reference document 2015
reference document 2015
INCORPORATION BY REFERENCE Pursuant to Article 28 of European Regulation No. 809/2004 of April 29, 2004, this Reference Document incorporates by reference the following information: XX for the year ended December 31, 2014: Annual Report, consolidated accounts and the corresponding Statutory Auditors’ Report, included in chapters 9, 20.1 and 20.2, respectively, of the Reference Document registered with the AMF on April 13, 2015 under number D. 15-0332; XX for the year ended December 31, 2013: Annual Report, consolidated accounts and the corresponding Statutory Auditors’ Report, included in chapters 9, 20.1 and 20.2, respectively, of the Reference Document registered with the AMF on April 14, 2014 under number D.14-0360.
This Reference Document was registered with the French Financial Markets Authority (Autorité des marchés financiers – AMF) on April 4, 2016, in accordance with the provisions of Article 212-13 of the AMF General Regulations. It may not be used in support of a financial transaction unless supplemented by an offering memorandum approved by the AMF. It has been prepared by the issuer and is binding on the signatories.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 1 contents
1 Persons responsible for information 5 9 Financial Review AFR 135 1.1 Person responsible for the Reference Document 5 9.1 General Information 136 1.2 Declaration of the person responsible for the 9.2 Analysis of income statements 138 Reference Document AFR 5 9.3 Financing and net debt 143 9.4 Provisions 149 2 Statutory Auditors 7 9.5 Contractual commitments 150 9.6 Parent Company financial statements 152 2.1 Principal Statutory Auditors 7 9.7 Outlook 152 2.2 Deputy Statutory Auditors 7
3 Selected Financial Information 9 10 Cash and Shareholders’ Equity 153 10.1 Company shareholders’ equity 154 10.2 Source and amount of the issuer’s cash flows 4 Risk factors 11 and description of cash flows 154 4.1 Main risks 12 10.3 Borrowing terms and issuer’s financing 4.2 Risk management and control within the Group 28 structure 155 10.4 Restrictions on the use of capital 156 10.5 Expected sources of financing to meet Group information AFR 37 5 commitments relating to investment decisions 157 5.1 Group history and reorganization 38 5.2 Investments 40 11 Research and Innovation, trademarks, patents and licenses AFR 159 6 Overview of activities AFR 41 11.1 Research and Innovation 160 6.1 General information 42 11.2 Patents and trademarks 165 6.2 The Group’s strengths 45 6.3 Strategy 48 6.4 Presentation of the market and competitive 12 Information on trends AFR 167 position 56 6.5 Description of the Group’s main activities 64 13 Profits forecasts or estimates 169 6.6 Dependence factors 88 6.7 Legal and regulatory framework 88 6.8 Group environmental, corporate and social 14 Governance, management and supervisory responsibility policy 102 bodies and General Management AFR 171 14.1 Composition of governance and management 7 Organizational Chart 125 bodies 172 7.1 Simplified Group organization 14.2 Conflicts of interest within administrative as of December 31, 2015 126 bodies and General Management 193 7.2 Presentation of the Group’s main subsidiaries 127 7.3 Relations with subsidiaries 127 15 Compensation and benefits AFR 195 15.1 Compensation and benefits in kind 196 8 Real estate and equipment AFR 129 15.2 Amounts provisioned by the Company and its subsidiaries for the payment of pensions, 8.1 Group real estate and equipment 130 retirement benefits, and other benefits to 8.2 Environmental constraints that may affect the members of the Management Committee 209 Group’s use of its fixed assets 133
The elements of the Annual Financial Report are clearly identified in the sub-table of contents using the AFR pictograms AFR
2 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 16 Functioning of Governance 21 Complementary information AFR 379 and Management Bodies AFR 211 21.1 General information on share capital 380 16.1 Terms of office of members of the Board 21.2 Memorandum of association and Bylaws 386 of Directors 212 16.2 Information on service contracts between 22 Significant contracts 393 members of the Company’s governance and management bodies and the Company or any of its subsidiaries 213 23 Information from third parties, statements 16.3 Committees of the Board of Directors 213 of experts and declarations of interest 395 16.4 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code 214 24 Documents available to the public 397 16.5 Report of the Statutory Auditors on the Report 24.1 Consultation of documents 397 of the Chairman of the Board of Directors 230 24.2 Financial reporting calendar 397
17 Employees AFR 231 25 Information on equity interests 399 17.1 Human resources 232 17.2 Social information 238 Combined Shareholders’ Meeting of April 28 ,2016 401 17.3 Employee incentives and employee 26 shareholding 246 26.1 Agenda 402 17.4 Pensions and other employee benefit 26.2 Report of the Board of Directors 403 obligations 248 26.3 Statutory Auditors’ Special Report on related party agreements and commitments 412 26.4 Statutory Auditors’ reports 416 18 Major Shareholders AFR 249 26.5 Text of the draft resolutions 421 18.1 Breakdown of share capital at December 31, 2015 250 18.2 Major shareholders’ voting rights 251 18.3 Control of the Company 251 18.4 Agreement that may result in a change of control 252 Glossary 433 18.5 Summary of transactions made by persons Note on methodology 437 indicated in Article L. 621-18-2 of the French Monetary and Financial Code during the year Concordance table 439 ended December 31, 2015 253
19 Related-party transactions AFR 255
20 Financial information relating to the Company's assets, financial situation and revenues 257 20.1 Consolidated financial statements AFR 258 20.2 Statutory Auditors’ Report on the consolidated financial statements AFR 347 20.3 Parent Company financial statements AFR 349 20.4 Statutory Auditors’ Report on the Parent Company financial statements AFR 374 20.5 Dividend distribution policy 376 20.6 Legal and arbitration proceedings 376 20.7 Significant change in the financial or business situation 378
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 3 Notice The Company = SUEZ ENVIRONNEMENT COMPANY The Group = the Company and its subsidiaries The Reference Document serves as the Management Report (see Concordance Table)
This document is a free translation of the French language Reference Document that was registered with the Autorité des marchés financiers (the “AMF”) on April 4, 2016. It has not been approved by the AMF. This translation has been prepared solely for the information and convenience of shareholders of SUEZ ENVIRONNEMENT COMPANY. No assurances are given as to the accuracy or completeness of this translation, and SUEZ ENVIRONNEMENT COMPANY assumes no responsibility with respect to this translation or any misstatement or omission that may be contained therein. In the event of any ambiguity or discrepancy between this translation and the French Reference Document, the French version shall prevail.
4 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Persons responsible for information1
1.1 Person responsible for the Reference Document
Mr. Jean-Louis Chaussade, Chief Executive Officer of SUEZ ENVIRONNEMENT COMPANY.
1.2 Declaration of the person responsible for the Reference Document
“I hereby certify, after taking all reasonable measures to that effect, that the information contained in this Reference Document is, to the best of my knowledge, accurate and does not include any omission that would distort its substance. I certify that, to the best of my knowledge, the financial statements have been drawn up in accordance with applicable accounting standards and give a true and fair view of the assets, financial situation and results of the Company as well as of that of all the companies included in the consolidation, and that the Management Report enclosed presents a true and fair picture of the way in which business is developing, the results, and the financial situation of the Company and all the companies included in the consolidation, as well as a description of the main risks and uncertainties they face. I have obtained an audit completion letter from the Statutory Auditors, in which they indicate that they have audited the information concerning the financial position and the financial statements presented in this Reference Document, and have read the entire document. The consolidated financial statements for fiscal year ended December 31, 2015 presented in this document are the subject of a report by the Statutory Auditors in chapter 20.2."
Jean-Louis Chaussade Chief Executive Officer
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 5 6 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Statutory Auditors2
2.1 Principal Statutory Auditors
XX Ernst & Young et Autres XX Mazars 1/2, place des Saisons 61, rue Henri Regnault – Tour Exaltis 92400 Courbevoie Paris-La Défense 1 – France 92400 Courbevoie – France Appointed by decision of the Combined Shareholders’ Meeting Appointed by decision of the Combined Shareholders’ Meeting of December 21, 2007, and reappointed by the Shareholders’ of July 15, 2008 and reappointed by the Shareholders’ Meeting Meeting of May 24, 2012 for a six-year term expiring at the of May 22, 2014 for a six-year term expiring at the close of the close of the Ordinary Shareholders’ Meeting convened in 2018 Ordinary Shareholders’ Meeting convened in 2020 to approve to approve the financial statements for the fiscal year ending the financial statements for the fiscal year ending December 31, December 31, 2017. Represented by Jean‑Pierre Letartre and 2019. Represented by Isabelle Massa and Gonzague Senlis (2). Stéphane Pedron (1).
2.2 Deputy Statutory Auditors
XX Auditex XX CBA 1/2, place des Saisons Tour Exaltis - 61, rue Henri Regnault 92400 Courbevoie Paris-La Défense 1 – France 92400 Courbevoie – France Appointed by decision of the Combined Shareholders’ Meeting Appointed by decision of the Combined Shareholders’ Meeting of July 21, 2007 and reappointed by the Shareholders’ Meeting of July 15, 2008 and reappointed by the Shareholders’ Meeting of May 24, 2012 for a six-year term expiring at the close of the of May 22, 2014 for a six-year term expiring at the close of the Ordinary Shareholders’ Meeting convened in 2018 to approve Ordinary Shareholders’ Meeting convened in 2020 to approve the financial statements for the fiscal year ending December 31, the financial statements for the fiscal year ending December 31, 2017. 2019.
The fee schedule for the Statutory Auditors is found in Note 29 to the consolidated financial statements, in chapter 20.1 of this Reference Document.
(1) Ernst & Young et Autres is a member of the Compagnie Régionale des Commissaires aux comptes de Versailles. (2) Mazars is a member of the Compagnie Régionale des Commissaires aux comptes de Versailles.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 7 8 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Selected Financial Information3
The tables below present excerpts from the consolidated The selected financial information below should be read in income statements, statements of financial position and cash conjunction with the consolidated financial statements in flow statements of the Group for the years ended December 31, chapter 20.1 of this Reference Document and with the financial 2015, December 31, 2014 and December 31, 2013. review of the Group in chapter 9 of this Reference Document.
Key data from the consolidated income statements
In millions of euros 2015 2014 2013 Revenues 15,134.7 14,324.1 14,322.9 EBITDA (a) 2,751.1 2,643.6 2,534.2 Current operating income 1,115.1 1,011.2 1,148.4 Net income Group share 407.6 417.2 352.2
(a) The Group uses EBITDA to measure its operating performance and its ability to generate operating cash flows. EBITDA is not defined in IFRS and does not appear directly in the Group’s consolidated income statement. The transition from current operating income to EBITDA is described in section 9.2.1 of this Reference Document.
Key data from the consolidated statements of financial position
2014 In millions of euros 2015 restated (b) 2013 Non-current assets 19,592.5 18,991.5 18,433.1 Current assets 8,039.1 7,863.3 7,987.8 TOTAL ASSETS 27,631.6 26,854.8 26,420.9 Shareholders’ equity, Group share 5,419.8 5,486.2 4,951.6 Non-controlling interests 1,385.6 1,518.5 1,998.9 Other liabilities 20,826.2 19,850.1 19,470.4 TOTAL LIABILITIES 27,631.6 26,854.8 26,420.9
(b) Data at December 31, 2014 was restated for comparison purposes to account for the IFRIC 21 interpretation described in Note 1.2.1 of chapter 20.1.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 9 3 Selected Financial Information
Key data from the consolidated cash flow statements
In millions of euros 2015 2014 2013 Cash flows from/(used in) operating activities 1,991.5 1,973.1 1,780.2 Cash flows from/(used in) investing activities (1,350.3) (860.3) (928.0) Cash flows from/(used in) financing activities (811.1) (1,277.6) (513.3) Impact of changes in foreign exchange rates and others 0.1 22.2 (76.7) TOTAL CASH FLOWS FOR THE PERIOD (169.8) (142.6) 262.2
10 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors4
4.1 Main risks 12 4.1.1 Risks related to the Group’s business sector 12 4.1.2 Risks related to the Group’s business activities 15 4.1.3 Market risks 22 4.1.4 Insurance risks 26 4.1.5 Legal risks 26 4.1.6 Tax-related risks 27 4.1.7 Risks relating to the Company’s shares 27
4.2 Risk management and control within the Group 28 4.2.1 General framework for Group risk management and control 28 4.2.2 Management of industrial and environmental risks 29 4.2.3 Management of legal risks 31 4.2.4 Management of market risks 31 4.2.5 Ethics Program 33 4.2.6 Management and financing of insurable risks 34
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 11 Risk factors 4 Main risks
4.1 Main risks
Given the broad range of its businesses, locations and products, The Group operates in a rapidly changing environment that poses the Group represents a portfolio of risks and opportunities of a numerous risks, including some beyond its control. The Group financial, industrial and commercial nature. Its position as a key presents hereafter the significant risks to which it believes it is player in the environmental sector and its development goals exposed. The occurrence of any one of these risks could have also expose the Group to strategic risks, which are particularly a significant negative impact on the Group’s business, financial contingent upon regulatory, economic and industry developments position, earnings, image, or outlook or on the Company’s share in the segments in which it is involved. price.
4.1.1 Risks related to the Group’s business sector
..A changing competitive environment Finally, certain technological choices made by SUEZ to remain competitive or conquer new markets may not produce the The Group’s core businesses continue to face strong expected results and may have a negative impact on the Group’s competition from major international operators and, in some operations, earnings or outlook. markets, from “niche” players. New industrial (equipment manufacturers) and financial players (Asian conglomerates) . invest in markets or reposition themselves within the value .Group exposure to economic cycles chain by adopting aggressive strategies. In addition, the Group The year 2015 was marked by an increase in revenues, with also faces competition from public sector operators in some organic growth reaching 2.7% at the end of December 2015. markets, such as the semi-public companies in France. Finally, Because of its businesses, the Group is sensitive to economic for contracts previously awarded by public authorities, some factors whose impacts are described below. The economic cities may desire to retain or assume direct management of context that followed the 2008 crisis is persisting, causing water and waste services (notably in the form of public control, a prolonged slowdown in the activities of the Group’s major “régie”) instead of depending on private operators. customers. This strong competitive pressure, which could increase in a Some Group business lines, particularly services to industrial context of consolidation among private entities (which is already clients, both in the water and waste segments, are sensitive to underway in the waste sector in Europe), may put pressure on economic cycles. Since the Group is mainly present in Europe, the commercial development and prices of the services offered the United States, Chile and the Asia-Pacific zone, a proportion of by the Group, which could have a negative impact on its activity, its activity is sensitive to changes in the economic conditions of earnings and outlook. those geographic regions. Any economic slowdown in a country The risk of pressure on prices is exacerbated in the waste where the Group is present lowers consumption as well as treatment sector in some countries, where the Group may see investments and industrial production and, therefore, negatively the profitability of its facilities fall due to a reduction in the impacts demand for the services offered by the Group, which utilization rate resulting from the development of overcapacity. could in turn have a negative impact on the Group’s activity, earnings and outlook. The risk of price pressure is aggravated in the water treatment engineering segment due to the ramping up of new Spanish and Due to a possible correlation of the slowdown in activity in Korean players in the context of a contraction of the European Europe, the United States, Chile and the Asia-Pacific region, municipal market in relation to the worsening financial health the wide geographical diversity of the Group’s activities only of local public entities and the risk of a lack of competitiveness. offers partial protection from this risk. Moreover, in order to offer services that are comparable to or A persistent economic downturn could also result in payment better than those offered by its competitors, the Group may have difficulties for customers. At present, however, there is no to develop new technologies and services, thus enabling it to relationship of dependency vis-à-vis major customers due to generate additional revenues, which brings with it substantial the granularity of the customer base; indeed, the weight of the costs that could have a negative impact on the financial position largest municipal customer represents annual revenues of and earnings of the Group. €109 million or 0.7% of revenues (with the top five customers representing €357 million or 2.4% of revenues). The weight of the largest industrial customer is €87 million or 0.6% of
12 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Main risks 4
revenues (with the top five customers representing €228 million extended insurance program (see section 4.2.6, "Management or 1.5% of revenues). and financing of insurable risks"). As of December 31, 2015, the amounts provisioned for bad debts However, there are still many risks that result from the in the consolidated statement of financial position represent, vagueness of some regulatory provisions or the fact that in aggregate, €290.3 million. The final losses recorded do not regulatory bodies can amend their enforcing instructions and represent a significant challenge for the Group. that major developments in the legal framework may occur. In addition, the competent regulatory bodies have the power ..Group exposure to changes in consumption trends to institute administrative or legal proceedings against the Group, which could lead to the suspension or revocation of In the supply of drinking water in some developed countries, a permits or authorizations the Group holds, or injunctions to decrease is being observed in volumes consumed mainly due to cease or abandon certain activities or services, fines, or civil social factors and the idea that water is a resource that needs penalties or criminal convictions, which could negatively and to be preserved. For example, in France, the Group estimates significantly affect the Group’s public image, activity, financial that the volumes of water billed have declined by roughly 1% position, earnings and outlook. a year on average over the last 15 years. Moreover, amending or strengthening regulatory provisions The productivity gains achieved by the Group and the fact that could engender additional costs or investments for the Group. 4 some contracts provide for a fee portion that is independent As a result of such measures, the Group might have to reduce, of volume consumed, the development of high value-added temporarily interrupt, or even discontinue the conduct of one services, particularly in supporting public authorities in their or more activities with no assurance that it will be able to obligation to meet changing regulations, and rate adjustments compensate for the corresponding losses. Regulatory changes have helped the Group to offset this reduction in volume. may also affect prices, margins, investments and operations, However, if these developments are insufficient in the future to and, consequently the Group’s activity, earnings and outlook. offset the reduced volume, there may be a negative impact on The applicable regulations involve investment and operating the Group’s activity, earnings and outlook. costs not only for the Group, but also for its customers, particularly the contracting local or regional public authorities, ..Impact of climatic conditions on earnings from Group water notably due to compliance obligations. Failure by the customer to meet its obligations could injure the Group as operator and operations harm its reputation and capacity for growth. The Group’s earnings in the water sector can be affected by Finally, even if the Group complies with applicable regulations, significant weather changes. it has no control over privately owned interior pipes that may In France, for example, exceptional rainfall caused a reduction be the source of some quality issues with tap water. Such pipes in water consumption in 2007, while episodes of hot weather are not the responsibility of the operator of public drinking water generated greater water consumption in 2003. Therefore, production and distribution networks. Indeed, in recent years, exceptional rainfalls may have a negative impact on the Group’s French regulations gradually lowered the maximum permitted operations and earnings. level of lead in water intended for human consumption with a target of 10 micrograms per liter at the end of 2013. The . Group is offering to replace customers’ pipes to achieve these .Change in the environmental, health and safety objectives. This work involves renegotiations of contracts. Still, regulatory context the Group cannot exclude the possibility of deviations from this target because of the presence of lead in privately owned pipes The Group’s businesses are subject to environmental protection, over which the Group has no control. Any overstepping of the public health and safety rules that are increasingly restrictive regulatory standard for drinking water, whatever its origin, and differ from country to country. These rules apply to water could have a negative impact on the Group’s image. discharge, drinking water quality, waste treatment, long-term monitoring of landfills, soil and water-table contamination, air Despite the monitoring systems implemented, it is impossible quality and greenhouse gas emissions (see chapter 6.7, "Legal to predict all regulatory changes. However, by engaging in its and regulatory framework"). businesses in several countries, each with its own regulatory system, the Group diversifies this risk. Overall, regulatory changes offer new market opportunities for the Group’s businesses. The Group strives to limit all of these risks by conducting a proactive policy of environmental and industrial risk management (see section 6.8.1) and an
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 13 Risk factors 4 Main risks
..Some Group activities require administrative authorizations agricultural droughts, changes in flows and quality of water and reduced quality of fresh water reserves. The report states that can be difficult to obtain, or renew that the impacts of climate change on water resources should In performing its activities, the Group is required to hold various intensify significantly with increases in greenhouse gas permits and authorizations, which often require lengthy, costly emissions. Every additional degree could cause around 7% of and seemingly arbitrary procedures to obtain or renew. the world population to suffer a reduction of at least 20% in renewable water resources. Furthermore, the percentage of the Moreover, the Group may face opposition from local citizens population exposed to the risk of an exceptional flood at the end or associations for installing and operating certain facilities of the 21st century could be three times greater in relation with a (specifically landfills, incinerators and wastewater treatment high emissions scenario compared to a low emissions scenario. plants) involving nuisances, landscape degradation or, more Modifications to the physical parameters of the climate are generally, damage to the environment, making it more difficult likely to bring on a slowing of world economic growth because for the Group to obtain construction or operating permits of increasing North-South imbalances and of the increase in and authorizations, or resulting in non-renewal or even legal migratory flows linked to climate change. Moreover, uncertainty challenges. In this respect, the Group could face legal action around changing climate scenarios may create a risk of over- or from environmental organizations that could delay or impede under-investment for the Group. its operations or the development of its activities despite the various initiatives and actions it has undertaken. Operational risks Finally, the conditions attached to authorizations and permits In general, increased drought frequency and intensity could that the Group has obtained could be made substantially more lead to a localized decrease in the availability of groundwater stringent by the competent authorities. and surface water resources. This increasing scarcity of water The Group’s failure to obtain or a delay in obtaining a permit resources, in combination with demographic and metropolization or authorization, non-renewal of or a challenge to a permit pressures could reduce or interrupt production capacity and or authorization, or significantly more stringent conditions cause increased conflicts of use between agriculture, industry associated with the authorizations and permits obtained by and domestic consumption, impacting more specifically energy the Group could have a negative impact on its activity, financial supplies and food security. Moreover, the increase of drought position, earnings and prospects for development. phenomena could increase the risk of saltwater intrusion into aquifers. On a secondary level, it could lead to an increase ..Risks linked to climate disruptions in sedimentation of rivers, a worsening of raw water quality and a modification of the natural assimilative capacity of the Article 173 of the Law on Energy Transition for Green Growth, receiving environment, increasing the risks related to treatment paragraph 3 in particular, stipulates that companies publish of drinking water, including standard treatment processes. information regarding financial risks linked to climate Droughts could also cause landslides that could degrade the change and the measures they are taking to reduce them by performance of drinking water networks. implementing low-carbon strategies in all components of their The increasing occurrence of significant rainfall events, as activities. The Group is already determining and making public well as an increase in their intensity, creates a growing risk annually the risks of climate disruption caused by its businesses in coming decades of flooding of Group-managed facilities as part of its response to the Carbon Disclosure Project. and overloading of storm sewer networks. Meanwhile, the disruption of transportation systems by flooding could affect Business risks power supply, waste collection and the delivery of reagents for In its fifth assessment report published in 2014, the water treatment. Intergovernmental Panel on Climate Change (IPCC) has stated that the average rise in temperature due to climate change The gradual increase in such weather events could have will probably be between 1.5°C and 4°C compared to pre- increasingly significant consequences for the Group’s activities. industrial levels, depending on greenhouse gas emission While these are long-term risks, the Group is already preparing scenarios. These disruptions should lead to significant impacts for them by directing its innovation policy and business strategy on natural environment, especially on water resources, and towards managing the effects of climate change as it relates to include a significant reduction of available surface water drought risk and risks related to exceptional rainfall. and groundwater resources, an increase in the frequency of
14 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Main risks 4
Regulatory risks ..Risks related to fluctuations in certain commodity Regulatory changes in environmental and tax legislation in and energy prices France (Grenelle II, Law No. 2015-992 of August 17, 2015 relating to energy transition for green growth), in Europe (Climate and The Group’s activities consume significant quantities of raw Energy Package), and internationally (proliferation of markets materials and energy, more specifically gasoil and electricity, for GHG emissions quotas) do not seem to include the waste and therefore the Group is vulnerable to fluctuations in their sector in any discharge taxation mechanism. For example, the prices. new government in Australia abandoned its Emission Trading The Group’s contracts generally provide for indexation Scheme in July 2014. The most intensive activities of the mechanisms, particularly in long-term contracts. The Group Group in terms of energy consumption will nevertheless be cannot guarantee that such mechanisms will cover all of the increasingly covered by carbon pricing mechanisms, such as in additional costs generated by increases in electricity and oil the United Kingdom, where industries using more than 6 GWh prices. In addition, some contracts entered into by the Group do of energy per year are subject to a tax per ton of greenhouse not include indexing provisions. Accordingly, any major increase gas emitted. in the price of electricity or oil could have a negative impact on However, setting a price on carbon could lead to a new economic the Group’s earnings and outlook. reality that must be taken into account in the business models. Moreover, the Group’s waste activities lead to the production of 4 While it could apply to greenhouse gas emissions generated by plastic, wood, cardboard, metals, and electricity; a significant the Group, it could also create financial value from emissions decrease in their price could affect the profitability of some that its solutions help to avoid. The Paris Treaty signed by the investments or the economic balance of certain contracts and 196 parties to the United Nations Framework Convention on have a negative impact on the Group’s activity, earnings and Climate Change on December 12, 2015 works in this direction, outlook. as Title V of the document acknowledges the importance of For projects that require large quantities of raw materials, providing incentives to emissions reduction activities, involving which are the most sensitive to market fluctuations, the Group particularly tools such as national policies and carbon pricing. continually tries to consolidate its procurement sources and The steps taken by the Group to implement its low-carbon maintain a sufficient number of suppliers for strategically strategy and to reduce risks related to climate change are important equipment and raw materials. The objective is to presented in section 6.8.1.5 of this Reference Document. obtain the best market conditions at all times.
