecourt

Yohann Terry

Philippe Ourpatian

MANAGEMENT DISCUSSION SECTION

Operator

Ladies and gentlemen, welcome to Veolia Environnement 2012 Q1 Results Conference Call. I now hand over to Mr.

Riolacci, CFO. Sir, please go ahead.

Pierre-Franois Riolacci

Thank you for attending the call. Good morning to all of you for the first quarter update. I hope that the sound is okay.

Maybe for those of you who can't see the screen, you can use the slideshow as well I think that it would be it would

help you obviously to hear the call.

I am on page four on the slideshow. Before moving to numbers, I wish to highlight a few comments. We are moving

forward in the implementation of convergence plan. As we will come back later, you will see that we have identified

75 million for year of savings to-date. So we are on schedule for 100 million annual target.

We are moving forward also on the asset divestment program, and I will give you some slight update on where we are.

You will find in the appendix some of the contract that we have learned we have won in the last few months and

which shows the good commercial dynamics that we have on the top-line result.

And in terms of numbers, the key items are the revenues which are increasing by 4.6%. That's a 3.4% organic growth.

Adjusted operating cash flow are declining by 3.1%. That's minus 3.3% at constant exchange rate. Adjusted operating

income is declining by 12.2%, and the main difference between operating cash flow and operating income being the

cost of implementation of the transformation plan some provision that we had to take, but also higher amortization

expenses in a few geographies.

We can move to the key figures 2012, revenues 7.825 billion plus 4.6% adjusted operating cash flow 900 million

minus 3.1%, adjusted operating income 543 million minus 12%. The free cash flow is negative by 519 million, and

the net debt is at 15 billion up 300 million.


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If we move to the breakdown of revenues by division, you will note first that there is a limited impact of the scope and

the ForEx variation. ForEx is plus 60 million that's not a big deal at the earlier level.

Scope is plus 30 million that's 0.4%. With diverging trends we have an increase in terms of Scope which is a

contribution of a new Warsaw operation in Poland that's 95 million and we are negative in the water and the waste

business that impact of disposal, some disposal that we have completed last year after the first quarter.

The organic growth is at 3.4%. I remind you that it was negative in Q4 2011 minus 2.1% so there is a clear inflection

there, but I would like to highlight straight away that we have a very strong contribution of construction works in the

water division. And also strong impact of the energy prices increase in with Dalkia contribution.

Some details now division, in the water business, revenue increased by 4.9% to 3.50 billion in operation, the revenue

is up by 2% that's 3.6% organic growth. We have a good valuation of revenues in France with stable volumes,

quarter-to-quarter and favorable indexation closes impact.

We have a good growth in Europe, more than 5% organic growth in Europe with a strong contribution of the

Braunschweig contract and also higher prices in both Central and Eastern Europe. Asia Pacific is only up by 3% with

here again contracted trends, good trends in Japan and Korea for the works, which are running high.

Good trends in China with higher volumes, both in drinking water and even more in waste water plus the impact of

higher prices that we booked in the second part of 2011. But we have on the contrary in China, a decline in the

construction works. You know that there are significant we have significant concession in China, where there is a

significant amount of works, which is booked at sales under IFRIC 12 regulation.

Since we have less construction works in the first quarter, we have less contribution in this area. We have also a

negative impact in Australia, which is the end of the Adelaide contract, which incurred mid 2011. And that explains

why Asia Pacific is not that high.

In the U.S., we have a decline of 8%, which is mainly due to the termination of the Indianapolis contract, which

incurred in August 2011. For the construction part, technologies and network, revenue is up by 12.7%, that's close to

10% of organic growth. We have a stabilization of the municipal market with the Hong Kong [indiscernible] (06:11)

contract, which is now offsetting the negative design in the municipal impact, so neutral in municipal; strong

contribution of the industrial customers. That was already the case for industrial solution; it's now the case already also

for design and build for industrial customer, which is pushing up.

