Veolia Environnement: 2012 Annual Results

  Veolia Environnement: 2012 Annual Results

               FIRST YEAR OF TRANSFORMATION AHEAD OF OBJECTIVES

    Debt reduction target for the end of 2013 already exceeded and raised

               2012 ending net financial debt of €11.3 billion

          More than €3.7 billion in divestments completed in 2012^1

Adjusted net financial debt objective between €6 billion and €7 billion at the
                                end of 2013^2

          Operational improvement throughout the second half of 2012

        Improvement in adjusted operating cash flow in the second half

         €142 million in gross cost savings, above the 2012 objective

    Positive cash flow before financial divestments and dividend payment^3

                          Net income of €394 million

Business Wire

PARIS -- February 28, 2013

Regulatory News:

Veolia Environnement (Paris:VIE)

2012 Annual Results Key Figures

  *Revenue: €29.4 billion
  *Adjusted operating cash flow: €2,723
    million                                *Asset optimization: €5,099
  *Adjusted operating income: €1,194        million
    million                                *Free Cash Flow: +€3,673 million
  *Adjusted net income (Group share):     *Net financial debt: €11.3 billion
    €60 million                            *Leverage ratio: 3.26x^4
  *Net income (Group share): €394         *Proposed dividend: €0.70 per
    million                                  share



Antoine Frérot, Chairman and CEO of Veolia Environnement: “In 2012, Veolia
achieved significant improvements, which enabled the Company to favorably
alter its trajectory and accelerate the achievement of its transformation
objectives. Divestments were completed under very good conditions. The
Company’s net financial debt was reduced to €11.3 billion, a year in advance
of our original objective. At the end of 2013, the Company’s adjusted net
financial debt should reach between €6 billion and €7 billion^2. The
implementation of the Convergence Plan contributed €142 million in gross cost
savings, and after implementation costs, contributed €60 million to operating
income. We have achieved a number of commercial successes in economically
dynamic geographies with offerings from new business models. The progress
achieved in 2012 will enable Veolia to start 2013 with a strong base, ahead of
our objectives. Veolia is on the right path. We are ahead of our debt
reduction targets and we are confident in the success of our strategic plan,
despite an economic environment that remains uncertain. As such, Veolia
expects an absolute dividend level in 2014 equal to that which will be paid in
2013.”

2012 Highlights:

  *Implementation of the company’s transformation is proceeding faster than
    expected:

       *€3.7 billion in divestments were completed in 2012, while the change
         in accounting method for the Berlin water contract resulted in the
         deconsolidation of €1.4 billion in additional net financial debt, for
         a total of €5.1 billion in asset portfolio optimization. The
         restructuring of the Company is well underway.
       *Net financial debt was reduced by €3.4 billion to €11.3 billion at
         the end of 2012, compared to an initial target of less than €12
         billion by the end of 2013, which is a year ahead of schedule.
       *A leverage ratio “Net financial debt / (operating cash flow before
         changes in working capital + repayments from operating financial
         assets)” of 3.26x vs. 3.88x at the end of 2011.
       *Positive cash generation after payment of financial expense and taxes
         and before net financial divestments of €89 million^3 in 2012.
       *Cost reductions were achieved faster than expected, in particular a
         reduction in SG&A expense of €82 million (-2.7%). A positive
         contribution from the Convergence Plan was achieved in its first year
         due to gross cost savings of €142 million versus an estimated €100
         million, and resulting in a net impact on operating income of €60
         million. The objectives of the Convergence Plan are confirmed.

  *Good resilience in the Environmental Services division, with waste volumes
    stable compared to the prior year and resilient operating cash flow,
    despite a difficult economic environment.
  *Growth in adjusted operating cash flow in the third quarter, which
    continued in the fourth quarter^5.

Activity

Veolia Environnement consolidated revenue increased 1.5% at constant
consolidation scope and exchange rates (+3.0% at current consolidation scope
and exchange rates) to €29,439 million compared to re-presented €28,577
million in 2011. Water division revenue grew 1% at constant consolidation
scope and exchange rates. Environmental Services division revenue declined
1.9% at constant consolidation scope and exchange rates, mainly due to lower
recycled raw material prices. However, the revenue improvement seen in the
third quarter continued, with a return to organic growth during the fourth
quarter of +3.0%, while volumes were stable for the full year. In the Energy
Services division, revenue growth continued throughout the year, with 5.8%
growth at constant consolidation scope and exchange rates, due to higher
energy prices and a favorable weather effect.

Adjusted operating cash flow declined 4.6% (-6.2% at constant exchange rates)
to €2,723 million, compared to the 2011 re-presented figure, due in part to
the following developments:

  *in Italy, the impact in the first half of 2012 of the receivables write
    down and accrued other charges in Energy Services for €82 million;
  *contractual erosion in France in the Water division and the impact of only
    10 months proportional consolidation of the Berlin water contract versus
    12 months proportional consolidation in 2011, partially compensated by
    revenue growth in Central and Eastern Europe;
  *the decline in recycled raw materials prices in the Environmental Services
    division; and
  *a favorable impact of the reversal of operational difficulties experienced
    in 2011

Adjusted operating income declined 23.4% (-24.5% at constant exchange rates)
to € 1,194 million compared to the 2011 re-presented figure.

The annual contribution to the operating income of the Company’s Efficiency
and Convergence Plans was €251 million, net of implementation costs, including
€60 million from the Convergence Plan. SG&A costs declined by €82 million
(-2.7%).

Excluding the difficulties in Dalkia Italy, adjusted operating cash flow would
have declined by 3.3% at constant exchange rates and adjusted operating income
would have declined by 19.2% at constant exchange rates. Excluding the impact
of the change to equity method accounting for the Berlin water contract as of
October 31, 2012, adjusted operating cash flow would have posted a second
consecutive quarter of growth in 2012 with +2.9% growth in the fourth quarter,
after +1.9% growth in the third quarter.

Operating income increased 32.1% to €1,095 million from re-presented €829
million in 2011, given a favorable base effect, with the 2011 fiscal year
recording goodwill and other asset impairments in the re-presented amount of
€470 million (vs. €86 million in goodwill and asset impairments in 2012).

Net income from discontinued operations amounted to €386 million, including
€442 million in capital gains, net of tax and transaction costs, and the
results from activities divested in 2012, primarily the U.K. regulated water
and U.S. solid waste businesses.

Net income amounted to €394 million compared to a re-presented loss of €490
million in 2011. Adjusted net income amounted to €60 million compared to
re-presented €195 million in 2011.

Cash flow before net financial divestments and dividends amounted to €89
million^3 in 2012. Including divestments and after dividend payment Veolia
generated significant positive free cash flow of €3,673 million. Net financial
debt at December 31, 2012 was €11,283 million, a significant reduction from
€14,730 million as of December 31, 2011.

Dividend

The Board of Directors will propose to the Annual General Shareholder Meeting
to be held May 14, 2013 a dividend payment of €0.70 per share in respect of
the 2012 fiscal year, payable in cash or in shares of Veolia Environnement.
These new shares will be issued at a price equivalent to 90% of the average
opening price on the Euronext Paris of the shares over the twenty trading days
prior to the day of the Annual General Shareholders Meeting, less the amount
of the dividend. The ex-dividend date (for ordinary shares only) has been set
as May 20, 2013. The period during which shareholders may choose the option of
the payment of dividend in cash or in shares will begin on May 20, 2013 and
end June 4, 2013. The 2012 dividend will be paid, in cash or in shares, in
either case from June 14, 2013.

2013 is the second year in the Company’s Transformation, which will enable the
Company to expand upon the progress achieved in 2012, with major projects.
Productivity improvement and management of investments should enable the
Company to generate positive cash flow before net financial divestments in
2013. In addition, in January 2013, Veolia issued €1.5 billion of perpetual
hybrid debt callable beginning April 2018, benefitting from favorable rates
and confirming the Company’s financial strength. With the continuation of the
Company’s restructuring program, and in particular the dilution of the
Company’s stake in the Veolia Transdev joint venture, Veolia envisions a
further significant decrease in debt, which began in 2012. The Company
therefore expects to achieve adjusted net financial debt^2 at the end of 2013
between €6 billion and €7 billion, with a leverage ratio^4 of approximately 3x
(+/-5%) in 2014. Veolia will be better able to capitalize on development
opportunities in its priority growth markets given this new reduced debt level
and internal cash generation potential.

