Antoine Frérot - Chairman and CEO Philippe Capron - CFO

Emmanuel Turpin - Societe Generale Michel Debs - Citigroup Philippe Ourpatian - Natixis S.A. Pinaki Das - Bank of America Merrill Lynch Anna Scaglia - Morgan Stanley James Brand - Deutsche Bank AG Vincent Ayral - JPMorgan Chase & Co.

Olivier Van Doosselaere - Exane BNP Paribas

Ladies and gentlemen, good morning, and welcome to the presentation of Veolia's 2017 annual results. 2017 ended at an even faster pace of growth compared to each of the year's first three quarters relative to all of our key financial indicators.

The difficulties anticipated at the beginning of the year were quickly addressed and were neutralized, demonstrating that Veolia is now a reactive and aligned group. The quick reaction applied both to cost savings as well as business development efforts in particular, the reinforcement of our commercial resources by €40 million, a decision which was taken at the end of 2016, has clearly paid off.

The two main objectives of our strategy, growth and efficiency without increasing our debt levels, were achieved and even were quite robust during the last two quarters. The only exception, exchange rates, which were unfavorable throughout the entire year.

Now I'd like to move on to Slide 4. In the fourth quarter, revenue increased 6.3% at constant exchange rates and 4.4% on a like-for-like basis, an acceleration compared to the prior quarters.

The Rest of the World and Europe excluding France, were the largest contributors. But France and Global Businesses were also positive.

For the year as a whole, Veolia recorded revenue growth of plus 3.9% at current scope and exchange rates, plus 4.9% at constant exchange rates. Plus 3.5% like-for-like contribution by main geographies, largely similar to that of quarter four.

Revenue growth is clearly a strong contributor in 2017. EBITDA now.

In quarter four, EBITDA increased 5.2% at constant exchange rates. EBITDA growth accelerated at the end of the year even compared to a good third quarter.

For the year as a whole, it was up 2% at current scope and exchange rates, and plus 2.7% at constant exchange rate. As a result, current EBIT improved 5.3% at constant exchange rate for the full year.

And current net income at €623 million, up 6.1% at constant exchange rates, and up 7.3% on the same basis but excluding capital gains. Net free cash flow after growth CapEx amounted to €655 million, and net financial debt was stable at €7.8 billion.

Onto Slide 5. 2017 was not a one-off year isolated event.

Between 2014 and 2017, Veolia recorded four years of strong results and free cash flow growth. Increase in EBITDA of 5% on average per year, increase in current EBIT of 15% on average per year, increase in current net income of 36% on average per year.

Over these four years, cumulative net free cash flow after growth CapEx amounted to €2.8 billion, 80% dedicated to dividends and 20% allocated to small targeted acquisitions. Slide 6.

The strong results growth, coupled with solid control of capital employed, which remains stable despite the group's improved performance, has generated strong and consistent improvement in the growth - in the group's returns. Post-tax ROCE has improved 0.5 points each year.

In 2017, it was 8.4%, which is well above the group's WAC. Veolia creates more value each year.

Slide 7. This has allowed Veolia to, year after year, raise our dividend following the improvement in current net income.

With respect to the 2017 fiscal year, and therefore to be paid in 2018, Veolia's Board of Directors will propose to these shareholders another increase in dividend of 5%, bringing the dividend to €0.84 per share and representing a dividend yield of more than 4%. Slide 8.

These four years of strong results growth were supported throughout the entire period by ambitious and sustainable cost savings plans. On a cumulative basis, nearly €1 billion in savings achieved over the period.

2017 was once again a successful year. The annual objective, which have been raised at the beginning of the year from €200 million to €250 million, was at the end of the day slightly exceeded up to €255 million.

The usual levers have all been mobilized, general and administrative expenses; purchasing, where progress is now more at a local level; and operational efficiency and standardization, the main source of our cost savings. This source is deep and will therefore be sustainable.

But what's new in 2017 - this is Slide 9. What is new in 2017 relative to Veolia's overall performance is the strong revenue growth achieved.

Growth had already started at the end of 2016 and was consistent throughout 2017. This performance is due mainly to the group's commercial efforts, which were redoubled.

Commercial resources were increased by €40 million in 2017. The mission of the development, Innovation and Markets group was refocused on winning new business and a little less on the repositioning of our traditional businesses now widely relaunched.

This reorientation has materialized from increased support from our sales teams in different countries, to more systematically replicate our key offers, those that are the most differentiating, the most attractive and the most profitable within our target geographies; to accelerate and further penetrate our business with our 30 key industrial accounts chosen from leaders within Veolia's priority markets; and to mobilize the group's internal digital communities in order to share best practices and determine the best deployment of human capital. All of this has led to the design of detailed and ambitious sales development plans in each of our countries where execution is only halfway complete.

This mobilization of the entire group, in addition to and in line with the plans I put in place regarding cost savings, bore initial fruit in 2017. Its full impacts will be felt in the years to come, and growth should continue in 2018.

Slide 10 now, Slide 10. This slide shows how, in recent years, Veolia has redesigned and repositioned its businesses and the resulting added value these efforts bring to customers.

Within our three businesses, Water, Waste and Energy, from our traditional offers, including operations, services or construction, we've added new layers of added value for our two types of clients, cities and industrial clients. For the first, cities.

Cities that are more inclusive, more connected, more circular and cities that are more resilient and more livable. For industrial clients, we help them to properly produce, i.e.

without endangering the environment, to produce with less cost, to protect their right to operate and also to defend their brand image. Our key offers, which I mentioned earlier, involve both our traditional offers as well as these new layers of added value.