That's the trends on the revenues of the water operation. Maybe a few comments at the level of operating cash flow. We

have a decline in the French Water business, which is due to the contractual erosion. It is right in line with our annual

expectation. You remember that for 2012, we expect the French Water operation adjusted operating cash flow to be

down by 40 million to 50 million. That's the trend that is consistent with the number that we have on the first quarter

We have a positive growth of operating cash flow in the international operation and overall, we have limited decline of

the water adjusted operating cash flow. The decline is higher in terms of operating income, and this is mainly due to

higher depreciation charges in the water business, mainly in France and China and some minor countries.

For environmental services, page eight, revenues are set at 2.236 billion, plus 0.3%. That's negative organic growth of

0.9%. The negative impact is due to the variation of the prices of recycled materials. Quarter to quarter, paper prices are

down in average of by 17%. Scrap metals down by 5%.

It's worth to mention that the trend during the quarter is very different, and you know that the prices have moved up

during the quarter and they end up with a very good level. But quarter to quarter in average they are down. The impact

is 34 million of revenues.

On volumes, overall, the volumes the waste volumes are stable. And it's worth to enter into detail. In France, we have

declined in collection, volume collection, in commercial business but even more in municipal business. On the

contrary, we had some operation downtime last year in the first quarter. And as the base effect is positive, we have

strong volumes, good variation of volumes in treatment for both landfill and incineration in France. And we have on


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the top of that, very strong contribution of Hazardous Waste with more than double-digit growth in France for this

operation.

In the UK, the collection is down in the commercial business. It's stable in municipal business. This is due to the

contribution of new contracts that we won last year and that are now in full year impact so, overall, municipal

collection is stable.

We have a very strong decline of volumes in landfill in the UK. This is due to as you know there is a new regulation,

and we have double-digit growth of incineration volumes. This is due to new contracts and our new PFI contract, even

if we had two plants which were in downtime during the first quarter 2012.

In Germany, we have slightly higher commercial collection volumes, but still lower municipal volumes; this is a time

that we encountered last year and which is concerned.

That's for the variation of prices and volumes. Just to mention on Italy, the extension of voluntary liquidation plan it

was, as you remember, we announced that we will liquidate Calabrian operation in March, and we have extended this

liquidation to our Tuscany operation a bit later.

In terms of operating cash flow, we have a slight decline in the waste business. This is the result of lower raw material

prices. We do convert still by about 20% the valuation of revenues into EBITDA. We have also higher fuel prices. The

impact on the quarter is negative by 5 million and we had the impact also of maintenance stoppage in the UK, but

overall, slight decline.

On Energy Services, revenues are up by 8.5% to 2.5 billion; that's plus 5.3% of organic growth and this is due to the

price of energy, which accounts for 140 million that's basically our organic growth.

In France, the topline is up by more than 10% at constant scope. We do benefit from the price effect on revenues for

about 100 million, even if we have commercial environment which is still tough in terms of competition. The weather

impact was slightly favorable in France overall, because you remember that we have these three weeks, which are very

cold in February.

In Central and Eastern Europe, the topline is up by 4.6% constant scope and ForEx, here again, price effect, which ispositive close to 50 million, this is due to higher heating prices and especially in Lithuania.

We have, on the contrary, some lower electricity sales in Czech Republic. This is due to volume and also in Hungary

and this is due to lower subsidies. It's worth to mention that in Central Europe, on the top of the organic growth, we

have also the positive contribution on this page.

Here again, the weather impact was limited. The weather impact was actually negative in the U.S. that's where we had

overall the significant negative impact. If we come to adjusted operating cash flow, it's down. It's down in particular

due to the competitive environment that we have in France and the lower electricity sales that we have in Central

Europe.

It's worth to mention also in France that we have a change in the GAAP price indexation rules in hitting tariff, which is

negative, and that offset the gains that we have on the rest of the price valuation, which is a positive. Overall, it's

natural. In terms of operating income, we have also the amortization charge of our new Warsaw operation.

