Antoine Frerot - Chairman and CEO: (Abrupt Start)…accounting standards and in particular the ending of proportionate consolidation. I’ll then give the floor to Francois Bertreau, our new Chief Financing Officer in charge of the transformation of the Group drive who will talk about our cost-cutting program and he’ll now take the forward gain to give you our guidance.
To kick off, I’d like to say that at the end of the first year of the transformation program, Veolia is ahead of objectives and is now clearly on the path I had defined for the Group a little bit more than a year ago.
2012, first of all, witnessed a major change in the Group’s governance and organization. Also in 2012, an asset divestment and refocusing of our business activities and that led to a sharp drop in its date.
Furthermore, the cost-cutting program was vigorously launched and the savings at the end of this first year exceed expectations. As a result, thanks to that savings as well as the good performance of our growth platforms and also the fact that our Environmental Services held up very well in late 2012 despite a rather bleak environment.
Now operating cash flow and it's significantly improved at the end of the second half and we are somewhat ahead of the priority targets with fit for our growth.
Last year shareholders meeting, as you remember, appointed four new directors including Groupama, Maryse Aulagnon, Nathalie Rachou, Jacques Aschenbroich and Groupama SA and this year Henri Proglio resigned and Marion Guillou was coopt.
The Group also changed its organization appointing a new Chief Operating Officer in charge the Group's transformation and in particular, in charge of industrializing our (work admissions) Francois Bertreau, whom I am delighted to introduce today for the first time as we present our results. Francois, as you already heard, will be talking to you in a few minutes.
With respect to the Group's re-focusing, first of all, we wrapped up two major divestments, regulated water activities in the U.K. and solid waste in the U.S., but furthermore, we finalized 30 smaller transactions along with the usual financial disinvestments and that tottered EUR3.7 billion. Furthermore, changes in the Berlin water company shareholding and lead to additional deleveraging of EUR1.4 billion. So all-in-all, we have reduced our debt by EUR5.1 billion, whereas we had projected this program over two years. Some transactions that have already been signed have yet to produce their results, for instance, our pull out from Transportation.
As of 31st of December 2012, capital employed by the Group was concentrated on 48 countries. In the last 18 months, we have sold business units which we want to pull out from countries, you can see them here in red. We have closed down loss-making operations, in yellow here, or sold assets we wanted to discount, although we did not want to pull out from the country and that's where you have green dots.
At the end of 2013, the capital employed by the Group will be concentrated around 40 countries. Thanks to this divestment program, but also keeping in check of CapEx, as well as the excellent performance of working capital requirement, in particular, in Q4. Debt has contracted to a significant extent, which was at – at 31st of December 2012 it was down to EUR11.3 billion. You remember when our objective was to lower it under EUR12 billion as of 31st of December 2013, so we are more than a year ahead of this objective.
Our Group's debt dropped by EUR3.4 billion and since from the same time 2009, has dropped by more than EUR.5 billion. Given the advance we have built up over our initial objectives, we have reviewed our deleveraging objective and our concern is when giving you guidance and our target at 31 December, 2013 will be ranging between EUR8 billion and EUR9 billion. As Pierre-Francois will explain, this will lead to an adjusted net financial debt of EUR6 billion. Given those major decline in debt and deleverage, and the good conditions of our divestments, the Group's leverage has increased from – it has got from 3.88 to 3.26 as of 31 December, 2012.
The second component of our transformation program was cost-cutting. As you know we have a full year program with EUR500 million in savings, the adjusted savings by 2015. The objective was to reduce cost by EUR100 million in 2013 and that's what you can see on the right hand side in rate. Once more, we have topped our objectives because savings total were EUR142 million versus EUR82 million in terms of implementation costs, so a net saving of EUR60 million that can be found in general and administrative costs.
Actually, in this slide what we can see is adjusted operating cash flow has improved despite the deterioration in our environments. This increase, of course, results partly from cost savings but also the excellent performance of Environmental Services and a good contribution of our growth platforms.
Lastly, in 2012, we also stepped up the Group's repositioning on high growth markets and recorded some superb successes with our new business models. These new business models for instance in Water led to successes in United States, in New York recently in California, but also in Pittsburg and in Winnipeg, but also in France.
In India for the drinking water operating – the drinking water network of the city of Nagpur, we have been awarded by contract and we’ve also renewed most of our contracts in France.
In Environmental Services in United Kingdom, we were awarded a major PFI contract for residual municipal waste treatment and Leeds with the 25-year duration.
In China, in Hunan province, we were also awarded a contract for hazardous waste treatment center.
In France, we commissioned three new lines of recovery, one for used motor oil recycling and (abnormality 129) and then one in North France (indiscernible) for anaerobic digestion of waste.
In Energy Services in Central and Eastern Europe, we increased our order backlog by around EUR1 billion, with the operation of the urban heating network in Romania and in France where we also renewed contracts and we commissioned the largest biomass plant in Europe.
I will now give the floor to Pierre-Francois. He's going to talk to you about the financial statements in detail. Also, talk about the consequences of the change in accounting standards and I will come back to talk about 2013 and our outlook.
Pierre-Francois Riolacci - CFO and SEVP: Good morning. Well, this is going to be a double serving; you're going to have the accounts and then the new IFRS standard.
Let's get down to (indiscernible) tax. Antoine has already pointed out some of the highlights for 2012. You also heard the main figures from (TDF) if you listened to the news. In any event 2012 was a good year of organic growth for us 1.5% against a very, very negative business climate. We have strong performance of adjusted operating cash flow. Put the divestment in Italy that haven’t had impact in the second half of the year. So this means that we’ve seen a well brightening of the picture in the second half of the year.
You can look this year we’ve had significant capital gains from our divestment instead of the write-downs that we saw last year. You can see that the free cash flow was down EUR3.7 million.
Here is the breakdown of revenue by division. Again, this is the direct impact of the drop in secondary raw materials from 2011 to 2012. This accounts for about 16% to 17% of our revenue. We would have been flat in Environmental Services, but nonetheless, we have held up very despite the drop in industrial output.
In Q4, we’ve seen 2.9% increase in organic growth. We were down at 0.8% in the second quarter and 0.4 or minus 0.3% in the third quarter. So we saw a market improvement towards the end of the year.
Let’s go through the details of each of our business activities. Water, we are looking at revenues of EUR12 billion. It is just 1.3% of organic growth. You can see something that is quite surprising is that France has posted a growth rate of 1.3% and this is due to the continued contractual erosion of EUR500 million. We also saw lower volumes which represent about EUR15 million in revenue, but we’ve got the positive impact of pricing construction activities, up 3% and also we’ve seen strong performance of services, all of the construction activities that is sort of an appendix to all of their activities and that's contributed some EUR30 million in revenue.
Outside France, we saw a decline of 1.1%. This is due to some specific developments, for example, the negative price impact related to the Berlin contract, and also with a contract in Indianapolis that kicked in in 2011 and that's a drop – that's equivalent to what we saw in Berlin. Then we also saw a slowdown in some of our construction projects, for example, on Japan, Fukushima we didn’t have the same volumes this year as a result of that. Also, in Australia, we saw – we ended the Adelaide contract which took place in 2011. Also in China we had fewer construction projects for our concession contracts.
However, in China, we have seen strong growth in volume terms and also a favorable price development. In Central Europe, we also saw very strong growth, a double-digit growth in terms of organic growth in Water in Central Europe and Technologies and Networks 5% with double-digit growth for industrial sectors, which shows how well we’ve been doing and how attractive it is as an addition to our Water entities.
Adjusted operating cash flow EUR1.172 billion. It's down by 8.4%, down 9.4% in constant FX, again these are the development we've already talked about. In France, contractual erosion and lower volumes, this is something that's primarily in line with what we've announced last year. We had anticipated these developments. There was also an operational accident in Guadeloupe, where we had to deal with EUR20 million in accounts receivable. There is also change in the system which we had to contend with. There was a one-off development. However it has nothing to do with the contract per se.
In Berlin, again on constant exchange rates, we have first of all the proportion of consolidation as of November, that's about EUR30 million and also we had lowered prices that I have already pointed to accounting to EUR35 million. But at the same time, there are two areas where we're performing very well with organic growth between 15% and 20%, that's China and Central Europe. 2012 was a very good year; in fact, we're above our expectations in those parts of the world.
Adjusted operating income declined 23% to EUR674 million. In 2011, we had a tax break from the tax provisional event that amounted to about EUR30 million. It was reflected in our operating income, so we didn't have that same effect this year and there are also some contractual risks that we already covered, especially in France and that amounted to around EUR30 million. We also had an increase in our write-downs in China and in the Central European countries amounting to about EUR20 million, so that covers Water.