4.1.2 Risks related to the Group’s business activities
..Risks related to major projects through its specialized Treatment solutions' subsidiaries and Safege (consulting activity). The Group’s organic growth is in part based on various major projects involving the construction of industrial assets, including These risks are related to the completion of fixed-price turnkey water production plants, water desalination plants, wastewater contracts. Under the terms of such contracts, the specialized and waste treatment plants. subsidiaries operating in the Treatment solutions segment agree to engineer, design and build operation-ready plants for The profitability of these assets, which have a lifespan of several a fixed price. The effective expenses resulting from executing a decades, is contingent in particular on controlling costs and turnkey contract can vary substantially from initial projections construction timeframes, operating performance and long-term for different reasons, such as: trends within the competitive environment, any of which could reduce the profitability of certain assets or result in loss of XX unforeseen increases in the cost of raw materials, equipment revenues and asset impairment. or labor; XX unexpected construction conditions; ..Risks related to design and build activities XX delays due to weather and/or natural disasters (particularly earthquakes and floods); In the water and waste sectors, the Group is involved in certain projects at the design and build phases of facilities, particularly XX non-performance by suppliers or subcontractors.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 15 Risk factors 4 Main risks
The terms of a fixed-price turnkey contract do not necessarily ..Risks of dependency on certain suppliers make it possible to increase prices to reflect elements that were difficult to predict when the bid was submitted. For Group companies may depend on a limited number of suppliers these reasons, it is impossible to determine with certainty the for their construction, operation or delegated management final costs or margins on a contract at the time the bid was activities. A distinction is made between three main groups submitted, or even at the start of the contract’s execution phase. of suppliers. If costs end up rising for one of these reasons, the specialized subsidiaries of the Treatment solutions segment might have Suppliers of raw water, wholesale treated water, and primary energy to reduce their margins or even book a significant loss on a Some Group companies depend on raw water, treated water contract. or primary energy suppliers for their distribution activities. Such dependence is generally imposed by regulation or local Engineering, procurement and construction projects (EPC) can technical configurations, leading to the de facto monopoly encounter problems that may entail a reduction in revenues, of these suppliers. It is always possible that such suppliers disputes or lawsuits. These projects are generally complex, may fail to meet their obligations due to technical issues and require major purchases of equipment and large-scale (breakdowns), pollution or for other reasons, causing a risk project management. Schedule shifts may occur, and the of service interruption. The Group seeks to mitigate this risk specialized subsidiaries of the Treatment solutions segment by diversifying sources of supply and by interconnecting might encounter design, engineering, supply chain, construction networks where possible and ensuring that contracts provide or installation problems. These factors could have an impact on for adequate exclusion of liability clauses in case insufficient their ability to complete certain projects by the original deadline. amounts of water or electricity are delivered to the concession Certain terms of the contracts concluded require the client to holder. provide particular design- or engineering-related information, in addition to the materials or equipment to be used in the project. Builders These contracts may also require the client to compensate them Some Group companies depend on “Builders” – suppliers or for additional work done or expenses incurred, if (i) the client subcontractors in civil engineering, combustion and energy changes its instructions, or (ii) the client is unable to provide recovery systems, etc. – for their design and construction them with adequate design or engineering information or activities. A one-off or wholesale failure by any of these materials or equipment for the project. suppliers or subcontractors could result in unforeseen delays In such cases, these subsidiaries usually negotiate financial in the construction schedule resulting in the application of late compensation with their clients for the additional time and penalties under the agreement. This risk is limited because it is money spent due to the client’s failure to meet its contractual managed from within the project and is in any case dispersed obligations. However, the Group cannot guarantee that it within the portfolio due to the large number of suppliers. In will receive sufficient compensation to offset the extra costs addition, special provisions may be adopted when designing incurred, even if it takes the dispute to court or arbitration. In projects to reduce dependence on certain suppliers. such cases, the Group’s earnings and financial position could Other Group companies also depend on "Builder" suppliers and be significantly affected. subcontractors as part of their concession or public services The Group, as part of the guarantees given to cover its contracts. The failure of one of these "Builders" resulting in subsidiaries’ commitments, may be required to pay financial delays in the commissioning of concessional facilities could compensation if it breaches contractual deadlines or other terms have an impact on contractual rate increases and consequences of the contract. For example, the new facility’s performance may for the overall profitability of the investment. The Group not comply with project specifications, a subsequent accident manages this risk through a careful selection process and by may invoke the Group’s civil or criminal liability, or other monitoring its "Builders". This risk is also not critical as it is problems may arise (now or in the future) in the performance dispersed within the supplier portfolio. of the contract that may also significantly impact the Group's operating income.
16 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Main risks 4
Other suppliers ..Risks of unilateral cancellation, non-renewal or amendment The Group companies also use various suppliers and of contracts with public authorities subcontractors in connection with their business and activities: service providers (temporary workforce agencies, design The contracts entered into by the Group with public authorities offices, transportation companies, etc.); suppliers of energy, make up a significant share of its revenues. However, in fuel, equipment, chemicals, etc. most of the countries in which the Group has a presence, including France, local public entities have the right, in certain The failure of any of these suppliers could have an impact on the circumstances, to amend or even terminate the contract continuity of service that is the critical performance indicator unilaterally, subject to compensation. If a contract is unilaterally in the public service activities of Group companies, both in the cancelled or amended by the contracting public authority, the Waste and Water sectors. Group may not be able to obtain compensation that fully offsets The Group considers that this risk is adequately covered by the resulting loss of earnings. the measures in place: careful selection of suppliers, backup Moreover, the Group does not always own the assets that it equipment, availability of generators, crisis management plans, uses in its operations under a public service delegation contract stockpiling chemicals, diversification of suppliers. (primarily through public service concessions or leases). SUEZ cannot guarantee that the contracting authority will renew each 4 Weight of the largest suppliers in the Group’s procurement process of its existing public service delegation contracts or that the Out of total purchases of €6.0 billion in 2015, the largest supplier financial conditions of the renewal will be the same as the initial represents €350 million, the top five €640 million, and the top delegation. This situation could negatively impact the Group’s ten €820 million. The Group considers that currently there are operations, financial position, earnings and outlook. no relationships of dependency on its main suppliers. ..Risks related to external growth operations ..Non-performance risks of long-term contracts The Group’s development strategy prioritizes organic growth, The Group carries out most of its business activities under but may include external development or growth operations long-term contracts with terms of up to 50 years or more. The through the acquisition of assets or companies and interests conditions for performing these long-term contracts may be or alliances in the waste and water businesses and geographic different from those that existed or that were anticipated at the areas in which the Group wishes to expand. The Group may time the contract was entered into, and may change the balance be unable, given the competitive environment, to successfully of the contract, particularly the financial balance. complete development or external growth operations that it SUEZ makes every effort to obtain contractual mechanisms may be planning based on its investment criteria. that allow it to adjust the balance of the contract in response Moreover, external growth operations may involve a certain to changes in certain significant economic, social, technical or number of risks related to the integration of the acquired regulatory conditions. However, not all long-term contracts businesses or staff, the difficulty in generating the expected entered into by the Group have such mechanisms. Moreover, synergies and/or savings, an increase in the Group’s debt and when the contracts entered into by the Group contain such the emergence of unexpected liabilities or costs. The occurrence adjustment mechanisms, the Group cannot guarantee that its of one or more of these risks could have a negative impact on contractual partner will agree to implement them or that they the activity, financial position, earnings or outlook of the Group. will be effective in re-establishing the financial balance of the contract. The absence or potential ineffectiveness of the adjustment mechanisms provided for by the Group in its contracts or the refusal of a contractual partner to implement them could have a negative impact on the Group’s financial situation, earnings and outlook.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 17 Risk factors 4 Main risks
..Risks related to a presence in certain emerging countries Changes in a project, in the local political and economic context, in the economic position of a partner, or the occurrence of a Although the Group’s business activities are concentrated disagreement between the partners may lead to the termination mainly in Europe, the United States, Chile and Australia, the of partnerships, particularly if partners exercise puts or calls on Group also conducts business in other markets, notably in a shares, if one of the partners requests the dissolution of the joint number of emerging countries. The Group’s activities in these venture, or through the exercise of a pre-emptive right. These countries involve a certain number of risks that are higher situations can also lead the Group to choose to strengthen its than in developed countries, such as GDP volatility, relative financial commitments in certain projects or, in the event of economic and governmental instability, sometimes major conflict with its partner(s), to seek solutions in court or before amendments to, or imperfect application of regulations, the the competent arbitration bodies. These situations could have nationalization and expropriation of private property, payment a significant negative impact on the Group’s business, financial collection difficulties, social problems, substantial fluctuations position, earnings and outlook. Moreover, the Group cannot in interest and exchange rates, claims by local authorities that guarantee that the projects it carries out in partnership will be call into question the initial tax framework or the application implemented on time and according to satisfactory economic, of contractual provisions, currency control measures, and financial and legal conditions, or that they will deliver the long- other unfavorable interventions or restrictions imposed by term profitability that was originally projected. governments. Although the Group’s activities in emerging markets are not ..Risks of civil and environmental liability concentrated in one country or a specific geographic region, events or unfavorable circumstances that take place in any of The business areas in which the Group operates involve a major these countries could have a negative impact on the Group’s risk of civil and environmental liability. The increase in legal, business and could also result in the Group having to book regulatory and administrative requirements exposes the Group provisions and/or impairments in its accounts, which could to greater risk of liability, particularly in terms of environmental have a significant negative impact on its financial position, responsibility, including liability for assets the Group no longer earnings and outlook. In addition, the Group could be unable owns or for activities that it has discontinued. to defend its rights in the courts of these countries if there is Specifically, the existing regulations impose the obligation to a conflict with their governments or other local public entities. restore environmentally classified sites when operations finally The Group manages these risks in connection with its end, which requires the booking of provisions. partnerships and contractual negotiations on a case-by- In addition to contractual precautions, the Group strives to case basis. In order to limit the risks related to operations limit all these risks as part of its environmental responsibility in emerging countries, the Group determines its choices by policy (see sections 4.2.2, "Management of Industrial and applying a selective strategy based on a detailed analysis of the Environmental Risks" and 6.8.1, "Environmental Management") country’s risks and, to the extent possible, taking out political as well as through its insurance policies (see section 4.2.6, risk insurance and putting international arbitration clauses in "Management and Financing of Insurable Risks"). However, the place. civil liability and environmental risk insurance policies taken out by the Group may prove insufficient in certain cases, and ..Risks linked to partnerships could generate major costs and negatively impact the Group’s financial position, earnings and outlook. In several countries, the Group carries out its activities through partnerships with local authorities or private local entities. . Moreover, the Group may be required to enter into new .Risks related to facilities management partnerships in order to develop its activities. The facilities that the Group owns or manages on behalf of third Partnerships are one of the means by which the Group shares parties carry risks to the surrounding environment (air, water, the economic and financial risk inherent in certain major projects soil, habitat and biodiversity) and may pose risks to the health of by limiting the amount of its capital employed and allowing it to consumers, local residents, employees, or even subcontractors. better adapt to the specific context of local markets. Moreover, These health and environmental risks, which are governed partnerships may be required by local laws and regulations. The by strict national and international regulations, are regularly partial loss of operating control is often the downside of this monitored by the Group’s teams and by the public authorities. reduced exposure in capital employed. However, this situation These changing regulations with regard to environmental is managed contractually on a case-by-case basis. responsibility and environmental liabilities carry the risk of
18 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Main risks 4
an increase in the Company’s vulnerability in relation to its management and financial liability; however, failure to comply activities. This vulnerability must be assessed for older facilities with standards may lead to contractual financial penalties or (such as closed landfills) and for sites in operation. It may also fines. involve damage caused to habitats or species. There are risks related to the operation of waste treatment As part of its activities, the Group must handle, or even generate, facilities, water treatment facilities, water supply networks and hazardous products or by-products. This is the case, for certain services rendered in an industrial context. These risks example, with certain chemicals used in water treatment. In can lead to industrial accidents with, for example, operational waste treatment, some Group facilities treat special industrial incidents such as fire or explosion, design faults or external or medical waste that may be toxic or infectious. events beyond the Group’s control (actions by third parties, In waste management, gas emissions to be considered include landslides, earthquakes, etc.). Such industrial accidents may greenhouse gases, gases that induce acidification of the air, cause injuries, loss of human life, significant damage to property noxious gases and dust. In water activities, the potential air or to the environment as well as business interruption and pollutants are mainly chlorine or gaseous by-products resulting loss of output. from accidental emissions of water treatment products. If a major drinking water production or distribution facility is Wastewater treatment and waste treatment activities can also unavailable, this could result in a stoppage of water delivery cause odor problems or the production of limited but dangerous across a fairly large area, resulting in loss of revenues and 4 quantities of toxic gas or micro-organisms. the risk of paying the relevant compensation as well as harm In the absence of adequate management, the Group’s activities to the Group’s public image and/or breach of a public service could have an impact on water in the natural environment: obligation. leachates from poorly monitored facilities, discharges of heavy Industrial risks are managed by implementing a safety metals into the environment, and aqueous discharges from flue management system at each site based on the principle of gas treatment systems at incineration plants. These various continuous improvement and aimed at reducing residual risk types of emissions could pollute water tables or watercourses. by focusing as a priority on the highest risks. An internal risk Wastewater treatment plants discharge decontaminated control procedure is implemented and coordinated by the water into the natural environment. For various reasons these Department of Innovation and Industrial Performance, following may temporarily fail to meet discharge standards in terms of an internal reference framework. organic, nitrogen, phosphorus or bacteriological load. Although the Group has premium civil liability and environmental Soil pollution issues could arise in the event of accidental spills risk insurance, it may still be held liable above the guaranteed of stored hazardous products and liquids, leaks from processes caps or for items not covered in the event of claims involving involving hazardous liquids and the storage and spread of the Group. sludge. Moreover, the amounts provisioned or covered may be Various mechanisms are used to monitor all of the above risks. insufficient if the Group incurs environmental liability, given The Group carries out its industrial activities under regulations the uncertainties inherent in forecasting expenses and liabilities that give rise to safety rules for the use of infrastructures or for related to health, safety and the environment. performing services. The care taken in the design, execution and Therefore, the Group’s liability for environmental and industrial operation of its works cannot prevent all industrial accidents risks could have a significant negative impact on its public that might interfere with the Group’s activities or generate image, activity, financial position, earnings and outlook. financial losses or material liability. The Group’s industrial and environmental risk management The laws and contracts that govern the Group’s operations policy is described in section 4.2.2 of this Reference Document. clarify the division of responsibilities with respect to risk
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 19 Risk factors 4 Main risks
..Specific risks related to operating high-risk sites (“Seveso” sites) According to Directive 2012/18/EU of July 4, 2012, SUEZ operates Seveso-designated sites within the European Union. The main sites classified as “high threshold” Seveso as of December 31, 2015 are as follows:
Business Unit Location Country Threshold Activity R&R France Villeparisis France High Storage and pre-treatment of hazardous waste R&R France Airvault France High Storage and pre-treatment of hazardous waste R&R France Champteussé sur Baconne France High Storage and pre-treatment of hazardous waste R&R France Bellegarde France High Storage and pre-treatment of hazardous waste R&R France Drambon (report in progress) France High Storage and pre-treatment of hazardous waste R&R France Jeandelaincourt France High Storage and pre-treatment of hazardous waste R&R France Vaivre France High Storage and pre-treatment of hazardous waste R&R France Givors France High Storage and pre-treatment of hazardous waste R&R France Pont-de-Claix France High Hazardous waste treatment R&R France Péage de Roussillon France High Hazardous waste treatment R&R France Beautor France High Hazardous waste treatment R&R France Amnéville France High Hazardous waste treatment R&R France Frontignan France High Storage and pre-treatment of hazardous waste R&R France Barlin Hersin France High Storage and pre-treatment of hazardous waste R&R France Herne Germany High Thermal desorption of soils polluted with PCBs and mercury R&R France Barbera Spain High Hazardous waste treatment
* R&R France: Recycling and Recovery France.
In addition to the facilities identified in Europe as Seveso “high international growth and the trends of its businesses require threshold” sites, SUEZ operates other hazardous industrial sites new know-how and a great deal of mobility among its staff, for which it is committed to applying the same high industrial particularly its executives. In order to meet this need, the safety standards. Accordingly, the Group conducts one-off Group has implemented a human resources policy focused on checks and audits to ensure that these obligations are being employment management tailored to the various locations and met. on fostering employability through the development of training. Any incident at these sites could cause serious harm to The Group’s success depends upon its ability to map employees working at the site, neighboring populations and organic skills, to hire, train and retain a sufficient number of the environment, and expose the Group to significant liabilities. employees, including managers, engineers, technicians and The Group’s insurance coverage (see section 4.2.6 of this sales professionals with experience in the industrial markets Reference Document) could be insufficient. Any such incident who have the required skills, expertise and local knowledge. could, therefore, have a negative impact on the public image, Competition for this kind of profile is strong. activity, financial position, earnings and outlook of the Group. To retain skilled personnel, the Group has implemented The Group follows an accident prevention policy through a a management policy aimed at key staff, which includes series of initiatives and actions described in section 4.2.2 of essential and high-potential profiles for whom special loyalty this Reference Document. arrangements are in place.
..Risks related to human resources management ..Risks of labor conflicts The Group employs specialists and executives with a broad Organizational changes and lack of understanding of the range of expertise applied to its various businesses. In order Group’s strategy can lead to cooperation and negotiation being to prevent the loss of key skills, the Group must anticipate ineffective in regulating labor relations. labor shortages in certain businesses. In addition, the Group’s
20 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Main risks 4
The Group must consider the possibility of labor disturbances, ..Risks related to natural disasters or other major events such as strikes, walkouts, claim actions or other labor problems that could disrupt its business and have a negative impact on for which the extent is difficult to predict its financial position and earnings. Because of its diverse geographical presence, some of the Moreover, in the waste segment, the occurrence of labor Group’s infrastructures could be exposed to natural disasters disruptions could have a significant negative impact on the such as earthquakes, heavy rainfalls, storms, hailstorms, Group’s public image. freezing, drought and landslides, etc. Apart from the occurrence of natural disasters, other major events, whose extent is difficult to predict (major epidemics, etc.), could impact the Group’s ..Risk of occupational illnesses, particularly those related activities. to exposure to asbestos, legionnaire’s disease The Group’s policy is to cover those risks through its insurance or muscular-skeletal problems programs with premium insurance companies and suitable coverage. However, the Group cannot guarantee that the The Group is very aware of the risks of deterioration in measures taken to control these risks will prove fully effective employees’ and subcontractors’ health and takes measures if any such event should occur. Moreover, the Group may to protect their health and safety. It takes great care to remain not always be able to maintain a level of coverage that is at in compliance with legal and regulatory health and safety 4 least equal to its existing coverage and at no higher cost. The provisions at its various sites. However, it may be confronted frequency and extent of natural disasters observed in recent with occupational illnesses that could lead to legal action years could impact both the capacity of insurance markets to against the Group and, potentially, to the payment of damages, cover such risks and the cost of insurance coverage. which could be significant. Personnel working at water production and distribution ..Risks related to information systems facilities and on hazardous industrial waste treatment sites may be exposed to chemical risks. Chemical risk is one of the Information systems are critically important in supporting all risks managed under the health and safety system. the Group’s business processes. In addition, the risk of a pandemic, such as avian flu, has been Increasingly, they are interconnected and cut across business anticipated by implementing continuity plans and measures segments. Any failure could lead to loss of business, loss of to protect and prevent infection of employees who continue to data or breach of confidentiality, and could negatively impact work during pandemics. the Group’s operations, financial position and earnings. The implementation of new applications may require ..Risks of criminal or terrorist acts at Group sites considerable development, which is then carried out in project mode, with risks relating to development costs, quality and Despite security measures taken by the Group in the operation deadlines. of its water and waste facilities, the possibility remains that they could be affected by malicious acts and acts of terrorism, Risk of malware intrusion in IT systems is increasing. This risk with consequences for public health or harm to employees, is a threat to data security and can lead to acts of fraud. It also equipment or sites. heightens the vulnerability of SCADA control and supervision systems at our industrial facilities. In addition, some of the Group’s employees work or travel in countries where the risks of terrorism or kidnapping may be high. ..Risks related to ethics breaches The occurrence of such acts could have a significant negative Actions by staff, corporate officers or representatives impact on the public image, activity, financial position, earnings contravening the principles affirmed by the Group could and outlook of the Group. expose it to legal and civil penalties as well as leading to loss of reputation.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 21 Risk factors 4 Main risks
4.1.3 Market risks
..4.1.3.1 Interest rate risk The Group’s exposure to interest rate risk derives mainly of this debt was at floating rates, 85% at fixed rates and 11% from its floating rate net financial debt. As of December 31, at inflation-indexed fixed rates. After hedging, 16% of the debt 2015, the Group’s net debt (excluding financial derivatives and was at floating rates, 73% at fixed rates and 11% at inflation- amortized cost) totaled €8,023.4 million. Before hedging, 4% indexed fixed rates.
The following table shows the distribution of the Group’s net debt by type of rates (after hedging) as of December 31, 2015.
Net debt at Net debt at Net debt at inflation- Less than In millions of euros Total fixed rates floating rates indexed rates 1 year 1 to 5 years Beyond Amount 8,023.4 5,878.1 1,256.9 888.4 (397.0) 2,700.9 5,719.5
The following table shows the Group’s net debt position exposed to floating interest rates as of December 31, 2015:
In millions of euros Total Gross debt 2,459.6 Financial assets measured at fair value through income (59.9) Cash and cash equivalents (2,079.0) Net position before management 320.7 Impact of interest rate derivatives 936.2 Net position after management 1,256.9 Impact of a 1% increase in short-term interest rates on income after management (10.8)
An interest rate risk sensitivity analysis is presented in However, because of the geographic diversification of its Note 14.1.3.2 to the consolidated financial statements, activities, the Group is exposed to translation risk, i.e. its chapter 20.1. statement of financial position and income statement are An increase in interest rates could also force the Group to sensitive to fluctuations in foreign exchange rates when the finance or refinance acquisitions or investments at a higher financial statements of its foreign subsidiaries outside the euro cost. zone are consolidated. As a result, fluctuation in the value of the euro against these various currencies may affect the value The interest rate risk management policy is described in of these items in its financial statements, even if their intrinsic section 4.2.4.1. value has not changed in their original currency. In addition, the Group implements currency hedges to create synthetic debt in ..4.1.3.2 Currency risk foreign currency based on the euro, mainly to fund some of its foreign subsidiaries. Due to the nature of its activities, the Group has little exposure to currency risk on transactions, i.e., flows related to the operations of SUEZ and its subsidiaries are denominated in their local currencies (with the exception of the Treatment solutions segment, former Degrémont).
22 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Main risks 4
The following table shows the distribution of the Group’s net debt by currency as of December 31, 2015 (including financial derivatives instruments and amortized cost):
Pound Chilean Hong Kong In millions of euros Euro (a) US dollar sterling peso dollar Other Total Net financial debt before the effects of forex derivatives 5,847.0 737.2 351.6 1,094.3 (11.9) 65.0 8,083.2 Net financial debt after the effects of forex derivatives 4,072.3 1,503.9 416.4 1,094.3 595.2 401.1 8,083.2 Impact on income of a 10% net appreciation of the euro on net position after management 0.2 (4.9) (0.6) (0.2) (0.4) (1.4) (7.3)
(a) The euro impact comes from the net euro position of Group entities whose operating currency is not the euro. The share of net financial debt in euros declines after the effects of forex derivatives due to the Group’s use of a portion of its debt in euro to create synthetic debt in foreign currency and finance foreign subsidiaries, mainly in US dollar and Hong Kong dollar.
The following table shows the distribution of the Group’s capital employed by currency as of December 31, 2015: 4 In millions of euros Euro (a) US dollar Pound sterling Other (b) Total Capital employed 9,019.7 2,772.5 1,141.6 2,074.0 15,007.8
(a) Euro: including Agbar and its subsidiaries. (b) Mainly the Australian dollar, Czech koruny, yuan, Hong Kong dollar and Swedish krona.