That's it for the operation comments. I will come to the cash flow statement. First to highlight that even if the

divestment program is progressing very well, we have not closed significant operation during the first quarter. When

last year at the same period, we have closed both the disposal of another chain operation in the waste business, and also

we have closed the transaction with Transdev in March.

Second item in the cash flow statement is the working capital valuation. You know that the first quarter is a strong

negative with Veolia. This is due to seasonal effects. It was a minus 570 million last year. It's minus 679 million this

year. So you have the same seasonal effect. I will mention on the top of it that during 2011, we had a deterioration of

the working capital of the French Water operation and we have the backend of this impact during the first quarter of


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2012.

And I would like also to mention that in Italy today, due to the banking system, it's difficult to carry on with the

securitization of receivables. So we have an increased amount of receivables in Italy. We do not observe any significant

deterioration of payment condition, but we don't have any more securitization. So we have a temporary effect on the

working capital requirement.

Just a word on that, the DSO, daily sales outstanding, is up by one day compared to the end of last year and two days

compared to the first quarter of 2011. On the gross investments, they are up by 130 million from 528 million to 656

million. This is due to two things the first one is a buyback of 7% of water subsidiary first in Central Europe. We

bought back 7% from EBRD and that accounts for close to 80 million. And the second item is the valuation of the

industrial growth capital expenditure in Energy Services with biomass investment in France and also Central Europe.

Maintenance CapEx are quite under control. They account for 2.2% of topline. Without VTD, it was 2.1% in 2011, so

no big change. Net debt, page 11, net debt is 15 billion, slightly up by 300 million. And that's it from numbers.

A quick update on the rollout of a convergence plan; and first, page 13 on the an update on the asset divestment

program. I won't give you too much detail too many details. You know that we are in negotiation. We are in

competitive option, so there are things that can be said and those that can't be said.

Maybe just to mention in the UK regulated water and U.S. solid waste processes, which are very close both in terms of

secure and timetable. We had an ambitious timeline. We are on schedule. We have received a non-binding offer

numerous non-binding offers from both assets we have won offers with very strong signatures, and we are not

disappointed in terms of valuation and I won't comment further this I think.

For Veolia Transdev, we are progressing in the preparation of VTD for withdrawal that implies various strong

negotiation and discussion with partner Caisse des Dpts on the strategy, the scope of business as a the level of

recapitalization, which is necessary, the refinancing strategy, the balance sheet structure. So we are progressing on this

aspect with Caisse des Dpts in including the transfer of [ph] SMTA (18:21). That's one thing.

Two, we have received an offer from an exclusive potential buyer on the 27 of April as expected. We are negotiating

this offer in terms of structure, especially financing structure, in terms of valuation and also in terms governance of the

new secure entity. And this will imply also as you can imagine, Caisse des Dpts.

It's worth to mention also that during the process, we have received some expression of interest from an alternative

buyer. This is the start of our negotiation process. I won't comment further as you can imagine also because we are in

negotiations.

A word on the cost reduction program that's the convergence plan, you remember that early March, we had identified

60 million of cost reduction for full year for 2012 with 38 million of implementation cost. Two months later, we

have identified 75 million full-year impact with 52 million of implementation costs.

The breakdown of geographic contribution and by weather is not very different from what you've seen two months ago.

It's worth to mention that we have more than 200 projects running, about three-quarters of this project are started at

very end of March, and we contribute further during the rest of the year.

More than 20 projects have been launched, including cost division project, back office materialization, new information

and technology program, purchase optimization et cetera all these projects have been launched today.

In addition, to the convergence plan, we have also a performance plan or efficiency plan that the one where we have a

target of 225 million for the annual objective. Today, we have 156 million of savings, which have been identified for

the full year and we are progressing, we are confident that we should be in a position to reach that target at the end of

the year.

That's basically the key takeaways of the quarter maybe just to mention page 15, you are familiar with our target, I

think the top 2012, 2013 we are obviously focusing our on a 5 billion of asset divestment program and also the 120


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million net impact and operating income 2013 from our cost reduction. That's obviously our key target nowadays.

That's it for this presentation, and I'm happy to answer your question now.