For each of these, this slide shows some of the most important representative contracts that Veolia was awarded in 2017. Slide 11.

Organic growth, which you'll recall was 3.5% for the group in 2017, which is 70% of total recorded growth for the year, was complemented by small targeted acquisitions. The main acquisitions completed are detailed on this slide.

Acquisition multiples were reasonable at 7.5x EBITDA, on average, for the whole. On the flip side, activities where Veolia's ability to create value had, in our view, been reduced, have been divested, and they've not been sold at fire sale.

The average divestment multiple was 10x EBITDA. These scope effects contributed 1.4% to revenue growth in 2017, which is 30% of the total.

Slide 12. Revenue growth will therefore continue in 2018, given the organization and commercial momentum I described to you earlier.

We anticipate growth mainly from the fastest-growing sectors, the most dynamic geographies and the business models, which were the best performing in 2017. In addition, we continue to develop and prepare new layers of added value that tomorrow will complete those of today.

From our prospective work covering the next two decades, we've selected priorities in terms of research and innovation. Some of these priorities indicated on the slide have already resulted in pilots on a realized scale at certain pioneering clients.

And as in 2017, growth in 2018 will be complemented by some targeted acquisitions, for example, in the following areas, plastics recycling, energy efficiency or hazardous waste treatment. Slide 13.

Our growth in 2018 will, as in 2017, be primarily driven by the entire group's reinforced commercial efforts. This will take place in a macroeconomic environment that's rather favorable, but with contrasting implications for our activities.

Today, we do not anticipate headwinds except for this - the surge case of Gabon, which I'll come back to, we don't expect headwinds or contractual or political difficulties at the level we had anticipated at the same time last year. Industrial production, which is correlated with our waste volumes, seems to be in positive dynamic.

2017 inflation, and therefore, price indexation in 2018, is slightly positive in Europe. The construction business environment has improved.

The dispute with the City of Sheffield in the U.K. is being finalized.

However, on the other hand, recycled raw materials prices have declined since the fourth quarter 2017 and should weigh negatively on 2018. And higher energy prices in Europe will drive higher fuel costs, while recovery through tariff indexation will only be felt in 2019.

As such, they'll also negatively impact 2018. And finally, on the surge of Gabon.

Last Friday, armed men commandeered our 51% subsidiary, SEEG, the Société d'énergie et d'eau du Gabon. They removed our leaders by armed force.

This coup was carried out by order of the Gabonese government and also terminated our concession contract, which had been renewed for another five years just 11 months ago. This expropriation was carried out in flagrant violation of the rule of law and the contractual rules, which bound us to the Gabonese state.

This is all the appearance of pillage. Of course, the group will pursue all manner of legal actions to obtain compensation for this pillage, including recourse to the international jurisdiction of the ICSID, as stipulated in the terms of the concession contract in case of dispute from the signatories.

However, the financial consequences of this matter remain moderate for Veolia, particularly in terms of EBIT and current net income. They will be detailed in a few minutes by our CFO, Philippe Capron.

This type of disappointment is part of our business, and it is our job to take action to compensate for the consequences. Despite this event, our group's strong momentum and vitality will enable it to continue on its improving path in 2018.

Slide 14. This is precisely why, in order to cope with such headwinds, that the continuation and even the increase in our cost-savings program will be necessary in 2018.

A year ago, the 2018 objective of the program was increased to €300 million. This is an ambitious objective, but it is achievable.

And of course, it is based on the three usual levers of our cost-savings program. Slide 15.

In conclusion, overall, the 2018 fiscal year will be, for Veolia, a year of confirmation and further strengthening of the performance developed in 2017. We expect the continuation of sustained revenue growth and EBITDA growth at constant exchange rates greater than that recorded in 2017 in spite of Gabon.

The 2019 objective is still the same as indicated a year ago, and you see on this slide and the same for our dividend policy. I will now turn the floor over to our Chief Financial Officer, Philippe Capron, who will provide further details on our 2017 results.

Philippe, over to you.

Thank you, Antoine. So ladies and gentlemen, good morning.

I'm pleased to comment very strong results after satisfactory years that results exceeded the guidance we gave to the market, including, notably, EBITDA. Slide 17.

Let me briefly recall the key results announced by Antoine. Revenue, above €25 billion, up 4.9% like-for-like with a sharp acceleration in Q4.

EBITDA, up by 2%, current exchange rate and 2.7% at constant - current EBIT up 5.3% at constant exchange rate, and current net income group share up 6%. In fact, even 7.3%, excluding financial capital gains.

Modest this year, only €7 million net impact versus €13 million last year. Net income per share increases in the same proportion.

No shares issued. The coupon for the hybrid is set to disappear as of next year, €68 million.

The same slide, you note that our gross CapEx, slightly above €1.7 billion, are up, and this increase is especially focused at the end of the year, which is very good sign for our 2018 growth. It's that CapEx increase that explains that free cash flow is slightly down, but remains above the amount necessary to pay our dividends and marks further progress in WAC.

More about that in a moment. For the third consecutive year, free cash flow generated by Veolia is above its net income.

So we have very good conversion of cash into results. Free cash flow is, after all, CapEx naturally.

This allows our financial debt to remain stable, well below the €8 billion. We were slightly helped by ForEx.

You can see that, bottom right on 17. But the ForEx impact was unfavorable for our other key performance indicators, 1% for revenue impacted and €21 million EBITDA.

