acquisition of sulo, n°2 german waste company
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200 -04-27TRANSCRIPT
Acquisition of Sulo, n°2 German waste company
April 27, 2007
Investor Relations – April 2007
2Veolia Environnement
Disclaimer
Veolia Environnement is a corporation listed on the NYSE and Euronext Paris. This document contains "forward-looking statements" within the meaning of the provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside our control, including but not limited to: the risk of suffering reduced profits or losses as a result of intense competition, the risks associated with conducting business in some countries outside of Western Europe, the United States and Canada, the risk that changes in energy prices and taxes may reduce Veolia Environnement's profits, the risk that we may make investments in projects without being able to obtain the required approvals for the project, the risk that governmental authorities could terminate or modify some of Veolia Environnement's contracts, the risk that our long-term contracts may limit our capacity to quickly and effectively react to general economic changes affecting our performance under those contracts, the risk that Veolia Environnement's compliance with environmental laws may become more costly in the future, the risk that currency exchange rate fluctuations may negatively affect Veolia Environnement's financial results and the price of its shares, the risk that Veolia Environnement may incur environmental liability in connection with its past, present and future operations, as well as the risks described in the documents Veolia Environnement has filed with the U.S. Securities and Exchange Commission. Veolia Environnement does not undertake, nor does it have, any obligation to provide updates or to revise any forward-looking statements. Investors and security holders may obtain a free copy of documents filed by Veolia Environnement with the U.S. Securities and Exchange Commission from Veolia Environnement.
This document contains "non-GAAP financial measures" within the meaning of Regulation G adopted by the U.S. Securities and Exchange Commission under the U.S. Sarbanes-Oxley Act of 2002. These "non-GAAP financialmeasures" are being communicated and made public in accordance with the exemption provided by Rule 100(c) of Regulation G.
Investor Relations – April 2007
3Veolia Environnement
Strategic rationale
Core business in a consolidating and fast-transforming market
Complementary geographical footprint in Europe
Veolia Environmental Services becomes undisputed No1 player in European waste management
Strengthens Veolia Environnement’s European leadership in the recycling market
First-class management team
Accelerate opportunities of PPP development in Germany
Unrivalled platform for further growth in Central and Eastern Europe
Investor Relations – April 2007
4Veolia Environnement
The German waste sector: why now? — Recent evolution makes it an attractive development market
Major evolution due to changes in market structure and regulationIntroduction of tender offers in Municipal segment.
Opening of DS system resulting in the emergence of competitors to DSD
TASi legislation inducing strong requirements for sorting/treatment capacities
Attractive “new” German marketRegulatory and contractual maturity and transparency
Improved visibility of prices and margins
Growing importance of sorting/recycling and valorisation processes
Market consolidation underway
Investor Relations – April 2007
5Veolia Environnement
The German waste sector — Key value drivers
Demand for integrated solutions
New regulation (TASi, Dual System, municipal tenders)
Market consolidation
Valorisation of secondary raw
materials and RDF
Growing demand for sorting & recycling
facilities
Requirements for value-added
services
Acceleration of PPP initiatives
Requirements for scale and national
footprint
German waste sector
value drivers
Investor Relations – April 2007
6Veolia Environnement
Sulo – No2 operator in the German waste management sector
€1.3 billion revenues in 2006 out of which €186 million in environmental technologies
Municipal and Industrial nationwide waste management activity
No1 player in Municipal segmentNo2 player in Commercial & Industrial segmentNo1 operator in the Dual System market
Leadership on the Recovered Paper and Plastic markets
Strategically located sorting/recycling facilities
9 Public Private Partnerships
Employs 7,700 employees
Environmental Services revenue breakdown
Commercial &Industrial 49%
Dual System/Recycling
18%
Plastic 3%Int'l 5%
Other 6%
Municipal19%
Investor Relations – April 2007
7Veolia Environnement
The German waste sector — Growth opportunities from a still fragmented and public-owned market
Private market size of around €12 billion
A very fragmented market
Room for further consolidation
A third of municipal market still managed by public-owned companies
“private” market structure
Top 3 = 38% market share
18%
Remondis
11%SULO
9% Alba
Others
€15.1bnTop4 - 8
Investor Relations – April 2007
8Veolia Environnement
Sulo - A growing player in Central & Eastern European and Baltic markets
More than €55 million revenues in 2006
Leading waste services provider in Central & Eastern EuropeNo4 in Poland