Q&A

Operator

[Operator Instruction] We have a first question from Mr. Vincent Gilles from Credit Suisse. Sir, please go ahead.

: Yes. Good morning, everyone. Can you hear me?

: Yes.

: Yeah, wonderful, lucky you. Just two questions, pretty obvious ones. The first one is could

you elaborate a bit on French Water? You talk about pressure on the operating cash flow in the French Municipal

Water contract and it's the usual story, but maybe you can help us to see what happened in the first quarter this year,any news that could help us anticipate what may happen during the year?

And the second question is on the waste business. I appreciate there was a dip in recycled prices and then they went

back up at the end of the quarter. But should we assume that after the sort of strength we saw in the beginning of

second quarter, your target for the year could be upgraded or maybe not. Maybe you can help us see through the impact

of that? Thank you.

: Thank you, Vincent. On the French Water market, we there has been no structural

change in the market during the first quarter. You may have seen some first about the contract. I would say a small size

contract Southeast of France with a lot of noise in the press. What I can tell you is that this contract is by no way

different from what we experienced in the past. There is a way to present things, but we in the we are still in the same

competitive process which means that at the time of competitive renewal, we will lose about 80% of EBITDA margin.

And that's the trend that we had in the last 18 months and that's the trend that we see in the first quarter. There is no

further deterioration in the French Water market even if there is, as you can imagine, a lot of politics in this time of themarket. So the market did not show any significant downturn or upturn in the last few months.

On the waste business I think that we need to be careful. First, it's true that there has been a very impressive recovery of

raw material prices in the first months of year. That's a good thing and to be frank, that was not something that we

expected and it's rather a positive surprise. We hope that it will maintain that way later in the year.

On volumes, as you can see in our first quarter results, the impact is neutral, which I think is a good thing. However, we

can see that in terms of collection, it's negative in Europe; mainly in all countries in Europe the trends are negative in

collection. So we need to be careful. It's true that we have some base effects in Q1 2011, so it helped us to show this

zero impact on volume. But it's fair to say that overall, collection volumes are down compared to what they were.

Now you know also and if you I know that you are looking to our future performance, you know that we do not have

any targets for the year. So we cannot improve our targets because we have none, so that's the first thing.

The second thing is that first quarter 2011 was the best quarter of the year. You remember that our operation

downturn during the second quarter of 2011 and obviously, we have a basis of comparison in the first quarter, which is

not very positive for us. That's a reality. I won't comment much further because, as I mentioned, we do not have targets

for 2012.

: So you're not changing your overall target for the year, in terms of the company's

profitability?

: No.

: Okay. Thank you.


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OperatorWe have a next question from Mr. Emmanuel Turpin from Morgan Stanley. Sir, please go ahead.

: Good morning, everybody. First question on the amounts of charges restructuring

charges on provisions included in your first quarter figures at the EBITDA on the EBIT level, could you please offer

some form of quantification in absolute terms at both levels and also put these figures in the context of your plan for the

full year in terms of the charges. I remember you had announced something like 120 million overall.

Are could you maybe help us quantify any specific one-off operational losses you've incurred in the first quarter?

You did mention Italy for instance, you had provided figures for the overall amount of one-off last year and by one-off,

I mean, elements that are by nature non-recurrent and that should disappear mechanically next year.

On last questions on Transdev, I understand you're not going to give much detail, but at the full year result where you

announced that you had entered into a period of exclusive negotiation with a partner, that partner has sorry that party

has extended an offer. Are you still in a period of exclusivity or has this exclusivity period lapsed? And, therefore, are

you able to enter into discussions with a new party of interest? Thank you.

: Thank you, Emmanuel, very good questions. On restructuring, the valuation of

restructuring charges quarter-to-quarter is negative at the EBITDA level of about 7 million to 8 million and at EBIT

level, it's about 15-plus million; that's for the first quarter.