Environmental Services now, we're looking at revenue of (EUR9.083) billion, just up 0.8% and adjusted operating cash flow of EUR1 billion. Again, the business environment is very complicated for us. We have raw materials prices which has had an impact on us. Just remember that prices started to take-off in the first half of the year, so we hope that things will stabilize in 2013, especially as of the second half of the year.
Volumes generally in our businesses are flat and this is a bit strange, given that industrial activity is going down, but it's – what's happening is that the foundation is shrinking, but all of this is offset by the excellent operational performance, especially in France of our treatment centers which have been operating at nearly full capacity and also the strong growth in the Hazardous Waste sector, which is a very small part of our business for the time being, but it is growing and it's something that offsets drops in volumes elsewhere.
Price increases that is the price that we can pass on to our customers, it's 0.8% and we'll talk about that later on, we're still talking about adjusted operating cash flow, but tighter the market, just harder it is to pass on price increases and you can see that we had a better success with this type of approach in the first two quarters of the year than we did in second two quarters – the last two quarters of the year.
In any event we are overall – overall we are happy with the situation for our adjusted operating income, despite the fact that what we saw in Australia was something that was one-off development.
Now there is one thing that I know is something (that we tend) to talk about when you speak about things in geographical areas, in France. First of all, we had a slight drop in volume over the year, but we did have an increase in incineration volumes of 4.3%, that shows that we had increased capacity of our treatment centers. Also the increase in our Hazardous Waste Processing centers, for example, (OZ Loop), which kicked in the second half of the year.
In the U.K. revenue declined 2.1%. With Q4 that was especially difficult. There's also a downward pressure on prices in the U.K. If you are operating outside of PFI arrangement, things will get complicated. Now we did have some rates that were revised and we've also seen increasing of volumes because of increase in our market share, which gives us about 4% increase for the municipal clients and that's very good compared to 2011. This is the end of landfills in the U.K. So you look at incinerated volumes that have gone up by 12% to offset the 12% loss in landfills, so you can see that there is a shift going into PFI contracts where we have a real market hedge.
In Germany we saw a drop in constant scope and also low prices in volumes and raw materials. We can tell that things are still going to be tough, but we have seen a pickup in activity in the fourth quarter. Adjusted operating cash flow 2.7%, down 0.3% at constant FX. Standing at just over EUR1 billion, we have the unpreferable impact of raw materials prices, which is about 20% of our adjusted operating cost cash flow. So we're looking at minus EUR32 million.
We said high diesel prices, about EUR10 million higher than we did in 2011 and this price increase of 0.8% doesn't offset inflation that applies to our cost and that amounts to about EUR50 million. We're able to overcome all of these different negatives trends by, first of all, not accounting for the accidents that we saw in 2011. Those were one-off that we didn't see in 2011 and also we've made considerable improvements in productivity and that's helped us offset these decreases elsewhere. This is also been helped by our hazardous waste platforms in U.K.
Adjusted operating income declined 14.6% standing at EUR256 million, this is largely due to changes in landfills in U.K. EUR20 million and also hedging our risks in Germany, and also a recalculation of our marine services fleet, which meant that we had a EUR30 million write-down this year and now we’ve got about (EUR80 million) in asset values there.
Energy Services revenue at EUR7.7 billion, up 5.8% at constant scope in FX, France has organic revenue growth of 10%, in fact, we’re running foreseen ahead especially with favorable weather conditions and also price increases EUR50 million and we’ve also seen the CRE projects increasing construction activities in France, that’s also helped us out internationally, we’re looking at 2% organic growth with energy prices increases that are much lower overall, because energy prices have gone down in the United States and also the weather impact has also been flat. In Italy, the situation is stabilized.
Operating, adjusted operating income our cash flow is -- were down 7.6% at constant FX, but in Italy the receivables write-down accrued expenses would have had an increase of 6.2%. And despite all of these developments to be nonetheless manage to eliminate the damage, but it’s true that our operating cash flow in France is gone down by 20%.
Let me say that Dalkia International excluding Italy would've had organic growth of its operating cash flow of 11%. We also had the changes in our scope which has improved the important performance of Dalkia International.
Adjusted operating income declined 22.9% to minus 22.5% at constant FX to EUR298 million.
Now, to summarize all of these different changes in our adjusted operating cash flow, we're now going to look at IFRS 5. You're used to this now and if we compare our 2011 figures and our 2012 figures, you can see the changes in scope have more or less been offset by foreign exchange. You also have the growth platforms contribution Veolia EUR68 million. Then you have the write-downs and other accrued charges. Dalkia Italy, that's down EUR82 million, France minus EUR72 million, including the Guadeloupe incident. Then the price impact of Berlin Water down minus EUR35 million; and in Environmental Services prices impact down EUR94 million.
Now, we have the Convergence and others down – that brought in EUR85 million. So that gives you – our adjusted operating cash flow EUR2.7 billion. That's (good thing) first half of the year and excluding Italy you can see that things went down but they were stabilized in the second half of the year, which is quite reassuring.
So we’ve seen increase in write-downs of EUR90 million. The EUR30 million comes from changes in foreign exchange. The rest comes from write-downs. Efficiency and Convergence also includes the risks that we have in the U.K. and Water we have provision for contractual adjustments and we also have a provision for SNCM EUR50 million provision which gives the value of SNCMs on our account is just above EUR12 million and that also limits our future risks in that shareholder.
With respect to adjusted operating income, well, this of course is in line with what I've already talked about. Note that this includes EUR79 million in implementation costs of cost saving programs. The larger part is seen as recurring as set out by this accounting standards and if you look at the appendices, you'll see the general administrative costs declined, had an impact on adjusted operating income and that appears directly in our financial statements in the other line you can see that there is a slight deterioration that's where we have booked the provision on SNCM.
In Q2 we had a provision we booked as part of the redundancy plan at the head office of Veolia and the EUR709 million were the one-off cost, the buyback of loans we carried out at the end of last year and that is directly linked to the proceeds from divestments. The borrowing rate is 5.25% reflecting the optimization in our cash position, because in 2012 we had a lower cash position than in 2011. So therefore the carrying cost was improved and that improved our overall cost of net financial debt, 100% of our debt is at fixed rate and then we have 35 basis points decline in our investments because of the decline in (union) right.
Debt management is we're very (attracted) in 2012 and we will remain attracted in 2013. We have just moved us over a redemption maturity. We have restricted to EUR1 billion redemptions and we have tried to optimize these proceeds from divestments, so we bought back debt and we have as planned managed to do so without changing our cash position.
I'd like to point out the hybrid we issued in January that went very well as you know. I'd simply like to talk about the rationale behind this transaction. First, we were seeking to free-up some leeway we expect to the ratio set by rating agencies. Of course there has also been the increase in adjusting cash flow. We also wanted to have somewhat more flexibility, so to have the possibility of buying out partners should be accretive transactions that would enable us to ultimately deconsolidate these assets there was one such transaction in 2012 with respect to tax.
The apparent tax rate at 58%, but of course we have to look at the restated 39.2% right because they were adjusted for one-off items and then obviously reflect the toughening of the tax environment for the Group, in particularly in France. The main challenge is to restore the French Group's tax position, because we are not a regular tax payer. Henceforth for measurement, this is we suggest using the effective tax rate which is closer to 35%. Then we have the results from discontinued operations, as you know, we carried our several divestments under very positive condition for more than EUR400 million in capital gains from the divestment of our Regulated Water operations in the U.K. and our businesses in the United States.
We have VTD, Veolia Transdev. We recorded a capital gain of about EUR20 million, which is Dalkia subsidiary and then of course Morocco Water and Dalkia units what were sold for EUR40 million. As for our operating income from discontinued operations (indiscernible) EUR386 million and we have about EUR117 million from other transactions, because of the CapEx incurred in our windmill business that we sold at the end of the year.
As for our net income, adjusted net income is at about EUR60 million, that's not really representative fortunately of our earnings capacity in 2012, which includes in particular EUR50 million and the negative impact from Dalkia Italy, it also includes the provision on (SNCM)EUR 30 million, and the fair value adjustment of Marine Services, so our earnings capacity is close to EUR160 million when adjusted for those items.
As for the cash flow statement, the statement of cash flows, well Antoine has already said the most important points why the sharp rise in net financial debt up to EUR3.5 billion with EUR600 million euros from discontinued operations. We also asset divestments. The change in working capital requirement is positive by about EUR100 million, that wasn't certain at the 30 September. We benefited from several developments, reclassification of our windmill business. We managed to complete that before the end of the year, so what was in WCR was transferred to CapEx.