With respect to the US dollar, the following table presents the impact of changes in the US dollar exchange rates between 2015 and 2014 on revenues, EBITDA, net debt and the amount of shareholders’ equity as of December 31, 2015:
In millions of euros Change Revenues 158.4 EBITDA 39.5 Net debt 143.1 Total Shareholders’ equity 68.3
For revenues and EBITDA, calculations were based on the change in the average 2015/2014 USD/EUR exchange rate (+19.7%). For net debt and shareholders’ equity, they were based on the change in the closing USD/EUR exchange rate between December 31, 2015 and December 31, 2014 (+11.5%).
With respect to the pound sterling, the following table presents the impact of changes in pound sterling exchange rates between 2015 and 2014 on revenues, EBITDA, net debt and the amount of shareholders’ equity as of December 31, 2015:
In millions of euros Change Revenues 105.1 EBITDA 9.4 Net debt 22.8 Total Shareholders’ equity 43.4
For revenues and EBITDA, calculations were based on the change in the average 2015/2014 GBP/EUR exchange rate (+11.0%).For net debt and shareholders’ equity, they were based on the change in the closing GBP/EUR exchange rate between December 31, 2015 and December 31, 2014 (+6.1%).
With respect to the Chilean peso, the following table presents the impact of changes in the Chilean peso exchange rates between 2015 and 2014 on revenues, EBITDA, net debt and on the amount of shareholders’ equity as of December 31, 2015:
In millions of euros Change Revenues 28.4 EBITDA 17.2 Net debt (43.3) Total Shareholders’ equity (42.1)
For revenues and EBITDA, calculations were based on the change in the average 2015/2014 CLP/EUR exchange rate (+4.2%).For net debt and shareholders’ equity, they were based on the change in the closing CLP/EUR exchange rate between December 31, 2015 and December 31, 2014 (-4.6%).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 23 Risk factors 4 Main risks
With respect to the Hong Kong dollar, the following table presents the impact of changes in the Hong Kong dollar exchange rates between 2015 and 2014 on revenues, EBITDA, net debt and on the amount of shareholders’ equity as of December 31, 2015:
In millions of euros Change Revenues 30.5 EBITDA 45.1 Net debt 33.1 Total Shareholders’ equity 74.3
For revenues and EBITDA, calculations were based on the change in the average 2015/2014 HKD/EUR exchange rate (+19.7%).For net debt and shareholders’ equity, they were based on the change in the closing HKD/EUR exchange rate between December 31, 2015 and December 31, 2014 (+11.6%).
An exchange rate sensitivity risk analysis appears in Note 14.1.2.2 of the consolidated financial statements, in chapter 20.1. The foreign exchange rate risk management policy is described in section 4.2.4.2.
..4.1.3.3 Liquidity risk The following table presents the maturity schedule for the Group’s borrowings and the amount of its cash as of December 31, 2015:
In millions of euros Total 2016 2017 2018 2019 Beyond 2020 Total borrowings 9,592.2 1,171.8 632.4 446.8 1,049.1 6,292.1 Overdrafts and current cash accounts 570.1 570.1 Total outstanding borrowings 10,162.3 1,741.9 632.4 446.8 1,049.1 6,292.1 Financial assets measured at fair value through income (59.9) (59.9) Cash and cash equivalents (2,079.0) (2,079.0) Net debt (excluding derivative financial instruments and amortized cost) 8,023.4 (397.0) 632.4 446.8 1,049.1 6,292.1
Some borrowings contracted by the Group’s subsidiaries or by these clauses has been activated. The Company also believes SUEZ environnement SAS on behalf of its subsidiaries include that the existence of these covenants does not have a material clauses requiring specific ratios to be maintained. The definition impact on the Group’s financial position. Finally, none of these and level of the ratios, i.e. the financial covenants, are determined financial covenants is based on SUEZ environnement SAS or in agreement with the lenders and may potentially be reviewed SUEZ ENVIRONNEMENT COMPANY’s share price, or on the during the term of the loan. Information about these covenants Group’s rating. Details on short- and long-term ratings and is presented in chapter 10.4 of this Reference Document. As of their evolution over the course of fiscal year 2015 appear December 31, 2015, 14% of borrowings exceeding €50 million in section 10.3.3 of this document. As of the date of this were subject to financial covenants. Failure to comply with Reference Document, there is no payment default on the Group’s these covenants could lead lenders to declare a covenant event consolidated debt. There was also no payment default on the of default and demand early repayment. As of December 31, Group’s consolidated debt as of December 31, 2015. 2015 and as of the date of this Reference Document, none of
24 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Main risks 4
The following table shows borrowings contracted by the Group as of December 31, 2015, in excess of €50 million:
Total amount of lines Amount drawn down at Dec. 31, 2015 at Dec. 31, 2015 Type Fixed/floating rate In millions of euros In millions of euros Maturity Bonds Fixed rate 800 800 2019 Bonds Fixed rate 750 750 2022 Bonds Fixed rate 750 750 2021 Bonds Fixed rate 500 500 2025 Bonds Fixed rate 500 500 2024 Bonds Fixed rate 500 500 2023 Bonds Fixed rate 341 341 2030 Bonds Fixed rate 311 311 2020 Bonds Fixed rate 250 250 2027 4 Bonds Floating rate 200 200 2017 Bonds Fixed rate 200 200 2021 Bonds Fixed rate 161 161 2030 Other bank borrowings Floating rate 155 155 2022 Bonds Fixed rate 150 150 2017 Bonds Fixed rate 115 115 2035 Bonds Fixed rate 100 100 2033 Bonds Fixed rate 100 100 2020 Bonds Fixed rate 100 100 2018 Lease arrangement Floating rate 99 99 2024 Bonds Fixed rate 76 76 2037 Bonds Fixed rate 76 76 2035 Bonds Fixed rate 75 75 2029 Bonds Fixed rate 75 75 2025 Bonds Fixed rate 74 74 2026 Bonds Fixed rate 69 69 2031 Bonds Fixed rate 69 69 2030 Bonds Fixed rate 66 66 2037 Bonds Fixed rate 66 66 2036 Bonds Fixed rate 58 58 2031 Bonds Fixed rate 55 55 2032 Bonds Fixed rate 53 53 2038 Other bank borrowings Fixed rate 51 51 2020 Bonds Fixed rate 50 50 2030 Commercial paper Fixed rate 50 50 2016 Commercial paper Fixed rate 50 50 2016
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 25 Risk factors 4 Main risks
As of December 31, 2015, the Group had the following unused confirmed credit facilities available:
Confirmed but unused credit facility programs Year of expiration In millions of euros 2016 125.5 2017 28.5 2018 79.9 2019 127.5 2020 1,650.9 Beyond 8.8 TOTAL 2,021.1
These credit facility programs include a €1.5 billion syndicated instruments used are essentially forward purchases and sales loan for SUEZ ENVIRONNEMENT COMPANY with a maturity as well as derivative products. extended by five years, to February 2020. The liquidity risk The counterparty risk management policy is described in management policy is described in section 4.2.4.3. section 4.2.4.4. . .4.1.3.4 Counterparty risk ..4.1.3.5 Equity risk The Group’s exposure to counterparty risk is linked to its cash The Group has equity interests in publicly traded companies, investments and its use of derivatives to control its exposure the value of which changes depending on trends in global stock in certain markets. markets, the performance of these companies and how the The Group’s surplus cash is invested in short-term deposits and markets perceive them. interest-bearing current accounts with international banks with As of December 31, 2015, the Group held interests in publicly a minimum A- rating (Standard & Poor’s rating), while ensuring traded companies with a market and book value of €23.4 million. that counterparty diversification policy is stricter and limiting A 10% overall decrease in the value of these shares from their in terms of counterparty selection. prices as of December 31, 2015 would have had an impact of The derivative financial instruments used by the Group are approximately €2.3 million on the Group shareholders’ equity. intended to manage its exposure to currency and interest The equity risk management policy is described in section 4.2.4.5. rate risks, as well as its risks on commodities. The financial
4.1.4 Insurance risks
The Group’s policy with respect to insurance is described in reimbursed under its insurance policies. In particular, with section 4.2.6 of this Reference Document. respect to civil liability and environmental risks, although the However, in certain cases it is still possible that the Group Group has premium insurance, it is possible that it may incur may have to pay large indemnities that are not covered by liability beyond the amount of its coverage or for events not the existing insurance program or may incur very significant covered. expenses that will not be reimbursed or will be insufficiently
4.1.5 Legal risks
In the normal course of activities, the Group’s companies may in chapter 20.6. In the context of some of these proceedings, be involved in legal, administrative or arbitration proceedings. financial claims of a significant amount are or may be brought The most significant current or potential disputes are detailed against one of the Group’s entities. Although the Group’s policy
26 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Main risks 4
in this regard is cautious, the provisions booked for this purpose against one of the entities of the Group. An unfavorable outcome by the Group could be insufficient, which could have significant in such proceedings could have a negative impact on the activity, negative consequences for its financial position and earnings. financial position, or earnings of the Group. Generally, it is possible that new proceedings, either related or unrelated to current proceedings, may subsequently be brought
4.1.6 Tax-related risks
Independently of the Group’s policy of compliance with Finally, several Group companies benefit from tax-approval applicable laws and regulations in each country where Group decisions issued by competent local authorities. If necessary, companies operate as well as with international tax rules, these approval decisions may be challenged. A challenge may certain provisions may present a source of risk because they are result if, for example, the company or the companies that are unclear, difficult to interpret or subject to changing interpretation party to an approval decision breach an undertaking that was by local authorities. Moreover, tax rules in the European Union assumed in exchange for its issuance, and/or the facts based 4 that currently apply to Group entities may be reviewed by the on which the approval decision was issued change, and/or the European Commission, and could be reconsidered. position of the competent tax authority changes. During the normal course of business, Group companies As a reminder, approval was granted in 2008 by the French could also face tax investigations by local authorities. In this Finance authorities to transfer to SUEZ ENVIRONNEMENT respect, tax investigations performed by the French or foreign COMPANY a maximum tax loss of €464 million, to which authorities are in progress. The tax investigations may result subsidiaries joining the SUEZ ENVIRONNEMENT COMPANY tax in adjustments and sometimes result in tax disputes in the consolidation group had contributed. To prepare consolidated competent jurisdictions. The Group’s main current tax disputes financial statements, tax losses transferred under this are described in section 20.6.3 of this Reference Document. agreement are updated every year to take into account any tax adjustments relating to the time when the subsidiaries were part of the former SUEZ tax group.
4.1.7 Risks relating to the Company’s shares
The Company’s share price may be volatile and subject to XX competitors’ announcements or announcements about the market fluctuations. Financial markets are subject to significant water and waste sectors; fluctuations that are at times unrelated to the results of XX announcements of changes in the Company’s shareholders; the companies whose shares are traded on them. Market fluctuations and economic conditions could significantly affect XX announcements of changes in the Group’s management the Company’s share price. team or key personnel; The Company’s share price could also be affected by numerous XX changes in the future outlook for the Group and its activities events that affect the Group, its competitors or general or the water and waste sectors in general; economic conditions, and the water and waste sectors in XX changes in the content of financial analysts’ reports about particular. Accordingly, the Company’s share price could the Group; fluctuate significantly in reaction to events such as: XX changes in economic and market conditions. XX variations in the financial results of the Group or of its competitors from one period to the next;
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 27 Risk factors 4 Risk management and control within the Group
4.2 Risk management and control within the Group
4.2.1 General framework for Group risk management and control
Management of the risks the Group is facing involves identifying of operating and financial indicators. It develops the Group’s and assessing such risks and putting in place the appropriate short- and medium-term financial forecasts and contributes action plans and hedges. to the analysis of development projects by the Group and its The Group has adopted an integrated corporate risk management subsidiaries. The Internal Control Department has rolled out policy, which aims to provide a complete overview of the risk a documentation, improvement and annual internal control portfolio through the use of methods and tools common to all assessment program to the main subsidiaries of the Group subsidiaries and functional departments. in collaboration with the Group’s functional and operational management teams. The Tax Department’s primary mission The Chief Risk Officer (CRO) is responsible for coordinating is to identify and analyze the Group’s tax risks; this integrated approach. He is supported by a network of risk officers who are responsible for seamlessly and consistently XX the Investment and Risk Department participates jointly executing the risk assessment and management techniques with the Planning and Control Department and the Legal within the different subsidiaries. The network is headed by the Department in the analysis of projects involving the Group CRO. and its subsidiaries; A risk-mapping process for the whole Group has been in place XX the Internal Audit Department, after consultation with the for several years. Risks are identified, classified by category Chief Risk Officer, proposes its annual audit plan on the (strategic, financial or operational), assessed (by significance basis of an analysis of the operational and financial risks and frequency), and quantified wherever possible. The method of Group companies. This audit plan is approved by Senior for handling them is then reviewed, which provides information Management. The objectives of the internal audit are to for action plans at different levels of the Company. assess the contribution of the audited entities in relation to their commitments, validate their risk analysis and control, This process, which is overseen centrally by the Chief Risk and verify that the Group’s procedures, guidelines and Officer and in the subsidiaries by the network of risk officers, charters are implemented. At the end of every assignment, makes it possible, in particular, to draw up an annual summary the Internal Audit Department communicates its conclusions of the major risks for the Group. It includes steps to select and recommendations for corrective actions; significant individual risks and, if applicable, aggregate homogeneous risks and to take into account possible links. XX the Human Resources Department analyzes the main The summary is discussed and validated by the Management labor risks, gaps in terms of skills, corporate culture, and Committee. employee mobilization and engagement. It develops action plans for recruiting local talent and skills development. The The subsidiaries maintain responsibility for implementing the Health and Safety Department monitors and ensures the most appropriate risk management policy for their particular prevention of occupational illnesses and accidents related activities. However, certain trans-Group risks are directly to the Group’s businesses. It ensures the implementation managed by the corporate departments involved: of warning and crisis management procedures within the XX the Legal Department analyzes, monitors and manages the subsidiaries and at SUEZ environnement SAS to establish Group’s legal risks, based on periodic reporting from the a culture of prevention at all levels, which further enhances subsidiaries of SUEZ environnement SAS and their network the quality and continuity of operations; of in-house legal counsel; XX the Innovation and Industrial Performance Department: XX within the Finance Department, the Treasury and Capital –– studies and monitors environmental and industrial risks Markets Department, together with the subsidiaries, and coordinates the actions needed to strengthen risk analyzes the Group’s main financial risks (interest rates, control and compliance with requirements in this area. To major currencies and banking counterparties), develops do so, it implements a schedule of environmental audits instruments for measuring positions and sets policy for and operates a network of Environmental and Industrial hedging such risks. The Planning and Control Department Risk Officers charged with deploying the environmental performs critical analyses of the subsidiaries’ actual and risk management policy uniformly and consistently at forecast financial performance through the monthly review each main subsidiary,
28 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Risk management and control within the Group 4
–– studies the operating risks associated with the Group’s and environmental damage, business interruption, and production systems and assists the subsidiaries in liability (third-party, professional, etc.); resolving operational issues at their sites, establishes and XX the Communication Department analyzes and manages distributes best practices and operational benchmarks image and reputational risk and prepares and implements to the subsidiaries and prepares solutions for a certain the appropriate crisis communication plans in association number of emerging risks by developing suitable research with the subsidiaries; it also monitors and regularly liaises programs; with the media. XX the Information Systems Department analyzes and manages Aside from these functional departments, the Board of Directors risks relating to information systems in order to guarantee is assisted by an Audit Committee whose assignments in terms availability, integrity and confidentiality of information; of risk are as follows: the Safety Department: the Group has long been developing XX XX obtain regular updates on the Group’s financial position, specialist know-how in the safety of large sites through cash position and significant commitments and risks; various large projects in Central America, South America, Africa, the Middle East and Asia. Faced with increasingly XX examine the risk control policy and the procedures selected complex and unstable safety conditions, the Group has to evaluate and manage these risks; developed its own upstream analysis system for potential XX evaluate the efficiency of the Group’s internal control system. 4 risks and an overall safety management system based on On October 23, 2015, the Audit Committee was presented with scalable solutions that are adapted to the specific local the results for 2015 of the overall risk management policy and and regional context. In this way, the Group continually an overview of the risks of each of the Group’s businesses. analyzes unstable situations so as to identify early signs For more details, please refer to the Chairman’s Report on of deterioration. This internal system is operational, as we corporate governance and internal control procedures within saw in early 2011 through the proactive management of the this document (see chapter 16.4). crises in Africa and the Middle East; Internal control is implemented according to the risks identified XX the Insurance Department, in conjunction with the within the Group’s activities as part of the risk-mapping process. subsidiaries and SUEZ environnement SAS, is the contracting authority for the Group’s insurance programs for industrial
4.2.2 Management of industrial and environmental risks
Controlling environmental and industrial risks is a priority ..4.2.2.1 Governance for the Group. For this reason, a specific management policy for these risks was enacted in 2014. It addresses risks which Within their organizations, SUEZ and each of its business units may be of accidental or natural origin. They may be due to each appoint an Environmental and Industrial Risk Officer (EIRO) human or organizational factors, equipment accidents or to ensure the coordinated functional management of these risks malicious acts. The scope of this policy covers all types of at every level of the organization. The Group EIRO reports to pollution (air, soil, aquatic environments) and environmental the Innovation and Industrial Performance Department. This nuisance (noise, vibration, odor, visual discomfort, etc.). It also individual is responsible for coordinating the network of EIROs covers environmental damage as well as property damage and within the business units. Under the principle of subsidiarity, personal injury caused by fire, explosion, machine breakage, the commitments are formalized with the business units or natural disaster, the collapse of structures, etc. other operating entities with the aim of continuously improving the management of environmental and industrial risks. First, This policy is consistent with the Global Risk Management and “Progress Contracts” are signed periodically with each CEO. Health and Safety policies. These contracts define and list areas for improvement and A structured management system ensures that the management related action plans for each business unit to control risk principles it contains are applied across all business units and reduce the occurrence of accidents and near accidents. internationally. Next, the annual “Compliance Letter” is used to disclose the
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 29 Risk factors 4 Risk management and control within the Group
significant risks identified and report on the measures taken as ..4.2.2.3 Control a result. Depending on the nature of the risk, action plans may be developed over one or more years. However, action plans The operating entities to which this policy applies must follow the seeking to mitigate significant risks must be developed within a SUEZ environmental and industrial risk management system limited timescale to minimize the risk of major accidents. This and its three-step approach: risk identification; risk assessment; document is signed by the CEO of each business unit, based on and implementation of risk management measures. the Compliance Memorandum of its EIRO. The operating entities must introduce an appropriate method (or a combination of different methods) to identify potential ..4.2.2.2 Management Rules and Standards environmental and industrial risks associated with their activities or specific to their facilities. There are a number A series of management rules offer guidance on how to apply of acceptable risk identification methods: internal audits, the SUEZ environmental and industrial risk management policy. self-assessment questionnaires, hazard studies conducted Compliance with local regulations is a must in all cases. Any as part of applications for authorization to operate, process business unit, subsidiary or facility with industrial operations, risk studies, risk prevention programs led by third parties and over which the Group has a dominant influence on its (e.g., companies specializing in risk prevention on behalf of technical operations, must comply with these management insurance companies), site visits by management or functional rules. They also apply to any service performed on behalf of a departments, and integration or acquisition of new facilities. third party at their facilities. In addition, audits are conducted by the Innovation and The Management Rules enable implementation in the Industrial Performance Department (including a general audit business units and operating entities of the main components of the environmental and industrial risk management system of the Environmental and Industrial Risk Management and audits on selected operational sites). These audits are policy: organization, risk management, design, operation intended to verify the capacity of the business units to identify and modification of facilities, standards, reporting, training, environmental and industrial risks, to determine measures subcontractor management, integration of new companies, for controlling such risks and to guarantee efficiency of these management and communication of accidents and near measures over time. Failure to apply the management rules accidents, as well as other measures. They also lay down and standards is reported to the appropriate management the roles and responsibilities for its implementation and the level for analysis and decision-making on the measures to be monitoring systems in place. implemented. A summary of the reported gaps is presented In addition, a series of environmental and industrial standards annually to the Group’s General Management. define the mandatory rules for all Group operations. The business units’ management systems must take into account ..4.2.2.4 Crisis alert and management and adhere to the principles of these standards. A crisis alert and management procedure is in place to The purpose of these standards is to enable operating entities anticipate and manage accidents or any unforeseen and sudden or subsidiaries to check that the operations under their control events that may have a negative impact on the environment, comply with the Group’s established criteria. Failure by existing the operating or third-party assets, business continuity or entities or newly acquired companies to comply with these reputation of the Group, as well as associated impacts on standards must be addressed by an action plan to return them employees and local residents. Such measures serve to ensure to compliance within an appropriate timeframe. immediate and reliable communication about emergency These standards are accompanied by “Practices”, which offer situations to appropriate levels of the organization (alert) and guidance and examples for the practical application of these to prepare and implement a “crisis organization” that is able rules. to decide, communicate, and respond locally and globally, even in situations made worse by events. The procedure specifies The standards and practices were completed during 2015, the type of events that must be communicated through SUEZ’s in order to specify expected results in the area of fire risk emergency stand-by team and the severity thresholds that prevention and the risk of machine breakage. should trigger an alert.
30 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Risk management and control within the Group 4
Each of the Group’s subsidiaries has emergency plans in place take appropriate measures to prevent a reoccurrence; update that involve two modes of intervention: a local emergency the risk analyses and reassess the robustness of risk control stand-by team that issues the alert and mobilizes the crisis measures; improve the understanding of phenomena and management resources, and a dedicated crisis management strengthen the safety culture by sharing feedback. organization that can handle the crisis effectively throughout In the case of severe accidents, a news flash is circulated its duration. The latter approach provides in particular for throughout the organization by the EIROs. A review panel may the organization of crisis management units that are capable also be set up. Chaired by a representative of Group General of taking into account internal or external impacts, whether Management, such a panel aims to ensure that the causes of technical, social, health-related, economic or reputational. the accident are analyzed and corrective measures are taken at business unit level to prevent a repeat of such an accident; ..4.2.2.5 Consideration of feedback validate the report and the measures taken; propose any additional measures or investigations; decide on possible Following an environmental or industrial accident, the operating actions at Group level; decide on the classification of the entities must analyze the event to determine the facts and accident and the possible consequences for the people involved understand the technical, organizational and human causes (employees and managers), and decide on how to communicate leading to the event. This analysis allows management to about the event. 4
4.2.3 Management of legal risks
As a result of its international operations, its activities, and an The terms and conditions for certain Group activities, particularly increasingly complex, restrictive regulatory environment, the the fact that certain contracts are very long-term (30-50 years) Group pays particular attention to the management of legal and consequently subject to periodic renegotiations, also require risks. ongoing involvement from the Group’s legal departments in The Group has specifically implemented internal legal order to assist operating departments in conducting such vigilance rules aimed at the various operating entities and their renegotiations. employees. More specifically, these rules cover the process Moreover, the Group frequently uses training processes to raise to be followed in entering into certain contracts, as well as employee awareness of the importance of managing legal risks feedback on dispute risks (to foster proactive management) and and of respecting the legal vigilance rules it has implemented. developments regarding major pending litigations.