On Page 18, you have a somewhat different presentation. You'll recall in 2016, we suffered strongly an impact on revenue on the price of energy on the one hand, even if it's on a pass-through, and construction activities.

We don't see the same thing this year because both before and after corresponding restatement, revenue growth increased 4.9% like-for-like. What's remarkable is the acceleration of this growth, in particular, with Q4 at 6.3%, helped some by construction activities and growth that is spread more uniformly than in the past because all areas, including France, if we correct for the scope effect, linked to the disposal at the end of 2016 of Bartin.

France is back to growth with organic growth coming in at 1.8%. Page 19, to give you some detail on growth across zones advancing in water.

We're back to growth, thanks to good volumes, thanks to price indexations that were slightly less unfavorable than expected. We budgeted minus 0.4% despite the impact of Hurricane Irma in Saint Martin.

Waste revenue showed good momentum in France as well as other geographies, more about that year later. Europe is experiencing sustained growth due to higher volumes and prices recorded largely everywhere.

And in particular, waste in Germany, up 11%, which is obviously a performance that we haven't seen for a long time. The Rest of the World that is driving Veolia's growth, experiencing double-digit growth, as usual.

Special mention for China, up 24% after 2016, which was remarkable in that geography. Return to growth for Australia, plus 8%.

The integration of Chemours in the United States was a complete success. We're very satisfied with this acquisition, and it's beginning to spread to other geographies.

The only fly in the ointment in the U.S. has been industrial services.

But as you know, as Antoine indicated, they were sold in January 2018. I can't give you a divestiture multiple because EBITDA was negative.

And so we're particularly pleased with that trend. It's actually €150 million from that disposal.

For Global Businesses, hazardous waste remains well positioned, growth of 5.7% at constant currencies. And for construction business, both bookings and backlog are starting to rise again.

SADE is posting strong revenue in France for years. Municipal contracts were very difficult for SADE in France.

We're back to good growth, which allows us to be more selective on our foreign bookings. Page 20, you see that it's commerce, contract awards and volumes that were overall well-oriented that drove Veolia's revenue growth as well as prices.

Those related to recyclates, and that's a factor that won't be favorable in 2018 as well as prices in some of our contracts, where there are increases in spite of the competition. Page 21, just a quick focus on waste, remarkable growth.

8% at constant currency, 4.7% organic growth due to good momentum in prices and volumes. 1.8% that we're booking for the year is in fact 3% recorded in H2.

All geographies benefited except industrial services business in the United States, as indicated. Page 22, you see that, in parallel with revenue, EBITDA is also improving everywhere except in Global Businesses due to the absence of favorable payments at contract end in 2016.

Cost reduction play a major role in all geographies in support of prices and volumes and aiding the absorption of higher costs, contractual negotiations and unforeseeable expenses, which are a lot in life when it comes to business. China EBITDA, 20%; Latin America, 28%; and Australia, 20%.

So it's the Rest of the World for EBITDA is driving our earnings growth. Page 23.

Another presentation of the same phenomena. Cost savings, €150 million, have allowed us to meet the tariff pass-throughs, €130 million.

But also the headwinds that we announced at the beginning of 2017. Particular effort - investment €40 million for commercial - for commerce.

That's not sustainable. That's going to be disappearing over time.

And €110 million of costs that affected this year, unfavorable comparison versus headwinds that we benefited from in '16 that disappeared in '17 or one-offs that will disappear in 2018. So we're addressing 2018 with a simpler situation because we don't have an unfavorable comparison base.

Page 24, current EBIT, up 5.3% at constant currency. EBITDA progression drove out of current EBIT.

Provision reversals concern landfills, site remediation. That's a constant.

Adjustments to provisions for retirement, the settlement of all disputes, about €120 million of provision reversals. Over half, in fact €70 million of these provision reversals, suggest offsetting the EBITDA impact, that is to say that we have the corresponding drop in EBITDA, but we're reversing the previously booked provision for EBIT.

The contribution of equity-accounted entities increased, thanks to performance of the Chinese concessions despite scope changes because, for example, you know that we divested the remaining 10% stake in Affinity Water in the U.K. Page 25, you'll see that the cost of net financial debt continues to decline despite the increase in costs related to non-euro-denominated debt, which offsets the benefit of good financing conditions.

Current tax rate, only 24% of income, excluding JVs and associates, which is lower than the medium-term trend, primarily due to the reimbursement results with lower corporate tax rates in Eastern Europe. But also, we have the reimbursement of the 3% dividend within that impact of favorable of €20 million in 2017.

Page 26 now. As in previous years, active debt management, we anticipated the reimbursement of the hybrid.

That represents just over €1.4 billion with €500 million. We have €1.9 billion in total repayments that we took advantage of good market conditions, notably in March, with two bond issues, very attractive rates.

November 2017, a three-year bond with a negative yield. After April '18, we will save €68 million in dividends paid in cash, have no impact on the P&L, but are paid in cash.

We have no plans to issue a new hybrid instrument at the moment, but it goes without saying that, if necessary, we could do so again because our balance sheet will be free of that at the end of the year. Page - 2017, you see we're posting fewer noncurrent impairments than last year.

However, restructuring charges remain high, €143 million, owing to the restructuring plan announced and approved by the employment, the Labor Ministry at the beginning of the year. In 2018, we expect to see a significant decrease of this figure because, today, the bulk of the activities that we have to restructure in the United States production, water in France, that's behind us.

The impact of Lithuania, which has been classified in discontinued operations, favorable impact, €30 million. That contribution from Transdev declined because we only have 30%, no longer 50% stake in Transdev last year.