The securitization market in Italy picked up and we're able to securitize EUR170 million in Italy, down from more than EUR200 million in previous years. So that obviously helped us. Overall, there was an improvement in our sort of – (indiscernible) about two days. So all of this played. So all the indicators turn green. The ForEx impact remained negative because of the appreciation in the main currencies against the euro.
As for CapEx, I need to talk about this a bit more because of its importance for you and we had made commitments in early August, freezing CapEx in 2013 and 2014. So what has happened? We've bought out minority interest, more than EUR400 million in 2012, particularly the joint-venture in Middle East and North Africa, some of our noncontrolling interest here in the year and then EUR180 million from windmill businesses.
We also bought (SPC) for EUR227 million in 2011. You can also see the benefit of the reduction in investments, a EUR 180 million and that leads us to the ultimate trigger of EUR3.3 billion. As we said in the Investors Day, we have completed about EUR9 billion in divestments since 2009. These divestments were carried out in more than 150 operations. Out of 23 transactions, more than EUR150 million, as you can see in the footnote here. These transactions were carried out at more than 10 times EBITDA. So they are quite homogenous really going through the year. 2011 was a superb year. There are differences, of course, by division, but in reality all of this depends on the quality of each asset. So all-in-all, EUR9 billion in divestments and very positive conditions.
So we believe that our asset divestment program has started very well. To finish with the financial statements; with respect to cash flows. So quite a few people would have wondered how much cash flow was generated by Veolia. We’ve broken that down into what is on the left-hand side high normal business and the right-hand side everything from discontinued operations and divestments.
At the left, you can see sort of the repayment of OFAs, the change in WCR, and all this totals amount EUR2.1 billion to EUR2.02 billion. On the right you have tax and dividends. So we end with about EUR100 million at the end of the day, but as you know, we’re very productive in terms of our asset management. There are in particular financial transactions worth EUR400 million in the buyouts of partners and this leaves us with a balance of EUR4.4 billion.
So at the end of the day, our variable cash flow it comes in at EUR4.276 billion. 8% was allocated to our lenders for our deleveraging drive and the rest to our shareholders with a noncontrolling interest of the parent company.
So that's the overall picture with respect to our cash flows. We’ve finished with financial statements. So let's say a few words about changes in IFRS. You will have an opportunity to talk about this at length with the IR team later on. (Indiscernible) this very quickly.
As you know, we are moving from IAS 27 to IFRS 10 and 11. Now the difference between these two worlds is being of proportionate consolidation. That has a major or massive impact on Veolia. But most of our joint ventures are concerned by (distinct). A very few can maintain proportionate consolidation. Which JVs have been affected? Dalkia International, (with) owned 75% by Dalkia, 25% by EDF. VTD where we had a 50% stake. Proactiva, our the joint venture in Latin America with 50% stake held by the Veolia and 50% by the Spanish company FCC.
Now, equity interest in the Chinese joint venture in Shenzhen, and a joint venture in Northern Europe, Denmark and Czech Republic in Environmental Services where we have a family owned foundation as a partner plus several other small transactions – operations.
So in this world of financial statements, I actually (rate) somewhat differently and less important for Veolia given the number of joint ventures that have been affected. So, of course, we will specify very clearly the contribution of these businesses. Thanks to IFRS 12, you’ll have a lot of additional information about operational activities. In our income statement, we will have the contribution of companies accounted for by the equity method and also they will appear in adjusted net income.
We haven't yet taken a decision as to how the accounting treatment will end up, but we also have loans that have been granted to joint ventures. Income from these loans will be recognized under operating income. The biggest impact, of course, will be on the balance sheet and in particular on net financial debt.
Since the proportional consolidation has been ended into company loans, of course, will now be booked under net financial debt. That's why we are introducing an additional indicator, i.e., adjusted net financial debt and we’ll deduct from it loans granted to joint venture. We no longer have the EBITDA and that’s very important accordingly to adjust the existence of this complementary asset, but once more you will find all the additional information in an appendix, thanks to our IFRS 12.
So what are we talking about here? Well, real money. About one-third of restated 2011 EBITDA we are the largest contributors here and pro forma 2011 accounts under the former standards. We are preparing the new figures under the new operational standards, but this gives you a reference basis, so Berlin of course, Dalkia International and all this totals amount EUR70 billion in EBITDA. But there is also a decline in adjusted net financial debt and this is more – means this is more nascent line with the groups gearing. Of course on the other hand, where you can see the challenge in terms of financing and a lot of these joint ventures are self-financed internally. We're at EUR1.8 billion in Dalkia International.
Now this gives you some information about 2012 and how to fine-tune your calculation and it's immediately look at the impact on the likely to meeting our objectives. The first impact is on CapEx, we're at EUR3.3 billion in CapEx in 2012 unchanged from what we said earlier. In 2013, there will be an impact because of assets divested, but of course closing dates of transactions in 2013 and not yet known. That could easily lead to EUR50 million to EUR100 million in CapEx moving, but roughly speaking we're talking about EUR600 million.
IFRS 11 and 12, so investments in proportionately consolidated companies that will no longer trends in Veolia's cash flow statement. That's about EUR500 million and then they additionally fit on CapEx we had announced, the freeze in CapEx, so that's another EUR400 million an additional reduction in CapEx and that lead just EUR1.7 billion, so we would like to keep a bit of leeway to buyout apartments, we'll talk about a bit later again, but this is important first, like in 2012 we want to have a bit of flexibility and seize opportunities whey they are attractive to have swift accretive benefits from operations or buyouts of partners either for synergies or for a complete withdrawal as is the case for instance in Morocco.
With respect to our objectives we had a commitment of EUR5 billion, automatically building is withdrawn according to Veolia’s definitions so it's treated separately, but it appears automatically for EUR1.4 billion in divestments. Our objective has been ranged to at least EUR6 billion since Berlin is now included and we will see up to an amount of EUR400 million or what traders will make, it all depend on valuation of course, that's (indiscernible).
In the EUR6 billion, we include the repayment of loans from joint ventures, they were not loans from refinancing, but in companies that are accounted for now by the equity method we carry out divestments and proceeds are allocated to reimbursements, this will be included in our budget here. So repayment of loans related to divestments will be recognized in our divestment program.
By the way, let me point out that those divestments will have an impact on net financial debt by reduced net financial debt, but not adjusted net financial debt. We'll have to learn how to operate with these new definitions, but these divestments won't change the adjusted net income, but they do have an impact on net financial debt, but we will talk about that later on at length. As you can see our objectives are quiet ambitious. Precisely with respect to our deleverage, our historical objective was EUR12 million. At Investor Day we had said that it was EUR4.3 billion in proportionately consolidated companies. This has automatically reduced.
If we include and (deliver genuine) platform, this internal financing cost, we issued a hybrid bond in January and we keep EUR100 million in fixed annuity, EUR400 million in terms of trade-offs of asset, although I mentioned earlier and the possibility to buy our partners. So that's about financial flexibility. Now depending on whether we use this flexibility or not that will have an impact on EBITDA. If we don't, of course, our debt will be lower. So we end up with an adjusted net debt objective of EUR6 billion.
Our refinancing objectives, as you can see, including (VGD) totals – net financial – leads to a net financial debt of EUR8 billion to EUR9 billion. On the following page side to side, you have our four more objectives and our new ones, but we don't want our effort to reduce our debt and generate cash to being – unfortunately went out by suspicions that we are window dressing.
Divestments, up from EUR5 billion to EUR6 billion, net financial debt to EUR6 billion – in 2013, adjusted net financial debt between EUR6 billion and EUR7 billion, cost reductions we talked about EUR420 million were (inflated) to back to EUR470 million. All cost reductions for the entire consolidation scope including proportionate consolidation, but in adjusted cash flow you won't see these savings, because about 20% on these savings will be carried out in the former proportionate consolidation scope that will appear of course in our net income. So keep that in mind, when you're monitoring these figures.
As for leverage we had an objective of 3% and we maintained it for 2014 adjusted leverage. So we've adjusted debt for the amounts we've talked about earlier. We reassert without any problem our three times objective, as well organic revenue growth nothing changes over the next three to five years. 5% growth in adjusted operating cash flow and 3% in organic revenue growth. So we can really – we have upside potential for our profit margins, that's what we have to say about our financial statements. Thank you for your attention.