4.2.4 Management of market risks
In the context of its operating and financial activities, the Group The Group’s policy is to diversify net debt interest rate is exposed to market risks such as interest rate risks, foreign references between fixed and floating rates. The aim is to exchange risks, liquidity risks, or the risk related to certain achieve a balanced distribution among the various interest commodity prices. To ensure greater control of these risks, rates and maturities. the Group has implemented the management rules described The Group also uses hedging instruments (particularly swaps) below. to protect itself from interest rate fluctuations in the currencies Market risk management issues are presented at a monthly in which its debt is denominated. Financial instruments held Treasury Committee meeting chaired by the Chief Financial by the Group in order to hedge interest rate risk are detailed in Officer and decisions regarding the management of these risks Note 14.1.4 to the Group’s consolidated financial statements, are taken by this Committee. chapter 20.1. The Group primarily uses financial instruments to manage its The Group’s exposure to interest rate risk is for the most part exposure to fluctuations in interest rates, exchange rates and centrally managed and regularly reviewed during meetings of commodity prices. the Treasury Committee. Hedges decided upon by the Treasury Committee are generally executed and implemented on behalf ..4.2.4.1 Management of interest rate risk of the Group by its Treasury and Capital Markets Department. The Group’s exposure to interest rate risk is described in section 4.1.3.1.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 31 Risk factors 4 Risk management and control within the Group
..4.2.4.2 Management of foreign exchange risk sustainable financial resources). Financing through the capital markets represents 85.7% of this total (77.5% bonds and 8.2% The foreign exchange risk to which the Group is exposed is commercial paper). detailed in section 4.1.3.2. As of December 31, 2015, net cash represented €2,308.1 million The Group is exposed to financial statement translation risk and confirmed credit facilities €2,148.3 million, of which due to the geographical spread of its activities: its statement €127.2 million had been drawn down. of financial position and income statement are impacted by changes in exchange rates upon consolidation of the financial At December 31, 2015, available cash, comprising cash and cash statements of its foreign subsidiaries outside the eurozone. equivalents (€2,079.0 million) and financial assets measured at fair value through income (€59.9 million), net of bank overdrafts For investments denominated in non-euro currencies, the and short term borrowings (€570.1 million), amounted to Group’s hedging policy is to contract liabilities denominated in €1,568.8 million. the same currency as the cash flows generated by these assets. As of that date, the Group also had total liquidity consistent with Among the hedging instruments used, borrowings in the its size and the maturities it had to meet. relevant currency constitute the most natural hedging tool. The Group also uses foreign currency derivatives (swaps), Liquidity risk is regularly monitored by the Treasury Committee which allow for the creation of synthetic currency debts. The and the Audit Committee; monthly reporting of consolidated financial instruments held by the Group to hedge currency Group debt includes a debt schedule for the current year, years risk are detailed in Note 14.1.4 to the consolidated financial y+1 to y+8 and beyond. statements, chapter 20.1. Access to the long-term capital markets is primarily However, this hedging policy is not implemented (or is only concentrated through SUEZ ENVIRONNEMENT COMPANY (the partially implemented) in certain circumstances, notably: Parent Company) for new bond issuance and structured bank debt. XX if the hedging cost (ultimately the interest rate of the reference currency) is too high; ..4.2.4.4 Management of counterparty risk XX the currency’s liquidity and/or the available hedging durations are insufficient; The counterparty risk to which the Group is exposed is described in section 4.1.3.4. XX market expectations for the relevant currency are contrary to current trends. The Group’s policy for managing counterparty risk is based on the diversification of its counterparties and an assessment of The asset hedging ratio (which is the ratio between the book the financial position of these counterparties. value of an asset denominated in a non-euro currency and the debt contracted on this asset) is reviewed periodically, according The Group invests the majority of its cash surpluses and to market conditions and on each entry or exit of an asset. negotiates its financial hedging instruments with leading Any significant change in the hedging ratio is subject to prior counterparties. Within the framework of its counterparty risk approval by the Treasury Committee. management policy, the Group has implemented management and control procedures based, on the one hand, on counterparty . accreditation according to external rating and objective market .4.2.4.3 Management of liquidity risk aspects (credit default swaps, stock market capitalization), and The liquidity risk to which the Group is exposed is described on the other hand, on the definition of risk limits. Similarly, the in section 4.1.3.3. Group selects its insurers in a way that limits its counterparty risk. The Group’s 2015 financing policy had the following objectives: XX diversification of financing sources by recourse to the . banking market and capital markets; .4.2.4.5 Management of equity risk XX optimization of financing costs; The equity risk to which the Group is exposed is described in section 4.1.3.5. XX balancing the repayment profile of financial debt. The Group’s portfolio of listed equities is part of its long-term At December 31, 2015, following the various transactions investment policy. As of the date of this Reference Document, carried out during the year and described in chapter 10 of equity risk is not subject to any particular hedging, but the this Reference Document, bank loans accounted for 8.9% of Finance Department monitors price changes in the Group’s total outstanding borrowings (excluding bank overdrafts and equity interests in various companies on a regular basis. short term borrowings as those elements do not correspond to
32 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Risk management and control within the Group 4
..4.2.4.6 Management of commodity and energy risks Volumes that are not purchased under contracts where revenues are indexed to the change in diesel prices are considered “at The commodity risk to which the Group is exposed is described risk” volumes and are financially hedged through the use of in section 4.1.1. derivative products (particularly swaps). The Group’s hedging policy primarily concerns risk related to In order to best implement the planned hedges, the Group’s fluctuations in oil prices, particularly due to fuel consumption Treasury and Capital Markets Department monitors changes in by the main subsidiaries active in the waste sector (Sita the market and hedging prices and makes recommendations France, SUEZ Deutschland and SUEZ Recycling & Recovery to the Treasury Committee and to the subsidiaries concerned. Netherlands).
4.2.5 Ethics Program
The Group pays particular attention to sharing and adherence XX specifically addressing the fight against corruption, the to ethical values. Given its presence in many countries, it Handbook provides rules and detailed procedures that apply 4 specifically ensures compliance with related local regulations to the whole Group when it comes to signing agreements and obligations. for patronage or sponsorships, as well as contracts with The SUEZ ethics policy was designed to promote a Group culture institutional or business consultants; that encourages responsible behavior (in compliance with the XX the Group regularly provides training on ethical issues, applicable ethical values and regulations) by each employee of particularly on compliance with competition rules and the the Group. It is based on three pillars: fight against corruption; XX a charter, supplemented by practical guidelines and XX SUEZ’s commitment to Ethics has been reaffirmed through procedures; its support for the United Nations Global Compact and the Water Integrity Network (WIN); XX governance provided by the Ethics and Sustainable Development Committee, the Board of Directors, the Ethics XX SUEZ is a member of Transparency International. (1) Compliance Committee and the Ethics Officers network; Furthermore, to increase awareness of ethical issues, an Ethics XX ethics reporting tools. handbook on business relationships was reviewed and validated SUEZ has made ethics an indispensable element of its global by the Management Committee, then approved by the Ethics performance improvement. Adherence to these values and Sustainable Development Committee, before distribution. is essential in all the Group’s activities, both in internal This handbook is available in eight languages and emphasizes relationships within the Company, and in its relationships with a certain number of rules, especially those applicable to gifts clients, suppliers and all external stakeholders. To this end, the and invitations. Furthermore, the targets in terms of training Group has established an expanded Ethics Program, as follows: and awareness on ethical issues and overseeing the delivery of regulations and training courses by the Group Ethics Officer XX an Ethics Charter and Handbook were published in 2010 in have increased. eight languages: French, English, Spanish, German, Dutch, Czech, Arabic and Polish. These documents, which can be In 2008, the Company’s Board of Directors set up an Ethics and consulted by any Group employee via the SUEZ intranet, Sustainable Development Committee responsible for, among have been prepared to reflect the ethical standards issued other things, monitoring the Group’s ethics and sustainable by national and international bodies (such as the Global development policies and ensuring that Group employees Compact, the Conventions of the International Labor comply with the individual and collective values on which the Organization and the OECD guidelines for multinational Group’s activities are based (for a description of the Ethics and companies) and the values of the Group; Sustainable Development Committee, see section 1.3.2 of the Chairman’s Report on governance, internal control and risk management for the year ended December 31, 2015, which can be found in chapter 16.4 of this Reference Document).
(1) This Committee is made up of the General Secretary (as Group Ethics Officer of the Group), a Human Resources Director, a Legal Director and an Internal Audit Director of the Group.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 33 Risk factors 4 Risk management and control within the Group
The Ethics Program, which aims to prevent or detect behaviors be subject to an internal audit. In 2015, there were several dozen that are contrary to the Group’s ethical rules, is coordinated proven breaches of ethical rules reported in the Group. These within the Group by the General Secretary, as Group Ethics behaviors were sanctioned in a proportionate manner (with Officer. The Ethics Program is applied by all subsidiaries of sanctions leading to dismissal, where necessary). significant size. Furthermore, the Group has a network of Ethics More generally, each year the Ethics Officers at each main Officers, whose structure was reviewed in 2015 to adapt to subsidiary send a report on the application of the Ethics changes in the operational organization that occurred during Program in their subsidiary to their General Management team the year. As of December 31, 2015, 27 Ethics Officers were and the Group Ethics Officer. A compliance letter signed by the working in the “first tier” subsidiaries. In addition, to facilitate Chief Executive Officer of each major subsidiary or entity is the smooth roll-out of the Ethics Program at some companies sent to the Group Chief Executive Officer and the Group Ethics or business units with many subsidiaries, Ethics Officers or Officer every year. coordinators have been appointed in the main business lines or subsidiaries in order to effectively relay the ethics mechanism. The Group Ethics Officer produces an annual report on the The Ethics Officers are responsible for ensuring the roll-out and Ethics Program’s activities within the Group and sends it to effectiveness of the Ethics Program within their subsidiary and the Chairman of the Board of Directors. It is also submitted for implementing internal and external investigation procedures to the Ethics and Sustainable Development Committee, which for any issue brought to their attention that may potentially be in reports on it to the Board. breach of the Group’s ethics rules. To allow employees and third Compliance with ethical principles is also an integral part of parties to easily contact Ethics Officers, SUEZ ENVIRONNEMENT the Group’s internal control program. COMPANY and a significant number of its subsidiaries have In accordance with the decisions taken in 2014 to bolster control put in place email addresses and telephone lines dedicated to over the implementation of Group ethics rules, the audit plan ethics. In 2015, over 40 emails with requests for information developed by the Management Committee and approved by or allegations of unethical behavior were sent to the Group's the Audit and Accounting Committee provides for regular email address at [email protected]. systematic reviews of Group entities. All such audits specifically When ethical concerns arise, the relevant Ethics Officer is either include an ethics component (through a variety of reviews of involved directly or immediately notified. This individual will areas such as the distribution of ethics documents, training examine the matter in close collaboration with the Legal and and awareness measures, and the system for reporting ethical Human Resources departments. The most serious cases are incidents). reviewed by the Group’s Ethics Compliance Committee and may
4.2.6 Management and financing of insurable risks
The roll-out of the industrial risk management policy described For each of the traditional areas of insurance (i.e. property in section 4.2.2 helps to further reduce the occurrence or effects damage and interruption of business, civil liability, and employee of accidental events. benefits), the Group transfers risks to the insurance market or To limit the impact of certain events on its financial position, uses internal financing plans: or to meet contractual or legal requirements, the Group has XX the transfer of risk to the insurance market is performed as created dedicated insurance programs to cover its main risks often as possible through transversal programs in strategic of damage to property, civil liability, and personal insurance. areas, that are considered strategic because of either the The policy for transferring risk to the insurance market is fixed potential intensity of the risks covered or the economies of every year and updated as necessary in order to reflect not only scale generated by transversal programs; changes in the Group, its activities and the risks it faces, but XX the financing of random risks of low or moderate intensity also changes in the insurance market. relies mostly on internal financing plans, especially through The Insurance Department organizes the policy defined by the deductibles or risk retention or via the captive non-life Group: selection of the brokers and insurers, monitoring of the reinsurance subsidiary SUEZ Ré whose activity consists policies and, if necessary, control of the prevention or protection in reinsurance of all or part of the risks transferred by policies. For this purpose, it works with a network of specialists SUEZ environnement SAS and its subsidiaries to non-life or agents within the Group’s subsidiaries. insurers. Its expert-led Technical and Financial Committees validate each commitment and monitor management transactions.
34 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Risk factors Risk management and control within the Group 4
In 2015, the premiums (including taxes and retentions) relating CIVIL LIABILITY to the main insurance programs established by the Group in The Group’s third-party civil liability is covered by various types the areas of asset protection (covering property damage and of civil liability insurance. interruption of business) and third-party recourse amounted to approximately 0.3% of Group consolidated revenues. Coverage for general civil liability, product liability, professional liability or liability for environmental damage is part of a Group PROPERTY DAMAGE AND INTERRUPTION OF BUSINESS program taken out and managed by SUEZ environnement SAS on behalf of all its subsidiaries. The protection of Group assets covers property the Group owns as well as property that it leases or that has been entrusted to it. The maximum coverage under this policy was €300 million in 2015. Facilities are covered by programs that are generally underwritten at Group level. However, insurance policies are Insurance for certain types of civil liability that correspond to also taken out by subsidiaries and, in exceptional circumstances, legal obligations (vehicle fleet and workplace accidents) are by sites, if justified by contractual requirements. These local covered by specific policies. insurance policies are identified and checked by the Insurance EMPLOYEE BENEFITS Department. 4 The underwriting limits for property damage cover the In accordance with legislation currently in force and with maximum loss assessed for each site. Company agreements, programs for protecting employees against the risk of accidents and medical costs are set up at With respect to interruption of business resulting from property operating entity level. These programs may either be financed damage, the coverage periods take into account an estimate through retention based on capacity or transferred to the of the consequences of the total or partial shutdown of a site insurance market. In France, mutual and insurance programs (repair period, amount of daily losses, additional expenses and are largely consolidated and are subject to at least one review redundancy). per year to analyze risks and trends as well as to anticipate Construction projects are covered by a “Construction All Risks” changes in the economic balance of the plans concerned. policy taken out by the project manager, the general contractor or the main company involved.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 35 36 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Group information5
5.1 Group history and reorganization 38 5.1.1 Legal name 38 5.1.2 Trade and Company Register 38 5.1.3 Company’s date of incorporation and term 38 5.1.4 Registered address, legal form and applicable legislation 38 5.1.5 Group history 38
5.2 Investments 40 5.2.1 Main investments made by SUEZ ENVIRONNEMENT COMPANY over the past two years 40 5.2.2 Main investments of the Company in progress 40 5.2.3 Main investments planned or subject to firm commitments from the management bodies 40
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 37 Group information 5 Group history and reorganization
5.1 Group history and reorganization
5.1.1 Legal name
The legal name of the Company is SUEZ ENVIRONNEMENT COMPANY. A proposal will be submitted at the Shareholders' Meeting on April 28, 2016 to change the company's legal name to SUEZ.
5.1.2 Trade and Company Register
The Company is registered at the Trade and Company Register of Nanterre (France) under the number 433 466 570 RCS Nanterre.
5.1.3 Company’s date of incorporation and term
The Company was incorporated on November 9, 2000 for a term of 99 years. Except in the event of early dissolution or extension, the Company will cease to exist on November 9, 2099.
5.1.4 Registered address, legal form and applicable legislation
The Company’s registered address is Tour CB21, 16, place de The Company is a French société anonyme (public limited l’Iris, 92040 Paris-La Défense Cedex, France. company) with a Board of Directors, and is governed by the Telephone: + 33 (0)1 58 81 20 00. provisions of Book II of the French Commercial Code applicable to commercial companies and all legal provisions applicable to commercial companies. It is governed by current and future legal and regulatory provisions and its bylaws.
5.1.5 Group history
Since 2003, SUEZ environnement has handled all the expertise 1919, CREATION OF SITA in water management, wastewater treatment and waste The Société Industrielle des Transports Automobiles (Sita) was management services within the SUEZ group. This expertise is one of the two service providers selected to collect household supported by companies such as Degrémont, Safege, Lyonnaise waste in Paris. At that time, Sita had two activities: transport of des Eaux and Sita, who are renowned for their highly developed all kinds and public service delegation. It later diversified into know-how, over more than a century in certain cases, in serving passenger transport and corporate vehicle leasing. their customers.
1946, PARTIAL NATIONALIZATION OF LYONNAISE DES EAUX 1880, ESTABLISHMENT OF LYONNAISE DES EAUX ET DE L'ÉCLAIRAGE In 1946, France nationalized the gas and electricity sectors. The company operated in the public services of water, electricity Société Lyonnaise des Eaux et de l’Éclairage was partially and gas distribution in rapidly growing cities and suburbs such nationalized. The company therefore focused on water-related as Cannes, Bordeaux, Lille and Rouen. From the very beginning, activities to meet the growing demand for services and network Lyonnaise des Eaux was also developing its activities abroad. development in the suburbs of large cities. In line with this same growth strategy, Lyonnaise des Eaux became a majority shareholder in Degrémont, a water treatment company established in Paris in 1939.
38 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Group information Group history and reorganization 5
1971, ACQUISITION OF SITA announced in October 2009. As a result of this transaction, SUEZ environnement owned 75.23% of Agbar, a company In order to meet increasing environmental protection formed in 1882 and specializing in water cycle management requirements, Sita set up a waste sorting and recycling line in Spain and other countries (primarily Chile). On September 17, in the 1970s. In 1971, Lyonnaise des Eaux acquired a stake in 2014, SUEZ ENVIRONNEMENT COMPANY acquired the indirect Sita, which became the Group’s “waste division”. Sita has been interest of Criteria Caixa in Agbar and on the outcome of this wholly owned by the SUEZ group since 2000. transaction held 99.49% of Agbar, a stake that was increased to 100% in 2015. On this occasion, Criteria Caixa became the 1974, COMPAGNIE FINANCIÈRE DE SUEZ, MAJORITY SHAREHOLDER OF second largest shareholder of the Company, acquiring a 4.1% LYONNAISE DES EAUX stake in its share capital, which was increased to 5.65% on 1974, Compagnie Financière de SUEZ became majority December 31, 2015. shareholder of Lyonnaise des Eaux. After being nationalized by the French government in 1982, Compagnie Financière de 2012-2013, A NEW PHASE FOR SUEZ ENVIRONNEMENT SUEZ was again privatized in 1987. On December 5, 2012, the Board of Directors of the Company recorded the decision by ENGIE and all signatories of the 1997, MERGER OF COMPAGNIE FINANCIÈRE DE SUEZ AND LYONNAISE DES EAUX Shareholders’ Agreement (as described in section 18.3.1 of In 1997, the merger between Lyonnaise des Eaux and Compagnie the 2013 Reference Document), except the Company, not to Financière de SUEZ resulted in SUEZ Lyonnaise des Eaux, the renew the Shareholders’ Agreement, which therefore ended world’s leading group for local services. on July 22, 2013. This decision resulted in ENGIE losing control of SUEZ 5 2001, SPIN-OFF OF THE SUEZ GROUP WATER ACTIVITIES ENVIRONNEMENT COMPANY. As of July 22, 2013, the stake held by ENGIE in the Group (33.6% as at December 31, 2015) is In 2001, SUEZ Lyonnaise des Eaux became SUEZ and, through a accounted for by the equity method in the consolidated financial contribution in kind, combined all of its water-related activities statements of ENGIE. within Ondeo as part of a spin-off process. Water activities in France were consolidated under the name Lyonnaise des Eaux ENGIE reaffirmed its commitment to continue as a long- France. term strategic partner and reference shareholder of SUEZ. Accordingly, ENGIE and SUEZ environnement signed a 2003, FORMATION OF SUEZ ENVIRONNEMENT framework agreement in January 2013 outlining the terms of an industrial and commercial cooperation between the two In 2003, the water and waste activities were combined within companies. SUEZ environnement following the merger of Sita with Ondeo Services, which changed its name to SUEZ environnement. 2015, A SINGLE BRAND, SUEZ, TO ACCELERATE THE GROUP'S DEVELOPMENT AND SUEZ environnement then united almost all of the environmental TO SUPPORT IT IN MEETING CHALLENGES TO GROWTH activities of the SUEZ group in the water, waste and engineering sectors. In 2015, all the Group’s trademarks were federated under a single brand, SUEZ, positioned in the sustainable management 2008, LISTING OF SUEZ ENVIRONNEMENT COMPANY of resources. As part of the merger between SUEZ and Gaz de France, which This change has three goals: to simplify a multi-brand created a global leader in the gas and electricity sectors with a architecture to improve performance and commercial efficiency, strong French-Belgian base, SUEZ completed the consolidation to meet the new needs of customers and to reinforce the of all its environmental operations within a new company: convergence between the Group’s activities so that we can SUEZ ENVIRONNEMENT COMPANY. SUEZ contributed all the address the challenges of a circular economy. shares of the former company SUEZ environnement to this new The Group is now organized around four main activities: company, and distributed 65% of the Company’s capital to SUEZ management of the extended water cycle, recycling and reuse shareholders prior to the merger. Since that distribution, the of waste, water treatment solutions and consulting services for merged entity GDF SUEZ, later ENGIE, has had a stable equity sustainable urban and regional development. stake in the Company (33.6% as of December 31, 2015). On July 28, 2015, SUEZ environnement became SUEZ. At the date of this Reference Document, all the entities of the Group 2010, TAKEOVER OF AGBAR have not changed their name yet. These changes are expected On June 8, 2010, SUEZ environnement completed the to continue throughout 2016. process of taking over Aguas de Barcelona (Agbar),
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 39 Group information 5 Investments
5.2 Investments
5.2.1 Main investments made by SUEZ ENVIRONNEMENT COMPANY over the past two years
A description of the principal investments made by the Group over the course of 2014-2015 is provided in section 9.3.1,"Cash flows from investment activities", of this Reference Document.
5.2.2 Main investments of the Company in progress
None.
5.2.3 Main investments planned or subject to firm commitments from the management bodies
None.
40 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities6
6.1 General information 42
6.2 The Group’s strengths 45
6.3 Strategy 48 6.3.1 Environmental performance and operational and technical know-how: the Group’s core strategic ambitions 49 6.3.2 Continued global development to maintain a local presence 50 6.3.3 Maintaining a balanced industrial model and improving operating performance 53 6.3.4 Outlook 55
6.4 Presentation of the market and competitive position 56 6.4.1 Presentation of the Water and Waste sectors 56 6.4.2 Competition 61
6.5 Description of the Group’s main activities 64 6.5.1 Presentation of the Group’s activities 65 6.5.2 Presentation of Water Europe activities 69 6.5.3 The Recycling and Recovery activities in Europe 72 6.5.4 Presentation of the Group’s International activities 79 6.5.5 Presentation of the Group’s other activities 87
6.6 Dependence factors 88
6.7 Legal and regulatory framework 88 6.7.1 Interdisciplinary regulations 89 6.7.2 Regulations related to activities 94
6.8 Group environmental, corporate and social responsibility policy 102 6.8.1 Environmental management 102 6.8.2 Employee relations policy 114 6.8.3 Corporate commitments to sustainable development 115 6.8.4 Independent verifier's report on consolidated social, environmental and societal information presented in the management report 122
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 41 Overview of activities 6 General information
6.1 General information
With total revenues of €15.1 billion, and more than The Group’s activities in the waste sector notably include: 82,000 employees as of December 31, 2015, the Group is a XX waste collection (household waste, waste from local major player in the global environmental market (water and authorities, and industrial waste; non-hazardous and waste). hazardous waste, excluding waste that may be contaminated The Group is active in each stage of the water and waste cycles by radioactive residues from nuclear activities) and urban and therefore has thorough expertise in these areas. It operates cleaning services; both on behalf of public authorities and private sector players. XX pretreatment of such waste; The Group’s water-related activities specifically include: XX sorting, recycling, and material, biological or energy recovery XX catchment, treatment and distribution of drinking water; of recoverable fractions; XX maintenance of networks and operation of plants; XX disposal, by incineration and landfilling of residual fractions; XX customer management; XX integrated management of industrial sites (industrial wastewater treatment, “in situ” waste collection and XX collection and treatment of municipal and industrial wastewater; treatment, pollution clean-up and remediation of polluted sites or soil); and XX design, building, occasional financing and operation of drinking water production and wastewater treatment plants, XX sludge treatment and recovery. as well as desalination and water treatment plants, for reuse The Group engages in its activities through public and private purposes; customers, under various types of contracts: XX studies, master plans, modeling of underground water XX in the water sector, the Group primarily enters into delegation tables and hydraulic flows and general contracting for water of public service contracts (leases or concessions) and public management infrastructure projects; and contracts, as well as service, operational and maintenance contracts, as well as building and engineering contracts; XX biological and energy recovery of treated sewage sludge; XX in the waste sector, the Group enters into service or management contracts (delegated and non-delegated, integrated and non-integrated), operational and maintenance contracts, and design, build and operate contracts. In 2015, 50% of the Group’s consolidated revenues were generated in the water segment, and 50% in the waste segment.
42 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities General information 6
At December 31, 2015, the Group's structure was built around three operational divisions – Water Europe, Recycling and Recovery Europe and International – comprising ten Business Units and three cross-divisional businesses, Treatment Solutions, Advanced Solutions and Industrial Solutions. Another segment, known as “Other”, mainly covers corporate functions, as well as the activities of Safege, the Group consultancy subsidiary. The chart below shows the structure of the Company's operational divisions and cross-divisional businesses.
