Veolia Environnement Annual Report 2002 by Veolia Water

www.veoliaenvironnement.com Société Anonyme with capital stock of 5,468,451,196.50 euros

Consulting and writing: Image 7 (tel. +33 1 53 70 74 70) Writer: Catherine Radiguet Art direction and production: Ikoneo (tel. +33 1 40 92 75 71) Photos: Christophe Majani d’Inguimbert/Bruno Clergue/VE photo library/Corbis/Gettyimages. Illustrations: Stéphane Jungers.

VE registered office: 36-38 avenue Kléber F-75116 Paris Tel: +33 1 71 75 00 00

2002 Annual Report

CONTENTS This document is not the document de référence approved by the COB (the French securities and exchange commission).

The company’s values

A message from the Chairman of the Management Board

2002 key figures

Profile

Historical overview: 150 years of serving the environment

The company’s new name

Corporate governance

Stock market and shareholders

An international company

Customers:

Municipal customers

Industrial and tertiary customers

Research and innovation

OUR BUSINESSES

> Water EA

Waste management

Energy services

Transportation

FCC

SUSTAINABLE DEVELOPMENT

Principles and actions

Value creation

Environmental responsibility

Social responsibility

Risk management

76 82

FINANCIAL RESULTS AND MANAGEMENT REPORT SUMMARY

Key words

For further information

In addition to this Annual Report, VE has published the following documents for its shareholders: - a document de référence approved by the COB - a 20 F registered with the SEC - a sustainable development report. These documents can be sent on request or accessed on the following Web sites: - Corporate Web site: www.veoliaenvironnement.com - Shareholders’Web site: www.veoliaenvironnement-finance.com - Financial Web site: www.actionnaires.veoliaenvironnement.com - The VE sustainable development Web site: www.d.durable.veoliaenvironnement.com

Environmental services

This document is printed on Belair Mat Satin ecological paper.

Vivendi Environnement

becomes

VE - 2002 Annual Report

THE COMPANYâ&#x20AC;&#x2122;S VALUES CUSTOMER FOCUS We focus on our customers at all times, demonstrating the discipline and professionalism to anticipate and adapt to their needs and building a solid and lasting relationship with them.

RESPONSIBILITY We realize that our everyday actions have impacts on the improvement of peopleâ&#x20AC;&#x2122;s living conditions.We never forget the effects of our business on our employees and on society as a whole, and operate with the common good in mind.We allow our managers to assume full responsibility for the decisions they are called upon to make in carrying out their duties and expect them to fulfill that responsibility.

INNOVATION We create the environmental services of the future. Through bold and imaginative research and innovative technologies, we continuously improve quality of service and value added for customers and users alike.

PERFORMANCE We show financial discipline at every level and concentrate on creating value for the company and its shareholders with a view to sustaining our action and ensuring long-term growth.

COHESION The interests of individuals within the company are subordinated to the common interest. Experiences are shared and every success is a collective victory.

2002 Annual Report - VE

VE is committed to protecting the environment wherever the company operates. In particular by:

• Strictly complying with international and local environmental regulations • Involving its teams in improving the quality of people’s daily life • Operating its business to the highest environmental standards.

VE is committed to anticipating the environmental needs and expectations of its municipal, business and residential customers. In particular by:

• Paying attention to its customers’ needs and learning about their businesses • Taking into account new challenges such as health and hygiene safety in its innovative research • Employing skilled and professional teams that are committed to implementing the company’s environmental policy with discipline and innovation.

These commitments are described in detail in a 10-point Charter on Sustainable Development, which appears in the Sustainable Development Report published along with this Annual Report. It is available on request and is posted on our Web site.

They are also expressed in the Code of Ethics adopted by VE on March 3, 2003, which all of its employees worldwide are expected to adhere to.

VEOLIA ENVIRONMENT: A COMMITTED COMPANY VE - 2002 Annual Report

HENRI PROGLIO, CHAIRMAN OF THE MANAGEMENT BOARD

A MESSAGE FROM THE CHAIRMAN I

n its long history, our company has seen

change was in order because of the

many eventful years, but 2002 was

sentiments we perceived on the part of our

certainly one of the most remarkable.

employees, customers and shareholders. It is a fitting expression of our shared feeling

In the economic sphere, the company was

of a new start combined with respect for

able to achieve real growth while meeting

our roots. We will have the opportunity to

strict financial criteria. Excluding foreign

demonstrate this during the year, since

exchange fluctuations, revenue increased

2003 marks the 150th anniversary of our

5.9%, with a 7.2% rise in core business activi-

company’s founding.

ties alone. Cash flow from operations climbed 13% in 2002 on the heels of a 26%

This new start is reflected even more

increase in 2001. Recurring net income

concretely in the radical change in our

amounted to €429 million, compared with

ownership structure. In 2002, Vivendi

€420 million in 2001 and justifying continu-

Universal’s holding in our company was

ation of a dividend of €0.55 per share. Over

reduced from 63% to 20.4%. This enabled a

and above these results,which were attained

group of investors, made up mainly of

despite the stock market crisis and slow-

major financial institutions, to acquire an

down in the economy, our company’s main

interest in our company and be involved in

achievement in 2002 was to put in place the

our long-term growth.

conditions for a new beginning characterized by coherence and responsibility.