Given the significant reduction in net financial debt and initial success from
the company’s transformation plan, Veolia will propose a dividend of €0.70 per
share in respect of the 2013 fiscal year, payable in 2014.

Objectives confirmed

The results of the first year of the Company’s 2012-2015 Transformation Plan,
enable confirmation of the objectives set during the December 6, 2011 Investor
Day and revised on the date of the publication of Veolia’s first half 2012
results.

The significant improvement achieved during the second half of 2012 will be
reinforced in 2013 by continuation of the Company’s transformation, supported
by the appointment of a new Chief Operating Officer in December 2012.

New IFRS accounting standards related to entity consolidation (IFRS 10, IFRS
11 and IFRS 12) were adopted by the European Union on December 29, 2012. These
standards require consolidation of joint ventures by the equity method. Given
the Company’s stock listing in the United States, Veolia Environnement has
opted to apply these standards from January 1, 2013.

Excluding debt associated with joint ventures accounted for under the equity
method, Adjusted Net Financial Debt should reach between €6 billion and €7
billion by the end of 2013 due to the company’s divestment program and
generation of cash, compared to Net Financial Debt of €16.5 billion at the end
of 2008.

Given the application of these new IFRS standards, and the advancement of the
divestment program, the Company’s objectives are revised as follows:

Important Disclaimer

Veolia Environnement is a corporation listed on the NYSE and Euronext Paris.
This press release contains “forward-looking statements” within the meaning of
the provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are not guarantees of future performance.
Actual results may differ materially from the forward-looking statements as a
result of a number of risks and uncertainties, many of which are outside our
control, including but not limited to: the risk of suffering reduced profits
or losses as a result of intense competition, the risk that changes in energy
prices and taxes may reduce Veolia Environnement’s profits, the risk that
governmental authorities could terminate or modify some of Veolia
Environnement’s contracts, the risk that acquisitions may not provide the
benefits that Veolia Environnement hopes to achieve, the risks related to
customary provisions of divesture transactions, 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.

The review of results by auditors is still in progress.

 Analyst and institutional investor contact: Ronald Wasylec +33 1 71 75 12 23

         US Investors contact Terri Anne Powers – Tel +1312-552-2890

 Press release also available on our web site: http://www.finance.veolia.com

 The publication of Key figures for the quarter ended March 31, 2013 will be
                           released on May 3, 2013.

REVENUE AND COMMERCIAL DEVELOPMENT ACTIVITY^6
                                                                
Revenue (€ million)                                            
                    Year ended
Year ended          December 31,   % Change     Internal   External   Foreign
December 31, 2012  2011          2012/2011   growth    growth    exchange
                                                                      impact
                    re-presented
29,438.5           28,576.5      3.0%        1.5%      -0.3%     1.8%

Revenue was impacted in 2012 by:

  *a favorable price indexation environment in France, which offset the
    impact of contractual erosion in the Water division and revenue growth
    with industrial clients in the Technologies and Networks business;
  *a challenging macro-economic environment in the Environmental Services
    division with a decline in recycled raw material prices from the second
    quarter and a fall in industrial production indices in Europe and the
    United States, in a context of activity cessations particularly in Italy,
    North Africa and the Middle East;
  *rising energy prices in the Energy Services division in France and adverse
    regulatory developments in Europe.

Veolia Environnement consolidated revenue was €29,438.5 million, an increase
of 3.0% (+1.5% at constant consolidation scope and exchange rates) compared to
re-presented revenue of €28,576.5 million for the year ended December 31,
2011.

Changes in consolidation scope decreased 2012 revenue by €94.0 million,
including -€173 million in the Water division (primarily the impact of the
change to equity method accounting of the Group’s stake in Berlin Water from
October 31, 2012), -€23.2million in the Environmental Services division
(impact of the divestiture of Belgian activities in August 2011) and +82.8
million in the Energy Services division (primarily relating to the acquisition
of the Warsaw district heating network in October 2011).

At constant consolidation scope and exchange rates, 2012 revenue increased
1.5% compared with re-presented 2011 revenue. This increase was mainly due to:

  *the favorable effects of indexation in France and price increases and
    extensions in Central and Eastern Europe in operations and the growth of
    Technologies and Networks industrial activities, in the Water division;
    and
  *the increase in energy prices (impact of €205.3 million compared with
    December 31, 2011) combined with more favorable weather conditions than in
    2011 in the Energy Services division.

These effects were partially offset by contractual erosion in the Water
division in France and the fall in Environmental Services division revenue
mainly tied to the decrease in the price of recycled raw materials which was
particularly strong in the third quarter of 2012 (impact of around -€160
million compared with 2011), primarily in France and Germany.

Fourth quarter 2012 revenue increased 2.8%, compared to the fourth quarter of
2011. Organic growth (at constant consolidation scope and exchange rates) was
2.9% in the fourth quarter, due primarily to good performance in Australia in
the Environmental Services division, particularly in the fourth quarter, and
more favorable weather conditions in the Energy Services division, mainly in
France.

Revenue generated outside France in 2012 totaled €17,456.2 million,
representing 59.3% of total revenue, stable compared to the re-presented share
of 59.5% in 2011.

The €516.3 million foreign exchange impact primarily reflects the appreciation
against the euro of the US dollar in the amount of €137.4 million, the pound
sterling in the amount of €148.3 million, the Chinese remnimbi yuan in the
amount of €88.3 million, the Australian dollar in the amount of €83.4 million
and the Japanese yen in the amount of €32.1 million, offset by the
depreciation of the Polish zloty in the amount of -€12.0 million.

The Group continued its development in 2012 and achieved a number of
commercial successes related to enhanced and refined offerings, including the
following:

  *SIAAP (Syndicat Interdépartemental pour l’Assainissement de
    l’Agglomération Parisienne, the interdepartmental wastewater authority for
    the Greater Paris area) chose OTV, a subsidiary of Veolia Water Solutions
    & Technologies, to head the consortium that was awarded the contract to
    renovate the Seine Aval biological wastewater treatment plant in Achères.
    This contract is expected to generate estimated cumulative revenue of €196
    million (portion attributable to OTV);
  *The New York City Department of Environmental Protection (DEP) awarded a
    performance and consulting contract to Veolia Water to aid the
    optimization of public water and wastewater services for 4 years. This
    contract is expected to generate estimated cumulative revenue of USD36
    million;
  *The Greater Dijon joint district authority appointed Dalkia to design,
    build and operate its new heating network, as part of a public service
    management contract, for a period of 25 years. As much as 80% of the
    network’s energy needs will come from renewable resources. Cumulative
    revenue is estimated at €200 million;
  *Veolia Water, via Orange City Water (a joint venture with Vishvaraj
    Environment Ltd, one of India’s leading civil engineering and services
    companies) was awarded the drinking water service operation and
    maintenance contract by the city of Nagpur for 25 years. Estimated
    cumulative revenue of this contract is €387 million (Group share);
  *The European Parliament selected Dalkia to manage the technical and energy
    systems of its real-estate assets. This new contract represents estimated
    cumulative revenue of more than €120 million over the length of the
    contract (six years, on the basis of a 12-month contract that can be
    automatically renewed five times);
  *Veolia Environmental Services in partnership with a Chinese company
    working in the same sector has obtained the concession for a hazardous
    waste treatment center in Changsha, the capital of Hunan province. The
    estimated cumulative revenue of this 25-year concession is €320 million
    (at 100%);
  *The city of Iasi in Romania awarded Dalkia the operation of the city's
    district heating network for 20 years. This public service management
    contract involves the generation, transmission, distribution and supply of
    heating and is expected to generate estimated cumulative revenue of €781
    million;
  *Veolia Water India, a subsidiary of Veolia Eau and its local partner Swach
    Environment, was awarded a contract to manage drinking water production
    and distribution infrastructure, as well as the water department, for the
    Nangloi neighborhood to the west of New Delhi. This 15-year contract was
    awarded by the Delhi Jal Board, the water and wastewater authority for the
    Indian capital and is expected to generate estimated cumulative revenue of
    €282 million (100%);
  *Veolia Environmental Services, through its subsidiary Veolia Environmental
    Services (UK) Plc, was awarded a 25-year Private Finance Initiative (PFI)
    contract for residual municipal waste treatment and energy recovery for
    the City of Leeds. This contract follows the selection of Veolia
    Environmental Services as preferred bidder on January 23, 2012 is expected
    to generate estimated cumulative revenue of GBP460 million.