This is consistent with what we see on a full-year basis. I mentioned that on the convergence plan only, we have about

80 million of cost of implementation that we have in mind, plus cost of implementation also in the efficiency plan, so

it's consistent with the 120 million. I wouldn't say that there is a seasonality in terms of cost of implementation, but as

you know, there is you may remember that we had a very strong Q4 in terms of implementation charges, and this is

due to the negotiation that we have on these processes. And it's clear that we expect H2 to be higher than H1 in terms of

cost of implementation, and this is also a cycle of discussion that we have internally.

: Can I just stop you there please, Pierre-Franois. You mentioned a delta, a difference in

restructuring charges of 7 million to 8 million of EBITDA, so that's an increase in restructuring charges. What's the

figure in absolute terms, because I think your full-year number is in absolute terms, right?

: In Q1 you're right, in Q1, we have in Q1 2011 we had very small charges, so you

can take it basically as growth figures.

: So basically you had, let's say, at the EBIT level 15 million out of a full-year total of

more than 100 million?

: That's right.

: So you got less than a quarter, okay.

: That's correct.

: Thank you.

: On one-off losses, I think that we had plenty of one-off losses in 2011. Fortunately,

we don't have much on this first quarter, so you're right to point out that we're extending the liquidation on Italy. But

there is no impact on the account because as you remember, we had negative impact on Italy last year, and we have

obviously taken the charges last year. So, there is basically no one-off. You have always small one-off with big

operation like we have, but we have also some positive. So at the end of the day, on the first quarter, I will not highlight

that we have specific one-off in our P&L.


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On VTD, I mean I appreciate that you want to know where we are. I understand that you need to understand also that

we are in discussion we are already in negotiation and that's not the sort of process that you can run telling anyone

exactly where you are. So please accept that we are in this process. We I think that there has been a lot of news. Imean it's not a pure coincidence if today on this call I can tell you that we have received the offer from a potential

buyer, that we have received a non-binding offer on the U.S. and the UK, so clearly we have set dates which allow us

to give you some ideas of where we are. It's progressing. They are tough negotiation and issue to be very open, I

mean, the U.S. and the UK, it sounds like highway and clearly it would be a bumpy road up to the closing and we all

know that; so because it's a more complex one. So I won't comment further on all disposal process either in the U.S. or

UK or VTD.

Operator

You have the next question from Mr. Eric Lopez from Merrill Lynch. Sir, please go ahead.

: Bonjour, Pierre-Franois. Bonjour, Ronald. I have several questions, but first one on the cost

cutting program. A part of your I mean part of my question was already answered, but how much of the 75 millionof cost savings you've identified had already an impact in Q1 and if you had none, when do you expect it to have an

impact on numbers in 2012?

And regarding this cost-cutting program Mr. Geske left the company a month and a half ago. I guess there's a process

ongoing of hiring someone. Can you give us a little bit more detail about the profile of the person and the timing of the

hiring?

On the disposal program, I'm trying again sorry, I'm not going to focus on VTD but if I look at the other two assets UK

Water, U.S. Waste, you said you were happy with the offers. If we set that consensus at 20% premium to arrive in

seven times CBDA for U.S. Waste is that still the offers you've seen that still make you happy?

And finally, if I focus for one second on the Italian operations, it's been a big issue last year both in the Energy division

and in the Waste division. Can you give us an update on the profitability of both operations at that stage? Thank you

very much.

: Thank you, Eric. On the cost cutting program, I would say that out of the 75 million

that I mentioned about 10% had an impact in Q1. So that's a limited amount and it will move up throughout the year

quarter-after-quarter. We are indeed looking to high new Head of Confirmation and Operation, unfortunately, I'm not

the CEO of this company, I'm only the CFO. So I cannot tell you more details on the profile, what I can tell you is that

it's progressing well and we expect to be in a position to make a decision shortly.

In terms of offer, you mentioned the 20% premium on the regulatory asset value of UK operation. I think that's the

number that's calculated. I would say that that's a number that the market has in mind. I would say that if we had

received offer of less than 20%, we would have been disappointed and we are not.