SUEZ CORPORATE FUNCTIONS
Water Europe Recycling and International Treatment Recovery (R&R) Europe Solutions
Water France R&R France North America Advanced Solutions R&R Czech Asia Water Spain Republic + Poland Africa, Middle East, India Industrial R&R UK Solutions + Scandinavia Australia
R&R Germany Europe & + Benelux Latin America 6 The chart below shows the distribution of the Group’s consolidated revenues as of December 31, 2015, according to this organizational structure:
26% 42% International Recycling and Recovery Europe
31% 1% Water Europe Other
Europe is the Group’s historical development area. Thanks to this foothold in Europe, particularly in France, the Group is able to leverage its know-how and skills and adapt them to other continents. The following maps show the distribution of the Group’s revenues by geographical area as of December 31, 2015 (1):
8% 3% 69% 6% 7% 7%
NORTH AMERICA 8% AFRICA AND ASIA 3% EUROPE 69% SOUTH AMERICA 6% THE MIDDLE EAST 7% OCEANIA 7%
(1) These maps show the geographical distribution of the Group’s revenues irrespective of the accounting segmentation assumed in the Group’s consolidated financial statements in chapter 20.1 of this Reference Document.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 43 Overview of activities 6 General information
The Group benefits from an extensive network of subsidiaries the model of the historic partnership with La Caixa (Water Spain) and branches: as of year-end 2015, the Group was active as an or New World (Sino-French Holdings in China). operator in approximately 40 countries. Outside Europe, major Until March 11, 2015, the Group was active around the world cities such as Hong Kong, Casablanca, Algiers, Melbourne and under various well-known brands, such as Sita for waste and New Delhi have awarded the Group all or part of the management Lyonnaise des Eaux, Grupo Agbar, United Water Inc., Degrémont of their water, wastewater and waste-related services, as well and Degrémont Industry for water. as the building of major infrastructure in these areas. The Group is most often active through its partnerships with local public or Since the beginning of March 2015, all of the commercial brands private players (industrial, financial or non-profit organization) that make up the Group were melded into a single brand, SUEZ that have an in-depth knowledge of the local context, following environnement, then SUEZ since July 2015.
This map shows the locations of the Group’s main subsidiaries around the world as of December 31, 2015:
Water Activity Waste Activity Water & Waste Activities
Finally, the Group has always placed research and development IRSTEA and CNRS in France, Tongji and Tsinghua Universities at the core of its activities, particularly through major in China and UCLA in the United States) and private players. partnerships, joining with both public players (for example, with
44 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities The Group’s strengths 6
6.2 The Group’s strengths
A major player in environmental activities
With total revenues of €15.1 billion for 2015, the Group is one In the water sector, in 2015, the Group operated over of the two main global environmental players and the only 1,130 drinking water production plants (1), and close to international player exclusively dedicated to water and waste 2,310 wastewater treatment sites. activities. Through its presence in all water and waste cycles, In the waste sector, in 2015, the Group treated nearly 40 million the Group believes that it holds leading positions in all of its metric tons of waste. Through its waste collection activities, it activities (in terms of revenues): served over 400,000 customers in services and industry and XX No. 2 in France and Europe and No. 3 worldwide in the water some 34 million people. sector (2015 Group estimate); Furthermore, it holds a key competitive advantage that sets it XX No. 1 in water activities in Spain, through Sociedad General apart from its competitors through its wastewater treatment de Aguas de Barcelona (Agbar); and infrastructure construction activity. Finally, the Group enjoys an excellent reputation in all markets in which it is active, as well XX No. 1 in France, No. 2 in Europe and No. 4 worldwide in the waste sector (2015 Group estimate). as brand recognition.
A strong environmental market
The Group’s strategy is based on solid long-term growth factors: Regulatory changes brought about by increasing concerns for the strengthening of health and environmental regulations, environmental protection are an additional factor driving the 6 population growth, urbanization and scarcity of resources. growth of this market. This regulatory pressure – increasingly The environmental market benefits from favorable demographic popular with the public – has resulted in an increasing demand and social changes. for complex services and facilitates the growth of players in these markets, particularly global players such as SUEZ. For Growing urbanization in certain areas and increasing example, 84% of Europeans would, according to the European infrastructure needs are also economic and social assets Commission, agree to the European Union spending more to that benefit the Group. Thus, while 1.4 billion inhabitants are support environmentally friendly activities and development projected to be added to the current urban population over (source: Eurobarometer 2014). the next 20 years – thereby considerably increasing water infrastructure needs – 2.4 billion people – i.e. approximately Finally, the development of new technologies to address the 36% of the world population – do not currently have access growing complexity of environmental issues and the increasing to a sophisticated wastewater treatment system (source: MDG role of private operators (the portion of the global population Report, 2015). served by the private sector in the water segment exceeded the threshold of one billion persons in 2013 – source: GWI, 2013), are also positive factors for the expansion of the Group’s markets.
An integrated player throughout the entire water and waste value chain
The Group has completely mastered each step of the water The Group is thus able to offer a complete range of services and waste cycles, allowing it to implement commercial and in terms of types of services and contracts, adapted to all technological synergies within each activity. categories of customer, including both local authorities and private industrial players.
(1) Determination of the number of drinking water production plants, introduced in 2010, excludes “ordinary disinfection” plants.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 45 Overview of activities 6 The Group’s strengths
A player able to benefit from the complementary aspects of water and waste activities
Water and waste activities offer certain complementary in China with the Shanghai Chemical Industrial Park (SCIP) features, which the Group has turned into one of its strengths. marks an important step in trade collaboration between the Thus the Group is able to generate synergies between the two activities, by combining a wastewater treatment plant two activities, particularly by sharing certain technologies and China’s largest hazardous waste incineration plant at a (for example, in sludge and compost treatment), combining single site. Similarly, the sludge drying facility and wastewater research and development in various targeted programs (such treatment plant at the Suzhou industrial park, which supplies as biomass management for material and energy recovery the neighboring cogeneration plant, using dried sludge as purposes) and realizing operating synergies by pooling certain a secondary fuel, is an example of a practical application of corporate functions. To illustrate, the Group’s development circular-economy principles.
An emphasis on research and development at the core of the Group’s culture
For over 70 years, the Group has been the source of significant worldwide. The technical and research and development innovation: the first waste-compacting collection trucks in 1936 teams had around 400 researchers, technicians and experts (the “Rey-Sita compacting dumper”), the world’s first reverse- as well as a total effective budget, unchanged from 2014, of osmosis desalination plant for the production of urban drinking €74 million (the Group’s share of expenses). Finally, convinced water in 1985, the first compartmentalized collection trucks, that innovation also means encouraging external partnerships, allowing the separate collection of recyclable packaging (the particularly with start-ups, the Group has implemented a “combi system”), in the early 1990s, the first hazardous waste deliberate approach of stimulation, promotion and co-funding stabilization-solidification processes in 1993 and the first water for innovative technical, commercial and management ultra-filtration process in 1998. initiatives and projects by methodically reviewing the various The Group’s research is based on a global scientific and technical project proposals put forward by local teams (technological network consisting of experts grouped within expertise and tests) and by investing in innovative start-ups via SUEZ Ventures research centers. The technological developments resulting (former Blue Orange), the investment fund created in 2010 for from this research are the fruit of close collaboration and this purpose. knowledge-sharing between internal experts, as well as with The Group believes its technological expertise allows it to meet the Group’s university and industrial partners. In 2015, the Group its customers’ expectations effectively and to rank among the had over 60 research and development programs ongoing at leading players as regards technological developments in its various centers of expertise and research laboratories environmental management services.
A balanced economic model
One of the Group’s principal strengths lies in the diversity and 83% of its revenues are generated in Europe, North America balance of its businesses and geographical exposure. and Australia. The Group’s consolidated revenues show a balance between its The equilibrium in the Group’s business model is also due to the water and waste activities. SUEZ has a European base: 69% of variety of its exposure: service contracts, short-, medium- or its revenues are earned in Europe. SUEZ is mainly positioned long-term contracts, local authorities or industrial customers in developed markets with stable political and legal systems: and regulated/non-regulated markets.
46 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities The Group’s strengths 6
Targeted international growth based on a strong partnership culture
The Group is pursuing a selective international growth partnership, which is itself based on a large number of strategy (outside Europe) based on identifying the fastest- partnerships with local municipalities for the co-financing growing markets with controlled risk profiles. For example, the of assets. A flexible economic model that preserves the positioning of SUEZ in the United States in regulated activities economic balance of long-term contracts. addresses this issue and allows the Group to establish the solid The establishment of Derun Environment, the fruit of a position it needs for future development in the regulated market cooperation agreement between SUEZ and New World Services as well as in services for municipalities and industry. (NWS) on one side and Chongqing Water Assets on the other The Group maintains a strong partnership culture, particularly that was officialized in November 2015 featured a new public- in countries offering high growth potential in environmental private partnership (PPP) model based on a sharing of risks activities and where teaming up with local partners deepens and benefits. its understanding of local challenges, while allowing risks and A significant proportion of the Group’s business is conducted invested capital to be shared. through delegated management contracts (delegation of public A few examples include: service in France, or the equivalent outside France), entered into for long periods of time. XX Lydec, the Group’s spearhead in Morocco since 1997, is an example of a partnership with local investors in a listed These contracts generally afford the Group the flexibility needed company, which distributes water and electricity to the cities to maintain their economic balance, notably by continually of Casablanca and Mohammedia; improving the quality and sophistication of the services provided, thus meeting the needs of both parties by offering XX Sino-French Holdings (“SFH”) has operated since 1985 in an equal partnership with New World Services Holding, a Hong innovative and profitable services or technologies. Kong-based company. SFH is an example of an operating 6 A balanced financial structure and a selective development project management policy
The Group has a balanced financial structure. The development choices are based on a strict financial discipline that allows the Group to maintain a sound balance sheet.
Sustainable development at the core of the Group’s organization
Having published its first Sustainable Development Roadmap –– help our customers to optimize the management and in 2008, the Group is now launching the second phase of recovery of their waste; this Roadmap with new commitments that reaffirm its aim –– improve the environmental footprint of our facilities and of contributing to more sustainable growth through the services; management of water and waste cycles. The Group has set three priorities translated into 12 environmental, social and –– improve customer satisfaction and trust. societal performance commitments, with related objectives for 2. Develop the talents of our employees so that they become the end of 2016: enablers of the transformation of our businesses: 1. Innovate to develop our activities and help our customers –– invest in the development of our employees; to become leaders in economic and environmental –– boost the commitment of our employees and quality of performance: life at work; –– help our customers to better manage the water cycle as –– take action for equal opportunities; a whole; –– work together to ensure health and safety at work.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 47 Overview of activities 6 Strategy
3. Make our businesses contributors to regional attractiveness –– promote access to basic water and wastewater treatment and co-construct solutions with our stakeholders: services. –– contribute to a responsible economy through local The results and best practices associated with these employment and development; commitments are described in the Group’s Sustainable Development reports, which are published annually. The –– work together on solutions and have an open dialog with our stakeholders; Group’s performance is evaluated regularly by non-financial rating agencies. –– spread and share our expertise and knowledge;
Stable shareholding structure
ENGIE holds a 33.55% equity interest in SUEZ, making it the The second largest shareholder is La Caixa, through its Group’s largest shareholder. A cooperation agreement was subsidiary Criteria, with 5.65% of equity interest at December 31, signed in January 2013 that allows us to continue to benefit from 2015. La Caixa took an initial 4.1% stake in the Company in 2014 industrial and commercial synergies in our areas of business. and will progressively reinforce its position with a short-term The stock exchange listing gives SUEZ greater visibility and target of 7%. direct access to the financial markets.
6.3 Strategy
SUEZ’s ambition is to strengthen its position as a key player SUEZ's vision reflects its ambition to respond to its changing in the areas of environmental protection and sustainable markets and is being implemented on three levels: development, by offering its customers innovative solutions XX the transformation of its core businesses around a new focus: that reconcile the economic and environmental performances “Making the Group’s customers leaders in environmental of water and waste services. Its industrial plan reflects this performance”, with new water services and an end-to-end desire for development in all its businesses by giving priority offering in waste recovery; to sustainable and profitable growth, combined with a balanced risk profile. This plan aims to establish the Group as one of the XX a new way of working together: collaborating on solutions leaders in one and/or both of its business activities, in each tailored to the customer’s needs, with the Group no longer country where it operates. simply a service provider, but a partner with a central role in its customers’ processes; Leveraging its strengths in the context of changing demand in its traditional markets, the Group is engaged in a profound XX expanding the reach of SUEZ’s activities towards new transformation of its core businesses and expanding the reach frontiers in water and waste, allowing it to capture new of its activities. growth markets beyond its traditional businesses in four key areas: industrial process water, waste recovery, new water services and new international business models.
48 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Strategy 6
6.3.1 Environmental performance and operational and technical know-how: the Group’s core strategic ambitions
..6.3.1.1 Offering customers solutions that make them and organic matter can be recovered in the form of energy or compost. The Group is thus active in the progressive evolution leaders in environmental performance towards a cycle of materials preservation, which is one of the The growing aspiration for harmonious and sustainable major challenges of the 21st century. Likewise, in the water development means a greater focus on environmental protection sector, wastewater treatment plants are becoming a kind of and rational consumption of non-renewable resources. The refinery, producing reusable water, renewable energy, fertilizers, supply and distribution of drinking water, wastewater services and final waste to be eliminated without risk to the environment. and waste recovery and disposal are services essential to the well-being of people and the successful operation of businesses, ..6.3.1.3 Make research and technological expertise and constitute real challenges in certain regions of the world. The demand for these services, and for the expansion and a priority in the Group’s future development improvement in their quality, will continue to increase over the At the heart of the Group’s strategy is research focused on long term. applications that strive to improve its operational performance In offering high-quality water and waste management services, (anticipation and control of health and environmental risks, and the Group will specifically seek to: energy efficiency) and perfect its technical expertise (treatment of sludge, desalination, reuse of wastewater and environmental assist its customers in managing resources in a sustainable XX compatibility of landfilling). and reasonable way as well as in limiting their environmental impacts by identifying alternative resources; The Group also seeks to continue developing optimum technical solutions with the best experts, specifically in order to: XX offer optimized energy consumption solutions and, if appropriate, solutions that combine environmental XX adapt to climate change and prevent it from worsening, 6 protection and the production of renewable energy. preserve natural resources and biodiversity and protect the environment and quality of life; The Group will also ensure that it continues its involvement in improving environmental management governance, in both its XX improve the quality of drinking water and customer service traditional markets and emerging countries, so as to promote and anticipate the needs linked to a more rapid urbanization; the emergence of conditions favorable to the development XX extend its technological leadership to new areas, especially of Group activities. For example, the “New Ideas for Water” related to waste recovery and disposal, including becoming initiative launched by Lyonnaise des Eaux has been successful a key player in clean energy by capturing and leveraging the in developing a participatory management model for public- potential of organic waste; private partnerships. This program, based on dialogue with consumers and all water industry players in France, is aimed XX expand our offerings for industry to become their partner of at devising innovative approaches and solutions, driven by the choice in managing their environmental challenges. expectations expressed and based on joint analysis of the new To boost and provide an additional outlet for the research and deal on water realities. innovation policy, in 2010, the Group created SUEZ Ventures, formerly “Blue Orange”, an innovation investment fund for new ..6.3.1.2 Identifying and using resources, energy and water and waste technologies. SUEZ Ventures, with a budget of €50 million over 10 years (€0.5 to €2 million initial investment material generation potential in the value chains per project), acts as an investor and industrial partner for young Water and waste activities are facing new challenges, to which companies developing innovative technologies. the Group must respond and adapt. Waste, through appropriate The fund complements the Group’s efforts in the area of treatment and under controlled conditions, can and must be research and innovation and will contribute to discovering recovered and reincorporated as much as possible in the innovative technologies and converting the results of research economic cycle: landfills and incinerators can also operate into industrial solutions. as renewable energy production sites, recycled materials can be used as secondary raw materials in industrial circuits
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 49 Overview of activities 6 Strategy
6.3.2 Continued global development to maintain a local presence
The Group’s activities are local by nature, and the Group’s and elsewhere in Italy (Piedmont, Lombardy and Venetia, for objective is therefore to be recognized by its clients as a local instance). The establishment of a national regulator responsible player. Its strategic goals reflect the dynamics of each region for defining contractual rules should help to professionalize the and the positions achieved by the Group. market. Note that these rules apply equally to public, public- private and private companies. For these same reasons, SUEZ ..6.3.2.1 Consolidating the Group’s positions in Europe has increased its stake in Acea, through its subsidiary, Suez Italia, formerly Ondeo Italia. Acea is Italy’s largest water and wastewater operator and is also a player in energy distribution (a) In water and waste treatment in Rome. In France, a market in which it is firmly rooted, the Group intends In Great Britain, the Group, through its Agbar subsidiary, sold to both (i) expand its core business activities in drinking water, 70% of the regulated activity of Bristol Water, a UK drinking- wastewater and customer management for local authorities water distribution company, to Capstone Infrastructure and industry, and (ii) diversify its offering by selling higher Corporation in 2011. SUEZ continues to be a major operational value-added services: shareholder, retaining a 30% interest in this regulated activity, XX to local authorities (major water cycle and water resources which is consolidated as an equity associate, and retains a protection, dynamic and predictive management of water presence in the UK water market by pursuing development in and wastewater networks with the support and development the non-regulated sector, which is a growth driver. of Smart technologies); Finally, in the rest of Europe, the Group will seek growth XX to managers of real estate complexes (smart and multi- based on its strong positions in the region, taking advantage fluid metering); of opportunities associated with the requirements to comply with European Union standards for water management XX to businesses and industry. infrastructure. The Group is monitoring the reforms envisioned These actions should also strengthen the Group’s by some national authorities to achieve the dual aim of competitiveness, particularly in terms of the renewal of some compliance with European quality and service standards and of its major contracts. ensuring the long-term economic equilibrium of these services. In Spain, the Group aims at developing an approach that is both dynamic and local, to take advantage of growth opportunities (b) In recycling and recovery (wastewater, building and operation of desalination plants and The Group plans to consolidate its traditional collection and wastewater recycling plants, etc.), while taking into consideration treatment businesses and expand its waste recovery activities. very specific regional characteristics. In accordance with In addition, the Group aims to manage the entire waste value the framework agreement signed on July 17, 2014 SUEZ chain and strengthen certain positions, both in terms of ENVIRONNEMENT COMPANY acquired the remaining indirect geographical coverage and business expertise. 24.14% interest in Agbar, held by its historical partner, La Caixa, in exchange for the issuance of new SUEZ ENVIRONNEMENT In France, the Group intends to occupy a significant place in COMPANY shares and a cash payment. the materials or energies resource recovery sector and to participate in the development of the circular economy by In Italy, based on its strong positions in Tuscany, the Group intends implementing the experience it has acquired over many years to seize the development opportunities offered, either on its in France through heightened coordination on the European own or through public-private partnerships. This management level, while: model still offers plenty of potential in Italy, particularly given its performance in Tuscany and the investment needs in this sector, (i) continuing to develop and improve profitability in the estimated at €65 billion over the next 30 years. The Group has traditional businesses of collection, sorting and processing anticipated a very slow shift to public-private partnerships, and waste by making efforts in productivity and elevating the needs of Italy’s local authorities in terms of infrastructure operating and innovation standards; investment are very significant. Under present conditions, (ii) pursuing the industrialization and improving performance of municipalities will still be able to call on private operators under innovative recovery technologies of plastics, wood, metals, public service delegation contracts. SUEZ will be able to offer etc. thanks to structured partnerships or internal research its know-how in designing, financing and operating complex platforms such as Plastlab or BioResourceLab; water and wastewater systems, such as those in Tuscany
50 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Strategy 6
(iii) developing and bolstering its positions in emerging lines of for the Group’s activities. The Group will seek to strengthen business, such as remediation of polluted soils and sites, its positions in Poland and the Czech Republic, and to seize dismantling of end-of-life aircrafts, processing electrical and opportunities in new markets, mainly by supporting its industrial electronic equipment, etc. customers in their growth efforts in these countries. In Benelux and Germany, the Group intends to continue its integration across the value chain, working with partnerships ..6.3.2.2 Developing Group strongholds in the United States, to jointly develop closed-loop solutions. More specifically, it China and Australia seeks to position itself to seize selected opportunities related to the recovery segments where the Group can capitalize on its existing strengths. Its functional services have also been (a) The United States consolidated to take utmost advantage of opportunities for The Group’s objective is to (i) develop its regulated activities synergies presented by these regions in their border areas. through investments in maintenance and in the expansion of In Germany, SUEZ Deutschland has a strong presence in the its asset base, and through the corresponding rate increases western part of the country, particularly in municipal and expected from the regulator; (ii) consolidate its service contract selective collection. The Group is also strongly positioned in activities, specifically by entering into new contracts and selling incineration in the Leipzig region through its Zorbau site, as well technical assistance, providing operating and maintenance as in the sorting of household packaging through its recently services through public-private partnerships that also meet modernized site in Ochtenburg, near Koblenz. Meanwhile, the needs of government customers in terms of debt relief, numerous underperforming sites have been sold or offered and sustainable investment by partnering with private equity for sale in order to improve profitability, and more leeway is funds; and (iii) develop its service activities through USG (see granted in regions where SUEZ Deutschland is a market leader. section 6.5.2.2 (b)). At the same time, the Group intends to A more flexible organization, with an emphasis on the control increase its portfolio of regulated and non-regulated activities of the value chain rather than its ownership or operation, is around its current bases. also favored to allow SUEZ Deutschland to adapt to market demand. In the Netherlands, in a highly competitive market, the The Group also furnishes equipment and water treatment Group’s aim is to target the waste management value chain, in services to municipalities and industrial clients, particularly 6 which it intends to be a leader, optimizing resources (assets, in the petroleum and gas, petro-chemical and energy sectors. staff and marketing) and developing partnerships to expand SUEZ R&R’s (former Sita) existing offering. As in Germany, the (b) China objective is to control the value chain, rather than owning or In water, the Group intends to continue its growth by means of operating it. In parallel, the Group’s strategy is to capitalize on selective development of new concessions and other projects, its waste recovery capacities in both energy (i.e. through the especially in drinking water and serving municipalities, through new ReEnergy plant) and materials (through the Rotterdam Sino-French Water Development (SFWD), the water division plastic packaging sorting facility, for example). development subsidiary of Sino-French Holdings (SFH), a In Belgium, where the Group is a market leader, it intends joint venture with the New World Group based in Hong Kong. to retain its industrial and commercial customers through The Group also intends to develop its wastewater services to a selective acquisition strategy, particularly for medium/ municipalities and industrial parks, especially in the area of large customers and public authorities, and through logistics integrated sludge management, focusing on its bases in Macau, excellence. With Belgium’s ambitious regulatory program Shanghai, Beijing and Chongqing, and in line with its current (especially in the Flanders region), SUEZ R&R is well positioned investment structures (joint ventures and partnerships), with the to meet the rapidly changing needs of its customers. objective of seeking out stable, mature and high performance customers. In the UK and Scandinavia, the Group plans to support changes in treatment methods in the recycling and recovery of various In waste, Sita Waste Services (SWS) leads the market in Hong material flows. In the UK, the Group will also pursue its policy Kong, its Asian nerve center, and for over 40 years has offered of developing complex integrated waste-management projects. a wide range of waste management services to its municipal, It is also now building several energy recovery units. industrial and business customers in Hong Kong, Macau, Taiwan and China. The current scope of its activities includes waste In Central Europe and the Mediterranean basin, increasing transfer stations, landfills with biogas recovery, hazardous compliance with European Regulations, supported by European waste incineration, and energy recovery from waste. Union funding and the growing sophistication of waste management methods will make the coming years favorable
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 51 Overview of activities 6 Strategy
Given the demand from Asian authorities and public and private for a target rate set at 91%. It achieved the target rate of 70% on customers for sustainable waste management solutions, SWS the index for wastewater quality that was recently introduced. expects future growth in selected sectors and market segments. In 2015, the activities of the former entities Sita Australia, Together with its local and international partners, SWS is Degrémont and Process Group were combined under the single preparing to turn these challenges into opportunities in the brand of SUEZ. Australia is now the largest business unit of the form of joint ventures and partnerships in the various markets Group in the International division, with 2,500 employees, over of China and South East Asia. Through these opportunities, it will 160 sites and revenues of nearly AUD1.5 billion. In November grow and secure its new activities, underpinned by its strong 2015, the Group took over full control of SUEZ Recycling and market positions, networks and synergies. Examples of this Recovery Pty (former Sita Australia) activities through the include capturing the potential of the new energy recovery purchase of a 40% stake formerly held by Sembcorp Industries. market in Hong Kong, where SWS is currently building the first The Group also acquired Pro Skips, a waste management food waste treatment plant, which will produce energy from the company based in the southeast of Queensland, thus providing daily treatment of 200 tons of waste, and pursuing additional SUEZ with the platform it needs to expand its construction growth through projects in hazardous waste treatment and soil and demolition businesses and rounding out the Group's sales rehabilitation in China. SWS will also explore opportunities and and industrial presence. The Group's strategy is to develop contribute to selected energy recovery and hazardous waste its businesses and the SUEZ brand in Australia through full treatment projects in Indonesia, Malaysia and Singapore. integration of both the Recycling and Recovery and Treatment Furthermore, SUEZ has invested in Derun Environment in Solutions businesses. The Recycling and Recovery segment is cooperation with Chongqing Water Assets Management Co. Ltd. pursuing development based on assets, organic growth and (50/50 joint-venture between SUEZ and NWS Holdings Limited a strategy of targeted acquisitions. The Treatment Solutions "NWS"). Derun Environment will work on major projects in the businesses are essentially made up of "DB" contracts in the area of waste treatment such as recycling, energy recovery from municipal sector, especially with operations and maintenance waste and soil remediation, and in a more general sense, the businesses, which will be increased by development of targeted development of environmental protection-related technologies. industrial sectors to include oil and gas, the mining sector, Finally, as illustrated by its five industrial and chemical parks, energy and food and beverages. The Oil and Gas divisions, for example in Shanghai, the Group intends to promote its present through SUEZ's acquisition of Process Group in 2014, two activities, water and waste, through a common trading will concentrate on finalizing its incorporation into SUEZ's approach, to meet the growing demand from industrial sites businesses while continuing to expand in new target regions for an integrated multi-utility management service. such as Latin America and North America.