In 2002, the company also moved to its new head office on Avenue Kléber in Paris.

2002 Annual Report - VE

That new beginning is symbolized by the

For the first time in our history, all of the

new name, Veolia Environnement, which

corporate functions and the senior

will be submitted for approval at our

management of each of the divisions are

Shareholders Meeting. We felt that a name

now housed under the same roof.

> The company’s overhaul was accompanied

Veolia Environnement also reflects this

by a reorganization of senior management

coherence through its total expertise in a

that took place in February, and a proposal

demanding business where success has

to the Shareholders Meeting that the

been built on three foundations: first, the

company be managed by a Board of

rigorous management experience we have

Directors, which would be more suitable

acquired over the decades everywhere in

for representing a diversified ownership

the world; next, our considerable capacity

structure.

in research and innovation, which is totally focused on improving the financial and

Veolia Environnement, first, reflects a

environmental performance of our techno-

coherent future because of its stable strategy.

logies; last, but far from least, the quality of our human resources, which has been

“

Our divisions’ synergies are

Our company has only one core business,

maintained throughout our growth by an

and that is environmental services. It carries

explicit policy on training and career

out that business in four complementary

advancement.

sectors: Water, Waste Management, Energy

being tapped every day: in research, in shared know-how and the convergence of the businesses

”

Services and Transportation.

This high degree of expertise serving a coherent, strict and ambitious conception of

This complementary relationship of our

its business makes Veolia Environnement

businesses corresponds to a strong com-

unique on the international stage in many

mercial reality. In an increasingly urbanized

respects.

world, our four activities meet the main concerns of municipalities, their elected

It explains the company’s success despite

representatives and their inhabitants. Our

the sluggish market conditions in 2002:

expertise in this range of services also

Shanghai, Indianapolis, Poznan, London,

allows us to propose integrated offerings to

Atlanta, Singapore, Rabat, Jerusalem, Prague

industrial customers, an area that is meet-

and The Hague are some outstanding

ing with increasing success.

examples of cities that awarded us contracts, generally for between 20 and 50

But beyond their commercial interest, our

years.We also won new industrial contracts,

divisions’ synergies are being tapped

often involving several of our divisions, and

every day: in research, where more and

saw an exceptionally high rate of renewal of

more of our studies involve several of

our expiring contracts.

our activities; in shared know-how, for example in the transposition of methods for managing transportation networks to the rationalization of household waste collection; and in the convergence of the businesses, an excellent example of which is energy recovery from waste.

VE - 2002 Annual Report

A MESSAGE FROM THE CHAIRMAN

“

In 2002, our company exceeded –and at times by far– the targets it had set itself,

not have to invest in primary energy

As I see it, our professionalism, the successes

production and allows us to concentrate on

we have achieved and our company’s

developing value added energy services.

uniqueness require that responsibility of us.

This is the logic I want to see reinforced in our growth; we must take advantage of

confirming the validity of its management decisions.

Our new start is also one of responsibility.

”

We are responsible first of all to our

developments in the sector that enhance

shareholders, without whom we would not

our competitive edge.

be able to achieve anything. Whether in terms of the strong growth in our cash flow

In the first months of 2003, several major

from operations, the reduction of our debt or

contracts were signed that required no

the disposal of non-core businesses, in 2002

significant investments on our part: two

our company exceeded –and at times by far–

examples are a transportation contract in

the targets it had set itself, confirming the

Boston and a waste management contract

validity of its management decisions. But in

in Puxi-Shanghai. This is the direction we

these difficult times, there is no room for

must take, since it will allow us to strike the

complacency.

right balance between profitability and the pursuit of growth that creates value for our

Thus, I have made it a point to remind our

shareholders.

managers, and especially those on whom our growth depends, of the need to

We are also responsible on a more global

continuously strive to improve our return

level as a company wishing to be a player in

on investment.

sustainable development and in building a world in which economic progress and

Fundamentally, we are service providers.

better living conditions go hand in hand.

The quality of the services we provide and our capacity to generate savings for our

Sustainable development is not a passing

public and private-sector customers form

fad. The rational and informed use of

the basis of our commercial approach. The

scarce resources and control over the

infrastructure financing that is sometimes

impact of human activities will be among

part of our assignments must be carefully

the century’s priorities.

weighed from the perspective of its

2002 Annual Report - VE

necessity, size and cost-effectiveness. This

Problems of sustainable development are

reasoning is illustrated by the agreement

often considered third-world problems, but

we signed in 2000 with EDF. Our strategic

they also concern developed countries. One

partnership with the world’s biggest

striking example comes from North

producer of electricity means that we do

America, where as much as 50% of the

A MESSAGE FROM THE CHAIRMAN

water in municipal networks can be lost because of leaks. That is five times the rate we obtain in operating certain European networks! We contribute significantly to sustainable

“

By being scrupulous,

they have remained loyal to us and enthusiastic in their support for our

rigorous and imaginative in our work, we are helping to build a form of progress

development by fighting wastage and improving the quality of water; by destroy-

growth when we increased our capital stock in the summer of 2002. They are also frustrating times for our employees because the markets have not yet acknowledged their efforts at improving

that preserves life.