On the multiple of seven, that would be disappointing. But we're not disappointed, okay. So I think that I won't

comment further on that because it's a competitive option and I won't I cannot tell the range of the offer that we have

received. I mean that's impossible that would be detrimental to the company. So I can tell you I mentioned that wewere not disappointed, it's clear that we are comfortable with the numbers that have been in the market so far.

In Italy, the contribution of waste operation is insignificant. We took the charges last year, so today I mean that's really

not such a big deal for us now. The question is it is a big old question to make sure that we can secure this liquidation

in [indiscernible] (35:32) and we are now handling the matter in legal terms. We have some residual operation in the

waste business, which are historical operation, which are running okay and we will have to make a decision on that

one, but there here again that's not a big deal.

On the energy business, the first quarter last year was quite good in terms of EBITDA and EBIT. So the base of

comparison in Q1 is not favorable to us. As you know, in Energy Services, the downturn incurred in the second quarter


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: Yes. Good morning, everyone. I have two questions if I may. The first one, can we have a

breakdown of your technology and networks revenue between the Water Works and Veolia Water Solution and

Technology?

And secondly, regarding the French Water market, I guess we have in mind the major contracts to be renewed in the

next couple of years. However, are you doing any assumption or what are your expectations at this stage of the impact

of the [indiscernible] (42:03) by 2015? Is this included in your mid-term guidance or not? And what are your

assumptions regarding the impact of this decrease? Thanks.

: Thank you, Julie. On the [indiscernible] (42:20) statement. Yes, I mean, obviously

we took in account in our mid-term target and giving all the number of that have been given during the Investor Day,

we are factoring in the impact on the [indiscernible] (42:26) in 2015.

Now, in the meantime, as you know, with the [indiscernible] (42:32) contract there are two things which are very

important to discuss with our customer. The first one is a possible extension of the contract and that's clearly the start

our action plan is that in some cities, we will extend the contract beyond the 2015 date and there obviously and this is

obviously allowed by the law. But it's a negotiation, and it needs to be authorized by the authorities. And this has beenthe case already in different contracts, for example, in Toulouse, and there will be this will be the case in several

contracts [indiscernible] (43:24).

The second thing that we need to discuss is that when this contract will be terminated, there would be a discussion

about the indemnity that we are allowed to get. And obviously, there is a lot there is the law and there is a lot of

trading behind that because if the contract is terminated, it means that it will come for renewal and that will impact

diversification.

So we have a few hundreds of contracts which are falling under [indiscernible] (43:56) and we have an action plan

which is different for each contract tackling these two aspects of the negotiation and just to be very clear this is factored

in our forecast and the number that we have given to the market in early December last year. We do not give usually

the breakdown of VWAC on one side and the work on the other side. I won't comment further on that one.

: Thank you very much.

Operator

The next question is from Mr. Vincent de Blic from JP Morgan. Please go ahead.

: Yes. Good morning. I had three quick questions. The first one again on savings, I'm trying to

understand also the [indiscernible] (44:49) numbers; in the press release you mention a number of 34 million in net

savings in Q1 from efficiency and convergence. Can you just clarify whether it's an EBITDA or an EBIT number?

Give us the off number if it's one or the other and also what the growth number and what the implementation costs are

in this number?

The second question was on disposals on Transdev, do you expect timing similar to UK and U.S. i.e. signing around

the summer and closing by year-end or could it be earlier or later?

And third point, you've mentioned competitive pressure in France for Energy Services; I wondered if you could

elaborate a bit on what's going on, where it's coming from, which clients are most exposed to these trends? Thank you

very much.

: Thank you. On the cost cutting, the net impact is 54 million at the level of EBITDA

I mentioned that we had about 7 million to 8 million in the convergence plan and the efficiency plan is about 27

million. This is net of cost of implementation. This is completely net, which means that I mentioned that we had about

15 million of implementation cost, which means that the gross number is close 50 million and the net number is 34

million. So that's for the cost cutting.