Antoine Frerot - Chairman and CEO: Thank you very much. Thank you very much for all of the explanations not just about our figures for 2012, but also the impact of these changes in accounting. We now have an understanding of what we have to do, we are still working through all of the details and our people who liaise with you investors are available to give you any further details if you are so interested.
Now, let's look at the outlook in particular 2013. 2013 will be the second year of the Group's transformation, a lot has already been accomplished, but there is still a lot amount of work to be done. In particular, we have to start by tapping our full potential of productivity gains. Francois Bertreau is now going to tell you, how we're going to improve our performance and bring down costs.
So I turn the floor to Francois.
Francois Bertreau - COO: Good morning. Just very quickly. Everybody is familiar with the strength of Veolia which are many. Markets are growing. We are the world's largest Environmental Services Group. In the world, we have genuine technical expertise in all of our divisions, Energy, Water Management, Environmental Services. We really are the world’s unchallenged leader and we are refocusing our activities. Also, this is a company that is improvable, significantly so, and that is why it has made it possible for us to have an additional savings plan of EUR470 million and I think we even got to be able to go beyond that.
Now, just to start by talking about costs. Let’s look at trade. First of all, our objective is to increase the size of Veolia, to increase the share of our industrial clients without reducing the amount of municipal customers that we have, but we really have to look at trade and marketing. We have to determine exactly where we are going to be selling and to whom. One thing that we can improve on is in expanding the markets of municipalities for Water. They account for about 80% of water distribution around the world. You can see that it makes a huge difference if you operating in the network, but we have enough knowhow in this group to offer to local authorities the services that are a la carte services.
Another thing that we need to do is standardize our product offers for some segments, especially for Industrial clients where we can come up with comprehensive standardized packages. We can do think that they are very attractive to our industrial clients and that is why we decided to setup a key account manager, I was very surprised when arrived in Veolia to see that for an oil refinery for example, we would provide water treatment services for three of the refineries out of the entire fleet of 16 refineries, but we need to grow in that direction. It has a huge impact on the top-line, but also we have to make sure that our country managers are empowered to actually drive business growth in their different regions.
One last thing that I just focused on is R&D, once again we've refocused our efforts in R&D. This is one other thing that will lead us to separate from our competitors. We have to finally hone our R&D effort to make sure that we do things that have a huge impact on our business operations and that we avoid becoming too dispersed.
When it comes to performance within each one of the divisions we have a huge amount of potential for improvement when it comes to establishing division by division a benchmark. We also have a broad range of different services in each one of the divisions and each of the divisions is very different to one another. So we are starting to benchmark all of these activities within the divisions at Group level and a global level and I’ll also going to go in details in a few minutes talking about the rationalization of R&D programs so that we can avoid excessive dispersal.
Another key point which will have an impact about EUR1 billion is our geographic mutualization. We have some clients that don't bring in any value to the divisions services mainly is that our transactional services accounts payable general accounting, payroll, IT infrastructure that overly bringing in lot of money or new business to the division. So we are starting to mutualize all of this on a country-by country basis. After that we'll move it up to the global level by having a Chief Administrative Officer who will be the person keeping watch on all of these transactional activities. This could represent a savings of EUR1 billion in the short to medium run.
Another key area our information systems; we spend about (EUR550) million per year on IT. It's not that much, but we could rationalize the cost area. We're already carried out a review and have introduced conventional measures to save cost, rationalizing our infrastructure with the limited number of data centers. We've also been rationalizing our computer programs and applications, basically trying to do some house clearing. We had plethora of different applications that have been piggybacking on one another as time has gone by which gives rise to certain amount of ways. Now we're looking at making cost prudent there and we've already identified EUR40 million in cost savings.
Another important thing – important areas is purchasing, we have EUR14 billion purchases for year, about EUR9 billion are addressable and what we see today is that there has been a lack of discipline in the decision-making process with the lot of dispersal of decision-making, especially when it comes to choice of suppliers and so we're going to have a standardize process of assessing our two needs and shortlist of different suppliers, so that we can benefit from the volume effect negotiating larger contracts with smaller number of suppliers. We've already carried out a pilot project in Poland to see what kinds of cost savings you can make and we are looking there at about 8% in savings of our total purchases on a constant business base line. So if we could make 5% savings in all of our purchases, it seems like a reasonable objective.
Just a couple of key points, The plan that was started last year for cost savings is highly credible, we are very comfortable with the fact that the objective that we've stated and just increased will be met. We are also trying to beef-up this plan and in just a few weeks' time I'll come back and talk with you about a plan that will have been enhanced for increased net cost savings by 2015.
Antoine Frerot - Chairman and CEO: Thank you, Francois. I shall continue. Looking at the outlook, as you can see, we are well on track with bringing down the Group's debt and I think we'll reach the end of the like by the end of 2013 and you can see this on this chart. We are looking at nearly EUR17 billion in debt as of September 2009, we will bring this down to EUR8 billion to EUR9 billion by 2013 and even lower than that with adjusted net of financial debt.
The same thing applies for our leverage. Even just a few years ago we were close to four times and now we are at 3.26 times, this shows that our objective of 3.0 actually for 2014 is something that we are very confident will be achieved. So the Group now has a solid financial footing in 2012 as (indiscernible) just said, free cash flow was positive before our net financial divestments, the same thing will apply to 2013. By sticking into the target of positive free cash flow in 2013, the Group will also be generating its own resources in order to make investments in growing market.
2013 will be the second year of transformation and we'll be focusing mainly on accelerating our cost-cutting program. Looking at what we've achieved in 2012, we are fully confident that we'll be able to meet all of the objectives that we shared with you on an Investor Day. We will, first of all, be proposing to this general shareholders meeting for 2012 payable in 2013 is a dividend payout of EUR0.70 per share, but we will also be carrying this over for 2013 payable in 2014, again, EUR0.70 per share.
Now, where do we want to take the Group once we have transformed its structure by the end of 2013? Let me just mention some key features in our main growth platforms. As you can see on this slide that these growth platforms are available. These are the ones that we already have in hand over the last three years and especially in a pretty tough global economic environment, these growth platforms have given us an overall annual increase in our adjusted operating cash flow of about 10%, and this is going to be driving a renewed Veolia Group.
Now these aren't the only (indiscernible) of growth. I think that we can also start deploying a new business models, working with new business areas, new customers and new geographical areas and based on new business models.
Let’s look at our new activities. First of all, we'll be looking more and more at the main environmental challenges, the most complex environmental challenges in the world. They will bring in not only new additional volumes of business, but also better value. We’ve seen this already with hazardous wastes or coming up with solutions to address the scarcity of raw materials, water or the raw materials, and also the increase in provision of public services to major metropolises.
But there is some new environmental challenges that we’ll have to meet as well. For example, wastewater management or dismantling of nuclear power plants or clean solutions to tap into alternative energy sources such as shale gas. So these are new business areas, new customers as well as I’ve already mentioned.
As Francois already said, we will have a systematic methodical approach to lobbying all of our main industrial clients who are operating in dynamic parts of the world and they can no longer afford to pollute the environment.
Our objective between now and five years now is to make sure that our share of revenue from industrial clients, who go up from 35% to 50% in just a five-year timeframe. So new businesses, new clients, and also new geographical areas, again this is the way in which Veolia would be able to capitalize on the business dynamism of some parts of the world. Of course, Central and Eastern Europe, but also Asia we’ve often spoken about China, but we’re also going to start looking at India as well, the Middle East and also going to start looking at India as well, the Middle East and also Latin America. Again, in five years our objective is to shift a part of our revenue else there. We're looking today about 30% of our revenue comes from these dynamic growth areas and by five years from now we want to see that figure go up to 50%. Also, we have to evolve our business models. New business models for new markets, of course, but also to see a full recovery and new dynamism in our traditional markets.
Let's look at large scale markets with significant environmental issues. These are things that are going to bring in more volume, but they are also very complex and bring in more value. One example is dismantling of nuclear power plants. Now this is a huge potential market, because it's represented about more than EUR200 billion over 20 years, about EUR30 billion of which will be in France.
It’s also highly technical market. It requires 100% guarantee of success. The clients will be willing to pay a premium in order to have that guarantee. This is also a market in which Veolia really does have a unique position, even at present. First of all, we have recognized expertise in hazardous waste management. We also have proven expertise in the management of radioactive waste. We are subcontracted to ANDRA and we manage all of the weekly radioactive waste in France.
We also have a strong position because of the challenges that we met last year in Fukushima where we dealt with all of the highly radiated wastewater and the power plant and we managed to do all of that in record time.