”

growth and efficiency.

ing waste cleanly, converting it to energy or recycling it; by promoting ways of saving

I am convinced that the upheavals, which

energy; and by improving transportation

obviously are affecting us, are transitory.

systems.

They will eventually fade away, leaving a more accurate assessment of reality. As for

These actions are an intrinsic part of our

Veolia Environnement, the reality is that

business. By being scrupulous, rigorous and

we have met and surpassed our targets;

imaginative in our work, we are helping to

our business model has proven valid; stable

build a form of progress that preserves life.

and solvent new markets are opening up

This is the message our company brought

for us; our exposure to international risk is

to the Earth Summit in Johannesburg and

very limited; we have exceptional visibility,

a few weeks ago to the Third World Water

with signed contracts representing more

Forum in Kyoto.

than 10 years of revenue; and we are not only the world leader in our business

The concept of “public-private partner-

but perhaps the only pure player in

ships” is emerging in international circles as

environmental services.

one of the best ways of meeting the challenges of sustainable development.

Those are the reasons for my confidence

We are pleased to see this because the

in the future of Veolia Environnement.

concept is basically very similar to the

I sincerely hope that you share it.

French mechanism of public-service outsourcing, the very foundation of our company’s business model. Since July 2000,when Veolia Environnement carried out its IPO, the financial markets have been in turmoil. These have been difficult times for our shareholders, but

VE - 2002 Annual Report

KEY FIGURES Revenue Breakdown of 2002 revenue by division

Change in consolidated revenue

Breakdown of 2002 revenue by geographical area

(in billions of euros)

30.08 29.13 26.26

44.2% Water

43.2% France

20.4% Waste management

32.6% Rest of Europe 18.3% Americas

15.2% Energy services

5.9% Rest of the world

11.4% Transportation 8.8% FCC* 2000

2001

2002

Consolidated revenue was up 3.3% on the 2001 figure. Excluding non-core businesses sold during the year or in the process of being sold, the increase amounted to 5.9% (or 7.2% at constant exchange rates).

The Water Division’s contribution to consolidated revenue decreased from 46.8% in 2001 to 44.2% in 2002. This was attributable mainly to the divestment of noncore businesses completed during the year. * VE share: 49%

In 2002, revenue increased everywhere except the Americas, where divestments and change in the dollar exchange rate had an adverse effect. The positive trend in other geographical areas reflects the consolidation of acquisitions made in 2001 and the startup of contracts won in 2000 and 2001.

Cash flow from operations

Capital expenditure and investments

Net debt

(in millions of euros)

(in millions of euros)*

(in millions of euros)

2,780 2,455 1,953

3,738

13,066 14,283 13,188

4,052 3,539

2,670 2,415 2,208 1,382

1,331

2000

2001

2002

2000 Growth investments

Following a 26% increase in 2001, cash flow from operations rose again in 2002 (13%). After maintenance capital expenditures, which remained virtually flat at €1.3 billion, free cash flow from operations before growth investments increased 36% to €1,457 million. In addition, asset disposals completed in 2002 generated a further €1.8 billion in cash and cash equivalents.

2002 Annual Report - VE

1,323

2001

2002

VE continued to expand in 2002, investing selectively in new projects. * including 49% for FCC

2000

2001

2002

Maintenance capital expenditures

While maintaining a significant level of investment in 2002, VE strengthened its financial structure and reduced its net debt through the disposal of non-core assets and a capital increase in August.

STOCK MARKET AND SHAREHOLDERS

VEOLIA ENVIRONNEMENT AND THE STOCK MARKET >

SHARE PRICE PERFORMANCE Comparison with the CAC 40 and DJ Stoxx Utilities indexes (base of 100 on July 20, 2000, the date of the IPO)

World leader in environmental services • Consolidated revenue of €30 billion in 2002 • Recurring net income of €429 million • 302,000 employees managed*

First “socially responsible” rating VE shares were

Éthibel

selected in November 2002 by

180

Éthibel, an independent Belgian

160 140

One core business: serving the environment

Earnings Change in consolidated EBIT

Performance of VE shares on the Paris Stock Exchange

(in millions of euros)

120

1,971 2,013 1,650

52.0% Water

12.4% Energy services

sustainable development.

5.9 % Transportation

100

and environmental standards satisfying the strictest

sustainable development

2000

2001

The concept of a social rating

by specialized agencies is a new 0

The 2.1% decline in EBIT in 2002 is attributable to the sale of non-core businesses and the fall in the dollar. Excluding non-core divestments, all of the divisions contributed to 1.9% growth in EBIT, or 3.2% at constant exchange rates.

2002 CAC 40

7 % Rest of the world

Four divisions

refinement. But ethical and socially responsible investment

DJ STOXX UTILITIES

In 2002, the Water Division’s contribution to EBIT, calculated solely on the basis of core businesses (i.e., excluding businesses sold or in the process of being sold), amounted to 48.7%. * VE share (49%)

Change in recurring net income (in millions of dollars)

idea, which requires further J A S O N D J F MAM J J A S O N D J F MA M J J A S O N D J F M

2001

25 % Americas

2002

criteria.