We didn't record any capital gains last year, a capital gain on the 20% sold. So Transdev results remain stable year-on-year.

In the other line item that you see appearing in the noncurrent items, there's a charge there which doesn't correspond to any economic reality, an impairment of €37 million related to the depreciation of our U.S. deferred tax assets due to the Trump tax reform, the decrease, it's fully artificial.

There's actually a gain that's strictly identical, which is due to the fact that we will be paying less tax in the United States in the coming years. In other words, with the same amount of deferred tax assets, we will erase the same number of profit over years in the United States by consuming those DTAs at a lower rate.

But accounting rules, unfortunately, require that we depreciate these DTAs even if there's no real loss for the group. Page 28.

We see that free cash flow at €655 million is weaker than last year. That's due to higher CapEx at year-end, as I indicated that August.

While a reduction working capital requirement was more modest for 2 previous years. For the past 2 years, we reduced by €500 million WCR.

It's only reduced by €112 million this year. It's quite a spectacular achievement because, year after year, we continue to reduce it.

Whereas it's necessary a physical limit to what can be achieved, WCR for Veolia is a resource to the tune of €700 million, which is quite remarkable. And in spite of the increased CapEx, the conversion of net income into free cash after all CapEx, restructuring costs also paid cash.

That continues to be very high than our net income, which is the sign of the good financial health of the company. Our net debt remains stable at €7.8 billion, only represents 2.4x EBITDA.

Even, you imagine, a key scenario that we don't have to issue a new hybrid instrument so that IFRS debt increases to 1.5 we'd still be at a multiple of 2.8, something that is fully manageable and compatible with maintaining our investment-grade rating. Page 29, the increase in CapEx mainly relates to existing contract portfolios that illustrates the commercial dynamism of our teams across geographies.

Major new developments, discretionary, often being financed by our clients or third-party financing, the AssetCo/OpCo that we've often discussed won't discuss further. Slide 30.

That speaks for itself and rehearses items that you've already seen. Page 31.

Antoine indicated the conditions under which we were literally expropriated from our Gabonese asset, 51% that we hold in SEEG. This is obviously clearly an unpleasant event, but we mustn't overstate its impact.

Gabon represented in 2017, 64% - 64 - 2% of EBIT. We only have 51% of SEEG.

We have to take account of the fact that half this EBITDA belong to minority interest, not to Veolia. As regards EBIT, it's less than 1% that Gabon represented last year.

And on current net income, it's less than 0.5%. So one mustn't overstate the consequences of this Gabon, that's why the guidance given incorporates this that we will offset - compensate by heightened efforts in other geographies.

Page 32. We've given you a chart with which you're not familiar with, it's the first time we're showing this, that answers the question raised by events in Gabon, how we depend on key contracts.

Shown here is the expiration dates. Normally, these contracts are renewed before the - before they terminate.

The group's 35 largest contracts, over €50 million, representing just over €4 billion in revenue or 16% of total group revenue. The contract expirations have an average duration of 11 years.

The conclusion, over and above the fact that as you can see that, in '18 and '19, excluding Gabon, there are no very significant contracts coming up for renewal. So Veolia, through its size and diversification in terms of geographies activities, does not depend on a particular large client.

Also, the way we'll be absorbing events in Gabon demonstrate this. Page 33, we, therefore, fully maintain our 2019 outlook.

For 2018, we're specifying this. You've heard what was said.

Cost reduction above €300 million. This is something that you already know, that it's our objective, and we pledge to deliver.

That EBITDA growth will be greater than that of 2017 in spite of Gabon, that we will phase up, too. So we're entering 2018 with a good deal of confidence, given the momentum gained in 2017, especially in Q4, as we do every year.

We'll have to face challenges, but we're confident that we will be able to rise to the occasion, thanks to our organization processes in place that are both driving for continued growth and further cost reduction. Thank you.

Thank you, Philippe. Now let's move on to our question-and-answer session.

You have the floor to ask your questions.

My first question, starting [Technical Difficulty] with a quite high restructuring charges. Could you give us some idea of the amounts you expect for, maybe, '18 or '19?

The next question is capital allocation. You mentioned in your introduction speech that you would consider some tuck-in acquisitions.

You mentioned hazardous waste, energy efficiency, plastic recycling. That seems to indicate that you've identified some potential targets.

I was wondering if you could give us maybe an idea of the total investment envelope you were considering for '18 in terms of total amount for financial investments. And my last question would be on guidance.

You mentioned a directional guidance for '18 of greater growth in EBITDA than in '17. Could you tell us what growth metric you use as a reference for '17?

Is it the 2.7% on a same currency growth? Is this growth needing financial investments to be delivered, i.e.

without financial investments, do you still commit to an EBITDA growth of, let's say, more than 3%? And any color you want to give on that '18 EBITDA growth?

Thank you, Emanuel. I will answer your two last questions and leave Philippe to prepare the answers to the second, first.

And I will switch also to French because we have a translation. First of all, regarding CapEx allocation, I confirm clearly, we have identified several targets, always based on the same rationale, targets of small and average size tuck-ins.

All the targets we're looking into, of course, won't necessarily lead to something. Others will come to fruition.

Other targets may appear during the year as well. I don't wish to give you any actual specific amount we'll be allocating to this activity of acquisition of small targets.

First of all because we don't have an actual specific figure in mind. You have to realize what we did in 2017 net of divestments.

Whether it be similar to events in 2018. Remember we started by divestment of an activity of industrial [indiscernible] in 2018 in the United States.