One additional point is that we have strategic partnership with the CEA at the Atomic Energy Commission.
This will make it possible for us to work for their upstream and CEA will be our prime end client for the dismantling of its own facilities. Another example, of a growth market for a Group, and for the oil and gas businesses Veolia is one of the world's rare companies that can come up with a solution they will make it possible to have shale gas extraction without any water pollution.
Recycling all of the water that's used for this, it's this critical knowhow that stems from our dual expertise and waste water management and Environmental Services, we are currently testing out these solutions in the United States and Poland and what we are seeing is a pattern of new demand that is emerging for example, in Australia as well.
Lastly, reinventing Veolia means renovating our traditional businesses which often are wrongly interpreted as mere commodities, we have to reinvent our historical businesses to enhance the value there vis-a-vis our conventional clients.
You can see how this transformation is going to take – is going to rollout collective incentive (submission), intelligent use of alternative raw materials such as biomass or smart metering for water for Dalkia. We also have to change the way in which we market our products and services instead of being just the operator, but we have to serve the operator as well. That's a break with our past experience.
We also have to see changes in profit sharing. We can be paid on the basis of performance achieved as stated by the customers and not just on the proportional basis of the volumes delivered, so basically what we are trying to do by transforming the group is to base our future not just on a special contractual model that is only conventional approach, but also to build on our expertise. We can market this expertise in a variety of different ways. Globally or an (indiscernible) basis as Francois has just said and we also see that that there are markets which headed to – were difficult for us to access, now we can move in by providing a broad range of different management services.
Now this presentation has been a bit lengthy because of the change in the accounting standards, but just one thing the outlook says that the results that we are sharing with you today are those that give you a snapshot of a much longer road trip that the Veolia is on.
Unidentified Company Speaker: (Indiscernible). Veolia from my viewpoint is now on the right part and we can confirm all the medium term objectives we have reported at the Investors Day and we've even improved some of them. We've talked about that with respect to divestments, net financial debt and savings and Francois gave you an appointment for few weeks time, you can see the figures here on the screen and we'll now have a Q&A session.
Thank you very much for attention.
Unidentified Analyst - Morgan Stanley: I'm from Credit Suisse. I have three questions if you don’t mind. The first with respect to the implementation of your cost cutting program, you have growth objectives and the net of implementation costs, but should we understand that that net part will be transferred to your income statement or will some of that be transferred to your customers under contractual arrangements for instance. Second question with respect to your divestment program, it's working well from what we understand. Will that have an impact on your cash flow, and particularly given the impact it will have on your volumes of business, since you are going to have divestments, but also changes in accounting standards. Then third, you talked about nuclear power and shale gas, this large European markets and nuclear power but not very soon and shale gas for the moment mostly relevant in North America, could you give us some figures in terms of 2015 as to what this might mean for Veolia's revenue?
Antoine Frerot - Chairman and CEO: Well, three different questions. I'll answer the first. Pierre-Francois. Please could you do with the second and then we'll both answer the third one. As for your first question, with respect the two examples I gave and the new growth markets. Let me point out for the figures I gave you, EUR200 billion over 20 years as of now and EUR30 billion in France, well that's an official figure. That was estimated by the French auditing (indiscernible). You know that nine nuclear plants have already been stopped in France, some of them have been stopped for quite a while and they have not yet been dismantled, because until now nobody knew how to do that. As soon as all the expertise and technology will be available that will enable us to map correctly the scale of the radioactive (indiscernible) the various components of a nuclear plant, well, dismantling will immediately begin. EUR600 million has already been allocated by the CEA to dismantling nuclear plants. The CEA, the French Nuclear Energy Centre will start giving us contracts in 2013. So the market is now as long as you know help to operate. There's still a few technological bricks are missing before we can offer a sustainable business model. Until now the only alternative was to burry all that to the very deep surface. But of – that's of now are obviously obsolete. We believe that within three to four years' time, the revenue from net activity for Veolia – an estimate is always just an estimate – be it close to EUR400 million in revenue. But then, of course, outside France, you have the German market, the U.K. market, the U.S. market and the Japanese market, and these are quite obviously markets where there will be a need for dismantling plants that are stopping operations. As for shale gas, coal seam gas, you talked about the large U.S. markets, don't forget the large Chinese market and now above all Australian market and in the last few days, the German market has been opened up. Not all countries have the same policies in terms of environmental protection. The most advanced in fact are the Australians. In that country, they have huge reserves and they have decided that building permits would be granted only to operators, who can provide solutions, but provide total guarantees for the entire environment including water. So the first cost for tenders have already been launched. Two, we awarded being the first permits unconvinced the Germany that has just authorized under conditions and in part of the country a similar procedure. I'm sure the Germans will have similar precautions and I'm sure that the Americans ultimately little gradually will move forward in this direction. Therefore, and I believe that, one, everybody knows that extracting this alternative energy has a huge economic challenge for the countries they can do it and a lot of these countries have decided or want to use this resource and if they want to do that in a clean manner, there is a market for us. I don't want to give you any assessment of potential revenue in a few years' time, but as you know the first the largest call for tenders have been launched in Australia and we are bidding. Second question Pierre-Francois could you answer that one.
Pierre-Francois Riolacci - CFO and SEVP: With respect to the first question. Net savings, our net savings as recorded in the income statement this also the operational performance plan, but like the EUR208 billion in savings that will be continued, but most of savings indeed I used in our business negotiations. But Convergence goes to income statement. But as for disposals, IFRS often can be criticized, but here there are advantages. IFRS 5 it was so tough for us for several years and now with the new standards it is possible to understand what needs to be done. Most of the divestments we have yet to carry out. You’ll already know most of the dilution you can see it directly in the figures. Any other questions?
Julie Arav - Barclays: Good morning. I am from Barclays. I have five questions. First, I'm afraid this is going to be unpleasant. Why don't you give us short-term guidance? So far, as you’ve just said that the dilution expected from additional divestments will be relatively restricted. The macroeconomic environment although remains uncertain, at least there are possibilities to make assumptions. I would like to know why can't we have a short-term guidance. My second question relates to the expected contribution in your EBITDA from growth platforms. I believe that earlier you were talking about EUR400 million. In this slide, Slide 61 you talk about EUR270 million. Is it only because of the impact of IFRS would be such a divergence? Another question would be with respect to your adjusted net financial debt. What is the attitude of credit rating agencies with respect to suggest net financial debt? Are you confident that your rating will be maintained and that the rating agencies will have an economic and normal accounting interpretation of your figures? Lastly, with your divestment program, you now have EUR6 billion as your targeted Berlin is included, I'm sure that the list of assets you had initially identified 18 months ago leads me to the question why not raise your target beyond that figure?
Unidentified Company Speaker: That's a lot indeed. We’re not going to break this down. I’ll start off with respect to guidance. As you’ll have understood, the 2013 has a second transformation year for Veolia, a lot of work has been carried out in the first year, in particular with respect to debt, the balance sheet and the Group’s configuration. The second year 2013 will see the cost savings program and so they are implemented. So we are focused on cost savings this year. The snapshot of what the Group’s consolidation scope will eventually be has not yet been defensively decided.
Unidentified Analyst - Morgan Stanley: As we all know, the macroeconomic context not only in Europe, but throughout the world is very uncertain. You are saying you could make macroeconomic assumptions and then give us guidance on that basis.
Unidentified Company Speaker: That's meaningless. If we are going to provide guidance that is conditional on assumptions, we have a fairly good idea of what would happen if we had a normal economy, but nobody can say – for instance, with respect to industrial outputs in Western Europe, nobody can say how it's going to move in the next few year, months and by the end of the year. Lastly, in our cost savings program. We have really robust implementation niches and they require cost. We kept them in checked in 2012, more or less at very expected levels. These implementation cost include redundancy costs and redundancy costs of course are subject to random developments. We are dealing with the Group undergoing an overhaul. The macroeconomic context is highly uncertain. Restructuring implementation costs are also uncertain; all of a sudden this led us to say right now it will not be reasonable to give short-term guidance on our income statement. What we can do is give guidance for our cash as we did last year and in fact last year our guidance was stretched over two years with respect to date and divestments. We've renewed that guidance and we have added another strong year for the dividend, so that we can work this year in depth on overhauling our group and start 2014 with the new Veolia. Second question growth platforms, you should make a confusion here. The figures I presented today, the EUR270 million growth over three years and the EUR400 million we did announced last year, but if I remember well, went until 2015. So we wanted to show EUR400 million figure is perfectly in line with what we have done between 2009-2012, so there is really to bolster our assumption that we would create adjusted cash flow from these growth platforms. That includes the IFRS impact because out of the five platforms, Dalkia International and China Water have been impacted by the change in accounting standards. What we are doing here, of course, is reaching at constant standards. Pierre-Francois, could you take the next question.