CAC 40

The fit between its four divisions, combined with its international presence, enables the company to develop integrated service packages that offer a comprehensive, tailored response to the environmental problems faced by customers in both the public and private sectors around the world.

38 % Rest of Europe

12.7 % FCC*

has high ethical, social

100

2000

30 % France

19.5 % Waste management

rating agency specializing in

VE is the only company in the world that focuses entirely on environmental services, covering the whole range in each of its four components: Water (water cycle management), Waste Management (collection, management, treatment and recycling of waste), Energy Services and Transportation. Through its core business, VE addresses the planet’s major challenges in sustainable development.

recognizes that the company

DJ STOXX UTILITIES

Breakdown of 2002 EBIT by geographical area

Breakdown of 2002 EBIT by division

By awarding VE its label, Éthibel VE

Change in consolidated net income

The breakdown by geographical area shows the decline in the contribution from the Americas and France in favor of other areas. This change was due principally to the disposal of US Filter’s non-core businesses, the market for equipment in the United States and the ramping up of contracts won between 2000 and 2002 in Central Europe and Asia.

No. 1 worldwide in the water industry

Water

Workforce at December 31

This capital increase will have a positive

was a very difficult year on the stock mar-

structural impact by helping to streng-

ket for all leading companies. Two addi-

then the company’s finances. The arrival

tional factors were a drag on the per-

of major new institutional shareholders

formance of VE shares:

illustrated the confidence and trust that

- the withdrawal of majority shareholder

the company commands.

Vivendi Universal during the year;

No. 1 in Europe for energy services*** 2002 revenue: €4.6 billion 70,000 facilities managed

indices are finding growing favor,

No. 1 private operator of surface passenger transportation in Europe

Transportation

especially among US and UK In France as in the United States, 2002

2002 revenue: €6.1 billion** 54 million metric tons of waste treated by Onyx around the world in 2002

Energy services

302,000 295,000 269,000

339.2 (2,251.2) 614.8

No. 2 worldwide and one of the world’s leaders in hazardous industrial waste

Waste management

(in millions of euros)

429.0 420.0 342.0

2002 revenue: €13.3 billion** 110 million people around the world provided with water and wastewater services

2002 revenue: €3.4 billion Over 4,000 municipal customers

investors. Investment funds specializing in

2000

2001

2002

2000

2001

2002

these values are currently experiencing an impressive rate of growth in the United States, as well as in Europe. By securing

- the dilutive impact of the €1.5 billion

Since the beginning of 2003, the stock mar-

capital increase carried out in August

kets, including the Paris stock exchange,

this first ethical label of quality,

2002 (issuance of new shares accounting

have continued to head sharply lower, and

VE has positioned itself as a

for 17% of the capital stock).

VE shares have not escaped unscathed.

company meeting the

2000

2001

2002

(100% of all subsidiaries, including FCC)

The growth in recurring net income in 2002 reflects solid earnings from each business despite difficult economic conditions, together with the successful strengthening of the company’s financial structure during the year.

Taking into account an exceptional goodwill write-down and restructuring costs, consolidated net income amounted to €339.2 million in 2002.

The weighted average consolidated workforce was 257,000 in 2002, compared with 239,000 in 2001 and 215,000 in 2000.

A worldwide network • Operations in nearly 100 countries around the globe • 57% of consolidated revenue generated outside France • Over 95% of revenue generated in industrialized countries with stable political and monetary systems

sustainable development criteria * Total workforce managed at December 31, 2002, including 100% of FCC’s employees ** Includes 100% of earnings from the Water and Waste Management businesses of Proactiva,a joint-venture company owned by FCC and VE *** Excludes production, trading and sale of electricity

of leading investors.

VE - 2002 Annual Report

STOCK MARKET AND SHAREHOLDERS

VEOLIA ENVIRONNEMENT AND THE STOCK MARKET >

SHARE PRICE PERFORMANCE Comparison with the CAC 40 and DJ Stoxx Utilities indexes (base of 100 on July 20, 2000, the date of the IPO)

World leader in environmental services • Consolidated revenue of €30 billion in 2002 • Recurring net income of €429 million • 302,000 employees managed*

First “socially responsible” rating VE shares were

Éthibel

selected in November 2002 by

180

Éthibel, an independent Belgian

160 140

One core business: serving the environment

Earnings Change in consolidated EBIT

Performance of VE shares on the Paris Stock Exchange

(in millions of euros)

120

1,971 2,013 1,650

52.0% Water

12.4% Energy services

sustainable development.

5.9 % Transportation

100

and environmental standards satisfying the strictest

sustainable development

2000

2001

The concept of a social rating

by specialized agencies is a new 0

2002 CAC 40

7 % Rest of the world

Four divisions

refinement. But ethical and socially responsible investment

DJ STOXX UTILITIES

Change in recurring net income (in millions of dollars)

idea, which requires further J A S O N D J F MAM J J A S O N D J F MA M J J A S O N D J F M

2001

25 % Americas

2002

criteria.

