2003 annual results

2003 financial statements - Paris, March 8, 2004 1


Disclaimer

Veolia Environnement is a corporation listed on the NYSE and Euronext Paris. This document contains "forward-looking statements" within the meaning of the provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including but not limited to: the risk of suffering reduced profits or losses as a result of intense competition, the risk that changes in energy prices and taxes may reduce Veolia Environnement's profits, the risk that governmental authorities could terminate or modify some of Veolia Environnement's contracts, the risk that Veolia Environnement's compliance with environmental laws may become more costly in the future, the risk that currency exchange rate fluctuations may negatively affect VeoliaEnvironnement's financial results and the price of its shares, the risk that Veolia Environnement may incur environmental liability in connection with its past, present and future operations, as well as the risks described in the documents Veolia Environnement has filed with the U.S. Securities and Exchange Commission. Veolia Environnement does not undertake, nor does it have, any obligation to provide updates or to revise any forward-looking statements. Investors and security holders may obtain a free copy of documents filed by Veolia Environnement with the U.S. Securities and Exchange Commission from Veolia Environnement.

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


2003: a well-established strategy deliveringresults

Improvement in operating performance excluding completed and announced disposals

Continued focus on long-term contracts in Europe, Asia and the United States

Implementation of refocusing in Water in the United States

Confirmation of the company’s capacity to generate free cash flow

Free cash flow (1) positive before disposals of non-core assets

Free cash flow (1) of nearly €700 million after disposals

Net debt reduced to €11.8 billion

Improvement in ROCE from 6.4% to 7.0%

Net dividend per share proposed to the Annual Shareholders Meeting on May 12, 2004: 0.55 euros

(1) Free cash flow net of tax and financial charges = cash flow from operations - change in WCR - Capex and financial investements andvariation in consolidation scope


International 27%

France 73%

29%4.0%

5.6%

7,4%

20.4%

3.8%2.8%

Vivendi Universal

CDC

Groupama

EDF

Société Générale

BNP Paribas

Other

International

Shareholder structure at December 31, 2003


Reported revenue 28,603 30,079 -4.9% -0.9%

of which revenue (1) excl. assets sold in 2002 and 2003 28,418 28,073 +1.2% +5.4%

of which new consolidation scope revenue (2) 26,873 26,300 +2.2% +5.4%

Reported EBIT 1,751 1,971 -11.2% -7.9%

of which EBIT (1) excl. assets sold in 2002 and 2003 1,749 1,847 -5.3% -1.8%

of which new consolidation scope EBIT (2) 1,714 1,669 +2.7% +6.1%

2003 Key figures∆∆ 2003/2002

Exchange rate2003 2002

(1) “Excluding assets sold in 2002 and 2003” is defined as follows: non-core businesses of USFilter (Filtration & Separation, Plymouth Products and Distribution US, Surface Preparation) and Bonna Sabla in France.Revenue from Everpure, taken into account for the whole of 2003, is not classified in this category due to the date of the disposal (December 2003).

(2) After disposals in 2002 and 2003 (Filtration & Separation, Plymouth Products, US Distribution, Surface Preparation and Bonna Sabla) and disposals under way in the United States: Everpure (sold Dec. 2003), Culligan, equipment and short-term services.

ConstantCurrent

In €m


Cash flow from operations 2,701 2,780Capex and financial investments 2,930 3,738

Net income (loss) (2,055) 339Recurring net income 250 429

Net debt 11,804 13,066

Free cash flow (1) before disposals of non-core assets, net of tax and financial charges 168 (1,525)

Free cash flow (1) after disposals, net of tax and financial charges 662 47

2003 Key figures (continued)

2003 2002

(1) Free cash flow net of tax and financial charges = cash flow from operations - change in WCR - Capex and financial investements andvariation in consolidation scope

In €m


Validation of financial model Net debt considerably reduced

13,06614,283

11,804

3.4

3.2

3.8

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2001 2002 20033.03.13.23.33.43.53.63.73.83.94.0

In €m Net debt / EBITDA (x)


-2300

-1800

-1300

-800

-300

200

700

-1,525

+168

+662

+47

-2,229

-1,837

20012001 20022002 20032003

Validation of financial model Significant increase in cash generation

In €m

Cash flow net of tax and financial charges before disposals of non-core assets

Cash flow net of tax and financial charges after disposals


Shenzhen (1) 50 yrs China 8,500Gera 10 yrs Germany 130Qingdao 25 yrs China 110California (multiple communities) 5-20 yrs USA 75Beijing (Lugouqiao) 20 yrs China 50Oslo 15 yrs Norway 27Alabama (multiple communities) 20 yrs USA 25Synthesia / Unipetrol (industrial) 10 yrs Czech Republic 90Johnson Matthey (industrial) 10 yrs UK n.a.L’Oréal (industrial) 5 yrs UK n.a.

