SUEZ ENVIRONNEMENT Annual Results 2009

    PARIS, February 25, 2010 /PRNewswire-FirstCall/ --

    2009: solid results in line with objectives

    - Revenue: EUR12.3 billion, +0.6% at constant forex

    - EBITDA: EUR2,060m, -1.2% at constant forex, i.e. an
      EBITDA/revenue ratio of 16.8%

    - Free cash flow: EUR891m, a 20% increase excluding non
      recurring items in 2009[1]

    - Net result Group share: EUR403m i.e. EUR0.82 per share

    - Net financial debt: EUR6,282m, i.e. net financial
      debt/EBITDA ratio of 3.0x

    - Proposed stable dividend[2] of EUR0.65 per share

    2010 objectives[3] and outlook:

    Confirmation of free cash flow generation and profitability protection
    priorities

    Launch of a new Compass cost optimization plan for 2010-2012

    - Revenue growth greater than or equal to 5 % compared to 2009, at
      constant forex

    - EBITDA growth greater than or equal to 8% compared to 2009, at constant
      forex

    - 2010 Free cash flow Generation greater than or equal to EUR0.7 billion1

    - 2010 Net investments less than or equal to EUR1.3 billion[4] plus
      EUR0.6 billion related to the step up in Agbar

    - Net financial debt/EBITDA ratio of around 3x by 2012 with a new COMPASS
      cost optimization plan of EUR250m over the period 2010-12 and pursuit
      of the capex selectivityin 2011 and 2012

The Board of Directors, meeting on 24 February 2010, approved the 2009 SUEZ ENVIRONNEMENT financial statements, which will be submitted for the approval of the General Meeting on 20 May 2010. On the date of the press release, the financial statements have been audited and certified by the auditors.

Commenting on the 2009 results, Jean-Louis Chaussade, CEO of SUEZ ENVIRONNEMENT, stated:

"In 2009, SUEZ ENVIRONNEMENT demonstrated the strength of its development business model and its ability to adapt in a difficult macro-economic environment. The Group achieved its COMPASS cost optimization programme one year in advance and generated substantially higher free cash flow.

At the same time, its solid financial profile and commercial dynamism have enabled the Group to continue its development with major strategic movements, such as the construction of the Group's second European water pillar with the step up in AGBAR expected mid-2010 and the construction of the largest desalination plant in the Southern Hemisphere in Melbourne.

Thanks to its financial solidity and sustainable and profitable development business model, SUEZ ENVIRONNEMENT expects going back to growth in 2010, in a still-fragile macro-economic environment.

I firmly believe that our water and waste business activities are entering a new era, where they find themselves at the heart of the developing circular economy. The Copenhagen Summit was a real wake-up moment for awareness of climate change. Our customers, whether municipalities, commercial and industrial customers alike, seek from now on to reconcile quality of service with sustainable development. By developing innovative green proposals for the sustainable management of resources, SUEZ ENVIRONNEMENT takes a clear lead over in the growth markets of water and waste which address the essential needs of populations and respond to environmental emergencies."

SUEZ ENVIRONNEMENT met its 2009 objectives, delivering solid results and demonstrating the resilience of its model and its ability to adapt to the crisis

In the difficult economic context, SUEZ ENVIRONNEMENT posted solid results for 2009 with an overall stable operational performance and strong generation of free cash flow:

    - Revenue came to EUR12,296m, which was globally stable at constant forex
      (up 0.6%), with "tuck-in" effects of +2.4% and organic growth down by
      - 1.8%.

    - EBITDA was EUR2,060m, slightly below last year (1.2% at constant
      forex). The Group maintained a high EBITDA/revenue margin of 16.8%
      which increased as the year progressed, moving from 16.2% during the
      first half of the year to 17.3% in the last six months, thanks to good
      operational performances of the three divisions, underpinned by the
      effectiveness of the COMPASS cost optimization plan.

    - The Current Operating Income of EUR926m fell by 12.1% at constant forex
      compared with 2008 due to a EUR60m rise in depreciation and renewal
      costs, which in turn resulted from an increase in capital investment
      and an increase of net charges on net provisions, with a EUR13m charge
      in 2009 to take into account the uncertain economic environment vs. a
      net reversal of EUR+16m in 2008.

    - The net financial result of EUR-260m improved by 21% on 2008, thanks to
      the decrease in the cost of net debt (4.6% in 2009 against 5.6% in
      2008).