Top 6 in Czech Republic
Major operator in the Baltic countriesNo1 in Estonia
No4 Lithuania
Top 6 in Latvia
Track record of successful profitable growth: CAGR 2002-2006: +15% per year
Strong platform for further development
Investor Relations – April 2007
9Veolia Environnement
Strategic benefits - Combining Eastern European franchises to capture forthcoming growth
Strong combined activities in Eastern Europe
Combined revenues of around €200 million
High development potential market
Veolia Environmental Services + Sulo combined forces can sustain double digit growth in this area
Veolia ES main activities
Veolia Environmental Services/Sulo activities in Europe
Sulo main activities
Veolia ES/Sulo activities
Investor Relations – April 2007
10Veolia Environnement
Strategic benefits – Integration of recycling and growth opportunities with German municipalities
Recycling and secondary materials market is increasing globallyStrong increase in demand for recovered materials in Asia
Scale driving commercialisation opportunities and prices
Identified opportunity on paper tradeDouble Veolia Environnement’s existing tonnage
Deliver integrated services in France, Germany, UK and rest of Europe
Expected strong development of Public Private PartnershipsIncreasing demand for efficiency and value-added services
Additional growth opportunities with German municipalitiesLeverage Veolia Environnement ’s breadth of expertise on Stadtwerke
Potential for comprehensive value proposition (water, energy services, waste management, public transport)
Investor Relations – April 2007
11Veolia Environnement
Key terms of the transaction
Enterprise value of €1,450 million
Including financial net debt and estimated after-tax liabilities of approximately €950 million
8.0x implied EV/2007 EBITDA including associates
Subject to regulatory approval by EU competition authorities
(1) Based on 2006 consolidated EBITDA adjusted for associates
Investor Relations – April 2007
12Veolia Environnement
Financial impact
The transaction meets Veolia Environnement’s investment criteria:
Significant value creation: IRR at more than 3% above WACC on base case scenario
Earnings accretive from year 1
Potential upside above base case of €200/300 million additional value creation
Limited impact on credit ratios
Investor Relations – April 2007
13Veolia Environnement
2007 estimated Veolia Environnemental Services’ revenue: a well balance geographic revenue breakdown
2007 estimated revenue (WasteManagement) before Sulo’s
acquisition
France 39%
Germany 2%
America 20%
Asia Pacific 7%ROW 1%
France 33%
America 17%
Asia Pacific 6%ROW 1%
2007 proforma estimated revenue (Waste Management) after Sulo’s
acquisition*
(*) Sulo’s contribution in revenue taken into account for 12 months
United Kingdom 21%
Rest of Europe 10%
United Kingdom 18%Germany 16%
Rest of Europe 9%
Investor Relations – April 2007
14Veolia Environnement
Veolia Environnement: presence in Germany multipliedby 3 in 4 years
Energy 5%
Wast e 12%
Wat er 59%
2003 Total revenue: €1,193m
Transport 16%
Energy 2%
Waste 43%
Water ( 1 )
39%
2007 proformaTotal revenue:€3,391m
(1) Water, (including BVAG)
Transport 24%
Investor Relations – April 2007
15Veolia Environnement
2007 estimated Veolia Environnement revenue by geographic region : a significant reinforcement in key strategic markets
2007 estimated VE Group revenue before Sulo’s acquisition
France 45%
Germany 6%
America 11%
Asia Pacific 7%ROW 3%
France 44%
America 10%
Asia Pacific 6%ROW 3%
2007 proforma estimated VE Group revenue after Sulo’s acquisition*
(*) Sulo’s contribution in revenue taken into account for 12 months
United Kingdom 9%
Rest of Europe 19%
United Kingdom 9%Germany 10%
Rest of Europe 18%
Investor Relations – April 2007
16Veolia Environnement
Glossary
United Resource Recovery Corporation, patented PET recycling process technologyURRC
Technische Anleitung Siedlungsabfall: ordinance on the Environmentally Sound Landfilling of Municipal Waste and on Biological Treatment Plants, which states that no waste may be disposed of in landfill sites without adequate pre-treatment from 2005 Onward
TASi
Refuse derived fuelRDF
Public Private Partnership: a business model where a municipality and a private company form a joint holding company, majority owned by the municipality but operationally controlled by the private partner
PPP
Polyethylene TerephthalatePET
Mechanical-biological pre-treatment: a way of treating waste pre-disposalMBT
Duales System Deutschland: a corporation owned by KKR in which the licensees pay fees to the DSD to be in return exempted from having to provide a recycling system for their packaging waste
DSD
Commercial and IndustrialC&I
DefinitionTerm
Investor Relations – April 2007
17Veolia Environnement
Nathalie PINON, Head of Investor Relationsand Financial Communication
38 Avenue Kléber – 75116 Paris - FranceTelephone +33 1 71 75 01 67
Fax +33 1 71 75 10 12e-mail [email protected]
Brian SULLIVAN, Vice President, US Investor Relations700 E. Butterfield Road -Suite 201
Lombard, IL 60148 - USATelephone +1 (630) 371 2749
Fax +1 (630) 282 0423e-mail [email protected]
Web sitehttp://www.veolia-finance.com
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