Continual commercial success Examples of contracts won since January 2003Continual commercial success Examples of contracts won since January 2003In €m

Water Waste Energy Services Transportation

VE Backlog

East Sussex/Brighton/Hove City 25 yrs UK 1,100Camden (announced in Dec. 2002) 7 yrs UK 190US industrial (sev. contracts) -- USA 54Puxi 20 yrs China 90Lao Gang 20 yrs China 260

Multi-services

Pigna (industrial) 12 yrs Italy 413Poznan -- Poland 75/yr(1) In partnership, VE share


Continual commercial successExamples of contracts won and renewed since January 2003

VE Backlog

Renewals and extensions

Rennes 10 yrs France 350Metz 15 yrs France 420200 + municipal contracts - France 90 / yr

+ 110 municipal contracts -- France 130 / yrTaichung 7 yrs Taiwan 57

Melbourne 5 yrs Australia 1,500

Schleswig-Holstein 10 yrs Germany 560Nordharz-Nertz (Magenburg-Harz) 12 yrs Germany 400

PSA Peugeot Citroen 10 yrs France 1,000Weisswasser, Saxony 20 yrs Germany 500

In €m

Water Waste Energy Services Transportation Multi-services


From revenue to net result

2002200220032003

RevenueRevenueEBITDAEBITDA

DepreciationDepreciation andand LT provisionsLT provisionsRenewalRenewal expensesexpenses

EBITEBITRecurringRecurring financialfinancial incomeincome ((expenseexpense))Nominal Nominal taxtax chargechargeRecurringRecurring earningsearnings of of equityequity methodmethod companiescompaniesMinorityMinority interestsinterests

RecurringRecurring net net incomeincome beforebefore goodwillgoodwillRecurringRecurring goodwillgoodwill amortizationamortization

RecurringRecurring net net incomeincome afterafter goodwillgoodwillNonNon--recurringrecurring net net losslossNet Net incomeincome ((lossloss))

30,07930,0793,8873,887(1,621)(1,621)

(295)(295)1,9711,971

(706)(706)(448)(448)

3939(177)(177)679679(250)(250)429429(90)(90)339339

28,60328,6033,6753,675(1,614)(1,614)

(310)(310)1,7511,751

(712)(712)(368)(368)

4646(257)(257)460460(210)(210)250250

(2,305)(2,305)(2,055)(2,055)

In €m


A year impacted by currency fluctuations

% of consolidatedrevenue at12/31/2003

CurrencyAveragerate 2002 (1€ = …)

Averagerate 2003(1€ = …)

2003/2002

12% US dollar 0,948 1,142 -17%

7% Pound sterling 0,629 0,693 -9%

2% Australian dollar 1,728 1,740 -1%

2% Czech Koruna 30,888 31,892 -3%


Growth in revenue excluding non-core assetssold in 2002 and 2003 (1): Organic growth of over 5% at constant exchange rates

WaterWater

WasteWaste

EnergyEnergy servicesservices

TransportationTransportation

FCC FCC (2)(2)

2003/2002Dec. 31, 2003

∆ in organic growth at

constant ex.rate

11,28811,288

6,1396,139

4,5714,571

3,4223,422

2,6532,653

-1.2%

-2.7%

+1.8%

+7.3%

+11.7%

+3.9%+3.9%

+4.1%+4.1%

+5.4%+5.4%

+9.4%+9.4%

+11.9%+11.9%

Dec. 31, 2002

11,15511,155

5,9725,972

4,6544,654

3,6733,673

2,9652,965

(1) “Excluding assets sold in 2002 and 2003” is defined as follows: non-core businesses of US Filter (Filtration & Separation, Plymouth and Distribution US) and Bonna Sabla in France, all sold in 2002, and Surface Preparation, sold in 2003. Revenue from Everpure taken into account for the whole of 2003 is not classified in this category.