    - Restructuring costs and asset depreciation net of capital gains on
      disposals during the year represented an expense of EUR-59m. Taxes
      rose, with the effective rate standing at 21% in 2009 versus 13% in
      2008, when SUEZ ENVIRONNEMENT benefited from tax losses transfer from
      the former SUEZ tax group, which resulted in the accounting of EUR131m
      deferred tax assets.

    - Net Result Group Share was EUR403m down 24.4% from 2008, i.e. EUR0.82
      per share. Restated to incorporate the above-mentioned deferred tax
      assets recognized in 2008, Net Result Group Share was stable
      year-on-year.

In the face of the difficult economic climate, SUEZ ENVIRONNEMENT took proactive measures from the end of 2008 to protect its balance sheet, adapting its short-term priorities to focus on: pursuit of increased free cash flow, maintenance of strict financial discipline and reinforced selectivity of investments.

    - Operating Cash flow[5] came to EUR1,797m, a rise of 1.4% at constant
      forex compared to 2008. It shows the Group's ability to adapt its cost
      structure in the prevailing economic crisis.

    - Free Cash Flow stood at EUR891m, up 50% on the previous year,
      benefiting from optimization of maintenance capex. This figure includes
      non-recurring items such as the reimbursement in 2009 of tax paid in
      2008 and accrued interest not due on bonds issued in 2009. Excluding
      the 2009 non-recurring items, free cash flow rose by 20% compared to
      2008.

    - The COMPASS cost optimization plan, launched in 2008, proved to be
      extremely effective. In terms of EBITDA, it generated savings of
      EUR190m over two years, exceeding the EUR180m end-2010 objective one
      year ahead of schedule.

    - The selective investment policy resulted in a net investment amount of
      EUR1,062m in 2009.

    - Net financial debt stood at EUR6,282m, with a net financial debt/EBITDA
      ratio in line with target at 3.0x. In addition, as part of its
      financing policy to diversify and extend the maturity of its debt, the
      group floated bond issues totalling EUR3 billion during 2009. The
      average maturity of the debt[6] increased from 4.4 to 5.6 years.

    - ROCE stood at 7.3% in 2009, higher than the Group's 6.8% WACC, but
      lower than in 2008 taking account of the increased capital intensity of
      its business activities and the decrease in operating profitability,
      caused by the economic crisis.

Major strategic movements to prepare for the future

With a strict financial discipline in 2009, the Group continued to develop strategic positions, in particular adding value to its long-term partnerships at international level.

After more than 30 years of close collaboration, AGBAR will soon become SUEZ ENVIRONNEMENT's second European pillar in water after the step up in Agbar which closing is expected mid 2010[7]. This transaction will enable the Group to become a major player in Spain and to acquire complementary positions to those already held by SUEZ ENVIRONNEMENT in high-growth markets.

SUEZ ENVIRONNEMENT has also strengthened its positions in the waste business in Asia by taking 100% control of Swire SITA, after 12 years of fruitful collaboration with the Swire Pacific group. In Hong Kong, the Group namely operates two of the largest and most modern landfills in the world.

The Group has also confirmed its leadership in the field of reverse osmosis through the contract for the seawater desalination plant in Melbourne (total revenue of EUR1.2 billion over 30 years for Degremont). This contract is the world's largest public-private partnership in the desalination sector.

commercial dynamism and new green offers contribute to the development of all its divisions

To meet customer expectations in terms of the circular economy, SUEZ ENVIRONNEMENT has continued its research and development and innovation policy by launching new "green" commercial initiatives which combine quality of service with environmental performance. Promoted under the Edelway offer, these " green" initiatives mark SUEZ ENVIRONNEMENT's commitment to its customers that it will meet its objectives and progress indicators in protecting natural resources and biodiversity and reducing greenhouse gas emissions. Its Edelway projects are also key selling points when bidding for contacts.

This commercial dynamism and innovation has permitted the continued development of all divisions of the Group.

Water Europe

With revenue of EUR3,993m, the Water Europe division showed growth at constant forex of 4.0% (organic growth up 2.7%). EDITDA stood at EUR866m, a rise of 7.2% at constant forex (organic growth up 5.6%). The profitability of the division improved sharply to 21.7% in 2009 (against 21.1% in 2008) thanks to commercial development and cost control (EUR25m of savings realised in 2009 within the COMPASS plan).

The division generated EUR249m of free cash flow.

Despite the average annual trend of volume reduction by 1%, business benefited in 2009 from the slight rise in water volumes in Europe thanks to favourable summer weather conditions and price increases due particularly to the application of tariff indexation formula. However, the economic downturn had a negative impact on the Group's work activity.