We'll continue our targeted policy of tuck-ins, but we don't expect any large-scale acquisition, not currently. As to guidance, EBITDA which we expect in 2018, yes, just as we said.

EBITDA growth greater than that of 2017. The 2.7% at constant exchange rates that we're targeting.

So at constant exchange rates compared to 2017. That's precisely what we're targeting.

This will contain organic growth, mainly, I think, as in 2017, as well as external growth through small acquisitions. All in all, what you saw in 2017, 70% of our growth is organic, 30% of our growth was external growth, so to speak.

I can't yet tell you in 2018 the specific breakdown. But we continue with our strategy, our growth is mainly organic added to through small acquisitions.

You realize we include these in our figures only once the deal gets closed. And of course, I can't give you figures that we're currently working through now.

Philippe, there were two further questions.

Waste services prices have improved, especially this year, especially at the end of the year. Part of it is just a mix effect and the chance renewal of contracts.

The main increases we have witnessed are in Latin America because there is some inflation in those countries, but also in the U.K. and Germany.

And overall, the climate has been good. I mean, the renewals we have had, especially in France where we had a big number of renewals of incinerators, have not deteriorated pricing.

Actually in some cases, we have been able to sell additional services, thereby improving the tariff. The provisions, especially for '18, I told you what they were for the previous year for '17.

So '18 and '19...

[Indiscernible].

Sorry, I misheard the question. Restructuring is not always easy to forecast because, of course, we adapt as the year unfolds and in cases we will face difficulties.

Overall, I would say that restructuring next year should be about half what it had been this year, what it has been this year. Because, as always in a group as large as Veolia, some restructuring activity going on, but it should be about, I'd say, half of what we've had, especially the big chunk which was a €90 million provision for restructuring in French Water, of course, not recur.

We will be spending that money as the EBITDA impact is the provision is behind us now.

First question, the bridge EBITDA. We hear that you're booking a gain of €42 million combining commercial efforts and volumes and then there's €40 million additional you spent on your sales force.

This boils down to the following, in net terms, commercial efforts and additional costs in sales force were yielding €2 million and that's helped by volumes. If we exclude volume assistance, this year, what was the impact in the EBITDA of additional sales for commercial developments that they have brought in?

And what can your expectation be? EBITDA contribution to the sales force in 2018 and '19.

Second question on the bridge, we see here that you're contending with headwinds around €131 million worth. Could you please flesh this out, give us more specifics?

The €131 million, what does this contain? What's the breakdown?

I have a last question. On your balance sheet, you've got renewed financial flexibility, making it possible to have an eye on acquisitions.

How are you viewing debt now? Are you considering the leverage effect, a target here?

If so, what's the leverage you're targeting? Or are you thinking in absolute terms, the amount of debt you want?

If so, what's the absolute amount of debt you intend to continue having in your balance sheet?

Thank you, Michele. I'll be answering question one and question three.

Philippe will then answer question two. Michele, we decided - of course the expense goes to the income statement, but there's 40 million additional euros in sales force expenses we decided on last year.

You yourself observed that the payback on that so-called, so to speak, investment was good. The sales force, which will continue, will be continuing.

In just one year's time, they brought in, in terms of EBITDA how much? Approximately the amount we invested.

So the commercial efforts are the main reason we've seen growth in our activity, particularly organic growth. This type of investment with the one-year payback is infrequent and now that we made this investment, most importantly in future years - well the €42 million that we won, gained in 2017 will continue in the future.

And the commercial sales force will continue reaping further benefits, bringing in more, generating a similar amount every year. That would mean additional 40 million in '18 and in subsequent years as well.

So yes, it's been expensed in the income statement, it's an investment in that respect, but a particularly effective investment for this group. Second point, regarding our acquisitions policy.

I'd like to recall the following, think about the stage in our strategy after the transformation plan in 2015, we are now in a stage where there are no restructurings. We want to really prove that Veolia is very much able in its market using its know-how to generate regular growth on the order of 2% to 3% on average each year.

Earnings growth, which will be quicker by, at least one additional point, using basically the same resources and the same capital employed. We want to demonstrate this, provide evidence.

We are doing so in 2017. We've done so provided this evidence and we'd like to further confirm this in 2018 and 2019.

So we'll continue with the selfsame strategy, which is to generate sufficient free cash, first of all, to pay our dividends which are going up and earmark the remaining free cash flow to finance our development. So same debt levels, same resources, we'll be providing evidence that we can grow, using the same resources, regularly grow in terms of revenue and even more so in terms of profits, organic and external growth.

That continues to be our policy. 2018 and 2019, of course, will also be used to prepare subsequent stages in the process, to go even further and become even stronger.

To go further, be stronger will mean also having solutions to new challenges that our clients are contending with. But it's still early days to go through these points in detail and early days to consider a specific investments policy that might - to be earmarked in this respect.

We're currently still in the stage where Veolia is providing evidence, demonstrating that it's a major global player, regular one, using its resources to fuel its development and move even further forward. Now to comment on the EBITDA bridge and the €231 million amount.

The - it's some headwinds, fairly conventional, every year we see these as a blend, some tariff changes such as last year, inflation started nudging back up, even though our rate indexations were based on the previous year where there had not been inflation in Europe. Then you've got commercial renewals, always some of these in France, though their impact is much softer than sometimes in the past.

Cost of start-up of new activities, new contracts, multiservices of industrial clients, where the launch of activities in Armenia. Other effects, some losses on 15 clients.