(2) Veolia Environnement's share

Total 28,418 28,073 +1.2% +5.6%

In €m


Good resilience of EBITDA (1)

+2.7% at constant exchange rates

2003

Total 3,671 -1.5% +2.7% 12.9%

In €m 2003 margin

13.7%13.7%

15.0%15.0%

13.1%13.1%

7.7%7.7%

13.8%13.8%

WaterWater

WasteWaste

EnergyEnergy Services Services


FCCFCC

(1) Excluding assets sold in 2002 and 2003

1,5311,531

893893

610610

283283

408408

-0.3%

+2.1%

+7.2%

-1.4%

+15.5%

∆ at constant ex.rate

∆ at current ex.rate

--4.6%4.6%

--5.9%5.9%

+5.9%+5.9%

--2.5%2.5%

+15.2%+15.2%


Contribution to EBIT

1 9711 971 1 7511 751

(1) (1) IncludesIncludes provisions for operating provisions for operating assetsassets in in thethe processprocess of of beingbeing soldsold for €67mfor €67m

1024784

385

244274

11693

250

275

380

+ 80- 65

- 113- 122

0200400600800

1 0001 2001 4001 6001 8002 0002 200

2002 Impact offoreign

exchange

Assets soldin 2002 and

2003

Assets to besold in 2004

Performance 2003

FCCTRANSPORTATIONENERGY SERVICESWASTEWATER

In €m


EBIT trends by division

Waste €380m, +7.3% at constant exchange rates (1)

Positive impacts of contract renegotiations in France, with increasein marginsImprovement on like-to-like basis of nearly 9% for business outsideFrance. Good performance in Northern Europe (UK and Norway) andin United States (+4% excl. exchange rate fluctuations)

Water €784m, +6% at constant ex. rates, under new 2004 consolidation scope

Double digit growth in EBIT excluding USA. Very good level of business in France (impact of weather conditions)Continued improvement of profitability in Europe (increased marginsin Czech Republic and Germany). Good progress in Asia, especiallyin South Korea and in ChinaProvisions of €67 million for operating assets being sold in the US

(1) Excluding Proactiva. Including Proactiva growth was 6.6.% at constant exchange rates.


EBIT trends by division

Transportation €93m, -19% at constant exchange rates

Business and profitability very satisfactory for urban networks in France. Outside France, year impacted by termination andconsequences of South-Eastern rail concession in UK. Strong increase in revenue and profitability in Eastern Europe and the U.S. Good performance of business in Benelux.

EBIT continued to grow in France despite unfavorabledevelopments in engineering activitiesOutside France: EBIT up 23% driven by Southern Europe (integration of Giglio), Northern Europe (+20%) and Central & Eastern Europe (impact of Vilnius and Poznan)

Energy Services €274m, +14.3% at constant exchange rates


Control of financial charges

CostCost of of financingfinancing

OtherOther financialfinancial incomeincome andand expenseexpenseRecurringRecurring

AmortizationAmortization OceaneOceane premium + premium + borrowingsborrowingsExchange rateExchange rateOtherOther

NonNon--recurringrecurring

Net financial expense

AverageAverage interestinterest rate for 2003: rate for 2003: 4.31%

2002

(681)(681)

(648)

2003

(624)(624)

(750) (102)

∆

5757

(88)(88)(52)(52)(8)(8)

(28)(28)

(38)(38)

(25)(25)(47)(47)

4444(22)(22)

5858

(63)(63)(5)(5)

(52)(52)(6)(6)

(96)(96)

In €m


Non-recurring income (expense)

20022003

WriteWrite--down of US down of US FilterFilter assetsassets

OtherOther nonnon--recurringrecurring goodwillgoodwill writewrite--downsdowns

RestructuringRestructuring costscosts

TaxTax

OtherOther ((includingincluding gains or gains or losseslosses fromfrom thethe sale of sale of sharesshares))

Total

(77)(77)

(57)(57)

1111

3434

(89)

(2,226)(2,226)

(124)(124)

(93)(93)

9494

4444

(2,305)

In €m


WaterWater

WasteWaste

EnergyEnergy servicesservices


FCC FCC andand ProactivaProactiva

Comments

Control of capex and financial investments:€2.9 billion compared with €3.7 billion in 2002

SouthernSouthern WaterWater, , MoroccoMorocco, , Shenzhen, Shenzhen, BrusselsBrussels

1,325 1,605

629629

334334

102102

132132

128128

667667

386386

282282

7979

191191

Major Major projectsprojects in France in France (Nîmes, Saumur) (Nîmes, Saumur) andand thethe UK UK (New Hampshire, Sheffield)(New Hampshire, Sheffield)Giglio Giglio

FFRFFR

2003

6464

151151

6969

--

Maintenance

3838

Growth

280280

2828

6262

2727

6161

Industrial Financial

of which major projectsIn €m


Disposals completed in 2003

Everpure

Surface Preparation

Other disposals

Sub-total

December 2003

September 2003

191

121

182

494

In €m

Disposals of non-strategic assets

Disposals of operating assetsTangible assets, miscellaneous

Total disposals

226

720


Strong improvement in cash flow fromoperations (excluding assets sold in 2002 and 2003) and atconstant exchange rates