(c) Australia ..6.3.2.3 Seizing attractive development opportunities The Group is present in the water segment in Australia via its in certain regions of the world Treatment solutions segment. The Group is looking for countries in which the “risk/return SUEZ currently has an Alliance contract (Aroona Alliance) on investment” ratio will allow it to establish long-term bases in Western Australia with Watercorp for the management of for development. It is using the full range of delegation of the city of Perth’s drinking water and wastewater services, public service contracts available and is seeking new forms comprising 19 drinking water plants, 14 wastewater treatment of partnership adapted to the specific features of the markets plants and two advanced wastewater treatment plants. The in question. Thus: primary objective of Aroona Alliance is to provide drinking XX on a global scale, the consulting activity, through Safege water and the treatment of wastewater in compliance with and its subsidiaries, gives the Group a very upstream regulatory requirements. In 2014 and 2015, results in this position in its activities and provides the Group with a clear area were continually in compliance with new requirements competitive advantage. As such, Safege will be involved both internally and externally, in terms of quality, quantity in studies and master plans, program management and and environmental management. The Alliance is continuously infrastructure design, thereby differentiating itself from raising its production standards. With regard to the drinking its competitors through its genuine long-term vision as an water quality index, Aroona achieved a 100% conformity rate operator/manager with a strong grasp of the challenges of sustainable development;
52 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Strategy 6
XX for its part, the Treatment Solutions activity intends to In addition, the Group is positioned to seize future opportunities pursue its global growth on every continent in the four areas on new industrial markets in water (Brazil, China and Middle of design-build, operation and services, equipment and BOT East), to meet the growing demand for new municipal waste contract management for its two categories of customers – treatment solutions (North Africa and the Middle East) and to local authorities and industry –in both its mature markets support SUEZ's key industrial customers in improving their and its emerging markets. environmental performance.
6.3.3 Maintaining a balanced industrial model and improving operating performance
..6.3.3.1 Maintaining a balanced industrial model Within the businesses of water and waste themselves, greater integration of the Water Europe and Recycling and Recovery One of the Group’s principal strengths lies in the diversity and Europe divisions and the expertise of the Innovation and balance of its exposure: service contracts, short-, medium- or Industrial Performance Department promote the sharing of long-term contracts, local authorities or industrial customers, good practices within the Group. regulated/non-regulated, mature countries and emerging markets. The Group also intends to pursue the exploitation of operational synergies with the ENGIE Group’s energy activities: The Group seeks to allocate the capital invested in order to preserve the diversity and balance of its business portfolio, XX combined project management, such as the recovery depending on the expected profitability and risks incurred by of renewable energy from waste, or the desalination of each activity. This approach is all the more significant since seawater (plants that combine energy production, thermal some of the Group’s activities will become more capital- desalination and membrane desalination); intensive, despite the development of new service activities. XX developing synergies as part of service offerings for the The Group considers itself well positioned to address this metering of fluids (in case of identical client issues); change and has the financial strength necessary to make the 6 XX pooling resources in order to benefit from significant corresponding investments. economies of scale, especially in procurement and R&D. The Group’s investment policy is carried out in accordance with strict financial criteria addressing the principles set forth in . section 6.3.4 of this document. .6.3.3.3 Improving performance Historically, the Group has given high priority to the optimization ..6.3.3.2 Exploiting potential synergies of business profitability, notably through ongoing performance improvement plans. The Group is organized to promote maximum integration The Group plans to pursue and expand its profitability efforts between both water and waste activities: through the COMPASS program, which is part of an ongoing XX joint research programs (odor treatment, energy recovery plan that has been in place for a number of years. COMPASS and biogas recycling); is an internal benchmark that aims both to promote industrial XX implementation of shared technologies (composting excellence and control operating costs. The COMPASS plan is activities, methanization, treatment and recycling of sludge deployed across a wide variety of activities at all levels of the and treatment of leachates in wastewater treatment plants); organization in order to foster a strong culture of performance improvement and convey the Group’s intention to adapt to XX generation of commercial synergies, such as in France, with increasingly uncertain economic conditions. a joint Development Department, or outside Europe, where some subsidiaries manage both activities; For 2010-2012, the COMPASS plan, for which the overall target was initially set at €250 million of sustainable net gains in XX joint commercial activities in the water and waste segments, EBITDA, adjusted to €300 million in 2011 and €360 million in to ensure an integrated multi-utilities management service; early 2012, ultimately led to €400 million in gains. XX savings in general expenses generated by combining In 2013 and 2014, savings from the COMPASS plan amounted corporate functions (finance, strategy, human resources, to €180 million and €160 million respectively, in line with IT, communications, legal and development). objectives.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 53 Overview of activities 6 Strategy
For 2015, the Group maintained its continuous improvement Netherlands, etc.); the rationalization of collection costs measures including process industrialization, purchasing (use of alternative fuels, vehicle maintenance, reduction efficiencies, and the reduction of SG&A costs. Sustainable net in distances covered, and streamlining of vehicle fleets); gains amounted to €160 million. The Group believes that the highly professional management of operating processes potential for continuous improvement represents about 1% in household and industrial waste (“Excellence” programs of annual operating expenses. It has also launched targeted at Recycling and Recovery France) and, more generally, plans in a macroeconomic climate that remains challenging, through the continuous benchmarking of all Water and particularly within the scope of Recycling & Recovery Europe. Recycling and Recovery sites to promote the dissemination All of the Group’s subsidiaries contributed to the achievement of standards (which are themselves based on the best of these strong results. practices identified). Finally, the Group is working hard to bring down the costs of its energy consumption and The initiatives implemented cover three main areas: enhance its production capacities as effectively as XX Purchasing: external purchases for the Group represent possible (incinerators, treatment plants, new processes, a total volume of about €6 billion. In 2013, the Group promotion of new energies and biogas), strengthened its purchasing skills and organization, –– increased focus on the least profitable commercial including through the deployment of category management contracts, to reap the benefits of its purchasing volumes in both its business line categories and its indirect categories. The –– continuation of specific plans for the Recycling & Recovery Group has also introduced a purchasing governance system Europe business involving the rationalization of the to reinforce the separation of roles between buyers and collection vehicle fleet, site closures, and lesser reliance specifiers, and ensure competitive bidding above certain on temporary workers; thresholds. XX the reduction of SG&A costs is ongoing with: –– Savings on purchases made under the COMPASS plan are –– the development of regional organizations by Recycling achieved through initiatives that span the entire Group, and Recovery France and Water France, such as tendering procedures or negotiating framework –– the launch of action plans in the support functions of agreements at European level – and even internationally in French entities grouped at the La Défense site (search some cases – as well as more local initiatives. With respect for synergies and greater integration), to business line categories, for example, standardized specifications between countries ease negotiations at –– action plans in the back offices of Group entities abroad international level for equipment such as construction to establish regional platforms. machinery and trucks for the Waste business, and for pumps, pipes, drying equipment, instrumentation and air ..6.3.3.4 Mobilizing employees around the industrial project production machinery for the Water business. Similarly, in indirect categories, rationalizing the needs and the Implementation of this strategy involves the permanent organization of joint negotiations in the interim, the mobilization of the Group’s expertise and employees. Priority management of the vehicle fleet, energy and IT equipment is given to local recruitment, centralized career management can generate significant savings. In addition, managing the and increased employee mobility among the Group’s various performance of strategic suppliers generates productivity subsidiaries and activities. To improve mobility, professional gains and enables the design of innovative products and experience and diversity in recruitment, strong links are services (Redesign-to-Cost); maintained with ENGIE and the various activities. XX Operational benefits, as the result of: To offer employees incentivizing professional career paths, the Group will continue to anticipate changes in activities and to –– a reduction in the cost of interventions on the network adapt skills to new needs through a dynamic training policy. through standardization and scheduling, and the use of The Group intends to promote long-term relationships with its GPS tools (Water France); a more focused management of employees and to boost their commitment. large numbers of customers in Water, and the promotion of electronic billing; and the conversion of incoming Finally, the Group’s strategic plan includes a chapter on the correspondence to a paperless system, long-term challenges facing Human Resources, to ensure that the objectives that have been set are consistent with projected –– the optimization of waste flow management (greater in- growth in activities. sourcing of flows, orientation toward more cost-effective treatment systems, flows between the UK and the
54 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Strategy 6
6.3.4 Outlook
In 2015, SUEZ posted very good performance results despite With its balanced position on growth markets and activities and uncertain and heterogeneous world economic conditions thanks supported by a strong balance sheet, the Group is fully poised to its robust model and the relevance of its strategy. In this to achieve EBITDA of €3 billion in 2017 (3). It will do so through unfavourable context, especially in France, SUEZ intends to sustained organic growth and selective acquisition, as well as enjoy regular growth in its activities and continue to give priority its cost savings plan which will generate an aggregate amount to obtaining a robust financial situation. For 2016, SUEZ has the of €460 million for the period 2015-2017, or €300 million from following goals (1): 2016-2017. XX Revenues: organic growth of 2% or more; This outlook is based on data, assumptions and estimates considered reasonable by the Group, and assumes the XX EBIT: organic growth in excess of growth in revenues; successful implementation of the strategy presented in XX Net Financial Debt/EBITDA ratio remains stable at around chapter 6.3 of this Reference Document. It may change or be three times; modified due to uncertainties, especially in economic, financial, XX the generation of about €1 billion in free cash flow; competitive, regulatory and climatic conditions. In addition, the occurrence of certain risks described in chapter 4 of this pursuing an attractive dividend policy: Dividend payment in XX document, “Risk factors”, could impact the activities of the Group 2016 of at least €0.65 per share for 2015 (2). and its ability to achieve its objectives. As a result, the Group In the medium term, SUEZ is confident in its future, given its does not make any commitments or give any guarantees on numerous advantages in responding to structural demand with the achievement of the objectives and forecasts described in new solutions for managing water and waste cycles throughout this section 6.3.4. the world. For SUEZ, sustainable development is a daily reality. These objectives and forecasts are based on accounting principles defined by the Group in drawing up the consolidated financial statements which appear in chapter 20.1 of this 6 Reference Document.
(1) Excluding the impact of exceptional summer volume in the Water Europe segment of €20 million; based on stability in industrial production in Europe in 2016 and with the budget assumption of stable prices of raw materials. (2) Subject to approval by the Shareholders’ Meeting. (3) Based on a macroeconomic recovery in Europe in 2017, at constant exchange rates compared to mid-February 2015 and accounting and tax standards unchanged from January 1, 2015.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 55 Overview of activities 6 Presentation of the market and competitive position
6.4 Presentation of the market and competitive position (1)
6.4.1 Presentation of the Water and Waste sectors
..6.4.1.1 General presentation of the Environmental corresponding infrastructures and services encourage local public entities to seek the expertise and collaboration of private Management Services sector operators. Like local public entities, in order to concentrate on managing (a) General characteristics their core business and satisfy the need to control environmental The environmental management services sector covers all costs, large international companies in the industrial and services provided to residential, municipal and industrial service sectors are increasingly outsourcing to specialized customers relating to (i) the production and distribution of players with the technical and operational resources to provide drinking water or industrial process water, wastewater collection these environmental management services efficiently. and treatment, waste management (activities that represented The use of specialized private operators by these major approximately 74.5% of total environmental expenditure in international players in the industrial and service sectors is also France in 2012; (source: L'Économie de l'environnement en France increasing due to the global deployment of these companies; en 2012, MEDD, 2014), as well as (ii) air protection, measures for concerned with efficiently managing these problems, they want combating noise, protection of biodiversity and management of to entrust these services to specialists that are just as global, radioactive nuclear waste (which together represented some in order to facilitate management and be assured of receiving 12% of total environmental expenditure in France in 2012; uniform service at all their sites. source: L'Économie de l'environnement en France en 2012, MEDD, 2014). (c) Growth factors in the environmental management services sector Increased demand for high levels of environmental protection has resulted in an increasingly strict, dedicated regulatory The Group believes that the environmental management framework. This entails major investments within the required services markets will grow in the long term, notably because deadlines and effective and global management of related of a combination of macroeconomic factors, including: issues, which has led to the emergence of European or global XX world demographic growth (average annual growth of 1.05% players that specialize in environmental management services. by 2020 – source: Banque Mondiale, 2015); This change is occurring at different speeds, depending on the increased urbanization, particularly in emerging countries country. XX (in 2030, nearly 60% of the world’s population will be living The public’s expectations for measures and actions regarding in urban regions, compared to 54% today – source: United environmental protection are not diminishing, even in the most Nations, 2014); advanced countries in this regard. For instance, 95% of the French world economic growth estimated at an average of almost are worried about the planet, and say that they are concerned XX 3.7% per year during 2015-2019 (source: IMF, October 2015); about environmental protection (source: Eurobarometer, 2014). Growth in expenditure related to environmental protection is XX increase in the prices of raw materials, which are set to generally greater than growth in gross domestic product. In remain high over the long term, increasing the economic France from 2000 to 2013, the average annual rate of growth attractiveness of waste recovery, through either recycling in expenditure related to environmental protection was 4%, or energy recovery; compared to 2.8% for gross domestic product during the same XX the need to adapt to climate change, which will affect water period (source: IFEN, 2015, INSEE 2015). resources most particularly.
(b) Growth in environmental management services Changes in regulatory requirements, higher expectations from end users and, consequently, the complexity of the
(1) The market data presented in this document come primarily from databases and studies carried out by Eurostat and the Institut français de l’environnement (IFEN, the French Institute for the Environment, now a unit of the Service de l’observation et des statistiques (Monitoring and Statistics Service)). At the time of writing, data or studies more recent than 2012 were not available for all countries in which the Group operates, to the knowledge of the Group.
56 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Presentation of the market and competitive position 6
In addition to these macroeconomic factors, the Group believes people have no access to a permanent supply of drinking these markets should expand through a combination of various water and it is estimated that 2.4 billion people lack adequate factors specific to the sector: wastewater system, source: MDG Report, 2015); XX greater attention paid to environmental protection around XX the growing number of areas affected by insufficient water the world; resources, or that are in a state of water stress, particularly related to global warming. The number of individuals in a XX greater demands from the public for better hygiene, quality of life and health, and changes in consumption linked to an situation of severe water stress is expected to rise from improvement in living standards; 1.2 billion in 2013 to 1.8 billion in 2025 (source: UN Water, 2013). XX stricter and more rigorously applied environmental regulations; The Group believes that it is possible to expect higher long-term growth in its markets compared to GDP growth. XX very large and yet unfulfilled needs for access to drinking water and wastewater facilities (currently, over 630 million
..6.4.1.2 Presentation of the water sector
(a) A value chain that uses complex industrial processes
MUNICIPALITIES Discharge of Pumping and Consumer Wastewater treated water Treatment production of and customer collection and into the natural and recovery drinking water service treatment environment of sludge
6
Storage and Synergies Distribution between Water INDUSTRIAL CLIENTS and Waste Process water Biological recovery Treatment of industrial wastewater Waste management services
(b) A sector characterized by significant investment and customized growth With regard to the supply of drinking water in some developed based on specific local characteristics countries, a slight decrease in volumes consumed is being observed, notably due to the increasing use of water-saving The Group estimates that across the European Union, the equipment, and the implementation of industrial production water-related environmental services sector represents about processes that consume less water. For example, in France, the €90 billion per year (source: Estimate 2013). All the European Group estimates that the volumes of water billed have declined countries are expected to invest some USD800 billion in water by over 1% per year on average for the last 15 years. production and distribution and wastewater treatment between 2006 and 2025 (source: Financing water and wastewater to 2025, Nevertheless, this trend has been offset by the provision of D. Lloyd Owen, 2006). more sophisticated services and additional consumer benefits in terms of water production, water distribution and wastewater treatment.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 57 Overview of activities 6 Presentation of the market and competitive position
In the United States, the size of the environmental management XX in Spain, the Group estimates that private operators services sector relating to water is USD103 billion (source: GWI currently represent approximately 55% of the drinking water study, 2015). It offers major opportunities for consolidation due production and distribution sector, and approximately 58% of to the very high number of small local players as well as acute the wastewater treatment sector (source: internal estimates); needs in terms of infrastructure replacement (a USD500 billion XX in the United States, the Group estimates that private investment is anticipated for the 2006-2025 period) (source: operators currently represent approximately 13% of the Financing water and wastewater to 2025, D. Lloyd Owen, 2006). drinking water production and distribution sector, and approximately 2% of the wastewater treatment sector (c) A market increasingly controlled by private operators (source: GWI 2015). The Group believes that the share of the The Group believes that the use of private operators (the private sector in this segment should increase in the coming portion of the world population served by the private sector years: with regard to service contract activities, growth totaled almost 14% in 2013 – source: GWI, 2013) should grow may originate from the increased use of private operators significantly in the long term, particularly in the form of public- by municipalities, and in terms of regulated activities, the private partnerships, notably for the following reasons: private sector is expected to benefit from the consolidation underway in this sector. XX private operators, which benefit from long-standing and diversified experience, have top-level skills; ..6.4.1.3 Presentation of the waste sector XX consumer requirements in terms of water quality and related services are increasing; The existence of a market for waste management services requires: XX regulations continue to tighten throughout the world; particularly in the European Union, environmental directives XX a minimum level of economic development: countries only and their various revisions define and strengthen the current allocate a portion of their wealth to waste management regulatory obligations; after meeting their other, higher-priority needs (particularly access to drinking water); XX among the 15 “initial members” of the European Union (1), some are late in transposing into domestic law the technical XX the definition and application of environmental regulations; European Directives related to water, particularly the 1991 XX the guarantee of a certain degree of contractual stability; European Directive on urban wastewater; XX public awareness of environmental issues. XX the “new Member States” of the European Union (2) must comply with the European standards; Each country has specific features and therefore the nature of the services offered by operators must be adapted XX pressure on public expenditure, greater demand from accordingly. Thus, in the least developed countries, demand consumers for efficient public services and the increased mainly corresponds to waste collection and removal services technical level of the business are encouraging many public provided by local operators; in emerging countries (Central entities to take the path of public-private partnerships. and Eastern Europe, North Africa, the Middle East and China), Local situations vary as to the use of the private sector by local demand extends to additional selective collection services, public entities with regard to water services; thus: pretreatment and sorting; finally, for more mature countries (the “original members” of the European Union, North America, in France, the management of municipal water systems are XX Japan and Australia), demand is for a full range of services often entrusted to the private sector, with municipalities including material recovery (sorting and recycling), biological retaining ownership of their assets; recovery (composting and methanization) and energy recovery XX in the United Kingdom, the water sector has been almost (waste-to-energy plant and alternative fuels from waste). entirely privatized since 1989, while operators, in this case, Given these specific features and the complexity of market/ own the infrastructure. These operators are increasingly business approaches that vary by country and region, there are, focused on managing investment programs and tend to with few exceptions, few pertinent, up-to-date data available on subcontract operation and maintenance; individual markets and/or geographical regions.
(1) Namely, Germany, Austria, Belgium, Denmark, Spain, Finland, France, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, the United Kingdom and Sweden. (2) Namely, Poland, Romania, Hungary, the Czech Republic, Bulgaria, Slovakia, Lithuania, Latvia, Slovenia, Cyprus, Estonia, Malta and Croatia.
58 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Presentation of the market and competitive position 6
(a) A complex value chain integrating several segments
Waste management chain Waste Waste Collection Recovery Pretreatment Elimination producers flows & Logistics & Recycling
Biological Households and Household municipalities (MSW) recovery Composting
Urban cleaning Commerce Commercial and Industry and Industrial
Incineration Pretreatment with energy Waste sorting recovery Building and collection Construction Synergies with water Demolition and energy activities
Industrial maintenance Hazardous Soils Dismantling Waste Hazardous depollution Contamined waste treatment sites and soils Material Landfilling recycling 6
(b) The various types of waste annual growth of 0.73% – source: Eurostat, 2015 data (2)) and decreased between 2010 and 2012 (annual average decrease Four principal sources of waste define the scope of the Group’s of 1.5%) activities: household and municipal solid waste, industrial and commercial waste, building and demolition waste and The volume of household and municipal solid waste depends hazardous industrial waste (excluding waste that may be primarily on the following: contaminated by radioactive residues from nuclear activities). XX economic growth and consumption trends: a richer In 2012, these sources represented an annual waste volume population consumes more and acquires more complex of around 2.5 billion metric tons in Europe (source: Eurostat, products, which it replaces frequently, thereby generating 2015 data); this total covers a range of scenarios from more greater quantities of waste requiring more elaborate mature countries to less developed countries in terms of waste treatment; management services. XX population growth and its social organization: thus, for Waste products from agricultural activities, mining activities, example, the increasing number of single-individual and quarries also represent very significant flows, but are not households results in increased individual packaging; included, or count for very little, in the scope of management of the sector’s operators (1). XX the country’s level of development and its environmental culture: the higher the level of development and the greater Household and municipal solid waste the awareness of environmental problems, the more the population agrees to allocate a greater part of its income to The production of household and municipal solid waste totaled waste management services; this dynamic can even result virtually 213 million metric tons in 2012 in the 28 Member in a reduced amount of waste produced. The Group believes States of the European Union (source: Eurostat, 2015 data), that the volume of household and municipal solid waste in 86% of the waste was generated by the “original” members of Europe should remain stable or decrease slightly, but with the European Union. significant disparities between the “original” and the “new” The volumes of household and municipal solid waste produced member states of the European Union. grew steadily in Europe between 2004 and 2010 (average
(1) It should be noted that an evaluation of waste volumes generated is also difficult, because of the heterogeneous nature of the definitions and the data collection methods at European level, and even more so at global level, particularly with regard to the allocation of waste in each waste segment. Moreover, each type of waste mentioned receives a different, and therefore potentially quite variable, treatment; mix treatment analysis is therefore necessary to complement the volume analysis. (2) It should be noted that a strict comparison of Eurostat historic data is not possible because Eurostat modified not only the current data but also the historical data when it updated them.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 59 Overview of activities 6 Presentation of the market and competitive position
Industrial and commercial waste (c) Waste treatment methods The production of industrial and commercial waste totaled The level of treatment (number and complexity of stages) approximately 2.21 billion metric tons in 2012 in the European applied to waste after collection is an important parameter Union (source: Eurostat, 2012 data) and 72% of the waste was that is inseparable from the analysis of growth in tonnages. generated by the “original” members of the European Union. Waste is collected, sorted and then treated using different The production of this waste and its growth depend on the type methods: and scope of industrial activities. The increase in the relative weight of the service sector, relocation (for the more developed XX after collection, the waste is directed towards recovery sites countries), industry efforts to reduce manufacturing residues (monoflow), either towards transfer and sorting platforms, and the level of economic activity are the principal factors or directly to treatment facilities. The volumes sent directly limiting this volume of waste. to final treatment facilities are sharply declining due to measures implemented to achieve regulatory targets for The crisis that started in 2008 has undoubtedly had an impact waste recovery as set by domestic or European Community on the volumes of industrial and commercial waste generated in governments (for example, the obligation to exclusively Europe. These volumes have now stabilized and should remain landfill “final” waste,i.e. waste that has undergone prior stable or increase moderately, in partial proportion to economic sorting/pre-treatment); growth. XX sorting consists of identifying and separating: The portions Building and demolition waste that can be recovered as a resource for the production of "secondary raw materials" such as metals, plastics, glass, The production of building and demolition waste totaled over wood, etc.; portions recoverable in the form of energy 821 million metric tons in 2012 in the European Union (source: (production of refuse-derived fuel, or RDF, incineration with Eurostat 2015). energy production); recoverable organic portions in the form The types of waste included in this category are those that vary of materials and/or energy (composting and methanization); the most significantly from one country to another. Moreover, inert portions recoverable in the form of fill material; and only a small portion of this waste is optimally managed. The finally, the residual portions treated by landfilling; Group is relatively underexposed to this type of waste. XX landfilling is the oldest disposal technique; but it has been considerably improved and currently requires advanced Hazardous waste technical know-how: for example, the installation of sealing The production of hazardous waste totaled around 100 million membranes, management by compartments (cells) to reduce metric tons in 2012 in the European Union (source: Eurostat impacts and decrease the surface area in contact with 2015). The criteria for the hazard level of waste are defined rainwater, management of leachates, monitoring after site by regulatory classification. Based on these criteria, European closure (generally 30 years) and proactive management of Regulations have developed a list of types of hazardous the decay of organic matter to produce energy (bioreactors); waste. Changes in the characteristics of the waste or of the energy recovery through incineration allows energy classification may lead to a change in the scope of this source. XX production (electrical or thermal) from waste. This technique Hazardous waste consists primarily of industrial waste. is currently widely used in the most developed countries Production of this waste and its growth thus depend on the from an environmental standpoint, it often requires type and scope of industrial activities in a given region. The significant investment. location of industries and their efforts to optimize the quantities of materials used in their manufacturing processes and to reduce residual quantities are therefore critical factors for this source of waste. Hazardous waste may be treated for recovery and/or disposal according to three main methods: physical, chemical or biological treatment, thermal treatment (incineration and co- incineration) and landfilling.