DIVESTMENTS AND ASSET PORTFOLIO OPTIMIZATION

During 2012, the Company continued its asset portfolio optimization program,
for a total of €5.1 billion, contributing to the reduction in net financial
debt at December 31, 2012.

The main transactions contributing to net financial debt reduction were:

  *The completion on June 28, 2012 of the sale by Veolia Water UK, a
    wholly-owned subsidiary of Veolia Environnement, of its regulated water
    activities in the United Kingdom, to Rift Acquisiotions Limited,for an
    enterprise value of GBP1.2 billion (€1.5 billion). The transaction
    reduced Group net financial debt by €1,517 million. Following its
    completion, Veolia Environnement retained all its non-regulated water
    business and acquired a 10% stake in the investment fund, Affinity Water A
    (formerly Rift Acquisition Ltd), for a period of at least 5 years. This
    10% shareholding has been accounted for using the equity method since June
    30, 2012. The transaction generated a capital gain of €233.3 million (net
    of transaction costs) recognized in discontinued operations.
  *The completion on November 20, 2012 of the sale of the U.S. solid waste
    business in the Environmental Services division to ADS Waste Holdings, for
    an enterprise value of USD1.9 billion (approximately €1.5 billion at the
    signature date exchange rate). The transaction reduced Group net financial
    debt by €1,464 million. The transaction generated a capital gain of €208.4
    million (net of tax and transaction costs) recognized in discontinued
    operations.

Following the buyout by the Land of Berlin of RWE minority interests in BWB,
the Berlin water contract operating company, changes to the governance
structure led to a change in consolidation method and a reduction in Group net
financial debt of approximately €1.4 billion.

The Group also performed a number of smaller divestitures under the
restructuring program, contributing €516 million to the reduction in Group net
financial debt.

Withdrawal from the Transportation business

Together with its co-shareholder, the Caisse des dépôts et consignations,
Veolia Environnement continues to prepare its withdrawal from Veolia Transdev,
tailoring the industrial strategy, targeted balance sheet structure and
refinancing strategy.

Accordingly, on March 30, 2012, Veolia Environnement and Caisse des dépôts et
consignations signed an agreement for negotiation aimed at the transfer of
Veolia Transdev’s 66% shareholding in SNCM and its subsidiaries to Veolia
Environnement, along with the rights and obligations attached to this
shareholding. This agreement defines the main terms and conditions of the
proposed transaction, including the repurchase by Veolia Environnement of the
shares in SNCM for a consideration of €1.

On October 22, 2012, Veolia Environnement and Caisse des dépôts et
consignations signed a new agreement for negotiation aimed at strengthening
the financial structure of Veolia Transdev and providing it with the necessary
resources to pursue its strategic development.

Under a definitive agreement to be concluded, the Caisse des depots et
consignations and Veolia Environnement would subscribe to a €800 million share
capital increase by conversion of existing shareholder loans. Following this
transaction, the Caisse des dépôts et consignations would hold 60% of the
share capital of Veolia Transdev and would take exclusive control of that
company. Veolia Environnement would retain a 40% shareholding.

The agreement also provides for asset disposals by Veolia Transdev in order to
repay the Veolia Environnement shareholder loan.

Concomitant to the signature of the agreement for negotiation on October 22,
2012, Veolia Environnement and Caisse des dépôts et consignations agreed to
negotiate in good faith a decrease in Veolia Environnement’s stake in Veolia
Transdev to 20%, through the purchase by Caisse des dépôts et consignations of
Veolia Transdev shares held by Veolia Environnement within a period of two
years from the completion of the above transaction.

OPERATIONAL PERFORMANCE

Adjusted operating cash flow declined 4.6% (-6.2% at constant exchange rates)
to €2,722.8 million for the year ended December 31, 2012, compared with
re-presented €2,852.6 million for the year ended December 31, 2011. The
adjusted operating cash flow margin fell 0.8 points from re-presented 10.0% in
2011 to 9.2% in 2012.

In 2012, impairment losses on receivables and accrued expenses of €81.5
million were recorded in the Energy Services division. Excluding these
impairment losses and accrued expenses in Italy, adjusted operating cash flow
would have declined 1.7% (-3.3% at constant exchange rates) to €2,804.3
million.

The decrease in adjusted operating cash flow in 2012 was impacted by:

  *a fall in operating performance in the Water division and particularly
    contractual erosion in France, recognition of the impact of the decrease
    in drinking water tariffs in Berlin ordered by the German Cartel Office
    and the impact of the change to equity method accounting of the Group’s
    stake in Berlin Water from October 31, 2012 (from proportionate
    consolidation method to equity method);
  *an unfavorable recycled raw material price differential in France and
    Germany in the Environmental Services division;
  *a challenging macro-economic environment in the Environmental Services
    division, particularly in Europe, which did not enable cost rises to be
    passed on in full to customers;
  *receivables write-downs and accrued expenses of €81.5 million in the
    Energy Services division in Italy.

Conversely, adjusted operating cash flow benefited from:

  *the positive contribution of cost saving plans, net of implementation
    costs;
  *activity growth in the Water division in Central and Eastern Europe, tied
    to price increases in Romania, Slovakia and the Czech Republic;
  *the reversal of operating difficulties encountered in 2011 and the related
    restructuring costs incurred primarily in Italy, North Africa and the
    Middle East in the Environmental Services division; and
  *activity growth with industrial clients in the Technologies and Networks
    business in the Water division.

Selling, general and administrative expenses (SG&A) for the year ended
December 31, 2012 totaled €3,610.0 million compared to re-presented €3,667.3
million for the year ended December 31, 2011. The ratio of SG&A costs to
revenue was therefore 12.3% in 2012, compared to re-presented 12.8% in 2011.

The 1.6% decline in these costs compared to re-presented 2011 figures reflects
the initial benefits of cost reduction plans, despite implementation costs of
€80.5 million.

The Group Efficiency and Convergence plan generated costs savings of €275
million, net of implementation costs, including €84 million in respect of the
Convergence plan.

Operating income for the year ended December 31, 2012 was €1,095.0 million,
compared to re-presented operating income of €829.1 million for the year ended
December 31, 2011.

In addition to the change in adjusted operating cash flow described below, the
change in operating income reflects:

  *impairment losses on goodwill (and negative goodwill) of €85.6 million,
    recognized in particular on Group non-regulated activities in the Water
    division in the amount of €56.6 million and on Estonian activities in the
    Energy Services and Environmental Services divisions, compared with
    re-presented €470.4 million in impairments in 2011;
  *an increase of €90,9 million in depreciation and amortization expense
    compared with re-presented 2011 figures, primarily due to recent
    developments particularly in the Energy Services and Water divisions. Net
    charges to operating depreciation and amortization totaled €1,479.8
    million for the year ended December 31, 2012, compared with re-presented
    €1,388.9 million in 2011, including a foreign exchange impact of -€26.2
    million;
  *a decrease in net charges to operating provisions to €116.9 million for
    the year ended December 31, 2012, compared to re-presented €222.0 million
    in 2011. In 2011, net charges to operating provisions included non-current
    asset impairments of €151.6million in Italy, presented as adjustments to
    operating income;
  *stable capital gains on industrial and financial asset divestitures of
    €84.3 million in 2012 compared with re-presented €77.1 million in 2011.

The Group’s Efficiency and Convergence Plans generated €251 million in total
net savings in 2012, of which €60 million is attributed to the Convergence
Plan.

Adjusted operating income declined 23.4% (-24.5% at constant exchange rates)
to €1,193.7 million for the year ended December 31, 2012, compared with
re-presented €1,557.8 million for the year ended December 31, 2011. Excluding
receivables write-downs and accrued expenses in Italy in the Energy Services
division, adjusted operating income fell 18.1% (-19.2% at constant exchange
rates) to €1,275.2 million.