2,7802,701+207-106

-180

2,000

2,200

2,400

2,600

2,800

3,000

Cash flow fromops 2002

Impactdisposals

Exchange rate Performance Cash flow fromops 2003

In €m


In €m

Strong improvement in cash generationFree cash flow after disposals of nearly €700 million

20022003

Cash flow from operations 2,701 2,780Change in WCR excl. securitization program and Dailly (1) 151 (241)Maintenance Capex (1,325) (1,323)Cash flow before disposals and investments for growth 1,527 1,216Investments for growth (1,605) (2,415)Change in consolidation scope 20 (525)Disposal of operating assets 226 199Cash flow before disposals of non-core assets 168 (1,525)Disposal of non-core assets 494 1,572Cash flow after disposals 662 47∆ of capital stock - 1,554Impact of ex. rate fluctuations/dividends/other 355 (161)∆ Securitization program and Dailly 245 (223)Cash flows for the year after capital increase 1,262 1,217Net debt at end of year (11,804) (13,066)(1) Incl. ∆∆ securitization program and Dailly, the change in WCR totaled €397m in 2003: (€464m) in 2002


Sound financial situation

30-year bond issue for €700 million

Extension of Extension of averageaverage debtdebt maturitymaturity to to 5.5 years

Liquidity position above €8 billion

Ratings: Standard & Poor's BBB+ / Positive / A2Moody's Baa1 / Stable / P2

5.15.13.43.4

4.84.83.83.8

20022003 2001

EBITDA/EBITDA/financialfinancial charges (x)charges (x)Net Net debtdebt/EBITDA (x)/EBITDA (x)

5.95.93.23.2

Financial ratios


Improvement in ROCE (1) in line with targets announced

Water 9,985 11,838 6.8% 5.7%Waste 4,698 5,043 6.6% 6.1%Energy services 2,544 2,516 8.3% 7.3%Transportation 1,338 1,257 5.6% 7.3%FCC 1,902 1,734 12.6% 12.1%

Average capital employed

2002

6.4%7.0%ROCE for VE22,73220,857Average capital employed (€m)

2002 (1)2003 (1)

(1) After disposals of assets in 2002 and 2003 (Filtration & Separation, US Distribution, Plymouth Products Surface Preparation Corp. and Bonna Sabla).

20032002 (€m)2003 (€m)

ROCE

Average capital employed =Average capital employed = Fixed assets + gross goodwill Fixed assets + gross goodwill –– exceptional writeexceptional write--downsdowns+ + share in companies accounted for by the equity method+ working capital requirement + working capital requirement –– provisions for liabilities and charges provisions for liabilities and charges –– other longother long--term liabilitiesterm liabilities

(EBIT(EBIT–– tax for the Group (*) + tax for the Group (*) + share in earnings of companies accounted for by the equity method))ROCE = ROCE =

Average capital employed during yearAverage capital employed during year

(*) excluding tax gain/expense related to future disposals which represent +€61m (in 2003)


"Veolia 2005": a rigorous efficiency plan with targeted savings of €300 million for full year 2006

• A “Project Veolia 2005” team reporting to the Chairman

• Monthly Executive Committee meeting:

• Decide on focus, priorities andprojects

• Validate proposals of VE 2005 team

• Steering Committee made up of division representatives

• Intra- or inter-division working groups withdedicated project leaders

• Single, shared system for operationalsteering and progress monitoring will bemade available to key players

Entire company is now mobilized to implement concrete action plans

Measures to support the plan andprovide operational steering

Operations• Cross-division and division-specific

operating processes• Risks / Insurance• Workforce performance

Purchasing• Cross-division purchasing• Core business purchasing• Investment purchasing

Support functions• Structures• Financial, fiscal and HR

commitments optimization• IS savings

Assets• Real estate• Portfolio of businesses

Estimatedcontribution

30 to 40%

20 to 25%

30 to 40%

10 to 15%

Total: €300m


Veolia 2005 efficiency plan: semi-annual assessment

Economic review to be carried out every six months:

Report on progress made

Estimated contribution per area

Illustration of projects under way

Today, a target of savings of €300 million for full year 2006

50% have so far begun in project phase should have a favorable impact of over €80 million on the 2004 income statement