60 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Presentation of the market and competitive position 6
(d) Regulatory framework Several European countries, however, have implemented tax systems intended to enhance the relative attractiveness of other European waste policy, particularly regarding the treatment sectors in the context of regulatory targets limiting volumes of waste, now increasingly focuses on waste recovery. sent to landfills. This has been the case in the Netherlands, the European directives set medium- and long-term targets for United Kingdom and France since January 2009. the reduction of waste volumes generated and increased recovery rates. The various member states then choose the In some of these countries, this tax has now reached significant most appropriate methods to achieve these targets at domestic levels, which for end users means a squeeze in the range of level by implementing, for example, financial incentive systems prices for available treatment solutions. for recovery, by imposing pre-required standards (mandatory According to the Group, in the future the trend should converge preliminary sorting, defining maximum thresholds for organic toward more elaborate treatment solutions (sorting, recovery portions or the calorific power of acceptable residues at and waste-to-energy) under the combined effects of the landfills), by levying taxes on tonnages eliminated, or even by regulatory targets resulting from the application of European implementing broader manufacturers’ liability schemes (for Directives and the increase in raw materials and energy prices. example, in terms of packaging, or for electrical or electronic products at the end of their lives). (f) Intervention by private operators The breakdown among the various waste treatment methods In Europe, the rate of penetration in the waste market by private used differs considerably from country to country. Accordingly, operators varies significantly from one country to another, both while the United Kingdom and Spain were recently still treating for collection and treatment activities. The gradual transposition a large part of their household and municipal solid waste by of European Directives by all EU member states by 2020 should landfilling (35% and 60%, respectively in 2013), the Netherlands result in significant investments in waste recovery methods and Germany make only marginal use of landfill (approximately and should require the necessary technical expertise for 1%), preferring waste recovery (source: Eurostat 2015-2013 data). the building and operation of these facilities. Although it is not impossible that we will see some local councils attempt (e) Cost of treatment to take over industrial and commercial waste management, Price ranges vary significantly from one treatment method to these changes should lead local authorities to use private 6 another. The average price of landfilling, excluding tax, is operators more often, and particularly those that are active in historically lower than other treatment methods. This is all segments and that combine a solid financial position with followed by composting. Incineration, biomechanical treatment advanced technical know-how. and biomethanization incur the highest prices (1).
6.4.2 Competition
The Group faces competition from a number of other operators, XX financial players (private equity and infrastructure funds) including: that are investing in markets through asset and company acquisitions; XX public operators that may decide to retain or resume management of their infrastructures after analyzing and XX companies involved in related industrial sectors seeking comparing the services offered by private operators; they to expand their offerings to environmental management may also offer proposals for markets in other regions or services, particularly building and public works companies cities; in the waste sector and equipment suppliers in the water sector (for example: General Electric and Siemens), by XX large private operators, already well-established in their domestic markets and seeking to expand their activities or positioning themselves on “BOT” (Build, Operate and services and use their expertise in areas that show strong Transfer) contract segments, allowing them to apply their potential; building expertise, as well as their ability to manage and operate those assets. XX local operators that are adopting aggressive strategies when participating in bidding processes;
(1) It should also be noted that biomechanical treatment and biomethanization are the exceptions, as they are treatment stages rather than methods of recovery or elimination; they therefore do not exclude disposal at landfills, incineration plants and composting sites.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 61 Overview of activities 6 Presentation of the market and competitive position
Most of these players, however, are not active in as broad a on improving the performance of their regulated activities, range of segments as the Group, whether in terms of services, with reduced emphasis on their operation and maintenance technical skills or geographical locations, even though through contracts in the non-regulated segment. In 2014, this CEO grouping or diversification strategies, these competing retired and was replaced by a successor who is pursuing companies are working to expand the scope of their activities to the Group’s growth strategy. SUEZ’s main competitors are satisfy customer expectations. Through its presence in all water Aqua America (in addition to its tuck-in policy in the regulated and waste cycles, to which it is exclusively devoted, the Group market), Veolia and Severn Trent (focused on the non-regulated believes it holds leading positions across all its businesses market for service contracts). Although both American Water lines. Works and Aqua America continued to focus on their regulated Consequently, any aggregate data relating to these competitors, activities in 2014, both players have shown an interest in other especially in the waste sector, are not particularly relevant as business models, as with American Water Works’ failed bid for they do not reflect the local structure of these various markets. a lease concession transaction in Allentown, Pennsylvania, and a hydraulic fracturing project for Aqua America. Meanwhile, At a global level, the Group’s main private competitor is Veolia. Veolia participated as operator of a concession contract in This company provides a combination of services including Rialto, California, while SUEZ Water Inc. (former United Water) water and waste, and is also active in the energy and transport finalized its contract with Bayonne, New Jersey in 2012 and won sectors. Veolia and the Group are the only “global providers” a smaller contract in Middletown, Pennsylvania, in September in the environmental management services market on a 2014. In addition, Veolia devoted considerable marketing efforts worldwide scale. to performance-based contracting, in contrast to its traditional O&M activities. As in 2010, 2011 and 2012, some financial groups ..6.4.2.1 Competition in the water sector continue to show interest for large operators in the water sector, with the acquisition of Southwest Water by JP Morgan and Water In terms of revenues, the Group ranks third in the global market Asset Management in 2010, and of Utilities Inc. by Corix in 2013. for environmental water-related services, behind General In the Treatment Solutions segment, the Group is in competition Electric and Veolia. Other companies active in this market have both with Veolia and with equipment suppliers such as General more local operations and lower revenues. Electric, Siemens, Evoqua and Aquatech. On national and regional levels, competition often comes from Asia is also an emerging market where demand for drinking local operators in the building and public works sectors. water production and wastewater infrastructure is strong. In France, Veolia and Saur are the Group’s main private Recently, there has been a growing trend for some Asian competitors. New competitors are also arriving, such as governments, such as in China, to accept the participation of Derichebourg Aqua. Against the “régies” (local publicly private players in such projects. Foreign investors such as Hyflux controlled entities), which are also a potential public competitor, have shown a growing interest in the Chinese market. Some of the balance is positive overall, in favor of private operators. these investors are also looking to enter this market by forming joint ventures with local players. For example, the Singaporean In Spain, the Group remains the leader in terms of revenue company Hankore, entered into a cooperation agreement and the size of the population it serves. Aqualia maintains its with China Everbright International (CEI) to further expand its No. 2 position. presence in the Chinese water industry. Meanwhile, in Japan the In the rest of Europe, there has not been any notable change Sumitomo conglomerate formed an alliance with Beijing Capital overall in relative positions. The Group continues to actively Co. Ltd. to capture opportunities in the wastewater market. In monitor the market. addition, the growing domestic demand for investment is also In the United States, American Water Works is the market generating competition for water treatment infrastructure from leader, but it mainly operates in the US and Canada, where pension funds, insurance companies and infrastructure funds it has several operating contracts. At the end of 2009, RWE (such as Macquarie Everbright China Infrastructure Fund). finalized its portfolio rationalization strategy and completed its In the Middle East, there is a firming up of the competitive withdrawal from American Water Works (after selling Thames environment with a strong presence of regional groups in the Water in 2006), which resulted in a profound restructuring of sector like Metito, in addition to Spanish and Indian groups like the management structure of the American market leader. As Larsen & Toubro or Vatech-Wabag. part of its restructuring, a new CEO was appointed who focused
62 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Presentation of the market and competitive position 6
..6.4.2.2 Competition in the waste sector In France, the competition is still very active, but with no substantial change in positions or significant consolidation The Group ranks fourth in terms of revenues in the global movements. Sita France sold the 36% stake it had in the Nicollin market for waste-related environmental services, behind Waste group in 2013. Management, Veolia, and Republic Services. Except for Veolia, most of the Group’s competitors in the waste sector are national In the United Kingdom, SUEZ R&R UK (former SITA UK) is players and/or do not provide all the services offered by the completing the development of its infrastructure projects Group. based on the Private Finance Initiative (PFI) model, increasing its recovery capacity throughout the country to 3 million tons. In Europe, the Group’s primary competitors are Veolia, Remondis, FCC, Van Gansewinkel Group, Shanks and Urbaser. Veolia, Biffa, Viridor, FCC and Cory Environmental are the largest Over the past three years, the German group Remondis has competitors in the United Kingdom, with SUEZ in the fourth become the waste industry leader in Germany. It is ranked third position in terms of market share. in Europe in terms of revenues, and, while it is still focused Some merger and acquisition trends were apparent in November mainly on Germany, it is expanding its presence in Central 2015. Biffa stated that it was reviewing acquisition offers and and Eastern Europe and, more recently, in Benelux. Remondis valued its business at nearly GBP1 billion (€1.36 billion). acquired Xervon from ThyssenKrupp. While the field of action for new PFI projects is now closed, Veolia The crisis, which severely affected the waste sector in the is focusing on recycling, energy recovery and hazardous/toxic second half of 2008 and in 2009 and continues to impact the waste treatment businesses. FCC Environment still operates the market, significantly slowed the consolidation trend witnessed largest landfill (void space) portfolio in the country. for several years in the European waste sector. A major Cory Environmental began to restructure its balance sheet consolidation trend from 2006 to 2008 involving FCC (with in the summer of 2015, after which it is expected to sell off Waste Recycling Group and ASA), Veolia (with Cleanaway UK, the business. Cory is actively seeking contracts with local Biffa Belgium, Sulo, TMT and Bartin), Séché Environnement municipalities, a segment in which the company recently lost (with Saur), Remondis (with TSR) and Alba-Interseroh, can be some long-term contracts. contrasted with a trend for smaller acquisitions, mainly in the recycling sector in Northern Europe. Due to added processing Viridor secured two municipal contracts for energy recovery, 6 capacity and the lower volume of waste caused by the economic Windsor & Maidenhead and Welsh Tomorrow's Valley. This crisis and increased recycling, the incineration market is facing operator is also targeting Scotland. significant overcapacity in Germany and the Netherlands (about In the UK, volumes in landfills continued to fall, with less 1 million metric tons). This overcapacity, particularly in the than 18 million metric tons landfilled in 2013. RDF exports Dutch market, is offset by the import of combustible municipal are growing. Although Biffa exported more RDF than SUEZ and industrial waste from various countries, including Italy and in 2015, SUEZ produced more, with a significant part of its the United Kingdom. production destined for the UK domestic market. In 2016, the The market of the solid recovered fuel (SRF) is also growing Group estimated that it will be both the leading producer and strongly. These are alternative combustible products that exporter of RDF. come primarily from waste residue that is treated to certain In Sweden, waste regulation extending producer responsibility is specifications. SFR is used as a replacement for fossil fuels by currently under revision. Following elections in September 2014, cement manufacturers or in general by industries with high the government (from the Social Democratic and environmental fuel consumption levels. parties) announced that it wished to transfer the responsibility The purchase of Van Gansewinkel by its creditors was for collection to local authorities, but to keep responsibility for announced in April 2015. The current owners, the CVC and KKR waste treatment in the producers’ hands. The review should be investment funds, agreed to sell off their stakes in exchange for complete in March 2016. The timing and application methods of a debt reduction mechanism. Remondis has gained ground in these changes are still being determined and currently there is the Netherlands by acquiring Dusseldorp. Veolia acquired AKG no effective change. In Finland regulations on waste changed Kunststof Groep, a producer of recycled raw materials. After in May 2012, transferring the full responsibility for managing an initial acquisition of 75% of Indaver at the beginning of the household solid waste to municipal entities. These changes year, the logistics provider Katoen Natie subsequently obtained have begun to be reflected in the market, resulting in more the remaining stake in the company. formalized household waste collection services contracts to replace the free trade zone with no official references.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 63 Overview of activities 6 Description of the Group’s main activities
In Poland, the regulatory developments that led to the on projects focused on energy recovery from household and establishment of a municipal tax effective July 1, 2013 have organic waste. The main competitors are public companies and created a favorable climate for the development of waste those supported by the government, such as China Everbright treatment and recovery facilities. The first public-private International, CECEP, Shanghai Environmental and Chongqing partnership (PPP) contract in Poland, for the construction and Sanfeng, which are active at either national or provincial levels. operation of an incinerator in Poznan, was won by Sita Polska Some of them are in partnership with international waste in April 2013. The Group aims to position itself on future calls management groups. The Chinese authorities are clearly for tender on energy recovery projects in the country. taking significant action to reduce existing pollution problems. In Australia, the waste market is still highly competitive, with The first measure is to improve standards to a level similar to waste actors taking advantage of regulatory disparities among that of Europe; the second, equally important, is to ensure the the States to obtain more advantageous treatment costs. Energy application of these standards. The result of these measures is recovery is an emerging trend with the development of certain an increase in the volumes of waste treated at the appropriate projects, particularly in Western Australia, where the regulatory sites. environment is the most favorable. Finally, we note the confirmed emergence of national In Asia, especially in China, the waste segment is undergoing competitors in Turkey, UAE (Imdaad), India (Ramky) and Lebanon robust growth and competition has intensified. The authorities (Averda – Lavajet) impacting the waste collection markets in are encouraging sustainable solutions to address the challenges the Middle East and the Indian subcontinent. related to waste treatment, and have issued public tenders
6.5 Description of the Group’s main activities
The Group provides services and equipment essential to life In the water sector worldwide: and environmental protection in the areas of water and waste: XX in 2015 the Group operated nearly 1,130 drinking water delegated management of drinking water and wastewater production sites, and produced about 5.2 billion cubic meters services, water treatment engineering, as well as waste of drinking water; collection, recovery, and waste disposal activities both for public authorities and private sector customers. XX in 2015 the Group operated nearly 2,310 wastewater treatment sites, and biologically treated over 4.3 billion cubic In 2015, the Group generated total revenues of €15.1 billion. meters of wastewater. Revenues per business line break down as follows: In the waste sector worldwide: XX Water Europe, representing 31% of the Group’s consolidated revenues in 2015: €4.7 billion; XX as of December 31, 2015, the Group provided collection services for approximately 34 million people; XX Recycling and Recovery Europe, representing 42% of the Group’s consolidated revenues in 2015: €6.4 billion; XX the Group operated a fleet of over 12,000 heavy vehicles and operated 121 composting platforms, 45 incineration sites XX International (Treatment Solutions and activities outside (44 with energy recovery capacity), 790 sorting, material Europe), representing 26% of the Group’s consolidated recovery and transfer stations and 129 landfills. revenues in 2015: €4.0 billion; XX Other activities (parent and holding companies and Safege) representing almost 1% of the Group’s consolidated revenues.
64 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
6.5.1 Presentation of the Group’s activities
..6.5.1.1 Water activities XX Customer service Specialized units are responsible for handling relations (a) Complete management of the water cycle with consumers, taking into account local realities: contract signings, meter reading, billing and account settlement or Through its subsidiaries, the Group covers the entire water cycle administration. value chain for all its customers (public authorities and private sector customers), including: XX Wastewater collection and treatment XX studies and master plans, modeling of networked and Wastewater treatment networks are an essential factor in natural water flows (groundwater, rivers and coastlines), and combating domestic pollution. They must pipe all wastewater engineering of water management infrastructure projects; to the wastewater treatment plant. Wastewater treatment requires a set of complex physical and biological procedures. XX engineering, design and construction of water treatment Wastewater treatment networks are also used to collect facilities through the Treatment Solutions business; and drain rainwater via techniques that make it possible to XX drinking water distribution and wastewater treatment separate it from wastewater, if needed. services, which include: XX Sludge –– drinking water production and distribution services: Treating 1 cubic meter of wastewater produces 350 to catchment, treatment and distribution of drinking water, 450 grams of raw sludge. Sludge drying and treatment –– wastewater treatment services (municipal or otherwise): processes reduce its volume. In France, most sludge is collection, clean-up and disposal of wastewater and recycled in agriculture through spreading, conversion to rainwater, compost or recovery as energy. –– customer management: relations with end users and The Group has recently offered its clients new, dedicated consumers, meter reading and the collection of payments environmental services (audits and assistance in reducing the 6 made by end consumers, and environmental footprint of water services in a given territory, quantitative management of resources to counter the impact –– for private sector customers, defining, building and of climate change and services to improve the water quality of operating tailored and scalable water management rivers, lakes and swimming areas), and also offers a new range solutions and selling high-end water treatment equipment. of services for local authorities, businesses and residents to The Group’s private sector customer offering includes control water consumption (leak alerts, remote meter-reading, the management of water resources, process water, leak insurance and assistance). wastewater and effluents, as well as sludge.
The Group offers a broad range of services, from drinking water (b) Contractual relations with customers in the water sector production to wastewater treatment. It offers services in the following five areas: The Group’s customers are local authorities and industry (mainly through its Ondeo Industrial Solutions subsidiary Water pumping and treatment XX or Safege for studies). However, the Group also serves local Pumping is the operation that extracts water from rivers, industrial and commercial customers under delegation of public groundwater and reservoirs to be piped to treatment plants. service contracts. Treatment depends on the quality of the raw water and may include many steps: pre-treatment (screening), clarification, Contractual relations with local public authorities filtration (elimination of finer particles), refining (elimination In general, local authorities are responsible for organizing both of micro-pollutants) and disinfection (elimination of viruses drinking water distribution and wastewater treatment services. and bacteria). They may choose to manage these directly (as a local publicly XX Storage and distribution owned company) or rely on an outside operator, which may be Reservoirs provide a safety net in the event of production public, private or semi-public. problems, consumption peaks, or pollution of resources. The underground distribution network is monitored in order to ensure stability of water quality and to prevent leaks.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 65 Overview of activities 6 Description of the Group’s main activities
Contracts entered into by the Group with public authorities ..6.5.1.2 Waste activities are governed by the rules for public contracts and/or specific competitive procedures. (a) Complete management of the waste cycle The Group distinguishes between two contract types: The Group manages the entire waste cycle by being involved XX the delegation of public service contracts in France, or their at each stage in waste management, and in almost every type equivalent outside France, including leases and concessions of waste: contracts, and all intermediate contractual forms. Under these contracts, the Group is responsible for all service XX collection of non-hazardous waste from municipalities management (water production and distribution and/or and companies, sorting, pretreatment, material recycling wastewater treatment): it is involved in managing relations and recovery, biological recovery (which mainly involves with end users, meter reading, preparing invoices and agricultural recovery and the remediation of poor soil), energy collecting payments made by end users. The Group engages recovery (incineration, co-incineration and methanization) in this activity at its own risk, and its compensation derives and landfilling, including the recovery of biogas; from billing users; a portion of the sums billed is paid back XX hazardous waste management (excluding waste that may to the local authorities to finance new investments. Leases be contaminated by radioactive residues from nuclear differ from concession contracts according to the size of activities); investment for which the private operator is responsible. XX treatment of wastewater and urban cleaning: maintenance of Most of the Group’s contracts in France are leases which municipal and industrial networks and cleaning of industrial are generally long-term, ranging from 10 to 20 years; and production tools; street washing/sweeping, maintenance of XX contracts for services and works, in which case operations street furniture; beach cleaning and snow clearing; and works are billed to the relevant local authority. These XX soil remediation: treatment of polluted sites, soil, subsoil, are medium- or long-term contracts, generally 5 to 20 years. and groundwater, dismantling and conversion of buildings; In general, public authorities own the assets involved in drinking and water and wastewater treatment services. However, in certain XX dismantling and disassembly of end-of-life vehicles, countries (notably the United Kingdom and the United States), aircrafts and boats. the Group owns the assets it operates; in this case, there are no contractual relations with public authorities; relations The Group offers services in the following areas: between the private operator and the various customers and other stakeholders are then governed by a regional or national Non-hazardous waste (collection, sorting, recovery and elimination) regulator under an operating license issued by the regulator. In the non-hazardous waste segment, the Group collects, In addition, in France, for historical reasons, the Group owns sorts, recycles, recovers and eliminates waste of municipal or certain assets (see chapter 8 of this document). industrial origin.
Contractual relations with industrial customers Collection The Group is also active in the entire water cycle with industrial Each day the Group collects waste of all kinds from private customers operating under design and build contracts, service individuals, companies and public entities: household waste, contracts, such as operating and maintenance agreements, and organic waste, non-hazardous industrial waste, medical waste the supply of mobile processing facilities and/or equipment and liquid and solid waste. sale agreements. Contracts are then generally agreed upon for The Group has a fleet of trucks suitable for all types of waste shorter terms than is typical for local authority contracts, most collection: mixed waste collection, selective collection, bulk often 1-5 years for a service contract. items, medical waste and industrial waste, in urban and rural As a multi-disciplinary engineering firm, Safege also assists environments. Waste from selective collection (plastic, glass, private customers in defining their environmental strategy, metal, paper, etc.) is sent to sorting sites to be prepared for integrating their project into the site, water management in recycling; residual waste is sent either to transfer/sorting/ the industrial cycle and the preparation of regulatory filings. pretreatment platforms or directly to incineration plants or landfills. Certain waste products may be highly polluting (batteries, aerosol cans, etc.). They are then sent to specialized sites for cleaning and conditioning before treatment or recovery.