In addition to the negative impacts identified in adjusted operating cash
flow, non-current asset impairments impacted adjusted operating income due to
the challenging macro-economic environment in the United Kingdom and Germany
in the Environmental Services division provisions for contractual risks in the
Water division and additional impairment losses recognized on SNCM of €35.0
million.

Adjusted operating income also includes capital gains on industrial and
financial asset divestitures of €84.3 million in 2012 compared with
re-presented of €77.1 million in 2011.

The adjusted operating income margin fell from re-presented 5.5% for the year
ended December 31, 2011 to 4.1% in 2012. Excluding receivables write-downs and
accrued expenses in Italy in the Energy Services division, the adjusted
operating income margin would have been 4.3% in 2012.

Net finance costs increased €48.7 million to €758.8 million in 2012 compared
with re-presented €710.1 million in 2011, for average net financial debt of
€14.3 billion over the 12-month period ended December 31, 2012 compared with
€14.6 billion over the 12-month period ended December 31, 2011.

The increase in net finance costs was mainly due to the active management of
debt and costs resulting from the early redemption of US private placements
(USPP)in February 2012 and bond redemptions in the fourth quarter of 2012
(related repurchase costs of €47.3 million are presented as adjustments to net
finance costs). These costs are partially offset by a decrease in expenses
following the redemption of the bond line maturing in February 2012 (5.875%).
These transactions were performed to optimize the cost of capital.

The income tax expense for 2012 was €159.0 million.

In France, following the update of the forecast tax schedule, the Veolia
Environnement tax group limited the recognition of deferred tax assets to the
amount of deferred tax liabilities as of December 31, 2012, as at the previous
year end.

The effective tax rate was 58.3%, primarily due to assets impairments not
deductible for tax purposes.

The income tax rate for 2012 was 39.2% (versus 37.2% published in 2011) after
adjustment for one-off items and particularly:

  *goodwill impairment of €85.6 million;
  *impairment of property, plant and equipment and receivables of €186.5
    million (€19.7 million deductible for tax purposes);
  *changes in the scope of the US tax group in the amount of +€53.9 million
    (tax amount).

The share of net income of associates was €30 million for the year ended
December 31, 2012, compared with €11.7 million for the year ended December
2011. This increase was mainly due to the change to equity method accounting
of Berlin Water from October 31, 2012.

Net income from discontinued operations was €386.1 million for the year ended
December 31, 2012, compared with re-presented €121.0 million for the year
ended December 2011.

This line item mainly comprises the following amounts:

  *the net income of regulated Water activities in the United Kingdom
    divested in June 2012, including a capital gain on disposal of €233.3
    million net of transaction costs;
  *the net income of solid waste activities in the United States in the
    Environmental Services division divested in November 2012, including a
    capital gain on disposal of €208.4 million net of the tax impact and
    transaction costs;
  *fair value adjustments of around €20 million to Veolia Transdev activities
    based on the reference value mentioned in the agreement for negotiation of
    October 22, 2012 of €400 million (100%);
  *the reclassification and fair value remeasurement of net income and
    expenses of Water activities in Morocco, in the course of divestiture;
  *the reclassification of net income and expenses of wind energy activities,
    in the course of divestiture;
  *the reclassification and fair value remeasurement of the net income and
    expenses of Citelum urban lighting activities in the Energy Services
    division, in the course of divestiture.

Net income attributable to non-controlling interests is €136.0 million for the
year ended December 31, 2012, compared with €173.2 million for the year ended
December 31, 2011, and mainly concerns minority shareholders of subsidiaries
in the Water division (€102.1 million), the Environmental Services division
(€26.2 million), the Energy Services division (€14.3 million) and Other
Segments (-€6.6 million).

The decrease in net income of non-controlling interests is mainly due to the
decrease in the net income of Berlin Water in line with the order issued by
the German Cartel Office to reduce Berlin drinking water tariffs and to a
lesser extent, the change in consolidation method of the Group’s stake in
Berlin Water (from proportionate consolidation to equity method accounting
from October 31, 2012). This decrease is also attributable to EDF’s share in
Italian receivables write-downs and accrued expenses in the Energy Services
division.

Net income attributable to owners of the Company was €393.8 million for the
year ended December 31, 2012, compared with a re-presented net loss of €489.8
million in 2011. Adjusted net income attributable to owners of the Company was
€59.5 million for the year ended December 31, 2012, compared with €194.7
million for the year ended December 31, 2011, re-presented for discontinued
operations.

Given the weighted average number of shares outstanding of 506.7 million in
2012 (basic and diluted) and 496.3 million in 2011 (basic and diluted),
earnings per share attributable to owners of the Company (basic and diluted)
was €0.78 in 2012, compared with –€0.99 in 2011. Adjusted net income per share
attributable to owners of the Company (basic and diluted) is €0.12 in 2012,
compared with re-presented €0.39 in 2011.

CASH FLOWS: NET FINANCIAL DEBT AT €11.3 BILLION

Operating cash flow before changes in working capital totaled €3,084.7 million
in 2012 (compared with €3,352.9 million in 2011), including adjusted operating
cash flow of €2,722.8 million (compared with re-presented €2,852.6 million in
2011), operating cash flow from financing activities of €24.8 million
(compared with re-presented €9.2 million in 2011) and operating cash flow from
discontinued operations of €337.2 million (compared with re-presented €491.1
million in 2011).

The improvement in working capital requirements which impacted net cash from
operating activities in the amount of €103 million for the year ended December
31, 2012, was due to:

  *efforts in recent years to speed up invoicing and payment receipt in the
    Water division in France;
  *increased securitization of receivables in the Energy Services division in
    France;
  *write downs of receivables and accrued expenses in the amount of €81.5
    million in the Energy Services division in Italy.
  *a fall in trade receivables following the order by the German Federal
    Cartel Office to reduce Berlin drinking water tariffs;
  *these favorable impacts were partially offset by the end of certain major
    Design and Buildcontracts in the Technologies and Networks business in
    the Water division.

These resources, together with the repayment of operating financial assets
(€371 million) entirely covered financing requirements, which includes
interest expense and taxes, payment of the 2011 dividend, all maintenance
investments, (€912 million) and growth investments (€2,370 million) net of
financial and industrial divestments (€5,099 million). They contributed to
free cash flow of €3,673 million, versus €438 million for the year ended
December 31, 2011.

The free cash flow between December 31, 2011 and 2012 reflects:

  *implementation of the asset portfolio optimization program, which
    contributed to the reduction in Group net financial debt by €5,099
    million;
  *the €103 million contribution of working capital requirements;
  *the continuation of the Group’s non-controlling interest buyout policy
    (including the acquisition of 49% of the share capital of Azaliya for an
    enterprise value of €247 million and the buyout of non-controlling
    interests in the Czech Republic in the Water division for €79 million), in
    a context of tight control over industrial investment;
  *the decline in adjusted operating cash flow.

As of December 31, 2012, the Group generated positive cash flow after payment
of financial expense and taxes, before net financial divestments (and before
operating cash flow before changes in working capital minus industrial
divestments of discontinued operations entities) of €89 million.

Net financial debt totaled €11,283 million as of December 31, 2012, including
an unfavorable exchange rate impact of €148 million, and compared to €14,730
million in net financial debt as of December 31, 2011.

AFTER-TAX RETURN ON CAPITAL EMPLOYED

The Company’s after-tax return on capital employed (ROCE) is as follows:

                                            
(€ million)  Net income from  Average capital  ROCE after
              operations        employed          tax
2012         750.5            14,780.0         5.08%
2011         931.9            15,149.4         6.15%

The decrease in the return on capital employed between 2012 and 2011 was due
to the downturn in operational performance in 2012.

^1 Excluding the debt reduction of €1.4 billion related to the change to
equity method accounting for the Berlin Water contract

^2 Excluding debt from joint ventures and post application of IFRS 10,11, and
12 and excluding closing foreign exchange impacts

^3 Cash flow before financial divestments and after payment of financial
expense and taxes represents the sum of adjusted operating cash flow and
operating cash flow from financing activities, principal payments on operating
financial assets, changes in working capital for operations and industrial
investments and industrial divestitures, excluding net industrial investments
of discontinued operations

^4 Net financial debt / (operating cash flow before changes in working capital
+ repayments from operating financial assets)

^5 Excluding the consolidation scope effect of the Berlin water contract for 2
months (-€31M)

^6 To ensure the comparability of periods, the 2011 financial statements have
been re-presented to include:

  *the impact of the reclassification into “net income from discontinued
    operations” of operations in the process of being sold such as the
    Moroccan activities in the Water division and the Renewable energies
    activities partially sold as of December 31,2012;
  *the impact of the reclassification into “net income from discontinued
    operations” of divested activities in 2012 such as the regulated
    activities in the United Kingdom in the Water division and Solid waste
    activities in the United States in the Environmental Services division.