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On the timing of the disposal in the UK and the U.S. maybe I've not been clear enough, but signing is expected for both

of them in July, and the closing will be done, I mean, maybe as the UK could close a bit earlier than the U.S. but both

of them should be closed by the end of the year in U.S. That's what we are working on.

On competitive pressure, in France, I mean, that's not new. That's we have many contracts coming for renewal in the

Energy Services business. You know that it's a very fragmented business with thousands of contracts in France. It is

competitive that has been the case for years and it is the case. There is no dramatic change in this competition

environment. So we have the same same trend; the only difference on the number of contracts or the nature of

contracts coming for renewal, the impact on Q1 was a bit higher than usual but no dramatic turn. Now what is at stake

in France is clearly the way the natural operation and especially converting historic facilities, which are basically gas

facilities into biomass. And this has to be linked to the investment efforts that we are doing now. I mentioned that

investments industrial investments in Dalkia were strongly up. That's actually they're nearly doubling

quarter-to-quarter and the core of this new investment, are in biomass and especially in France. And that's clearly a way

for us to protect our returns in the future, in the long-term. And that started [indiscernible] (48:40) story in the French

energy business.

: Okay. Just sorry to come back on my second question on disposals, on Transdev, do you thinksigning could happen more or less at the same time as the other two disposals, or?

: Our view is that the first Transdev contract is refinancing and we are working for

refinancing during the summer, as we mentioned already. Then it will pave the way for the signing of a transaction

before the end of the year. And we are still obviously working on this timetable to sign but also close by the end of the

year on VTD. But as I mentioned, it would be a bumpy road I think up to the very end.

: Super. And just on the refinancing, can you us again the main numbers in terms of

[indiscernible] (49:37)?

: No, I can't, because there is a strong impact on valuation and I won't comment on the

refinancing amount.

: Okay. Thank you.

Operator

We have the next question from Mr. Bertrand Lecourt from Deutsche Bank. Please go ahead.

: Good morning, Pierre-Franois. It's Bertrand Lecourt from Deutsche Bank. I just want to

focus on organic growth, and just want to understand what is going on. You said 34 million of net impact on EBITDA

for the savings, if you take that off the EBITDA and EBIT, your implied organic growth for the core business is minus

7% EBITDA and minus 18% EBIT. What is driving really the pressure on the core business?

We understand that's pressure on wastewater contracts and that count the cogeneration stories. But should we expect a

negative organic growth for the end of the year? If you go back in 2004 when you started to do cost cutting the first

one on cost cutting, you still add organic growth on top of the cost cutting, which was very for margins. I just want tounderstand what is the dynamics of the new Veolia's core business at the moment?

: I think that there is nothing new, Bertrand. First one the 34 million that you

mentioned include the 27 million of efficiency plan and you know that one of the key issues that we have is that a lot

of our efficiency today is passed through to our customer through tariff increase which do not much the cost inflation.

That's part of the issue that we clearly stated during 2011.

So the net impact is only 7 million, so it's not, as you can see, it's not a big driver. So there I can confirm that there is

no any deterioration of the trading business during the first quarter. It's just that in the first quarter, we have this base

of comparison to Q1 2011. You remember that the deterioration came mainly into the second quarter of 2011, and there

is no downturn in the trading on Q1. So we clearly not we have not identified any further deterioration. We are


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exactly where we thought we would be. I'm not going to comment on number against the budget, but we are exactly

where we thought we would be.

: Okay. And regarding fuel cost because it's a full element on in Waste. How you do you

expect the reversal by year end and how much was the impact for the first quarter and maybe what we could expect for

the full year?

: The fuel cost of the first quarter was 5 million in the Waste business, which is a

main one main exposure. Would that revert into the next quarter? It's a bit difficult to say. I mean, we do not know

what we discuss about prices in the next quarter. It's clear that compared to last year, the impact is much lower and you

know that's the basis of comparison will be not a variable unless we get those prices carry on to go up.

: Thank you.

: Thank you. One last question.

Operator

Our last question from Mr. Yohann Terry from Exane. Please go ahead.