CAC 40

38 % Rest of Europe

12.7 % FCC*

has high ethical, social

100

2000

30 % France

19.5 % Waste management

rating agency specializing in

recognizes that the company

DJ STOXX UTILITIES

Breakdown of 2002 EBIT by geographical area

Breakdown of 2002 EBIT by division

By awarding VE its label, Éthibel VE

Change in consolidated net income

No. 1 worldwide in the water industry

Water

Workforce at December 31

This capital increase will have a positive

was a very difficult year on the stock mar-

structural impact by helping to streng-

ket for all leading companies. Two addi-

then the company’s finances. The arrival

tional factors were a drag on the per-

of major new institutional shareholders

formance of VE shares:

illustrated the confidence and trust that

- the withdrawal of majority shareholder

the company commands.

Vivendi Universal during the year;

No. 1 in Europe for energy services*** 2002 revenue: €4.6 billion 70,000 facilities managed

indices are finding growing favor,

No. 1 private operator of surface passenger transportation in Europe

Transportation

especially among US and UK In France as in the United States, 2002

2002 revenue: €6.1 billion** 54 million metric tons of waste treated by Onyx around the world in 2002

Energy services

302,000 295,000 269,000

339.2 (2,251.2) 614.8

No. 2 worldwide and one of the world’s leaders in hazardous industrial waste

Waste management

(in millions of euros)

429.0 420.0 342.0

2002 revenue: €13.3 billion** 110 million people around the world provided with water and wastewater services

2002 revenue: €3.4 billion Over 4,000 municipal customers

investors. Investment funds specializing in

2000

2001

2002

2000

2001

2002

these values are currently experiencing an impressive rate of growth in the United States, as well as in Europe. By securing

- the dilutive impact of the €1.5 billion

Since the beginning of 2003, the stock mar-

capital increase carried out in August

kets, including the Paris stock exchange,

this first ethical label of quality,

2002 (issuance of new shares accounting

have continued to head sharply lower, and

VE has positioned itself as a

for 17% of the capital stock).

VE shares have not escaped unscathed.

company meeting the

2000

2001

2002

(100% of all subsidiaries, including FCC)

Taking into account an exceptional goodwill write-down and restructuring costs, consolidated net income amounted to €339.2 million in 2002.

The weighted average consolidated workforce was 257,000 in 2002, compared with 239,000 in 2001 and 215,000 in 2000.

of leading investors.

VE - 2002 Annual Report

HISTORICAL OVERVIEW

CORPORATE GOVERNANCE

150 YEARS OF SERVING THE ENVIRONMENT

and the amount and allocation of atten-

namely Serge Michel (Chairman), Paul-Louis

to adapt them to the needs of the Board

dance fees, as well as reviewing stock

Girardot and Louis Schweitzer.

of Directors, when it is introduced.

tion, the committee oversees the selection

The current plan is to leave in place the

Following the Supervisory Board’s lead,

and proposes the appointment of new

two new committees set up by the

each of the new committees was given a

executive directors. It has three members,

Supervisory Board during March 2003 and

code of conduct.

option plans for senior executives. In addi-

A NEW CORPORATE STRUCTURE: SWITCH TO A BOARD OF DIRECTORS 1853

1867

1875

1880

1900

1905

1912

1935

1953

1958

VE’s corporate structure with a Manage-

A resolution was proposed at the Annual

responsibility” laying down a code of con-

ment and Supervisory Board was originally

Shareholders Meeting of April 30, 2003 to

duct for the company’s dealings with all its

introduced by its former core shareholder,

give the company a Board of Directors with

employees and partners was adopted. This

Vivendi Universal, and has served its pur-

even tighter corporate governance rules. In

charter illustrates VE’s resolve to adopt the

Creation of

François Grandjouan

Creation of

Venice, Italy: the first

Creation of Fomento

Ozone, a major techno-

Charles Blum creates

Léon Dewailly founds

Compagnie Générale

Virtually all the

pose. Since Vivendi Universal held just

particular, an emphasis will be placed on

best corporate governance practices. Under

Compagnie Générale

wins a contract with

Compagnie Générale

success outside France.

de Obras y

logical discovery.

Compagnie Générale

Chauffage Service, a

des Eaux celebrates

contracts for mainte-

20.4% of VE’s capital at December 31, 2002,

the appointment of more independent

the charter, an ethics committee will be set

des Eaux (CGE)

the Nantes municipal-

Française de

A treaty grants CGE

Construcciones (FOC),

A process using ozone

d’Entreprises

company specializing

its 100th anniversary:

nance of America’s

it was time to overhaul the corporate struc-

directors.

up during 2003, which will be chaired by

on December 14, 1853

ity to “clear the streets

Tramways (CGFT).

the rights to water

a Spanish company

to filter and sterilize

Automobiles (CGEA),

in the operation

drinking water is now

NATO bases in France

ture. Consequently, VE proposed adapting

by Imperial decree. Its

of mud and waste,

The city concept

production and

specializing in civil

water is developed to

with the aim of

of heating and air

supplied to 8 million

are awarded to CGC.

its corporate decision-making bodies to

and convert it into

initiated by Baron

distribution in Venice.

engineering and

complement or replace

buying, selling,

conditioning

people over 10,000

In addition to

reflect its newly gained independence and

ADOPTION OF A CHARTER OF BUSINESS ETHICS

examining, coordinating and settling any

founders have two goals: to irrigate the

manure.”