    The 2011 financial statements have also been re-presented for the
    reclassification into ‘continuing operations’ since March 3, 2011 of the
    activities of the group Société Nationale Maritime Corse Méditerranée
    (SNCM) consolidated within the Transportation Division which was
    reclassified into “net income from discontinued operations” as of December
    31, 2011. The divesture process of SNCM was suspended during the first
    half of 2012.

                                  APPENDICES

                             RESULTS BY DIVISION

WATER

                                                                
Revenue (€ million)                                            
                    Year ended
Year ended          December 31,   % Change     Internal   External   Foreign
December 31, 2012  2011          2012/2011   growth    growth    exchange
                                                                      impact
                    re-presented
12,078.2           11,921.3      1.3%        1.0%      -1.5%     1.8%

The increase in Water division revenue at constant consolidation scope and
exchange rates can be attributed both to the favorable effects of indexation
in France, and price increases in Central and Eastern Europe and the increase
in Technologies and Networks industrial activities.

The negative contribution of external revenue growth in the Water division in
2012 is mainly due to the change in consolidation method of the Group’s stake
in Berlin Water (from proportional consolidation to equity method from October
31, 2012).

  *Revenue from Operations activities declined 1.5% (-0.2% at constant
    consolidation scope and exchange rates). In France, the slight increase of
    0.6% in revenue (+1.3% at constant consolidation scope) is due to a
    favorable price effect tied to indexation trends and the increase in the
    construction business partially offset by the effects of contractual
    erosion and lower water volumes sold (approximately -1% year-on-year).
  *Outside France, revenue dropped 2.8% (-1.1% at constant consolidation
    scope and exchange rates). In Europe, the 6.7% fall in revenue was mainly
    due to the change to equity method accounting of the Group’s stake in
    Berlin Water from October 31, 2012. Growth of 0.8% at constant
    consolidation scope and exchange rates was based on the good performance
    recorded in Central and Eastern Europe (favorable price effect in the
    Czech Republic and Romania, which also benefited from the extension of its
    activity scope), despite lower volumes sold. Revenue in Europe was,
    however, penalized by the German Cartel Office order to reduce Berlin
    drinking water tariffs by a total of €24.5 million. Revenue in the
    Asia-Pacific region rose 0.9% (-4.3% at constant consolidation scope and
    exchange rates). Revenue increased in China, due to growth in volumes with
    municipalities and the continuation of the tariff increase process
    (particularly in Shenzhen) and despite the decline in construction revenue
    and weaker sales volumes to industrial clients. Revenue in the rest of
    Asia was marked by a downturn in Japan, where the revenue increase
    observed after the March 2011 earthquake was not repeated and a decline in
    Australia following the end of the Adelaide contract in June 2011. In the
    United States, the 1% decline (-8.6% at constant consolidation scope and
    exchange rates) was mainly attributable to the end of the Indianapolis
    contract in August 2011.
  *Technologies and Networks revenue grew 7.9% (+4.9% at constant
    consolidation scope and exchange rates), benefitting from growth in
    industrial client activities in the Design and Build and
    Solutionssectors, primarily in the chemicals industry and the upstream
    oil sector, as well as the international expansion of Sade.

ANALYSIS OF PERFORMANCE

                                                           
                 Year ended     Year ended           % change at   % change at
(€ million)     December 31,  December 31, 2011   current      constant
                 2012           re-presented         exchange      exchange
                                                     rates         rates
Adjusted
operating cash  1,172.2       1,279.4             -8.4%        -9.4%
flow
Adjusted
operating cash  9.7%          10.7%                           
flow margin
Adjusted
operating       673.9         869.2               -22.5%       -23.3%
income
Adjusted
operating       5.6%          7.3%                            
income margin

Adjusted operating cash flow decreased 8.4% (-9.4% at constant exchange rates)
to €1,172.2 million for the year ended December 31, 2012, compared with
re-presented €1,279.4 million for the year ended December 31, 2011.

The adjusted operating cash flow margin (ratio of adjusted operating cash flow
to revenue) fell from re-presented 10.7% for the year ended December 31, 2011
to 9.7% for the same period in 2012.

For Operations activities, adjusted operating cash flow decreased by 10.6% and
11.6% at constant exchange rates.

  *In France, the decline in adjusted operating cash flow was due to the
    negative effects of contractual erosion, in a context of declining volumes
    sold compared with 2011 and operating difficulties in Guadeloupe.
  *Outside France, adjusted operating cash flow benefited from an improvement
    in Central and Eastern Europe, tied to price increases in Romania,
    Slovakia and the Czech Republic. These impacts were offset by the
    recognition of the €24.5 million reduction in Berlin water tariffs ordered
    by the German Cartel Office, the impact of equity method accounting of the
    Group’s stake in Berlin Water from October 31, 2012 (from proportionate
    consolidation method to equity method) as well as impairment losses on
    trade receivables and the carve-out expenses related to the divestiture of
    regulated activities in the United Kingdom incurred in the first half of
    2012.

Finally, the adjusted operating cash flow of the Technologies and Networks
business increased in line with the recovery in activity with industrial
clients.

The Efficiency and Convergence plan had a net impact of €106 million in 2012,
including €40 million in respect of the Convergence plan.

Adjusted operating income decreased 22.5% (-23.3% at constant exchange rates)
to €673.9 million for the year ended December 31, 2012, compared with
re-presented €869.2 million for the year ended December 31, 2011. In addition
to the change in adjusted operating cash flow, adjusted operating income of
the division was penalized, in particular, by provisions for contractual risk
and the increase in net depreciation and amortization.

Net charges to operating provisions totaled €5.3 million for the year ended
December 31, 2012, compared with re-presented net reversal €37.3 million for
the year ended December 31, 2011.

Net charges to operating depreciation and amortization totaled €522.3 million
for the year ended December 31, 2012, compared with re-presented €492.6
million for the year ended December 31, 2011. This increase was primarily due
to the development of activities in Central and Eastern Europe.

Accordingly, the adjusted operating income margin (adjusted operating income /
revenue) fell from re-presented 7.3% in the year ended December 31, 2011 to
5.6% in the year ended December 31, 2012.

ENVIRONMENTAL SERVICES

                                                                
Revenue (€ million)                                            
                    Year ended
Year ended          December 31,   % Change     Internal   External   Foreign
December 31, 2012  2011          2012/2011   growth    growth    exchange
                                                                      impact
                    re-presented
9,082.9            9,010.8       0.8%        -1.9%     -0.3%     3.0%

Environmental Services division revenue remained stable with 0.8% growth
(-1.9% at constant consolidation scope and exchange rates) despite:

  *a challenging macro-economic environment since the second quarter of 2012,
    particularly in Europe;
  *a recycled raw material price differential of -€160million (mainly in
    France, Germany and the United Kingdom), particularly marked in the third
    quarter of 2012;
  *the impact of the geographical restructuring plan, with the closure and
    restructuring of activities in North Africa, the Middle East and Italy.
  *In France, revenue increased 2.1% (+1.4% at constant consolidation scope).
    Growth in certain activities (particularly incineration and hazardous
    waste), combined with higher service prices and raw material volumes
    offset the impact of lower of recycled raw material prices
    (paper/cardboard and scrap metal);
  *Outside France, revenue was stable at current consolidation scope and
    exchange rates and down 3.9% at constant consolidation scope and exchange
    rates. Revenue in Germany declined 11.8% (-13.2% at constant consolidation
    scope) under the combined effect of lower raw material prices and volumes
    and adverse economic trends in the industrial and commercial sector.
    Revenue in the United Kingdom increased 4.6% (-2.1% at constant
    consolidation scope and exchange rates), with lower PFI construction
    revenue and a structural decline in landfill waste volumes in a
    challenging macro-economic environment. North America revenue increased
    9.1% (+1.1% at constant consolidation scope and exchange rates), where the
    increase in hazardous waste treatment activities was offset by lower
    industrial services activities. In the Asia-Pacific region, revenue growth
    of 17.5% (+8.0% at constant consolidation scope and exchange rates)
    benefited from the favorable impact of the landfill tax and good
    industrial services and landfill activity levels in Australia,
    particularly marked in the fourth quarter.