: Well, thank you to giving the last question. I just wanted to go back on pricing. You talked

about energy, I would like to talk a bit about waste and you're mentioning some pressure especially in Germany. Could

you give us more details on the main pressures by country and by segments maybe, if you have the information? Thank

you.

: Well, I think that's something we should come back maybe during the first half

accounts but to give you some ideas, I mean in the Hazardous Waste the prices are okay and still good if you see easier

what volumes are up. I think that if we can see country-by-country I think that in France, we still have a competitive

environment. I'm not talking about recycled materials; I'm talking about solid waste, Europe solid waste.

We still have a competitive environment, which means that it's always the site to get the increase, price increases whichcover inflation. So that's still that's still a fight, but no trend no specific trend in the first quarter. I think that's one

market which is difficult in the first quarter is the UK with clearly a strong pressure. Here you have the regulation of

landfill with the increase of landfill tax that is obviously pushing down the volumes in the landfill. There is no

significant competition on prices, it's just that the market is depressed.

In Germany, I think that in the C&I, we have no specific trend, it's still difficult in the municipal contract in Germany,

clearly when the municipal contract come to renewals, it's always a difficult story in terms of pricing. I think that's

basically the key items for our main markets.

: And if we wanted to have the same indication as you give in water 40 million to 50 million

pressure, could we have something in waste?

: No, because it's nothing of this magnitude. I mean in the waste business what

happened in the past is that our efficiency gain even in mature markets, have been able to match the potentialdiscrepancy between tariff increase and in cost inflation. So we are not at all in the same dynamics. It's a question of

competition in the different market to market, but we are not facing the waste business the same sort of situation that

we have in the French Water. No, nothing that can compare.

I think I knew that we in the waste business, we focused on leadership position which give us pricing power and this

is a much more open market, which is competitive, but where the pricing power add value and so that's very different.

: Thanks.

: Maybe one very last question.


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Operator

The next question is from Mr. Philippe Ourpatian from Natixis. Please go ahead.

: Yes. Good morning to everyone. Good morning, Pierre-Franois and Roland. Just three

question in fact. The first one is regarding the pace of renewal in your Energy Services business in France, could you

just elaborate you mentioned that there is a renewal wave of renewal in your Energy Services. We are expecting some

peak in terms of renewal contract this year and next year what is this based in fact?

The second thing is could you just elaborate a little bit more about marine services, no mention in your press release

where we are in this U.S. activity.

And the last in April where stand your working capital requirement, are you seeing an upturn regarding the seasonal

downturn we have seen in the first quarter figure? Thanks.

: Thank you, Philippe. No, there is no specific renewal impact for 2012-2013 in the

energy business. It's the flow of renewals of more than mid size contract. I think that what is really important for us is

the implementation of the curve that is the CRE contract which are the biomass contract and this will be the key of our

performance in France as being able to start this contract on a proper basis. No ways of renewal the specific ways of

renewal in that year.

On marine, to be very constant, we had an agreement with the buyer. He has not been in a position to close the deal due

to consent that were due by third-party. So we are, obviously, carry on with the process of disposing of this asset. We

have discussions with potential buyer, and we clearly intend to complete this transaction by the end of the year.

It's worth to mention that marine operations, from an operational standpoint, are doing better than last year. You may

remember that in the first quarter, we had an issue about utilization rate of the ships, the utilization rate is much better.

So, it's not a big deal in terms of operation. And we are now moving in the process of disposing of this asset. We're

disappointed not to close this transaction as expected at the end of March, but we are confident we should be in a

position to close by the end of the year.

On the working capital requirement, we do not see any structural change in the working cap of the company, and we

had good years. We had three good years in a row from 2009. We will obviously carry on with our efficiency plan in

terms of working capital, but we do not expect a significant deterioration of our working capital at year end.

Pierre-Franois Riolacci

Thank you very much for the call. Thank you very much for your questions and looking forward to talk to you a bit

later. Bye.

Operator

Ladies and gentlemen, this concludes the conference call. Thank you all very much for attending. You may nowdisconnect.

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