All in all, therefore I'd say, various different costs that are just part of our business lives, our daily business, nothing - if there's nothing nonrecurring or specific, we just continue reducing our costs so that we can contend with these types of usual business situations and ups and downs.

Next question, so just to make sure that I understood on the headwinds, were you expecting a stable trend in value terms?

Probably won't be the same composition, but I think this figure, that this is what we generally exposed, it's about half the savings that we're generating. The total amount should be relatively stable.

The order of magnitude is all right even if the make-up changes year on year.

I have three quick questions. The first, concerned price effect of secondary raw materials, sharply down since age 2, 27, that's continuing in large part linked to the position of China in the waste sensitivity to revenue in EBITDA, in other words, if we take today's numbers, what would be the impact in terms of revenue and EBITDA at the current price secondary commodities, your basket as it were.

So first question. Second question concerns EBITDA bridge.

If I read you right, you mentioned commercial costs and bridge year-on-year are said to disappear in 2018 because they were launched and there will no longer be a delta in '18 versus '17. And ditto for the transient excess costs.

If all other things being equal, we have those business levels, no trend change, EBITDA would be not far from €3,450,000,000, or 480. So over and above those items, is that calculation right?

Is it the commercial efforts that will make the difference? So today, the acceleration that you mentioned, can you confirm it in the initial weeks of 2018?

That's my second question. Third question for Philippe Capron.

This is my hobbyhorse. What's the French tax code?

Because there were deficits to be attributed that weren't attributed at the end of '17. But we had a tax balance.

Had we shifted to a tax profit for the French scope?

So Philippe - I'll answer your second question and Philippe will answer the other two. So first of all, on the EBITDA bridge, yes, €40 million commercial efforts launched in '17.

You won't find them in the '18 - the '17, '18 bridge, obviously. Similarly, in '16, we had EBITDA one-off profits, we have minus 20 - about €20 million, so, far less than in '16.

And so the final step of the bridge will shrink considerably. Of course, on the obverse side, there are some headwinds.

We didn't see many arrive except those I mentioned in my introduction. There's Gabon to be offset and we're going to do that.

And there was your first question on the price of recyclates. I mentioned also the price of primary energy on our heating activities that we'll recover the following year.

And that's part of our business. There are headwinds and there are tailwinds, favorable contents.

Very difficult to know where we'll end the year when it's barely under way. So difficult to give you.

On February 22nd I'll tell you what the EBITDA for December 31 will be. As you'll appreciate.

That's why our guidance mentions EBITDA that will grow more than it did in 2017. Philippe, on the other?

On commodities and raw materials, indeed, China is impacting us. In fact, last year, we were relatively optimistic because we were saying that, in fact, since we're working essentially on well-processed, well-selected products on best of the recycled raw materials that we wouldn't be impacted, but it's the whole chain by gradual knock on that was impacted.

We see that even for the noble paper quality or plastic, we - there is an impact on prices. Sensitivity for us is 10% reduction in price of recyclate, is a loss of €70 million to €80 million of revenue per year.

With regard to EBITDA on the other hand, most times we're in pass through. Either we have specific contracts or we buy through mercurial, the market prices.

Our EBITDA exposure is probably only in the order of 10% revenues. So 10% of recyclates, that would only represent €7 million or €8 million EBITDA loss.

But what counts, what matters here is the dynamics, the slope at what point we buy, what point we sell. If we have stocks or not more than the absolute level.

French tax scope, we're on the point of saying that we were practically breakeven. The improved earnings in France, the management efforts on our SG&A is such that this year, we were very close to breakeven.

In particular, the dividend of the hybrid, and that's going to disappear, and that improves mechanically by €70 million, are reaching the - homing in on the target. I hope very soon, we will be in a situation in which we will be able to mobilize that hidden asset, even assessed conservatively at the tax rate announced by the government in many years is considerable value, above €400 million.

It's very difficult to predict because it linked to the parent company accounts, the change in value of our treasuries, stock is one of the amounts that comes in to our parent company consolidated results and the tax rate in France. So we would have to increase the share price to reach that target.

So thank you, Philippe, for that good piece of advice. Next question?

I've got two questions. The first one is more on your growth outlook of - I'm interested to see that you talked about in your commercial efforts driving most of the growth in 2017.

And now in some of your disclosures later in the slide, you actually show that you have quite a number of new contract wins during 2017. From my number, it looks like almost €3.8 billion of new wins in 2017.

So my question is - you've mentioned that you expect this to continue. Do you think you'd be able to sign another €3 billion, €4 billion of all new contracts in 2017 - in 2018 if the sales efforts are going so well?

That's my first question. And my second question is around the guidance for 2018.

You've mentioned higher growth than in 2017. I just wanted to confirm that this is versus the sort of constant FX definition of 2.7% EBITDA growth.

So just wanted to understand around the guidance there.

First, our growth outlook remains very good for next year. We have completely reorganized, as explained by Antoine, our commercial organization.

Each country now has its own development plans. We see new initiatives developing, new activities developing in geographies.

For example, in Eastern Europe, there was practically no waste activity. Now this is in full development.

In Japan, we are developing energy activities, which used not to exist there. So we are mobilizing the potential of the group's technologies, commercial and technical know-how in order to generate growth in novel fields.

There is no doubt that this will continue at least at the same level this year. So we're very bullish there.

In terms of guidance, I can confirm, indeed, that it means we anticipate EBITDA at constant currency to grow by more than 2017, i.e. 2.7%.