Haussmann revolu-

It is followed by

municipal services,

chlorine.

maintaining and

systems. In 1960,

kilometers of supply

maintaining heating

improve its efficiency.

On February 5, 2003, a business ethics

damental corporate values, difficulties

countryside and to

At about the same

tionized urban

Constantinople in 1992

wastewater

Implementation starts

operating a fleet of

Chauffage Service

network in France.

facilities, the company

charter called “Ethics, conviction and

encountered and desired improvements.

supply water to towns

time (1870), Frères

transportation and

and Porto in 1883.

treatment, waste

four years later.

industrial vehicles

merges with

The company extends

undertakes a wide

and cities. The compa-

Soulier is created in

triggered a boom

In 1884, CGE extends

collection and

The investment in

equipped with the

Compagnie Générale

its business to new

range of maintenance

ny wins its first public

Rouen and Chauny to

in a new form of

its business

transportation. FOC,

research and

automobile front-

de Chauffe (CGC),

services such as

activities.

service concession to

buy, sell and collect

locomotion, the

for the first time to

which later becomes

development increases

wheel drive invented

created in 1944,

household waste

The experience is the

supply water in Lyons.

rags and old paper.

horse-drawn tram,

wastewater treatment

FCC, has been VE’s

throughout the

by Georges Latil.

which joins CGE

collection.

precursor of facilities

Seven years later, the

The two companies

in response to the

in Rheims.

strategic partner in

century, culminating in

In 1919, CGEA launches

in 1967.

Paris municipality

join CGE in 1980 and

inadequacy of the

Spain since 1998.

the creation of Anjou

into the household

signs a contract for

1990 respectively.

omnibus. CGFT oper-

Recherche, CREED and

waste collection

water distribution

ates the first tram

Eurolum, VE’s three

market in Paris.

1967

for 50 years.

services in Le Havre,

research entities.

The company joins

The group operates

CGE in 1980.

its first waste

Nancy and Marseilles. The company joins CGE in 1980.

management, now

Henri Proglio. It will be responsible for issues relating to compliance with the fun-

Disclosure of the remuneration paid to senior executives during 2002 Total gross remuneration, including benefits in kind, paid to senior executives during 2002 was as follows:

offered by Dalkia.

incineration plants.

Remuneration paid to members of the Management Board > Total gross remuneration paid to all members of the Management Board Stock option plans granted to the Management Board > Share subscription or purchase options granted in 2002 to all members of the Management Board with an exercise price of €37.53 and expiring on January 29, 2010 Attendance fees paid to members of the Supervisory Board

€4,357,691 (1)

465,000 options,

€398,125 (2)

(1) includes the remuneration paid by VE and controlled companies (2) out of a total budget of €400,000.

From Compagnie Générale des Eaux… 11

VE - 2002 Annual Report

For more detailed information about executive directors, please consult the document de reference, which is available upon request and may be downloaded from the company’s Web site.

VE - 2002 Annual Report

HISTORICAL OVERVIEW

CORPORATE GOVERNANCE

150 YEARS OF SERVING THE ENVIRONMENT

and the amount and allocation of atten-

namely Serge Michel (Chairman), Paul-Louis

to adapt them to the needs of the Board

dance fees, as well as reviewing stock

Girardot and Louis Schweitzer.

of Directors, when it is introduced.

tion, the committee oversees the selection

The current plan is to leave in place the

Following the Supervisory Board’s lead,

and proposes the appointment of new

two new committees set up by the

each of the new committees was given a

executive directors. It has three members,

Supervisory Board during March 2003 and

code of conduct.

option plans for senior executives. In addi-

A NEW CORPORATE STRUCTURE: SWITCH TO A BOARD OF DIRECTORS 1853

1867

1875

1880

1900

1905

1912

1935

1953

1958

VE’s corporate structure with a Manage-

A resolution was proposed at the Annual

responsibility” laying down a code of con-

ment and Supervisory Board was originally

Shareholders Meeting of April 30, 2003 to

duct for the company’s dealings with all its

introduced by its former core shareholder,

give the company a Board of Directors with

employees and partners was adopted. This

Vivendi Universal, and has served its pur-

even tighter corporate governance rules. In

charter illustrates VE’s resolve to adopt the

Creation of

François Grandjouan

Creation of

Venice, Italy: the first

Creation of Fomento

Ozone, a major techno-

Charles Blum creates

Léon Dewailly founds

Compagnie Générale

Virtually all the

pose. Since Vivendi Universal held just

particular, an emphasis will be placed on

best corporate governance practices. Under

Compagnie Générale

wins a contract with

Compagnie Générale

success outside France.

de Obras y

logical discovery.