ANALYSIS OF PERFORMANCE


                 Year ended     Year ended           % change at   % change at
(€ million)     December 31,  December 31, 2011   current      constant
                 2012           re-presented         exchange      exchange
                                                     rates         rates
Adjusted
operating cash  1,048.2       1,020.8             2.7%         -0.3%
flow
Adjusted
operating cash  11.5%         11.3%                           
flow margin
Adjusted
operating       356.0         417.0               -14.6%       -17.1%
income
Adjusted
operating       3.9%          4.6%                            
income margin

Adjusted operating cash flow increased 2.7% (-0.3% at constant exchange rates)
to €1,048.2 million for the year ended December 31, 2012, compared with
re-presented €1,020.8 million for the year ended December 31, 2011.

Adjusted operating cash flow for 2012 was stable on 2011 at constant exchange
rates and benefited, primarily, from:

  *an increase in hazardous waste activities both in and outside France;
  *the reversal of operating difficulties encountered in 2011 and the related
    restructuring costs incurred primarily in Italy, North Africa and the
    Middle East;

offset by:

  *a decrease in raw material prices, particularly in France, Germany and the
    United Kingdom;
  *cost inflation in excess of service price increases in France, the United
    Kingdom, Germany and North America.

Adjusted operating cash flow also benefited from the implementation of the
Efficiency and Convergence plans (€88 million), including €28 million in
respect of the Convergence plan.

The adjusted operating cash flow margin increased from re-presented 11.3% in
the year ended December 31, 2011, to 11.5% in the year ended December 31,
2012.

Adjusted operating income declined 14.6% (-17.1% at constant exchange rates)
to €356.0 million for the year ended December 31, 2012, compared with
re-presented €417.0 million for the year ended December 31, 2011.

In addition to changes in adjusted operating cash flow, this decrease in
adjusted operating income also reflects non-current asset impairments
recognized as a result of the challenging macro-economic environment in the
United Kingdom and Germany and the differential of capital gains on
divestitures related to the restructuring program.

Net charges to operating provisions totaled €68.8 million for the year ended
December 31, 2012, compared with re-presented €120.6 million for the year
ended December 31, 2011.

Net charges to operating depreciation and amortization totaled €639.4 million
for the year ended December 31, 2012, compared with re-presented €610.9
million for the year ended December 31, 2011.

The adjusted operating income margin fell from re-presented 4.6% in the year
ended December 31, 2011 to 3.9% in the year ended December 31, 2012.

ENERGY SERVICES

                                                                
Revenue (€ million)                                            
                    Year ended
Year ended          December 31,   % Change     Internal   External   Foreign
December 31, 2012  2011          2012/2011   growth    growth    exchange
                                                                      impact
                    re-presented
7,664.6            7,138.2       7.4%        5.8%      1.2%      0.4%

Energy Services division revenue increased 7.4% (+5.8% at constant
consolidation scope and exchange rates), mainly due to continued growth
outside France, particularly in Poland and good activity levels in the
Construction business in France. In addition, Energy Services benefited from
the positive impact of energy prices (€205.3 million compared with 2011)
combined with more favorable weather conditions than in 2011.

  *In France, revenue rose 8.6% (+9.9% at constant consolidation scope),
    driven by the increase in the average fuel basket combined with more
    favorable weather conditions than in 2011 and an increase in Construction
    volumes in a highly competitive environment.
  *Outside France, revenue increased 6.2% (+2.0% at constant consolidation
    scope and exchange rates). Central and Eastern European countries reported
    growth of 15.2%, including the full-year contribution of the Warsaw
    heating network (+6.4% at constant consolidation scope and exchange
    rates), attributable in particular to the increase in the price of heating
    year-on-year, which offset the fall in volumes (mainly the Czech Republic)
    and the end of subsidies on the sale of cogenerated energy in Hungary. In
    Southern Europe the Group continued to restructure its service activities
    in Italy and Spain. In the United States, revenue declined 4.9% (-12.2% at
    constant consolidation scope and exchange rates) as a result of
    unfavorable weather conditions, combined with exceptionally low energy
    prices. Finally in Asia, the Group accelerated the development of Chinese
    networks.

External revenue growth in the Energy Services division in 2012 was mainly due
to the acquisition of the Warsaw district heating network in October 2011.

ANALYSIS OF PERFORMANCE

                                                           
                 Year ended     Year ended           % change at   % change at
(€ million)     December 31,  December 31, 2011   current      constant
                 2012           re-presented         exchange      exchange
                                                     rates         rates
Adjusted
operating cash  544.4         588.9               -7.6%        -7.7%
flow
Adjusted
operating cash  7.1%          8.2%                            
flow margin
Adjusted
operating       298.5         387.0               -22.9%       -22.5%
income
Adjusted
operating       3.9%          5.4%                            
income margin

Adjusted operating cash flow decreased 7.6% (-7.7% at constant exchange rates)
to €544.4 million for the year ended December 31, 2012, compared with
re-presented €588.9 million for the year ended December 31, 2011. This
decrease is attributable to receivables write-downs and accrued expenses of
€81.5 million in Italy and adverse regulatory changes, partially offset by
good activity levels in Central and Eastern Europe.

In France, the decline in adjusted operating cash flow of the Energy Services
division was mainly due to a highly competitive environment and changes to
cogenerated electricity pricing rules, despite an overall positive price
effect.

Outside France, excluding the receivables write-downs and accrued expenses
recorded in Italy, adjusted operating cash flow reflects:

  *a favorable energy price effect in the Baltic States, the Czech Republic
    and Hungary, limited nonetheless in Hungary by the cessation of subsidies
    for the sale of cogenerated energy;
  *the contribution of the new Warsaw heating network contract (SPEC),
    limited by the decrease in energy certificates for cogenerated electricity
    produced from coal, and an increase in salary costs.

The Efficiency and Convergence plan had a net impact of €66 million in 2012,
including €8 million in respect of the Convergence plan.

The adjusted operating cash flow margin decreased from re-presented 8.2% in
the year ended December 31, 2011, to 7.1% in the year ended December 31, 2012.
Excluding receivables write-downs and accrued expenses of €81.5 million in
Italy, the margin was 8.2%.

Adjusted operating income declined 22.9% (-22.5% at constant exchange rates)
to €298.5 million for the year ended December 31, 2012, compared with
re-presented €387.0 million for the year ended December 31, 2011.

Net reversals to operating provisions totaled €10.1 million for the year ended
December 31, 2012, compared with re-presented net charges of €36.5 million for
the year ended December 31, 2011. In 2011, net charges to operating provisions
included impairment losses of €49.0million in Italy.

Net charges to operating depreciation and amortization totaled €258.3 million
for the year ended December 31, 2012, compared with re-presented €232.0
million for the year ended December 31, 2011, with the increase primarily
attributable to the acquisition of the Warsaw heating network.

Overall, the adjusted operating income margin fell from re-presented 5.4% in
the year ended December 31, 2011 to 3.9% in the year ended December 31, 2012.
Excluding receivables write-downs and accrued expenses of €81.5 million in
Italy, the margin was 5.0%.

OTHER SEGMENTS

                                                                
Revenue (€ million)                                            
                    Year ended
Year ended          December 31,   % Change     Internal   External   Foreign
December 31, 2012  2011          2012/2011   growth    growth    exchange
                                                                      impact
                    re-presented
612.8              506.2         21.1%       15.3%     3.9%      1.9%

Revenue from “Other Segments” mainly comprises revenue generated by SNCM and
ProActiva MedioAmbiente (joint venture with FCC).

Growth in this segment was 21.1% (+15.3% at constant consolidation scope and
exchange rates) and was primarily driven by ProActiva’s growth of 14.5%
(+10.5% at constant consolidation scope and exchange rates) particularly in
waste activities in Argentina, in Mexico and to a lesser degree in Brazil.