Just to add something to what has been stated by Mr. Capron regarding sales, we are now following and measuring the pipe in terms of the potential development for any country.

And what I can tell you is that it's true, two days of buyback at the end of January '18. It's better than the pipe we had at the end of January '17.

So we are very confident about sales development potential.

This is Anna Maria from Morgan Stanley. A few questions, if I may.

The first one is on Slide 32, which I found very interesting. Can you give us a sense of the 2020 revenues, let's say, that are under renewal?

Can you give us the sense what is the split by areas were? Whether you know is more concentrated in one business line or it's across the board?

Just to give us a sense. The second question was regarding contracts renewal.

I heard what you said to Manuel regarding the Waste business in France and that you see actually some improvement there. I'm - more generically, do you think this is - 2017 for the nine months, you said, was better than in the past?

Do you think it's a trend that is sustainable? Or do you think there is always pressure for you either to provide new services or actually to provide the same services at lower costs?

And the third question is regarding Slide 27. You mentioned the €37 million of impact on the tax rate.

I wanted to be sure I understood correctly, that's a one-off.

We can start with the - your last question. Indeed, it's a one-off.

I mean, the reimbursement of the dividend tax which we have paid in the past is, unfortunately, a one-off. This being said, in all calculations, we don't expect the apparent tax rate to grow much beyond 24% next year, maybe, we'll be somewhere between 24% and 26%.

But it shouldn't be much above that. For the 2020 renewal, indeed, we have a significant number of contracts being renewed in 2020.

One of them is well known, it's Toulouse French Water contract booked for water distribution and water treatment...

Waste-water.

And wastewater treatment. There is another series of contracts in the Czech Republic for water.

And - but one thing is worth mentioning is when we looked at - if we had looked at the same slide a year ago, it would have been €500 million higher in 2020 because there was also Braunschweig which was to be renewed. But guess what?

Now it's 2040 because we have renewed it in advance of the normal calendar. And this is what's happening a lot of the time.

So the fact that one given year we seem we have a large number, does not mean that will actually face renewal while at the specific date.

And it's not also saying that we would lose this contract. We have a very high renewal rate of our contracts, more than 90%.

I'm not sure if I understood your question regarding waste. It's difficult to predict what the growth is going to be.

Clearly, recyclates are probably not going to be supported. Volumes should remain well-oriented if we continue to face growth in Europe, as we have - including France, as we have this year.

Clearly the macro should help. But we're also helping ourselves.

The best and the fastest-growing segment of our waste activity worldwide is toxic waste and hazardous waste, where we have specific know-hows, a less crowded field and regulation helping to grow volumes.

Just one thing regarding my question, I was wondering regarding you spoke about renewal rate at more than 90%. I was wondering also what's the kind of pressure you get at renewal in terms of top line.

So - or margins, whether you think you can retain the margins or actually you see, in fact, some pressure on margins there?

Again, but I mean, that's what our business is in, we build higher profit margins by being more efficient, serving the clients more. We try to make ourselves indispensable so that at renewal time, the pressure we get from the clients spurred by competition is not such that he would want to take the risk of switching to a new supplier.

And therefore, the tariff we have to abandon is commensurate with the cost cutting we've done, so that we can actually keep the contract at a margin which is at least what it was at the original beginning of that same contract.

Just two questions. The first is on the balance sheet.

Obviously, you kind of highlighted very good conditions for raising debt and that you are likely to pay off the hybrid, in which case that's going to be a significant amount of cash going out in April, or at least refinance it. But you are carrying a very high amount of cash now on the balance sheet.

I think you've got €5.4 billion at group level and €1.1 billion at subsidiary level. And you also highlighted that the increased cash was one of the reasons why you aren't seeing the average cost of debt coming down.

So I was wondering whether you could just talk about that. I know it was something talked about a lot a few years ago about getting the cash balance down, but maybe you could give an update on what your plans are in that area.

And the second question is just on the energy business. And you helpfully provided some more details on Slide 43 in terms of some of the drivers there and the impact of weather.

But you've been doing very well in that business and seeing some decent volume growth and contract wins. So was wondering whether if you could just elaborate a little bit more on what you're doing there and maybe a bit more on what's driving the growth.

I'm sorry. On the balance sheet, we do indeed have a very large cash balance.

But that's for two reasons, mostly. One reason is that we use the favorable conditions to issue bonds in 2018 - in 2017, in advance of the reimbursement of the hybrid, although the hybrid, plus another bond, we will have to disburse €1.9 billion this year.

So of course, this will deplete our cash balance. But as you know, as you are familiar, our cash balance is high because we also have short-term debt in the guise of commercial paper.

We continue to issue €3.5 billion of commercial paper at minus 35 basis points. And to place this money in a variety of absolutely risk-free instruments, considered as cash by the French AMF and our auditors, with an average yield which today is about zero, which translates for the third year in a row into this abnormal situation where we can actually reduce the cost of our debt by €10 million during this arbitrage between commercial paper insurance and placement with the first name euro systemic banks at roughly zero.

So that's why we have this amount of cash. Of course, if market conditions changes, we would stop issuing commercial paper and our cash balance would be reduced by €3.5 billion.

It's a difficult environment because you don't know whether you will feel sorry because you issue bonds when you - and pay all them when actually the cash yields on this 0% or whether a few years down the road, we will be sorry that we've not issued more bonds, taking advantage of the very low rates which we are facing today. It's a rock and a hard place.

So in terms of game theory, we're trying to minimize our maximum of regrets.

Vincent Ayral here from JPMorgan. Just 2 or 3 questions here.