Compagnie Générale

Chauffage Service, a

des Eaux celebrates

contracts for mainte-

20.4% of VE’s capital at December 31, 2002,

the appointment of more independent

the charter, an ethics committee will be set

des Eaux (CGE)

the Nantes municipal-

Française de

A treaty grants CGE

Construcciones (FOC),

A process using ozone

d’Entreprises

company specializing

its 100th anniversary:

nance of America’s

it was time to overhaul the corporate struc-

directors.

up during 2003, which will be chaired by

on December 14, 1853

ity to “clear the streets

Tramways (CGFT).

the rights to water

a Spanish company

to filter and sterilize

Automobiles (CGEA),

in the operation

drinking water is now

NATO bases in France

ture. Consequently, VE proposed adapting

by Imperial decree. Its

of mud and waste,

The city concept

production and

specializing in civil

water is developed to

with the aim of

of heating and air

supplied to 8 million

are awarded to CGC.

its corporate decision-making bodies to

and convert it into

initiated by Baron

distribution in Venice.

engineering and

complement or replace

buying, selling,

conditioning

people over 10,000

In addition to

reflect its newly gained independence and

ADOPTION OF A CHARTER OF BUSINESS ETHICS

examining, coordinating and settling any

founders have two goals: to irrigate the

manure.”

Haussmann revolu-

It is followed by

municipal services,

chlorine.

maintaining and

systems. In 1960,

kilometers of supply

maintaining heating

improve its efficiency.

On February 5, 2003, a business ethics

damental corporate values, difficulties

countryside and to

At about the same

tionized urban

Constantinople in 1992

wastewater

Implementation starts

operating a fleet of

Chauffage Service

network in France.

facilities, the company

charter called “Ethics, conviction and

encountered and desired improvements.

supply water to towns

time (1870), Frères

transportation and

and Porto in 1883.

treatment, waste

four years later.

industrial vehicles

merges with

The company extends

undertakes a wide

and cities. The compa-

Soulier is created in

triggered a boom

In 1884, CGE extends

collection and

The investment in

equipped with the

Compagnie Générale

its business to new

range of maintenance

ny wins its first public

Rouen and Chauny to

in a new form of

its business

transportation. FOC,

research and

automobile front-

de Chauffe (CGC),

services such as

activities.

service concession to

buy, sell and collect

locomotion, the

for the first time to

which later becomes

development increases

wheel drive invented

created in 1944,

household waste

The experience is the

supply water in Lyons.

rags and old paper.

horse-drawn tram,

wastewater treatment

FCC, has been VE’s

throughout the

by Georges Latil.

which joins CGE

collection.

precursor of facilities

Seven years later, the

The two companies

in response to the

in Rheims.

strategic partner in

century, culminating in

In 1919, CGEA launches

in 1967.

Paris municipality

join CGE in 1980 and

inadequacy of the

Spain since 1998.

the creation of Anjou

into the household

signs a contract for

1990 respectively.

omnibus. CGFT oper-

Recherche, CREED and

waste collection

water distribution

ates the first tram

Eurolum, VE’s three

market in Paris.

1967

for 50 years.

services in Le Havre,

research entities.

The company joins

The group operates

CGE in 1980.

its first waste

Nancy and Marseilles. The company joins CGE in 1980.

management, now

Henri Proglio. It will be responsible for issues relating to compliance with the fun-

Disclosure of the remuneration paid to senior executives during 2002 Total gross remuneration, including benefits in kind, paid to senior executives during 2002 was as follows:

offered by Dalkia.

incineration plants.

€4,357,691 (1)

465,000 options,

€398,125 (2)

(1) includes the remuneration paid by VE and controlled companies (2) out of a total budget of €400,000.

From Compagnie Générale des Eaux… 11

VE - 2002 Annual Report

For more detailed information about executive directors, please consult the document de reference, which is available upon request and may be downloaded from the company’s Web site.

VE - 2002 Annual Report

CORPORATE GOVERNANCE

HISTORICAL OVERVIEW

In March 2003, the Supervisory Board

monitored regulated agreements, particu-

on March 3, 2003 by the audit and com-

introduced a code of conduct in line with

larly those entered into between VE and its

mitments committee, which is responsi-

the recommendations of the Bouton

shareholder Vivendi Universal.

ble for examining any financial and accounting issues relating to VE’s finance

report, as VE intends to comply with best The major issues examined by the commit-

department, audit department and statu-

tee during 2002 included the company’s

tory auditors. It has three members, who

Supervisory Board Committees

liquidity position and financing plan, as well

were chosen on account of their financial

To perform its duties as effectively as possi-

as the prospective acquisition of a share-

and accounting expertise, namely Jean-

ble, the Supervisory Board set up three

holding in UK water company Southern

Marie Espalioux (Chairman), Georges Ralli

specialized committees during 2002, which

Water. The committee met three times

and Murray Stuart. It met for the first

helped it to prepare its decisions. On March

during 2002.

time on February 24, 2003.

A commitments committee, which has the

Lastly, the remuneration committee, which

same members as the audit and transac-

met once during 2002, was replaced on

practices in corporate governance.