External revenue growth in this segment in 2012 is mainly attributable to SNCM
group, in respect of which 12 months of revenue was included in 2012 compared
with only 10 months of revenue in 2011.

Adjusted operating cash flow for this segment fell 15.1% (-21.6% at constant
exchange rates) to -€42.0 million for the year ended December 31, 2012,
compared with re-presented -€36.5 million for the year ended December 31,
2011.

The downturn over the period is mainly due to a negative fuel price effect in
SNCM.

Adjusted operating cash flow also benefited from the implementation of the
Efficiency and Convergence plans (€15 million), including €8 million in
respect of the Convergence plan.

Adjusted operating income declined 16.7% (-17.8% at constant exchange rates)
to -€134.7 million for the year ended December 31, 2012, compared with
re-presented -€115.4 million for the year ended December 31, 2011. This figure
includes additional asset impairments in respect of SNCM of €35.0 million,
reducing the enterprise value in the Group accounts to €13 million.

Net charges to operating provisions totaled €52.9 million for the year ended
December 31, 2012, compared with re-presented €102.2 million for the year
ended December 31, 2011. Re-presented 2011 net charges to operating provisions
included non-current asset impairments of €77.8million in respect of SNCM.

Net charges to operating depreciation and amortization totaled €59.8 million
for the year ended December 31, 2012, compared with re-presented €53.4 million
for the year ended December 31, 2011.

DEFINITIONS OF INDICATORS USED IN THIS PRESS RELEASE

GAAP (Generally Accepted Accounting Principles) indicators

Operating cash flow before changes in working capital, as presented in the
Consolidated cash flow statement, is comprised of three components: operating
cash flow from operating activities (referred to as “adjusted operating cash
flow” and known in French as “capacité d’autofinancement opérationnelle”)
consisting of operating income and expenses received and paid (“cash”),
operating cash flow from financing activities including cash financial items
relating to other financial income and expenses and operating cash flow from
discontinued operations composed of cash operating and financial income and
expense items classified in net income from discontinued operations pursuant
to IFRS 5.

The operating income margin is defined as operating income as a percentage of
revenue from continuing operations.

Net finance costs represent the cost of gross debt, including related gains
and losses on interest rate and currency hedges, less income on cash and cash
equivalents.

Net income (loss) from discontinued operations is the total of income and
expenses, net of tax, related to businesses divested or in the course of
divestiture, in accordance with IFRS 5.

Non-GAAP indicators

In addition, the Group uses non-GAAP indicators for management purposes. These
are relevant indicators of the Group’s operating and financial performance and
can be defined as follows:

The term “internal growth” (or “growth at constant consolidation scope and
exchange rates”) includes growth resulting from:

the expansion of an existing contract, primarily resulting from an increase in
prices and/or volumes distributed or processed;
new contracts; and
the acquisition of operating assets allocated to a particular contract or
project.

The term “external growth” includes growth through acquisitions (performed in
the period or which had only partial effect in the prior period), net of
divestitures, of entities and/or assets deployed in different markets and/or
containing a portfolio of more than one contract.

The term “change at constant exchange rates” represents the change resulting
from the application of exchange rates of the prior period to the current
period, all other things being equal.

Net financial debt (NFD) represents gross financial debt (non-current
borrowings, current borrowings, bank overdrafts and other cash position
items), net of cash and cash equivalents and excluding fair value adjustments
to derivatives hedging debt.

Adjusted net financial debt represents net financial debt, excluding debt from
joint ventures and post application of IFRS 10, 11 and 12.

The financing rate is defined as the ratio of net finance costs (excluding
fair value adjustments to instruments not qualifying for hedge accounting) to
average monthly net financial debt for the period.

The terms adjusted operating income and adjusted net income attributable to
owners of the Company correspond respectively to operating income and net
income attributable to owners of the Company adjusted to exclude goodwill
impairment and certain special items. Special items include items such as
gains and losses from asset disposals that substantially change the economics
of one or more cash-generating units and restructuring costs. Special items
also include significant impairment charges relating to assets other than
goodwill. In general, we exclude impairment charges in respect of such assets
as “special” items when they are large enough to significantly impact the
economics of a cash-generating unit. Items may qualify as “special” even
though they may have occurred in prior years or are likely to recur in
subsequent years. Other “special” items may be nonrecurring, meaning that the
nature of the relevant charge or gain is such that it is not reasonably to
recur within two years and there was not a similar charge or gain within the
two prior years.

The adjusted operating cash flow margin is defined as the ratio of adjusted
operating cash flow to revenue from continuing operations.

The adjusted operating income margin is defined as adjusted operating income
as a percentage of revenue from continuing operations.

Free Cash Flow represents cash generated (sum of operating cash flow before
changes in working capital and principal payments on operating financial
assets) net of the cash component of the following items: (i) changes in
working capital for operations, (ii) operations involving equity (share
capital movements, dividends paid and received), (iii) investments net of
divestitures (iv) the change in receivables and other financial assets), (v)
net financial interest paid and (vi) tax paid.

Cash flow before financial divestments and after payment of financial expense
and taxes represents the sum of adjusted operating cash flow and operating
cash flow from financing activities, principal payments on operating financial
assets, changes in working capital for operations and industrial investments
and industrial divestitures, excluding net industrial investments of
discontinued operations.

The term net investment, as presented in the Statement of change in net
financial debt, includes industrial investments net of industrial asset
disposals (purchases of intangible assets and property, plant and equipment
net of disposals), financial investment net of financial divestitures
(purchases of financial assets net of divestitures, including the net
financial debt of companies entering or leaving the scope of consolidation),
partial purchases net of sales resulting from transactions with
non-controlling interests where there is no change in control, new operating
financial assets and principal payments on operating financial assets. The net
investment concept also takes into account issues of share capital by
non-controlling interests.

The Group considers growth investments, which generate additional cash flows,
separately from maintenance-related investments, which reflect the replacement
of equipment and installations used by the Group.

The return on capital employed is defined as the ratio of:

  *net income from operations after tax, plus the share of net income from
    associates, less net operational income, after tax, from operating
    financial assets (return on operating financial assets net of tax
    allocated to this activity), to
  *average capital employed during the year, where
  *capital employed excludes operating financial assets and net income from
    operations excludes the related income.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Assets


(€ million)                  As of December  As of December  As of December
                              31, 2012         31, 2011         31, 2010
Goodwill                     4,795.0         5,795.9         6,840.2
Concession intangible        4,518.6         4,629.1         4,164.6
assets
Other intangible assets      1,142.9         1,280.8         1,505.8
Property, plant and          6,837.9         8,488.3         9,703.3
equipment
Investments in associates    441.5           325.2           311.7
Non-consolidated             77.4            106.3           130.7
investments
Non-current operating        2,650.7         5,088.3         5,255.3
financial assets
Non–current derivative       277.6           742.8           621.1
instruments - Assets
Other non-current financial  589.0           736.5           773.1
assets
Deferred tax assets          1,243.1         1,263.9         1,749.6
Non-current assets           22,573.7        28,457.1        31,055.4
Inventories and              1,018.4         1,020.8         1,130.6
work-in-progress
Operating receivables        10,305.9        11,427.6        12,488.7
Current operating financial  202.0           357.0           373.3
assets
Other current financial      944.8           114.6           132.3
assets
Current derivative           45.2            48.1            34.6
instruments – Assets
Cash and cash equivalents    5,547.8         5,723.9         5,406.8
Assets classified as held    3,974.3         3,256.5         805.6
for sale
Current assets               22,038.4        21,948.5        20,371.9
TOTAL ASSETS                 44,612.1        50,405.6        51,427.3

                                                            
                                                                
