Veolia Environnement (VE)

Cash flow from operations is down from €1,839.6 million in the first half of 2004 to €1,785.7 million in the first half of 2005. Excluding the cash flow from operations of business in the process of discontinuation in the first half of 2004 (€248.6 million), it is up 12.2%, reflecting improvement in the group's performance. Cash flow from operations, in the sense of the definition recommended by the CNC, excludes the tax and effects of financing operation.

Cash flow provided by operating activities is down, dropping from €1,731.2 million in the first half of 2004 to €1,413.9 million in the first half of 2005. Other than the change in cash flow from operations, the drop is due to the negative effects in the change in the working capital requirement, €(195.8) million in the first half of 2005, compared to €44.6 million in the first half of 2004, due to the increase in activity and seasonal events affecting accounts receivable.

Cash flow provided by investing activities stands at €(975.4) million compared to €(741.7) million in the first half of 2004. The €233.7 million increase primarily relates to an investment in the company holding the Braunschweig contract for €330.4 million, offset by a slight drop in industrial investment. Sales of industrial assets are down 112.2 million euros, with the first half of 2004 marked by the sale of American farmlands (€67 million) and railroad assets within the framework of the new Melbourne contract (€69 million). The increase in disposals of financial assets for €67 million results from the sales of the nuclear maintenance businesses of Dalkia (€17 million), CBM (€31.5 million) and Acque Potabili (€21 million).

Cash provided by operating activities increased from €(1,188.5) million to €(2,178.1) million. This €(989.6) million increase can be explained by the redemption of OCEANEs in the amount of €1.5 billion and TSARs for €0.3 billion, offset by the issue of bonds indexed on inflation for €0.6 billion.

"Free cash-flow" before major projects is defined as: cash flow from operations +/- deduction in the change of working capital requirement - tax + asset disposals – investment excluding investment projects +/- changes in scope. It has reached €306 million. In 2004, it had reached €563 million due to the improvement in working capital requirements.

Considering the change in the flows described above and the redemption of the TSARs and OCEANEs and the issue of bonds indexed to inflation, the closing cash position at June 30, 2005 was €2,629.7 million, compared to €4,240.2 million at December 31, 2004.