Pierre-Francois Riolacci - CFO and SEVP: Well, as you know, Veolia was one of the first groups to apply the new IFRS, so – because since we are listed in (exchange) we have a strong incentive, but we therefore had applied as of the 1st of January, 2013. Credit rating agencies (indiscernible) will not have an overall position, although we've (reach an) analysis to sign whether there needs to be a recalculation according to the position of each company. As you know there is a bit of leeway in Moody's rating of the Veolia and in our first informal contacts we got the impression they would be quite neutral. They have a few point is we want you – we want you to improve your operating income to net financial debt, so as long as you achieve progress there we're quite – they'll remain quite flexible. As you know for Standard & Poor's, we are on the more strained position with a 20% target for our objective. I believe that adjusted net financial debt is not the way agencies will look at that, but how we restate cash flows. So for some joint ventures, in fact, I believe the cash flow cannot be withdrawn from the calculation of the ratio. The key point is the change in accounting standards cannot lead to a change in the perception of the Company's (indiscernible) problem beforehand which might be the case, so they certainly have the idea that operational reality needs to be taken into account to adjust the calculation of ratio. We're working on that. I mean, we will have a chance to talk about that later on with them. They know about the quantified assessment of the change. They haven't saw scream blue murder saying that change is everything. This is what we said, there is a problem there, we'll need to discuss it. So they are very open minded and very reasonable. As for divestments, of course, as we sell at 9.6 times EBITDA, when our evaluation is 5.8, some might believe we should sell all assets – all our assets. But fortunately financial criteria not the early ones in this world. So we have objectives in terms of refocusing. We have done a lot of work on that. I'd like to draw your attention to the fact that out of EUR3.7 billion in divestments have been completed, EUR200 million on industrial operations and EUR500 million from other apart from the two large transactions we've talked about. So there are all sorts of assets there and that's the whole point. Are we focusing is on our core business and we will press ahead with that and that appears in our discontinued operations line. The second guideline was deleveraging. So there is two major divestments that have helps us achieve major progress. We can see that we're on track to meet our deleveraging objectives. We've left ourselves some leeway because we don't want to end up with, debt will be too low. I know it's a bit of a paradox, but given the way in which we've reduced our net financial debt, remember EUR11.3 billion does not include sort of IFRS statements. We had announced EUR12 billion at the 31st of December 2013, even if we don’t include Berlin, we are already at EUR12.3 billion. So we’re growing faster than expected, but of course, it’s partly because we have sold our assets at a higher valuation than expected. Should we continue selling the assets?
Unidentified Company Speaker: Yes, of course we need to, we maintain our objective of reducing the countries in which we operate to 40 and we’re going to work on that, but it should resell assets, but we don’t need to sell in terms of deleveraging and that would have a dilutive impact on our earnings. Of course, not we won’t sell it. We’ll see if the bids aren’t good enough, we will keep those assets. So we have that kind of flexibility and we will use it.
Antoine Frerot - Chairman and CEO: I can see that with (any) lighting system we have a question put by telephone, four questions on the telephone line. Let’s take the first one.
Nathalie Casali - JPMorgan: Nathalie Casali, JPMorgan. I have two questions. The first one is whether or not we can go it back to the financial equations that simplify that you gave us at the end of 2011 is actually quite useful for us? How you’re going to apply to 2015 the medium-term, there is adjusted operating cash flow, if we start from EUR2.7 billion in 2007 and takeout EUR900 million for the consolidated for instance there was 5% growth, I have ever seen EUR2.1 billion and the I look at CapEx at EUR1.7 billion then we have repayments et cetera? Then taxes, and minority interest is about EUR700 million there. Figures in the free cash flow before disposals divestments of about EUR300 million and a dividend of about EUR350 million. So could you give – make any comments on whether or not the medium term picture will be confirmed following for IFRS 11? My second question has to do with joint ventures are going to be deconsolidated and the economic impact. What will be the cash figures associated with that? Is it significant or if it is because it is something that is – just you'll be processing the figures will it be more or less neutral? I would like to know what would happen at the next Investors Day. Is there going to be guidance of the next three years or is it simply going to be an update on the progress of the cost cutting program?
Unidentified Company Speaker: Well, you've spoken to us about the picture, of course, we couldn't see you but we definitely heard you loud and clear. For your last question, it's not an Investors Day on June 3. We are working hard on bringing down costs. We have come up with the PKIs and validating all this we want to make sure that on the May 3 we can come back to you with an update on this part of our financial data.
Nathalie Casali - JPMorgan: Why is it on the May 3 instead of May 2?
Unidentified Company Speaker: Because May 2 is the presentation of the first quarter's result. So Pierre-Francois will be telling you his – he'll present with you his business case and on a more consolidated basis. The normalized free cash flow in 2015, well, let me perhaps answer your first question on joint ventures to begin with. You are right, there are some joint ventures that are in the process of being divested. For example, VTD, you have understood that, but for the rest we're looking at joint ventures that are actually growing. They have consumed a lot of capital over the past few years. They haven't really generated positive cash flow but at some time these joint ventures are now moving into the black and especially in China we haven't mentioned this in detail, but last year in terms of cash flow China was at the breakeven point, but this year we're looking at a positive figure of about EUR50 million so this is our factor starting to kick in China. Cash might seem like – might have seemed like a rather abstractive issue, just a couple of years ago, but now it has becoming a critical point. The cash that we anticipate coming from joint ventures in the future will largely be due to refinancing that as well will be going through a phase of excess cash and that excess cash will come back to us that's the best way to get cash back into the Group or in any company where we've seen and that is to get its debts repaid by its subsidiaries and it's a much more straightforward accounting procedure. In any event that's the way we've been approaching, our debt will be reimbursed before it goes into the dividend slide. So cash will be coming up from joint venture since the excess in operating cash flow will be used to repay our debt. Now when it comes to standardized cash flow presentations on Investor Day, of course the metrics change because of proportionate consolidation. You can see that our CapEx target has also been debt revised downwards we were talking about EUR1.7 billion for 2013 in CapEx, so you can see the figures for 2011 we had over EUR2 billion, but again, it's the same equilibrium that we're talking about, so debt rate for 2015 and I do apologize that I didn't have the details of all of the calculations that you shared with us, I'm sure that you are right in your calculations, but again, you're going so quickly through the figures, I didn’t have a chance to note them down, but I would just invite you to meet with our staff to talk about this, but the basics of our outlook for 2015 haven't changed.
Nathalie Casali - JPMorgan: For free cash flow, you had a target of 5% per year. Is this a target that applies to the operating cash flow figures after IFRS 11 that is after the consolidation of all of the growth platforms or is it going to be for the pre-IFRS 11 picture?
Unidentified Company Speaker: Look at it from a different angle; if you look at operating cash flow minus CapEx, you won't see the contributions of what we call the growth platforms. Cash will be coming from debt reimbursements or loan reimbursements from the subsidiaries, so it's not going to be – you are not going to see it in operating cash flow, but you will see it on the line where you talk about reimbursing our loans, also don't forget new calculations that out of the EUR1.7 billion that I mentioned there were new (AFOs), we shouldn't forget those either. Again they will have to be posted as revenue and also let's not forget that there are investments of EUR1.7 billion as gross investments but there are always industrial divestments in the Group. Now you might say that these are basically just peanuts, but if you look at EUR150 million to EUR200 million of (AFO) and also EUR150 million to EUR200 million in industrial divestments, you could see that it does actually have a significant impact, but again I would suggest that you meet with our staff to go through all the details of the calculations. Another question from the floor before we filled another question by phone.
Unidentified Analyst - Morgan Stanley: Morgan Stanley. You've been talking about long-term outlook, first question has to do with Environmental Services, could you just give us an update on volumes processed in collection incineration et cetera, in your European platforms for 2012 year-on-year and for Q4. You've explained to us the changes in revenue and in EBITDA with a volume effect outside of this zero. I think it's on Slide 18 where you can see that you mentioned zero, in fact in volumes, but I would have thought that the volume impact would have had a negative impact and also when it comes to Waste, you have mentioned Hazardous Waste Management with a sharp growth there, could you just give us an idea of just how much business we are talking about, as a part of the Divisions overall volumes. Then in Dalkia France, you already mentioned the negative impact of changes in the regulatory environment in 2012 in France. There has also been a sharp drop in CO2 prices and electricity, do you anticipate a negative impact in 2013 or 2014 because if these changes in the operating environment? Then a small question on one of your – on a non-financial indicator that you include in your plans that that stuck a year and half ago and those are the number of countries that you have activities in, how is that panning out for you? Lastly, looking forward, for the growth platforms on Slide 61, you mentioned a program of EUR210 million in operating cash flow in 2012, can you give us these figures in recurring terms and also how much CapEx is going to be invested in these growth platforms by the end of 2012 that will actually still be improved over the next few years?