Lyonnaise des Eaux and Agbar activities were driven principally by wastewater concessions (Cannes, Morillon, Briancon) and the new contracts won in 2009 such as Douchy Noyelles Haspres (EUR20m over 20 years), Le Havre (EUR19m over 4 years), Puertollano (EUR322m over 50 years) and Leon (EUR176m over 25 years).

Green Edelway initiatives were also introduced in the water sector with France seeing the commissioning of the first DEGRES BLEUS(c) technology in the city of Levallois, which helps reducing greenhouse gas emissions by recovering heat from the wastewater network to heat buildings. Such a DEGRES BLEUS(c) technology contributes to meet the climate and energy objectives set out in local authority Climate Plans.

SUEZ ENVIRONNEMENT also began construction in Cannes of the first carbon neutral wastewater treatment plant to be powered by a solar farm.

Waste Europe

2009 was marked, on the one hand, by the sharp fall in industrial production and, on the other hand, by weak demand for secondary raw materials.

In this context, the Waste Europe division generated revenue of EUR5,319m, a 5% decrease at constant forex (-7.5% organic change). EBITDA was EUR798m, down 12.1% at constant forex (organic growth down by -15.5%). Continuous cost reduction efforts (EUR70m COMPASS savings generated in 2009) such as the optimization of waste flow management (saturation of treatment capacity and internalization of volumes) helped to protect profitability which came to 15% of revenues (15.5% excluding the effect of fuel hedges). The division also optimised its maintenance capex, increasing its free cash flow generation by 4.5% to EUR341m.

Sorting and Recovery were particularly affected in 2009. The fall in these activities, with revenues of EUR850m in 2009, represents almost 40% of the division's turnover decline. The volumes processed in landfills and energy recovery plants slipped by 2.6% over the year, notably from industrial and commercial customers, with a sharp decline in early 2009 followed by stabilisation from the 2nd quarter.

The last quarter of 2009 benefited from a favourable base effect.

With the emergence of the circular economy, the Sorting and Recovery activities remain attractive over the long term. At Limay, SUEZ ENVIRONNEMENT has commissioned the industrial site of France Plastiques Recyclage to recover 40,000 tonnes of PET plastic bottles into R-PET. The granulates are re-used by packaging companies to produce new plastic bottles that use less raw materials and are more environmentally friendly.

International

The activity of the international division with turnover of EUR2,969m, increased sharply by 7.2% at constant forex (+3.6% organic growth). EBITDA was EUR468m, an increase of 11.3% at constant forex (+10.7% in organic growth) with an EBITDA margin rising to 15.8% (15.1% in 2008) thanks to the COMPASS programme effects (EUR24m of savings generated in 2009). The strong free cash flow generation of EUR174m, increased by 21.2% compared to 2008.

The growth in this division was the result of Degremont's new contracts in Australia, Mexico and South America. In addition, this year, SUEZ ENVIRONNEMENT's development in China saw a new concession contract for the distribution of drinking water in the area of Yuelai to the north of Chongqing, one of the largest cities in the world, with total revenue of approximately EUR800m over 40 years. Another major event was the renewal of the water contract for Macao, estimated to bring in revenue of EUR1 billion over 20 years, of which EUR500m will go to the Group.

Activity in the United States benefitted from price increases (successes of the "rate cases") in particular in New Jersey (+18%), but was negatively impacted by unusually unfavourable weather conditions (volumes of water sold down 7.6% in 2009 compared to 2008).

The demand for environmentally-friendly technological solutions is also increasing among industrial and commercial customers. SUEZ ENVIRONNEMENT has just won a contract to design and build a treatment and reuse plant for residual industrial wastewater for Petrobras in Brazil, which will give the oil group a low-cost water resource whilst limiting the volume of water it draws from the natural environment.

In Melbourne, Australia, the seawater desalination plant, a fine example of sustainable development, will be totally powered by renewable energy from a wind farm which will provide sufficient energy for its drinking water production.

Attractive dividend paid in 2010

With its 2009 performance in line with objectives, SUEZ ENVIRONNEMENT is offering an attractive remuneration to its shareholders in 2010 with a stable dividend of EUR0.65 per share, representing a yield of about 4%[8]. The dividend[9] remains subject to the approval of the General Meeting of 20 May 2010.