3, 2003, these committees were replaced by two new committees. In 2002, the role of the audit and transac-

tion committee, was responsible for

March 3, 2003 by the appointments and

tion committee was to examine any

reviewing requests for guarantees. It met

remuneration committee. It is responsible

financial and accounting issues in order to

on four occasions during 2002.

for making proposals concerning executive

guide the Supervisory Board. In addition, it

These two committees were replaced

directors’ remuneration (fixed and variable)

Members of the Supervisory Board

Jean-René Fourtou • Chairman of the Supervisory Board since September 23, 2002 • Chairman and Chief Executive Officer of Vivendi Universal French nationality

Jean Azema (*) • Member of the Supervisory Board since September 23, 2002 • Chief Executive Officer of Groupama French nationality

Daniel Bouton • Member of the Supervisory Board since October 20, 2000 • Chairman and Chief Executive Officer of Société Générale French nationality

Jean-Marc Espalioux • Member of the Supervisory Board since September 28, 2000 • Chairman of the Executive Board of Accor French nationality

Jacques Espinasse • Member of the Supervisory Board since September 23, 2000 • Senior Executive Vice President and Chief Financial Officer of Vivendi Universal French nationality

Paul-Louis Girardot • Member of the Supervisory Board since October 20, 2000 • Chairman of the Supervisory Board of Cie Générale des Eaux • Member of the Supervisory Board of Dalkia and director of Connex and Onyx French nationality

Richard Heckmann • Member of the Supervisory Board since October 20, 2000 • Chairman and Chief Executive Officer of K-2 Inc. and Chairman of an NYSE Committee US nationality

Arthur Laffer (*) • Member of the Supervisory Board since September 28, 2000 • Founding member of the Congressional Policy Advisory Board of the United States Congress • Chairman of Laffer Associates US nationality

Jean-Marie Messier • Member of the Supervisory Board since April 21, 2000 French nationality

Serge Michel • Member of the Supervisory Board since October 20, 2000 • Chairman of Soficot French nationality

Georges Ralli • Member of the Supervisory Board since October 20, 2000 • Executive, administrative and supervisory roles at Lazard Group companies French nationality

Louis Schweitzer (*) • Member of the Supervisory Board since February 5, 2003 • Chairman and Chief Executive Officer of Renault French nationality

Murray Stuart (*) • Member of the Supervisory Board since October 20, 2000 • Former Director of Royal Bank of Scotland Group plc UK nationality

Antoine Zacharias • Member of the Supervisory Board since September 28, 2000 • Chairman and Chief Executive Officer of Vinci French nationality

(*) Independent members: a member is deemed to be independent of the company’s management when he or she does not have any ties whatsoever with the company or its subsidiaries that may impair his or her freedom of judgment.

During 2002, the Supervisory Board conformed to the French New Economic Regulations (NRE) Act of May 15, 2001, which now limits the number of board mandates that may be held by one individual at any one time.

VE - 2002 Annual Report

1973

1980

1986

1990

1994

1995

1998

1999

2000

2002-2003

The first oil crisis

The business

Groupe Montenay,

Onyx acquires Groupe

CGE becomes one of

Reorganization:

CGE changes its name

Creation of Vivendi

Vivendi Environnement’s

Vivendi

triggers research for

consolidates:

created in 1860, joins

Soulier, which has

Europe’s leaders in

merger of Compagnie

to Vivendi, and the

Environnement

IPO on the Paris Bourse

Environnement

new technologies to

CGE groups together all

Compagnie Générale

become one of

waste management

Générale de Chauffe

French subsidiary

to consolidate all

on July 20, 2000.

assumes its

save energy. CGC

its subsidiaries

de Chauffe.

Europe’s biggest

and Groupe

specializing in water

environmental services

Vivendi Universal

independence

responds with

specializing in the

The ONYX brand is

paper and plastics

Foundation of the

Montenay to form

retains the name

activities: Vivendi

retains over 70% of the

in 2002, with the

solutions such as

design, engineering

created in 1989.

recovery companies.

Urban Environment

Compagnie Générale

Water (Water), Onyx

capital stock. Listing

gradual withdrawal

geothermal energy

and construction

Institute (UEI) ) at

des Eaux’s Energy

des Eaux.

(Waste Management),

on the New York Stock

of Vivendi Universal

and recovery of lost

of equipment for water

In the United States,

Jouy-le-Moutier, near

Services division.

Acquisition of a 49%

Dalkia (Energy

Exchange follows

from its capital.

energy.

and wastewater

US Filter is created

Paris, a training and

interest in the holding

Services) and Connex

in October 2001.

By December 2002,

treatment into

with the objective of

apprenticeship

Creation in 1996 of

company that

(Transportation).

In 1975, CGE create

Omnium de Traitement

becoming the world

center providing

Onyx’s cleaning

controls FCC, Spain’s

SARP Industries for

et de Valorisation (OTV).

leader in the

work-and-training

division, combining

market leader in

Acquisition of US Filter,

partnership agreement

recycling hazardous

CGE takes control of

manufacture of water

programs in

USP (railroad stations

municipal waste

market leader in water

on energy services

Vivendi

waste. The new

CGEA, later to become

treatment equipment.

environmental

and trains), Comatec

management and No. 2

treatment equipment

between VE and EDF.

Environnement will

company rapidly

Connex and Onyx,

The company is

services.

(urban transportation)

in water and waste-

in the United States.

becomes Europe’s No. 1

followed by Compagnie

acquired by CGE

and Rénosol.

water services.

center for treating

Générale de Chauffe,

in 1999.

The Energy Services

Veolia Environnement,

toxic liquid waste.

later to become Dalkia,

division adopts

in 2003 after approval

1980

thus bringing together

the name of DALKIA.

by the Shareholders

VE’s four businesses.

VU’s interest is Signature of a

reduced to 20.4%.

change its name to

Meeting on April 30.

…to Veolia Environnement VE - 2002 Annual Report