Unidentified Company Speaker: Well, that is very long menu of questions. I'm not sure if we are going to be able to answer them all. I see that Pierre-Francois noted them all down. First, let me talk to your answer your question about volumes for hazardous waste. We're looking at about EUR800 million and revenue from Europe and United States, so we can add to that what we have in China. We are close to EUR1 billion now.
Pierre-Francois Riolacci - CFO and SEVP: On the first question on waste. Well, let me just give you some bio data here and perhaps other people from my team could round out some of my answers. Again, correct me if I get anything wrong. Now volumes of revenue does not exclude – the figures that we've given you is collection and processed. It includes collection as well. The only thing is that collection volumes have gone down, but this is offset by improvements in commercial performance or operation – operational performance in processing, waste treatment. So we've had a decrease in volume, but we've managed to offset it in other areas. Now when it comes to volumes of waste treatment, I don't have all the figures at the top of my head, I've mentioned them for the U.K. Landfill volumes have gone down by 12%, but incineration has gone up by 12%. In Germany, we don't have a lot of capacity for waste treatment. We offer it much more in the area of recycling and there we really are dependent on volumes collected. Now in France we have strong performance in an incineration, up 4.5% and volumes for landfills is more or less holding steady with a slight change in the mix with polluted soils, it's not really at the exact same price. So that's a factor we have to bear in mind, but more or less we could say that our volumes are holding steady in France. Dalkia France now is CO2 and electricity prices. In France, we have been short in CO2 starting in 2013. So when prices go down, it doesn’t have an automatically negative impact, because we are basically – purchases our CO2 rights, okay, to small amounts. But when it comes to electricity prices in France, again, it’s a highly regulated market. As the unregulated segment of the market is quite of marginal importance in France, it’s greater internationally of course. So we are a bit more exposed, especially in Central Europe, where we have to sell excess electricity, but it’s all a very complicated picture because there are annual negotiations on heat and then sales of electricity which is following market prices. As I said, at the end of 2012, we have operations in 48 countries with permanent employees and about EUR500 million in capital employed, but we are trying to bring that down to 40 countries. Now, when it comes to your question of going further down into the income statement and looking at the volumes in each one of our growth platforms area, perhaps you’ve asked for a very specific information that we won’t be able to give you right now, but what we wanted to demonstrate was that the forecast that we made last year, when it came to these growth platforms and what they could contribute to Veolia. Well, those forecast were confirmed. We’re also looking at about EUR50 million in write-downs for the growth platforms or depreciation for the growth platforms in 2012. So that’s gives you an idea of changes in our amortizations and depreciations. Now, in China, we are reaching the end of a very long cycle of major CapEx. You can see that things are starting to stabilize, especially with our depreciations and amortizations in China. In Dalkia International, you know that we are continuing to make investments in Poland because in SPEC we anticipate that 2014 will be a major year for us because we’ll be starting a new combustion cycle for hazardous waste. Again we are moving forward there, but we've already have new operations, major operations coming on stream in 2013, but we have no committed CapEx there. Well, I'm just going to talk about changes in hazardous waste volumes. In 2012, we had growth of about 7%. This is organic growth of hazardous waste volumes. We had strong growth in the U.S. and also in Europe, not in France, but elsewhere in Europe. I have already mentioned to you about our European hazardous waste treatment network. This network is almost complete. We have seen an increase in our volumes processed elsewhere in Europe excluding the U.K. and France where we have very small presence, but I think increasing. We have done very well with our processing center in Poland. So in 2012, I'd say it was a very strong performance, especially given the general business climate. Now for PFI, we do have some embarked (indiscernible) CapEx there about EUR500 million if I recall correctly off the top of my head. Let's take another question by phone.
Olivier Van Doosselaere - Exane BNP Paribas: Olivier Van Doosselaere. Just some quick questions; perhaps if we begin by looking at your business. You said that the macro economic climate is somewhat difficult. Nonetheless, I would like to know if you can give us some indications concerning, first of all, volumes of waste expected for 2013. You were flat in 2012 but I get the impression where there was a press conference this morning you seem to say that there might be a decrease in volumes for 2015. Could you explain why you think that’s the case? Afterwards could you confirm volumes in Water in France where we see the similar trend and also for France over the next two-three years, do you anticipate a negative impact of EUR15 million from EBITDA because of negotiations? Then a second question, can you give us greater details on the improvements of your working capital requirement? I have tried to determine how much of that is linked to securitization, it's my understanding that part of this is really been covered by what's happening in Italy and France, and then lastly a medium term dividend payout outlook. From my understanding that as of 2014 your dividend – you might be hitting a historical payout, can you give us an idea of what that would be? Do you anticipate there any risk associated with that?
Unidentified Company Speaker: Again, mixed bag of questions. Let me start with the last one. We haven't given any guidance on dividend payout beyond the units just started and in new Veolia once we hit our cruising speed, once we’ve stimulate the operations, we will be going back to payout that will be about 70% of what we did in the past. Now when it comes to Water, Pierre-Francois has already said that volumes have gone down by 1% per year and the trend we saw in 2012 confirms that. When it comes to commercial renegotiations, again there is downward pressure on prices. This amounts to loss about EUR50 million for us every year. Now we have made a lot of progress in renegotiating all of these different contracts has started in 2012 and we started doing this before our competitors with the largest contract in France starting in 2010. There's still a bit more work to be done there, but we’re already well underway. You also raised a question, perhaps I forgotten what was it about.
Olivier Van Doosselaere - Exane BNP Paribas: Perhaps you could talk about the working capital requirements of volumes in France?
Unidentified Company Speaker: Well let me just tell you little bit about the rationale behind your dividend policy. We added another year of dividend payout at EUR0.70 per share.
Olivier Van Doosselaere - Exane BNP Paribas: So this would be a basis 2013 results pay down in 2014?
Unidentified Company Speaker: No, if we've decided to do this, this is because we felt that the EUR70 is something that over the long haul, because what we are anticipating we will achieve will be a viable payout. In 2014 we'll probably going to see an increase in our results and in 2015, we might have historical payout. If you look at all of this is before the crisis, we're looking at between EUR0.70 and EUR0.80 and of course, our Finance Director would say we could always have a 100% payout if our results are just stable enough, that's not what we're going to do. We have to have an improvement in our results year-in year-out. So one of the rationales behind this I have already told you that our baseline figure for 2012 was about EUR150 million to EUR200 million. The figures are already shared with you. You know the risk of conversions. This will leave some money aside for minority interest after taxes, not between 2012 and 2014, this will be stood into results – we don't pay much taxes in France. So this has nice impact on the bottom-line. The world doesn't just have bad news for us. There is also some good news and we are looking at another EUR150 million on a bottom-line. Now for the growth platforms here we have some minority interest. We'll also be paying taxes, but we are anticipating another EUR50 million and then we also have some divestments. We have Water in France the end of (indiscernible) business in the U.K., these are all challenges. There is also tightening of the regulatory framework in Dalkia France and this will probably continue for the next year or two, so all of these headwinds could have a slight negative impact on our bottom-line by 2014. Also debt reduction, we haven't really gauged the full impact of that, we won't know until the end of the year, but we are looking at another EUR100 million in financial expenses. If you go to all these figures that we are looking at and that resulted – that will probably be similar to what we had – are we more or less on par with the dividend payout, but here we are looking at a hypotheses of zero recovery to now nearly 2014, that's something that could really happen. That's at least something that's guiding I'm thinking right now. In any event, we can now hope that the clouds will break and that there might be sunshine once again shining on the European economies and if that happens then of course there is potential for a change in our dividend policy, but we set it at EUR0.70 because we also felt that it reflects our confidence in our earning power and that's a very important feature. When it comes to the working capital requirement, again it's EUR100 million, there is EUR80 million write-off so actually our working capital account is lite, if you look at our cash flow working capital requirement it's at EUR20 million. Now how did thing improve to the 30th of September, to 31st of December? Well, as I already mentioned, on 31st December we had EUR100 million of consolidated WCR because of our Wind Generation Plant, we took that divestment then to CapEx, so that's how that happened. This has lightened our working capital requirement. We also had securitization in Italy, that amounts to EUR170 million by the end of the year and it was at zero by the end of September, and also the (indiscernible) nature of WCR historically in Q4 and that's also been factored in, and we also are very pleased with all of the payment of accounts receivable and also advance payments because many of our clients wanted to secure their contracts before the end of the year. So, that's also helped us out. I mean, it's not a huge amount of money, but we're looking at EUR50 million that was posted in December. That helped us go beyond our WCR target. We weren't expecting it to be what it was. I think that covers all of your questions.