Comptes annuels 2003 - Paris, le 8 mars 2004 28

Strategy and outlook


26.326.9 Consolidated revenue (€ bn)

2002 adjusted (1)2003 adjusted (1)

Strategy and outlook2003 consolidation scope after disposals(1)

Water 36%

Waste22%

Energy services 17%

Transportation 14%

FCC 11%

2003 revenue (1)

by division2003 revenue(1)

by geographic area

France 48%

Rest of Europe 37%

North America 7%

Asia-Pacific 3.5%

RoW 4.5%

(1) After asset disposals in 2002 and 2003 (Filtration & Separation, Plymouth Products, US Distribution, Surface Preparation Corp. and Bonna Sabla) and asset disposals under way in the United States (Culligan, Everpure, equipment + short-term services)


Strategy and outlook

Continued leadership in environmental services for municipalities and industrial customers

Long-term and secure contracts guarantying on-going cash-flows

International geographic presence in growing areas:Europe, North America and some Asian countries

Increased of selectivity of investments while maintaining financial balance


Asia-Pacific: A region with a strong potential for growth

A targeted development strategyOpportunities in China, South Korea, Japan, Singapore, and AustraliaFlagship projects serving as customer references

Shanghai (water and waste), Shenzhen and Tianjin for municipal servicesHynix and Petronas for industrial services

Partnerships with financial institutions and industrial companies to limit risk

Beijing Capital, Korean Water, World Bank, Citic

Development of synergies between divisions Veolia Water and Onyx in Tianjin and ShanghaiConnex and Onyx in Australia


Asia-Pacific Well-targeted growth

CGE UtilitiesMUC

Petronas, Dungun

Tianjin, Chengdu, PudongShanghai, Lugouqiao, Zhuhai

Shenzhen, Baoji, Qingdao, Michelin, Guangzhou, Hangzhou, Hong Kong

Gusco

Adelaide (United Water) Noosa, Queensland

Illawarra/Woronora, NSW Gerringong Gerroa, JSW Aqua

(Bendigo), Victoria Ballarat, Victoria, Melbourne (Australia),

Woodlawn

Papakura (UW), N. Island Ruapehu (UW), N. Island

Auckland

Shangshui

Jenets

HynixHPC

Incheon

Australia

Malaysia

China

Thailand

Taiwan

New Zealand

Japan

South Korea


Asia-Pacific New contracts won recently

2002Pudong/Shanghai (50 yrs – backlog of €10bn)

Baoji (23 yrs – backlog of €265m)Zuhai (30 yrs – backlog of €390m)

Singapore (5 yrs – backlog of €45m)

2001LutSao1 (20 yrs – backlog of €1.3bn) Hynix (12 yrs – backlog of €930m)Inchon (20 yrs – backlog of €400m)

2003Shenzhen (50 yrs – backlog of €8.5bn)Laogang (20 yrs – backlog of €260m)Qingdao (25 yrs – backlog of €110m)Lougiqaio (20 yrs – backlog of €50m)

Puxi (20 yrs – backlog of €90m)

(1) In partnership

2004Melbourne (5 yrs – backlog of €1.5bn)

Auckland


Asia-Pacific: Key figures

0

100

200

300

400

Water Waste Energy services Transportation

2003 revenue €933 million

Asia

Pacific

2009 revenue target

> €2 billion

0

200

400

600

800

1000

1200

Revenue Capital employed

446446700700

300487

In €m

In €m


Outlook2004-2005: Targets maintained

revenue growth of between 4% and 8%

free cash flow positive before disposals and excluding new major projects

improvement targets confirmed for ROCE

8–9%

6.4%

0.7%0.7%

0.6%0.6%

0.50.5––1.3%1.3%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2002 ROCE

USdisposals

Performanceplan

Contract maturity

ROCE ROCE targettargetendend--20052005


Outlook

Medium term

Continuation of focus on profitable growthROCE objective: above 10% in 2009

while maintaining financial balance (net debt/EBITDA between 3 and 3.5x)

Allocation of free cash flownew projects (€300–700m /yr); focus on long-termcontracts in Europe, Asia and the United States

with municipal customers

with industrial customers

shareholder remuneration


Financial CommunicationNathalie PINON, Head of Investor Relations

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

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

e-mail [email protected]

Brian SULLIVAN, Vice President, US Investor Relations1605 Main Street, Suite 710, Sarasota, FL 34236- USA

Telephone (941) 362-2435Fax (941) 362-2499

e-mail [email protected]

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

2003 annual results

Business

financial charges

financial investments

free cash flow free

forwardlooking statements

core assets free cash

nongaap financial measures

disposals net debt

net debt11