One is on the French recovery. I'm sorry but in the Q&A with the different translations, it's been difficult to hear everything so where I may have missed something, I would like to know if you could elaborate a bit more on what you're seeing on the Waste, so how the macro is influencing which industry, maybe a bit pushing volumes, profitability and understand the structural for you, landfill versus riverisation?

And another question would be on international where you're posting a very high level of growth. Would like to understand a bit the level of sustainability of this type of growth, what you would basically assume of the medium-term?

And finally, there have been some still, again, strong movement in FX in January. Wanted to know the type of impacts you should have year-on-year on your accounts using today's ForEx, please?

Okay as on French Waste, indeed, we've had a very good year. It's in part due to the fact that we've had significant contract wins, but also in part to the fact that the industry has been more sustainable than it had been over the previous years.

The recovery, which is modest by international standard, has helped and should continue to help. I could not point out any specific industry which has done better.

The car industry is probably the example which brings to mind. But we feel that this should continue, or at least we don't see any reversal of this tendency in the beginning of the year.

International growth, I don't know whether it's going to be sustainable. I don't know whether global macro is going to look like a few quarters down the road, but for a number of years now, for Veolia, we've seen that international outside of Europe has been driving our growth because that's where our growth is concentrated, but also because regulation is changing in those countries.

In China, we're far outgrowing Chinese GDP because there's a need for cleaner environment, the recycling of resources and regulation is helping push both municipal and industrial clients to more sophisticated treatments, and therefore, they call on us.

I think there is also a question about if the recovery in France is not only for Waste but for Water business, and we confirm that in term of turnover but also EBITDA, we enjoyed in 2017 a positive number, meaning growth of turnover and EBITDA also around Water business. It's a small number, but it is no more negative.

We enjoyed good volumes, which has helped, but we also had significant wins commercially. We've started to win back some customers and that clearly has helped.

Or to extend some existing contracts, which has offset the natural tendency towards a price erosion at renewal time. In terms of FX impact, it's very difficult, of course, to give you a forecast for this year.

But in our own budget, let's put it this way, we anticipate over the 1% - a bit more than 1% drag on sales. And roughly €30 million impact on our EBITDA after the €20 million which we had faced last year.

We will take the three last questions, but I think we missed question about the Energy. Philippe, did you get it?

I understood it was about Energy and the good performance we've had and whether we forecast a continuation. Indeed, we do.

We see that Energy is a fundamental addition to what we do. We see a lot of combined contracts, including Water and Energy, self-sufficient water treatment plants, for example, of waste and energy.

So utilization of waste as a fuel or transform as gas or burn as is for our industrial customers. So this is a fundamental knowhow.

On top of this, our expertise, especially in biomass and in cogeneration, is increasingly called upon both by municipal and industrial clients. So it is a fundamental - it's only 20% of our global sales, but it's a fundamental addition.

And it's one of the reasons for which we are very often able to win large contracts combining all our offers.

Okay, the two last questions, please?

You've already said a lot, I will keep it brief. I know you won't want to give a too explicit guidance maybe on 2018, but I was wondering something what you're saying on, for example, energy costs in Central and Eastern Europe going up in 2018 and only being compensated in 2019.

And also the full effect of the cost cutting being started in 2019. I was wondering in order to reach that 2019 target, do you think that the EBITDA growth should probably be a bit stronger in 2019 than in 2018?

Or do you think it should be roughly similar?

Olivier, you're asking too much about 2019. I could not tell you what will be our cost cutting plan.

So we have a global objective, as you know, between €3.5 billion, €3.7 billion, including IFRIC 12. But I will not give you and I'm not able to give you precisely, for example, the cost cutting plan.

The cost cutting plan is not only a number. It is an action plan with a lot of actions in all our countries, so we need to build it.

It is the work of, I would say, at least a semester of work of our teams. So it's much too early to tell you about that.

And about '18, we - just to give you, I would say, a floor. So perhaps we will do better, we hope we will do better.

But we will not give more today about that.

I got three actually. Just going back on your last point, just wanted to have a feel of how comfortable you are with the consensus EBITDA for 2018, which has something of around 5% growth all in.

Secondly, if you give us an update on what's happening in Romania, on the Romanian case. I haven't heard anything about that for a little while now.

And thirdly, if you could give us a bit more of an idea of which sectors you've seen increasing backlog in the Global Businesses unit?

Well, regarding the - I mean, we are not responsible for the consensus. We're only responsible for our guidance and our guidance, which may seem a bit disappointing to you compared to the plus 5%, reflects market conditions, recyclate prices, for example, and also what happened in Gabon, which, of course, we'll try to offset as much as we can, but which is bound to have an impact, keeping in mind again that this was EBITDA which only belonged to us at 51%.

And I answer to Olivier to the same question two minutes ago. It's a floor.

So we will see how much we will do better in the future of the year. About Romania, nothing new.

An inquiry is in due course. This inquiry is not finished.

We are collaborating with the employee. We have to wait the end of it this inquiry.

I cannot tell you more about that.

And regarding the backlog for what we call the template for Global Businesses, we've had - I mentioned the fact that SADE has been doing better in France, both on its pipelaying and its telecom equipment activities. And therefore, the backlog has increased.

For VWT, or water construction activities, Australia and the Middle East are probably the two areas where we face - where we've seen backlog improve.

So thank you very much for your presence. We will end our conference call now.

Of course, you know that our Investor Relations team is ready to answer all your questions. Thank you very much to all of you, and have a good day.