Unidentified Analyst - Morgan Stanley: (Indiscernible) from Credit Suisse. In fact, I've got three questions that you'd be able to answer in one go. First with respect to Slide 59, when we see how you move up from leverage at 3 times in late 2013 and it goes over, what would have been (3.26) under the new standards? I don't want to see if there's not a distortion between JV (indiscernible) and per standards. Then second question with respect to debt from JVs. Does the new accounting treatment not give an incentive to have a non-recourse financing at the level of JV itself and that would facilitate into (federation)? I'd like to come back to what you said about S&P. You said that credit ratings are strained. Is maintaining a BBB+ an objective for you per se? I think BBB flat is a perfectly acceptable rating level. Would BBB flat, should that be the landing point for the new Veolia be acceptable or are you going to find to maintain your BBB+?
Unidentified Company Speaker: Well, that's financial strategy obviously. A word about the divestments, so that you understand what's happening, 2012 divestments affect the consolidation scope 100% with two huge transactions. What remains is divestments in the companies accounted for under the equity methods. So in the divestment program there were two phases, in 2012 the large divestments that immediately have an impact on debt and in 2013, a large ('13 averaging) with the divestments in account companies account for under the equity methods, what we wanted to do is straightforward, we want to – our net financial debt, adjusted the net financial debt to converge. My view point of the consequence is that having debt in subsidiaries that were historically financed by the Group, well that's not the optimum in terms of our net financial debt, because Veolia right now can borrow money at very good length as we saw with the hybrid bond and that obviously is not possible for a joint venture and our partners don't always have all the financial resources as us. It's not the case with Dalkia or transportation of course, but not every other partner has such financial talent as (EDF and CDC). Soon right now we're going to focus on net financial debt and that at some point we will want to simplify and it would be easier if net financial debt is equal to adjusted net financial debt. The other question about joint ventures, yes, we're going to refinance joint ventures. We have some JVs are strategic and we need to remain (vigilant) because of agreement reasons or market reasons, but otherwise (indiscernible) to take over controlling interest or we can't. So you’ve seen there are lots of other companies that were consolidated proportionately. So either we will take over control or we will pull out from them. So all of that will have an impact on our ratings of course, because here you have a huge liquidity problem. If we refinance JVs, that means more liquidity. We can buy bonds of course, but at some point it will be tougher and tougher. We're helped by our base bankers, but it is not that easy to buy back bonds, but we were forced to pay higher price in the state. We really had to pay an expensive price. So there is a limit there. Now, the rating, no, we are not hooked on BBB+ rating. Nevertheless, we do believe that this rating is part of the resources of the Group. It is not a traditional new utilities, straightforward utilities company. Our partners like to have the feeling that we are financially solid. It is one of our competitive advantages. So, we need to be extremely vigilant with respect to this kind of issue. In January people who subscribed to our hybrid securities were the two-notch difference, B- I'm not sure if I would be all that happy if we were to let our rating deteriorate. I believe it will be a good idea to maintain our BBB+ rating. But if we were to be downgraded for 18 months or two years during the transformation thing), as you rightly said there is nothing crucial there. We were not bound by confidence, so it's really, fundamentally a problem in terms of the visibility of Veolia as our long-term partner in long-term contracts than financing concerns. I haven't calculated the 3.26 under adjusted net financial debt, that figure wouldn't be biased. If I had calculated this I can assure you it won’t be (biased). So we'll take your question over the phone now if you don't mind. No more questions over the phone.
Operator: Martin Young, Nomura.
Martin Young - Nomura: Hopefully some relatively easy questions. The first relates to the discussion around the dividend. Are you going to base your mid-term payouts on your net recurring income or the EPS as adjusted by the cost of the hybrid, I believe that's an easy one to answer? Secondly, in terms of the divestments you’ve done by 0.1, surely transporter loan will take you to ballpark EUR6 billion. So are we done when the transport divestment is delivered or should we be thinking about other divestments on top of that? In terms of the U.K. waste market, specifically one of your competitors is starting to talk a more bullish picture from 2014 onwards, just wondered what your view on the outlook to the U.K. waste market was? Then the final question is really just an information request, hopefully this can be sent across by e-mail and that's the information on Page 44, which is the accounting treatment changes. Would it be possible to have those aggregate metrics broken down by individual company, particularly given that (indiscernible) has already been take out to the accounts?
Unidentified Company Speaker: With respect to the payout, our payout will be based on adjusted net income post hybrid transaction because hybrid bond will have a priority. With respect to EUR6 billion in terms of net debt, VTG has to be computed at EUR500 million. We don't need to deleverage by EUR900 million in VTG, this we won't sell immediately our 40% equity interest and all likelihood of some of the shares will be sold very swiftly after 2013 and that will partly complete our deleveraging, but the deleveraging expected from the VTG transaction as agreed with the partner is close to EUR500 million net of the investments we would make then in SNCM.
Martin Young - Nomura: Are we released with the EUR6 billion objectives?
Unidentified Company Speaker: As you've understood we don't use that flexibility of EUR800 million we should meet that objective quite easily. If you just look at discounted operations, this should easily lead us to the bottom of the range.
Martin Young - Nomura: Are we bullish about the waster market in U.K. from 2014 onward? What would you say? Are you bullish, you doesn't look like that?
Unidentified Company Speaker: Well, I can't be turned into a bull, I'm already a bull. Well, let’s think that the waste market in the U.K. is undergoing an overhaul and you mentioned that earlier because the landfills are declining and incinerators are gaining market share. We have fewer landfills than our competitors, but in the PFI segment, as you said earlier, we are going to invest about EUR400 million in the next few years. Our market share there is good and it's growing at, say, expected pace and generating the cash flow we would – operating cash flow we are expecting. As for sort of Waste, well we depend to a great extent on trade and consumers and we – I haven't got a crystal ball I can't tell you what's going to happen there. Let's have the last question from the room this time. If there aren't any questions, well we've got no one on the phone. Alright now we'll take the question over the phone.
Operator: Ignacio Perez-Cossio, UBS.
Ignacio Perez-Cossio - UBS: This is Ignacio from UBS. I have a couple. A, one on the Waste business, will you give us some guidance on how has the year started? I know Q4 was quite good with 3% revenue growth, but could you give us some clarity on Q1 and what do you expect for this year? Sorry if this has been asked already but the line was not too good. Second on the French Water business, apparently there is a EUR72 million EBITDA erosion from the contract renegotiations. How do you see this going forward? Do you see a similar EBITDA cut? Or how should we think about it going forward, especially even that there has been some municipalities large ones being renegotiated this year? Lastly, I would like to come back to Slide 59, which was also mentioned by another colleague. On this one you mentioned debt reduction from EUR16.5 billion to the EUR6 billion to EUR7 billion target. Could you please explain us how much of this is really coming from pure accounting from the hybrid? How much of this is real cash flow generation?
Unidentified Company Speaker: Well, with respect to your last question, how we drop from EUR16.5 billion to EUR6 billion as well EUR1.5 billion in hybrid bond, the EUR4 billion result from the change in IFRS. So that lead – that means there is about EUR4.3 billion in the accounting part, including (billing). It's about half of this reductions, half from divestments and cash flow and half from hybrid and accounting treatment. In France, water France EUR72 million in 2012, but 20 related to Guadeloupe and that’s because of a very specific operating problem. Now, the erosion remains on at around EUR15 million. (Indiscernible) at that level and that’s what we project over the next two to three years given the renewal of our contractual portfolio being I think we’ll level out in 2015 at the end of this phase of renewal. As for the waste market, well, this is a very start of the year. So far we're in line with what we saw on Q4. Volumes tend to be declining, there is no inflection point. Let me draw your attention to sorting of primary materials, it has been dropping since Q4, 2012. So that will have a comparison I think, but no major change. Well, thank you very much all of you for having come to this presentation. Don’t hesitate to get in touch with our financial teams. If you want additional information, thank you all of you and enjoy the rest of your day.