Outlook for 2010: back to growth

In this still unclear economic context, and with an hypothesis of weak growth in GDP estimated at 1% for the eurozone[10], the Group has set the following objectives for 2010:

    - Revenue growth greater than or equal to 5% compared with 2009, at
      constant forex

    - EBITDA growth greater than or equal to 8% compared with 2009, at
      constant forex

    - 2010 Free cash flow greater than or equal to EUR0.7 billion[11]

    - A level of investment less than or equal to EUR1.3 billion[12], plus
      EUR0.6 billion related to the step up in Agbar and the full
      consolidation of Agbar in SUEZ ENVIRONNEMENT accounts once the
      operation has been finalised.

These objectives include the closing of the announced step up in Agbar, expected mid-2010.

By 2012, the Group has an objective of net financial debt/EBITDA ratio of about 3 times with:

    - The implementation of a new plan "COMPASS 2" for the period 2010-2012
      with an objective of cumulated net EBITDA gain of EUR250 million over
      three years compared to the 2009 level

    - Pursuit in 2011 and 2012 of its capex selectivity.

SUEZ ENVIRONNEMENT's business model is based on its presence on the water and waste full value chains and a balanced development in terms of activities, types of contracts and customers (commercial and industrial, municipal), and geographical positions.

The Group confirms its long-term strategy, as presented at the time of its IPO in July 2008, based on a resilient business model, with solid long-term growth drivers allied to dwindling natural resources, growing populations and more stringent environmental protection regulations.

Natural resources are not infinite. Each day, SUEZ ENVIRONNEMENT (Paris: SEV, Brussels: SEVB) and its subsidiaries deal with the challenge to protect resources by providing innovative solutions to industries and to millions of people. SUEZ ENVIRONNEMENT supplies drinking water to 90 million people, provides wastewater treatment services for 58 million people and collects the waste produced by 46 million people. SUEZ ENVIRONNEMENT has 65,900 employees and, with its presence on a global scale, is the world's leader exclusively dedicated to environmental services. SUEZ ENVIRONNEMENT, a 35.4% GDF SUEZ affiliate, reported sales turnover of 12.3 billion euros at the end of financial year 2009.

2009 financial review relating to the company's assets, financial situation and revenues, consolidates accounts as of December 31, 2010 and Statutory Auditors' Report on consolidated accounts are also available on :

http://www.suez-environnement.com

Disclaimer

"The actual communication includes forward looking information and statements. Those prospective elements are based upon hypothesis, financial projections, estimations and statements regarding projects, objectives and expectations concerning operations, future products or services or future performances. No guarantee can be given on the realization of those prospective elements. Investors and shareholders of SUEZ ENVIRONNEMENT Company shares are informed that those forward looking information and statements are subject to a number of risks and uncertainties, hardly predictable and generally outside SUEZ ENVIRONNEMENT Company control and that could cause actual results to differ materially from those expressed or suggested by any such forward looking information and statements. Those risks include, but are not limited to, those developed or identified in public documents filed with the Autorite des Marches Financiers (AMF). The attention of investors and shareholders of SUEZ ENVIRONNEMENT Company shares is drawn on the fact that the realization of all or part of those risks is susceptible to have a significant unfavorable effect on SUEZ ENVIRONNEMENT Company. Suez Environnement Company disclaims any obligation or undertaking to release publicly any updates or revisions to any of those forward-looking statements."

This press release is also available at http://www.suez-environnement.com

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[1] Free Cash Flow in 2009 excluding non-recurring items : 710mEUR

[2] Resolution submitted to the General Meeting of shareholders of 20 May 2010 of EUR1.30/share including the interim dividend of 0.65EUR paid in 2009.

[3] See assumptions on page 5.

[4] Net investments, excluding other strategic acquisitions. These include maintenance, organic development and financial investments and are net of disposals.

[5] Before financial interest and tax

[6] Gross debt excluding GDF SUEZ debt

[7] This operation is subject to the necessary regulatory approvals

[8] 4,05% Yield on the basis of February 23 2010 closing price of 16.035EUR

[9] The dividend will be subject to a resolution proposing a dividend of EUR1.30 per share corresponding to the dividend payable in 2010 for the year 2009, and the interim dividend of EUR0.65 per share already paid in June 2009.

[10] Assuming stability of average prices of secondary raw materials in 2010 compared with 31/12/2009.

[11] EUR0.7bn = 2009 FCF excl. non recurring items

[12] Net investments, excluding other strategic acquisitions. These include maintenance, organic development and financial investments and are net of disposals.

SOURCE Suez Environnement