Equity and Liabilities

(€ million)                  As of December  As of December  As of December
                              31, 2012         31, 2011         31, 2010
Share capital                2,610.4         2,598.2         2,495.6
Additional paid-in capital   8,466.3         9,796.2         9,514.9
Reserves and retained
earnings attributable to     (3,924.6)       (5,324.7)       (4,134.6)
owners of the Company
Total equity attributable    7,152.1         7,069.7         7,875.9
to owners of the Company
Total equity attributable
to non-controlling           1,973.6         2,765.4         2,928.5
interests
Equity                       9,125.7         9,835.1         10,804.4
Non-current provisions       2,092.7         2,077.1         2,313.9
Non-current borrowings       13,083.7        16,706.7        17,896.1
Non–current derivative       235.1           215.4           195.1
instruments – Liabilities
Deferred tax liabilities     1,392.5         1,891.1         2,101.4
Non-current liabilities      16,804.0        20,890.3        22,506.5
Operating payables           11,598.7        12,598.6        13,773.9
Current provisions           543.0           604.8           689.9
Current borrowings           3,629.2         3,942.3         2,827.1
Current derivative           71.8            81.5            51.7
instruments – Liabilities
Bank overdrafts and other    288.7           440.2           387.0
cash position items
Liabilities directly
associated with assets       2,551.0         2,012.8         386.8
classified as held for sale
Current liabilities          18,682.4        19,680.2        18,116.4
TOTAL EQUITY AND             44,612.1        50,405.6        51,427.3
LIABILITIES


CONSOLIDATED INCOME STATEMENT

(€ million)                              Year ended December 31,
                                         2012^(1)    2011^(1)    2010 ^(1)
Revenue                                  29,438.5    28,576.5    27,851.6
o/w Revenue from operating financial     329.4       383.7       380.8
assets
Cost of sales                            (24,795.4)  (24,143.0)  (22,644.2)
Selling costs                            (607.7)     (582.7)     (572.8)
General and administrative expenses      (3,002.3)   (3,084.5)   (3,040.7)
Other operating revenue and expenses     61.9        62.8        182.2
Operating income                         1,095.0     829.1       1,776.1
Finance costs                            (838.9)     (823.0)     (816.2)
Income from cash and cash equivalents    80.1        112.9       93.2
Other financial income and expenses      (63.5)      (47.4)      (97.4)
Income tax expense                       (159.0)     (520.9)     (272.4)
Share of net income of associates        30.0        11.7        19.3
Net income (loss) from continuing        143.7       (437.6)     702.6
operations
Net income (loss) from discontinued      386.1       121.0       146.4
operations
Net income (loss) for the year           529.8       (316.6)     849.0
Attributable to owners of the Company    393.8       (489.8)     558.5
Attributable to non-controlling          136.0       173.2       290.5
interests
(in euros)                                                     
NET INCOME (LOSS) ATTRIBUTABLE TO                              
OWNERS OF THE COMPANY PER SHARE ^(2)
Diluted                                  0.78        (0.99)      1.16
Basic                                    0.78        (0.99)      1.16
NET INCOME (LOSS) FROM CONTINUING
OPERATIONS ATTRIBUTABLE TO OWNERS OF                           
THE COMPANY PER SHARE ^(2)
Diluted                                  (0.06)      (1.27)      0.84
Basic                                    (0.06)      (1.27)      0.84
NET INCOME (LOSS) FROM DISCONTINUED
OPERATIONS ATTRIBUTABLE TO OWNERS OF                           
THE COMPANY PER SHARE ^(2)
Diluted                                  0.84        0.28        0.32
Basic                                    0.84        0.28        0.32

(1) Pursuant to IFRS 5, Non-Current Assets Held for Sale and Discontinued
Operations, the income statements of:– discontinued operations in the course
of divestiture, i.e. the entire contribution of Veolia Transdev, excluding the
activities of Société Nationale Maritime Corse Méditerranée (SNCM) Group,
Water activities in Morocco and urban lighting activities (Citelum) in the
Energy Services Division and European wind energy activities;-discontinued
operations divested, i.e. regulated activities in the United Kingdom in the
Water Division, divested in June 2012, Solid Waste activities in the United
States in the Environmental Services Division, divested in November 2012 and
American wind energy activities, divested in December 2012;are presented in a
separate line, Net income from discontinued operations, for the years ended
December 31, 2012, 2011 and 2010.

(2) The weighted average number of shares outstanding at December 31, 2012, is
506.7 million (basic and diluted).

                                           
                                             
CONSOLIDATED CASH FLOW STATEMENT
                                             
                                           
(€ million)                                 Year ended December 31,
                                           2012       2011       2010
Net income (loss) for the year              529.8      (316.6)    849.0
Operating depreciation, amortization,       1,972.9    2,842.5    1,884.2
provisions and impairment losses
Financial amortization and impairment       8.4        5.6        18.6
losses
Gains/losses on disposal and dilution       (682.1)    (592.4)    (277.2)
Share of net income of associates           (30.0)     (13.4)     (18.4)
Dividends received                          (6.0)      (4.9)      (6.9)
Finance costs and finance income            834.7      796.1      811.2
Income tax expense                          326.5      558.3      362.4
Other items                                 130.5      77.7       95.8
Operating cash flow before changes in       3,084.7    3,352.9    3,718.7
working capital
Changes in working capital                  102.8      (40.7)     105.8
Income taxes paid                           (336.0)    (368.2)    (367.9)
Net cash from operating activities          2,851.5    2,944.0    3,456.6
Including Net cash from operating           285.7      467.7      665.1
activities of discontinued operations
Industrial investments                      (2,302.0)  (2,258.3)  (2,083.7)
Proceeds on disposal of intangible assets   174.0      168.9      205.2
and property, plant and equipment
Purchases of investments                    (168.6)    (372.1)    (426.3)
Proceeds on disposal of financial assets    2,810.8    1,286.9    498.6
(*)
Operating financial assets                                      
New operating financial assets              (411.7)    (363.5)    (489.1)
Principal payments on operating financial   370,9      441.0      424.1
assets
Dividends received (including dividends     39.0       12.4       12.9
received from associates)
New non-current loans granted               (91.3)     (160.3)    (59.8)
Principal payments on non-current loans     32.3       110.5      31.8
Net decrease/increase in current loans      (25.5)     (3.1)      69.1
Net cash used in investing activities       427.9      (1,137.6)  (1,817.2)
Including Net cash used in investing        2,132.5    706.6      (309.3)
activities of discontinued operations
Net increase/decrease in current            (1,268.9)  (534.5)    (938.2)
borrowings
New non-current borrowings and other debts  1,326.1    745.1      537.6
Principal payments on non-current           (1,659.6)  (315.0)    (148.8)
borrowings and other debts
Proceeds on issue of shares                 3.4        2.5        128.8
Share capital reduction                     -          -          -
Transactions with non-controlling           (124.4)    24.4       91.8
interests: partial purchases and sales
Purchases of/proceeds from treasury shares  -          2.2        7.9
Dividends paid                              (546.6)    (547.0)    (735.6)
Interest paid                               (844.8)    (753.6)    (821.9)
Net cash used in financing activities       (3,114.8)  (1,375.9)  (1,878.4)
Including Net cash used in financing        (37.0)     (71.2)     (30.0)
activities of discontinued operations
NET CASH AT THE BEGINNING OF THE YEAR       5,283.7    5,019.8    5,159.5
Effect of foreign exchange rate changes     (189.2)    (166.6)    99.3
and other
NET CASH AT THE END OF THE YEAR             5,259.1    5,283.7    5,019.8
Cash and cash equivalents                   5,547.8    5,723.9    5,406.8
Bank overdrafts and other cash position     288.7      440.2      387.0
items
NET CASH AT THE END OF THE YEAR             5,259.1    5,283.7    5,019.8

^(*) Proceeds on disposal of financial assets in the Consolidated Cash Flow
Statement include financial disposals and cash and cash equivalents and bank
overdrafts and other cash position items removed from the scope of
consolidation.

This amount includes, in particular, the disposal of regulated Water
activities in the United Kingdom (€1,230 million) and of solid waste
activities in the United States in the Environmental Services Division (€1,461
million) in 2012. Impacts of these transactions on net financial debt are
presented in Note 3.2.

Net cash flows attributable to discontinued operations as defined in IFRS 5
primarily concern:

  *regulated Water activities in the United Kingdom divested in June 2012;
  *solid waste activities in the United States in the Environmental Services
    Division, divested in November 2012;
  *the Water activity in Morocco;
  *wind energy activities, partially divested as of December 31, 2012,
    through the divestiture of Ridgeline on December 31, 2012;
  *urban lighting activities (Citelum).

Contact:

Veolia Environnement
Analyst and institutional investor contact:
Ronald Wasylec, +33 1 71 75 12 23
or
US Investors contact
Terri Anne Powers, Tel +1312-552-2890
 
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