66 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
Materials recovery Energy recovery Household and industrial waste from selective collection is sent Waste may also be recovered through incineration. Thermal to one of the 362 sorting and material recovery sites operated treatment of waste has several advantages: it reduces waste by the Group. It is then sorted by type (plastic, glass, paper, mass and volume, it is quick and hygienic and it produces cardboard or metal), conditioned and consolidated by recovery energy (largely renewable) that can be recovered in the form process on appropriate platforms. Recoverable materials are of electricity and/or heat. then sent to appropriate processing areas and sorted (non- Six types of waste may be recovered for energy production: recyclable) waste is recovered for energy whenever possible (i) household waste, (ii) industrial waste similar to household by incineration. Failing this, it is landfilled. waste, (iii) waste from sorting sites, (iv) medical waste, (v) sludge The economics of recycling are intended to afford industrial from wastewater treatment plants and (vi) hazardous waste. customers a steady supply of quality recycled materials and In the Group-operated incineration plants, waste is burnt at provide waste producers with ongoing management of their high temperatures in accordance with regulatory requirements. waste in compliance with applicable regulations. Recycling Heat released by the combustion is recovered in steam boilers. activities (for example, involving metals and plastics) are also This steam is used to generate electricity and also supplies organized according to specific collection. heat networks. In 2015, the Group managed over 16.3 million metric tons of In 2015, the Group’s incineration units treated approximately waste for recovery. Of this total, nearly 15.5 million metric 7 million metric tons of waste, and produced over 3,000 GWh tons were processed for materials recovery, enabling about of electricity, resulting in the sale of more than 2,360 thermal 4.7 million metric tons of secondary raw materials (paper, GWh. The gases produced by waste combustion are purified cardboard, glass, metal, plastic and wood) to be put back on using dedicated treatment systems before being released into the market. The remaining part being compost used as organic the atmosphere. Solid waste essentially consists of bottom soil conditioner. In addition to its traditional recycling activities, ash, which is reused for road beds after undergoing suitable the Group has put in place dismantling and recovery facilities for treatment, or disposed of at landfills, as well as purification Waste Electrical and Electronic Equipment (WEEE), end-of-life residue from smoke, which is landfilled after stabilization. aircraft and vehicles (ELV), including through the opening of a 6 new aircraft dismantling facility in Teruel, Spain. This activity is subject to numerous regulatory and technical constraints designed to reduce impact (smoke discharges, At its clients’ request, the Group is also pursuing the production of bottom ash and fly ash) and to recover energy implementation of industrial processing solutions to recover produced by waste combustion in the form of heat and/or residual waste, such as mechanical and biological sorting of electricity. waste (MBS). Organic waste may also be recovered for energy production Composting and biological recovery through methanization. This process of decomposition of natural Composting is a natural process that involves converting organic matter – through microorganisms and in the absence organic waste into soil conditioner. Four types of waste are of oxygen – has long been known. Its use on an industrial scale involved: (i) green waste from households and public entities, is more recent. Methanization produces a biogas that may be as well as by-products of the wood industry (bark, sawdust, recovered for electrical and/or thermal energy, plus a residue etc.); (ii) the organic portion of household waste, restaurant that may be recovered for use as an organic soil conditioner and supermarket waste; (iii) sludge from wastewater treatment after composting. plants; and (iv) sludge and by-products from paper and food Another method used for recovering energy is the production producers. of refuse-derived fuel (RDF) from non-hazardous industrial Numerous analyses are performed on organic waste before, waste and, to a lesser extent, household waste. Mainly used during and after its conversion to compost. Air from the by cement manufacturers, this fuel presents a real opportunity composting process is collected and treated to reduce odor for developing solutions that complement the recycling and pollution. disposal sectors. The waste that goes into these RDFs is not easily recyclable under existing technical and economic Sludge management is at the core of the Group’s know-how, conditions, so RDFs represent an excellent alternative fuel for and the Group assists local authorities in their sludge recovery cement and lime kilns as well as the heat- and steam-generating and waste composting projects. units of industries that consume high levels of energy (chemical producers, paper mills, etc.) and are equipped with adequate smoke treatment systems.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 67 Overview of activities 6 Description of the Group’s main activities
Elimination of waste in landfills Wastewater treatment, maintenance and urban cleaning Landfilling remains the predominant treatment method in many The Group provides local authorities, private individuals, and countries. Upstream, the search for a site must conform to industrial customers with wastewater treatment and industrial legally mandated specifications and conditions, specifically cleaning services (particularly during plant shutdowns), concerning soil quality, the protection of groundwater and collection of hazardous industrial waste, as well as more distance from housing. During the operating stage, discharges specific services such as the cleaning of water towers, oil- must be controlled, effluents (biogas and leachates) captured, related work, or monitoring of wastewater treatment networks recovered or treated, and environmental parameters measured in nuclear plants. regularly. Once closed, sites remain subject to monitoring for Urban cleaning is a concern for local authorities and a health 30 years. requirement. In this regard, the Group offers the following The Group operates 129 landfills around the world, mainly in services: mechanized and manual street sweeping, maintenance Europe. In the course of these activities, the Group develops of street furniture, poster and graffiti removal, snow clearing, and operates innovative industrial solutions for the recovery beach cleaning, emptying and maintenance of refuse bins of renewable biogas energy from landfills. and public awareness measures. Depending on the country, additional services may be offered, such as the maintenance Hazardous waste of public parks and gardens. Waste representing a danger to humans or the environment requires special precautions when being treated. Once collected, Pollution clean-up and conversion of polluted industrial sites it is analyzed, sorted by type and then gathered. It is then sent Soil pollution may be of two kinds: organic and mineral. There to the most appropriate site. are three types of treatment: There are several treatment options for such waste, including: XX in situ treatment, for subterranean clean-up operations of XX recovery as a fuel substitute, particularly for clinker water tables or soils without excavation; kilns, after being subjected to any necessary physical XX on-site treatment, whereby the soil is extracted but treated pretreatment; on site; and XX incineration at high temperatures, with energy recovery (as XX off-site treatment, when the soil must not only be extracted, in the case of halogenated, toxic and reactive wastes); but also sent to special sites where it undergoes biological, XX treatment using physical and chemical as well as biological thermal or physicochemical treatment and/or landfilling. methods (as in the case of aqueous waste: acids, bases, Through its specialized subsidiaries, the Group has been chromate baths, etc.); developing innovative solutions for clean-up and conversion XX treatment, clean-up or solidification before being landfilled of industrial sites for 25 years. at suitable sites. Paint residue, for example, is mixed with By way of illustration, following on from its clean-up and reagents to form a concrete that stabilizes pollutants within remediation of the former Metaleurop Nord foundry site a mineral matrix before landfilling; in France, the Group is now in charge of the clean-up XX regeneration for purposes of materials recycling, i.e. purified and remediation of The Avenue, an industrial complex in for reuse (in particular, this is the case for oils and certain Chesterfield, in the United Kingdom, through its entity SUEZ solvents). Haz Waste (former Sita Spécialités). This project, carried out in collaboration with Volker Stevin UK and DEME Environmental SUEZ Recycling and Recovery (former Sita) is an international Contractors (DEC NV), is the largest public project of this type in player in the hazardous waste market. The Group has treatment the United Kingdom, and one of the largest sites for the clean-up facilities in France, Europe and China. of derelict industrial land in Europe. The Group may thus offer its customers solutions suitable for all types of hazardous waste (except waste potentially (b) Contractual relations with customers in the waste segments contaminated by radionuclides from nuclear sites), such as packaging ranging from 100 grams (in particular special The Group works for two types of customer: household or laboratory waste) up to hundreds of metric tons. XX local authorities (municipal or other authorities): contracts In 2015, more than 3.7 million metric tons of hazardous waste entered into with local authorities are generally medium- were treated by the Group: pretreatment on ad hoc platforms, or long-term (generally with a term of three to seven years stabilization and storage at Class I landfills, incineration of for collection, and up to 20 or even 30 years for treatment waste with high chlorine or sulfur content and co-incineration in certain cases), and involve locally regulated activities in at cement plants. which public utilities are major players; and
68 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
XX industrial operators: contracts with industrial customers are The Group offers energy produced during waste treatment and generally short- or medium-term (often one year, renewable, materials from this treatment and recycling (secondary raw for collection) and involve activities for which industrial materials) both to public authorities and industrial customers. customers increasingly outsource all their waste services management to subcontractors.
6.5.2 Presentation of Water Europe activities
Europe is at the center of the Group’s water sector activities. (ii) Description of Water France’s activities Companies operating in the Group’s Water Europe segment The Group operates in France with public authorities and contributed €4.7 billion to the 2015 Group’s consolidated companies, primarily through its subsidiary Lyonnaise des Eaux (1) revenues. Water France generated 48% of consolidated France (LDEF) and its subsidiaries. LDEF has been involved in revenues for the Water Europe division, and Water Spain (Agbar) the water-related service sector in France since its creation in the remaining portion. 1880, and today operates throughout the entire water cycle, from drinking water production to wastewater treatment. More ..6.5.2.1 Water France specifically, it provides water pumping and treatment, storage and distribution, customer service, wastewater collection and Water France comprises the activities of Lyonnaise des Eaux treatment and sludge treatment services. France and the Group’s water activities in Italy and Central Europe, but since 2014 it no longer includes the activities of In 2015, LDEF's contribution to the Group’s consolidated Safege. revenues was approximately €2.1 billion (43% from drinking water production and distribution under delegation of public In 2015, Water France generated consolidated revenues of service contracts (DSP), 27% from wastewater treatment €2.3 billion and employed more than 11,200 people. under delegation of public service contracts, 19% from non- 6 public-service contracts and diversified services, and 11% (a) Lyonnaise des Eaux France from improvements on distribution facilities and networks). Including all subsidiaries, LDEF employed over 11,200 people (i) Specific characteristics of the water sector in France as of December 31, 2015. In France, 3.9 billion cubic meters of drinking water were In 2015, LDEF operated over 671 drinking water production invoiced in 2013 to consumers connected to public water sites and delivered over 990 million cubic meters of drinking systems. Following a period of 15% negative growth between water to the network. 2006 and 2009, volumes of water invoiced have remained In 2015, LDEF operated more than 1,511 treatment plants, stable, in spite of growing population. Consumers have adopted which treated nearly 835 million cubic meters of wastewater. water saving practices and economic slowdown since 2008 has braked industrial use. Water companies distribute over two LDEF is the second-largest private operator in France. thirds of the volume of drinking water in France (66% in 2013) and the breakdown between public and private operators has (iii) Lyonnaise des Eaux France contracts been stable since 2006. Regarding treatment of wastewater, In its core business, which still represents 95% of revenues, water companies treated 53% of wastewater volumes collected three-quarters of its contracts in term of revenues are water in France in 2013, and this percentage has been 54% on average and wastewater treatment under delegation of public service since 2006 (source: 2013 figures from a BIPE/FP2E study, (DSP) contracts, and one-quarter are service or works contracts. October 2015). LDEF had a portfolio of approximately 2,300 public service contracts as of December 31, 2015.
(1) Including activities in France, Italy and Central Europe.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 69 Overview of activities 6 Description of the Group’s main activities
The Group distinguishes between two contract types: XX development of Smart Environment tools and applications; XX delegation of public service contracts in France, or their XX development of intelligent solutions in the water and equivalent outside France, including leases and concession environment sectors and technology integration. contracts, and all intermediate contractual forms under the generic term of “public service delegation.” Under such (iv) Commercial successes for Lyonnaise des Eaux France contracts, the Group is responsible for the entire service management (drinking water or wastewater) or partial A. Core business service management (water production and distribution In 2015, LDEF had many commercial successes, including: and/or wastewater collection, transportation or treatment). XX in drinking water, the Syndicat Mixte pour l'Adduction It is responsible for operating and maintaining works and d'Eau de la Lys (SMAEL) chose LDEF for a delegation of for restoration work, where applicable, as well as managing public service contract of five years for total revenues of relations with end-users, meter reading, preparing invoices €23 million; and collecting payments made by end-users. It ensures the performance of services provided. The Group engages in XX in drinking water, Vendée Eau contracted the management this activity at its own risk and is compensated by billing of the drinking water production facility at Angle Guignard users; a portion of the sums billed is paid back to the local to LDEF for a period of 14 years for total revenues of authorities to finance new investments. Leases, which €18.2 million. relate to the operation of the service, differ from concession Major renewals: contracts under which the private operator is responsible for the Unified Public Private Partnership management (SEMOP) investments. Most of LDEF's contracts are leases, generally XX of water and wastewater treatment services for the city for 8 to 12 years; concessions, with longer terms range from of Dole for total revenues of €68 million. A first initiative 15 to 20 years; in France, the SEMOP Dolea is setting up a new method XX public contracts for services or works. Under service of water and wastewater treatment management over contracts, the Group mainly handles the operation and 13 years, bringing together the municipality and the Group in maintenance of service facilities (water or wastewater a shared governance system by means of a dedicated entity; treatment). Works contracts mainly involve interventions the city of Calais is renewing the delegation of public service on the networks. With public contracts, services and works XX contract for drinking water to LDEF for a period of 12 years are billed to the public authority customer, which remains and aggregate revenues of €79 million; responsible for billing the end-consumers. These are short- to long-term contracts, generally lasting from 2 to 10 years. XX the contract with the Gennevilliers Water Utility Syndicate (SEPG): a new contract for the supply of bulk drinking water Contracts are more varied in the diversification portfolio. for 15 years for total revenues of €234 million with the Under its diversification strategy, LDEF has for the last four years installation of a centralized water decarbonization process. targeted a wide array of customers ranging from residents who use water services, to property managers (public and private B. Diversification lessors, municipal buildings and office buildings), and large Among the major events of 2015, those of special note include: businesses and industry. Diversified services also supplement the offering for historical customers, local authorities. XX Ocea Smart Building signed a four-year contract with the Auvergne Rhône-Alpes Regional Council for the monitoring Services offered to customers fall into several categories: and analysis of water, gas and electricity of the 270 colleges XX insurance sales to individuals; that it manages; XX five- to ten-year contracts for property performance XX in Nantes, the leading French sugar producer Téréos management services; chose CDES for the cleaning of its lagoon, a major contract extending over seven years; XX property and environmental management consulting; XX a long-range remote meter reading contract awarded at XX works in natural environments lasting from several weeks Mont-de-Marsan with 28,000 meters for €3.6 million over to several months; 12 years. XX delegation of public service contracts for public installations (ports, swimming pools, sports and recreational facilities, etc.);
70 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
(b) Other businesses of Water France (a) Businesses in Spain Through the Water France business unit, the Group is also active: Specific aspects of Spain’s water sector The Group estimates that private operators represent In Italy approximately 55% of the drinking water production and Through its subsidiary SUEZ Italia (former Ondeo Italia), based distribution sector and 58% of the wastewater treatment sector in Milan, the Group holds an interest in five water and wastewater (source: internal estimates). treatment companies in Tuscany (in Arezzo, Florence, Pisa, Sienna and Montecatini Terme). Also through SUEZ Italia, the Description of Agbar’s activities Group owns an interest in Acea that rose from 8.41% in 2013 Agbar operates throughout the entire water cycle: catchment, to 12.48% as of December 31, 2014 (1). Acea is listed on the Milan transportation, treatment and distribution of drinking water; stock exchange and is active in integrated water management, collection, treatment and re-use of wastewater; recovery of energy sales and distribution, public lighting and, to a lesser sludge; and services to customers. The company’s customers extent, waste treatment. Based in Rome, Acea is the main water primarily consist of local public authorities. and wastewater treatment operator in Italy. Agbar is the leading private player in Spain’s water sector.
In Greece Other businesses of Agbar Through a 5.46% equity interest in Eyath, a company listed on In 2011, Agbar launched Aqualogy, a new brand that consolidates the Athens Stock Exchange, which manages the Thessaloniki the Group’s know-how to offer value-added solutions tailored water service. to the needs of its customers and new markets. Agbar plans to continue the development of Aqualogy activities both in Spain In Central Europe and in international markets. The commercial development The Group has been active in the water sector for many years of this new brand is a priority for the Group. In 2015, Agbar in several new European Union member states. The Group continued to develop Aqualogy, which brings together all manages, alone or through partnerships: innovative technologies and solutions in the water sector under 6 a single brand, and seeks to meet the needs of each customer, XX drinking water and wastewater treatment services in several cities in the Czech Republic, where it has been optimize use of water resources, and improve the quality of life. present since 1993; Aqualogy focuses on revenue management, water and energy technologies, laboratory testing of water and environment XX in Slovenia, the operation of the wastewater treatment plant quality and hydraulic engineering infrastructures. it built in Maribor. In addition, the Group is paying close attention to growth (b) Development of Agbar outside of Spain opportunities in Poland and Romania. Outside Spain, Agbar provides drinking water services to nearly The water sector in Central and Eastern Europe is characterized 9 million people and wastewater services to over 6 million by a decline in consumption in some countries and the difficulty people. of adjusting tariffs. The Group believes, however, that it has Outside Spain, Agbar is also present: growth opportunities there in view of these countries’ need to comply with EU environmental regulations stipulating In South America improvement in their operations. In particular in Chile, through its subsidiary Aguas Andinas . (production and distribution of drinking water and wastewater .6.5.2.2 Water Spain treatment to over 6 million inhabitants), and via Essal (the fourth In 2014, SUEZ ENVIRONNEMENT COMPANY acquired the water distribution company in Chile) in which Agbar acquired a remaining indirect 24.14% interest in Agbar from La Caixa 53.5% interest in 2008. The plan for treating wastewater in the in exchange for the issuance of new SUEZ ENVIRONNEMENT city of Santiago was concluded in 2013 with the commissioning COMPANY shares and a cash payment of €298.6 million. of the wastewater treatment facility of Mapocho. Through this project, the city has achieved a level of 100% coverage In 2015, the contribution of Water Spain business unit to for wastewater treatment. Final acceptance of the plant was the Group’s consolidated revenues totaled €2.4 billion. With completed in April 2013 with a tariff increase applied at the approximately 11,500 employees worldwide (excluding USG same date. In November 2014, Aguas Andinas, Aguas Cordillera, but including Agbar employees outside of Spain), Water Spain Aguas Manguehue and SISS reached an agreement on water generated 65% of its revenues in Spain and 35% in the rest of tariffs for the five-year period from 2015-2020 based on the world.
(1) As of December 31, 2014.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 71 Overview of activities 6 Description of the Group’s main activities
maintaining current prices and an agreement on renovation UK leveraged the development of its technology to win contracts work to enhance safety and improve the wastewater treatment in the United States, Chile and Spain. The acquisition of Latis system. Essal is currently involved in the process of establishing Laboratory, specialist in microbiological and chemical analysis new water rates, which will be implemented for the period was completed in September 2014. Finally, in November 2014 2016-2021. Aqualogy UK acquired the patent on “Ice Pigging” technology, Agbar also operates in Mexico, Colombia, Peru and Brazil. allowing Aqualogy access to a more diverse industrial market In 2014, Aqualogy Brazil acquired Restor, an engineering in cleaning systems. In 2015, Aqualogy increased its growth company. In 2015, Agbar increased its stake in Aquaoccidente through an expansion and its capacity for adapting its solutions (a concession contract in the city of Palmira, Colombia) from and technologies offer to market requirements. In 2015, the 30% to 50.1%. Group acquired ADHQ, QTS Environmental Limited, Aqua Enviro Limited and Sentinel Water Holdings Limited. The Ice Pigging (1) In the United Kingdom technology is established in the United Kingdom and projects have been started in Sweden, the Czech Republic, Italy and the Agbar operates through Bristol Water (acquired in 2006), Netherlands. serving over 1 million people. In 2010, Agbar also took over Marral, a company supplying services to industrial customers In Algeria as part of its diversification strategy towards the non-regulated water market. Agbar operates through a contract for SEOR (Société de l’Eau et de l’Assainissement d’Oran), a water and wastewater company In October 2011, Agbar sold 70% of Bristol Water’s capital to established in April 2008, through which the company produces Capstone Infrastructure Corporation. This transaction was an and distributes drinking water to more than 1.6 million people. integral part of the Group's strategy of refocusing on high-value- added water services. Agbar retained a 30% equity interest in In the United States Bristol Water and remains a major active shareholder via a In 2011, Agbar entered the US market by signing a management management and operating contract. contract with Utility Service Group (USG), a SUEZ subsidiary 2015 is the first year of the current regulatory period ending based in Georgia. USG specializes in the maintenance of drinking in March 2020. Work on the main objectives continued, in water reservoirs. It is the growth platform of Aqualogy in North observing the targets set by regulators in the different sectors. America. Wells Water Solutions Group was acquired in October The main objectives for the next regulatory period include 2014 to accelerate the growth of this thriving business segment improved customer service, system resilience, water quality, launched in 2013. Wells Water Solutions Group is present in environmental sustainability and leakage reduction. several states in the northeastern part of the United States. In 2011, Aqualogy UK released “Ice Pigging” onto the market, In 2015, USG acquired Rowe, a company working in the well- an innovative, patented technology that allows water pipes to drilling segment that operates in the southeastern part of the be cleaned from the inside using ice slurry. In 2012, Aqualogy United States.
6.5.3 The Recycling and Recovery activities in Europe
Europe is the heart of the Group’s waste sector activities. Sita France and Lyonnaise des Eaux France specializing in the Companies operating in the Group’s Recycling and Recovery composting and treatment of sludge in France. Europe segment contributed €6.4 billion to the Group’s Companies in the Recycling and Recovery Europe segment consolidated revenues in 2015. The Recycling and Recovery generated 53% of their revenues in France, 17% in the United Europe business of the Group is operated mostly by Sita Kingdom and 31% in the rest of Europe (EU and non-EU). France and its specialized subsidiaries, SUEZ R&R Belgium, SUEZ Deutschland, SUEZ Recycling & Recovery Netherlands, In Europe, the Group’s collection activities served over 26 million SUEZ Recycling & Recovery UK, SUEZ Suomi (Finland) and people and more than 340,000 industrial and commercial SUEZ Recycling AB (former Sita Sverige) in Scandinavia, Sita customers in 2015. The Group collected more than 19 million Polska and Sita CZ in Central and Eastern Europe. In 2006, SUEZ metric tons and processed nearly 31 million metric tons of created SUEZ Organique (former Terralys), a joint subsidiary of household, industrial, and healthcare waste.
(1) Technology that uses the natural abrasive properties of ice to remove sediment and other foreign bodies from pipes.
72 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
..6.5.3.1 R&R France plastic and compost from waste. The Hazardous Waste business unit, through its Scori subsidiary, has 30 years of experience The Group is active in France in the waste sector through its in preparing fuel from hazardous waste (solid and liquid) for R&R France business unit, which operates via Sita France and cement kilns. its subsidiaries. In 2015, R&R France’s contribution to the Group’s consolidated revenues totaled €3.3 billion. As of December 31, R&R France (a) Specific characteristics of France’s waste sector employed 18,937 people. The French waste sector represents €16.7 billion (source: IFEN, In 2015, R&R France provided waste collection services to nearly (1) 2015 ). Of a total of over 345 million metric tons of waste, 71% 10 million inhabitants and more than 70,283 commercial and is generated by building and demolition activities, 19% by industrial customers. The company treated over 17.5 million commercial and industrial activities, 9% by municipalities and metric tons of waste (including the international activities of households, and 1% by wastewater and remediation activities Teris and Boone Comenor, which amounted to just over one (source: ADEME, 2015). Regarding household and municipal solid million metric tons). As of December 31, 2015, R&R France waste, 28% is landfilled, 34% undergoes thermal treatment and operated 83 composting platforms, 37 incineration sites (36 of 38% is recovered or undergoes biological treatment (source: which have energy recovery capacity), and 438 sorting and Eurostat, 2013 data); the Group believes the recycling portion transfer stations. will grow in the future. In 2015, the Group treated nearly 2 million metric tons of ferrous Two regulatory texts drafted in 2015 are going to have a short- and non-ferrous metals, and expanded its range of services to and medium-term impact on the French market: industrials customers in France and abroad. XX The Energy Transition Law for Green Growth, which seeks to In the Aude region, Sita was awarded a contract for the "fight against waste and promote the circular economy". The renewal and extension of its collection and waste treatment objective of this law is to increase the portion of recycling business as part of the delegation of public service contract and recovery. Various measures that help contribute to this for the COVALDEM11 area. This contract, for total revenues of are included, such as the gradual rollout of incentive pricing, €459 million over 19 years, stipulates the construction of new the collection of biowaste, the five-stream waste sorting industrial tools such as a new connected waste site concept 6 process, etc. via a Smartphone “monservicedechets.com” application called XX The “Notre” Law concerning new regional organization that Recydrive, and a recycling and resources center dedicated to extends the scope of the regions' jurisdiction in the area of repairing and reusing items. This contract follows on several waste management through the establishment of a single contract renewals and extensions awarded the same year in regional plan (Article 5). Argenteuil (€227 million over seven years), Caen (€120 million over 15 years), Lamballe (€25 million over eight years) and The Group is prepared for the changes stemming from these Carhaix (€25 million over 10 years). new laws and expects to seize the opportunities for development they provide. As such, the increase in the portion of recovery and In Burgundy, Sita reconquered the waste collection and recycling, which has been at the core of the Group's strategy management contract for Greater Dijon with €45 million for several years, is being confirmed. revenues over five years. This contract began on January 1, 2016 and is unique due to its major technological component (b) Description of R&R France’s activities involving the use of mobile technologies such as geolocation to display the closest drop-off points for users (mondechet. R&R France is active throughout the entire waste cycle: com), integration of social networks and a module in which collection, sorting, recovery and elimination (material recovery, users can ask questions directly, distribution of a touchpad for biological recovery, energy recovery and landfill), management pre-collection staff as part of their work, etc. of hazardous waste, soil remediation, wastewater treatment and industrial maintenance. In October 2015, SUEZ strengthened its industrial partnership with Safran through an agreement on waste management Sita France has been active in France’s waste sector since its and maintenance of wastewater treatment plants on 23 of incorporation in 1919. The Group has substantial treatment the Group's industrial sites in France. This contract, for total capacity, a diversified portfolio of contracts, special expertise in revenues of nearly €10 million over an initial period of three recovery and treatment (sorting, recycling, landfill, incineration years, may be extended for an additional two years. SUEZ's task and methanization), solid geographic network coverage in will be to streamline and enhance waste flows and to guarantee France, and the ability to innovate by offering new treatment the permanence and maintenance of wastewater treatment and recovery solutions. Today, R&R France is active in the facilities on Safran sites. recovery of ferrous and non-ferrous metals, cardboard, wood,
(1) Estimated total current national expenditure on waste management.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 73 Overview of activities 6 Description of the Group’s main activities
We note the following main projects for Recycling and Recovery XX Pont-à-Mousson: in January 2016, Sita, in partnership with in France: ENGIE, began the construction of the energy production plant and urban heating network that will supply a complex of XX Waste collection contract in Nîmes: Sita was awarded the waste collection contract for Nîmes metropolitan area with public and private buildings in the city of Pont-à-Mousson. (1) total revenues of €52 million over seven and a half years. The heat, 85% of which comes from biogas combustion The contract includes collecting residual household waste produced on the site of the non-hazardous waste storage and waste from selective collection, door-to-door glass facility operated by Sita, will be used to heat water circulated collection, cardboard from professional activities and on the network, a first initiative in France. managing the Nîmes market place. The Group believes that Sita France is the second-largest private operator in France. XX The Poitiers and Épinal sorting sites: Sita invested in two modernized sorting sites for €6.5 million and €9 million respectively. These two sites are a synthesis of the most ..6.5.3.2 R&R UK and Scandinavia advanced selective waste sorting operations, intended to provide better separation of materials for better recovery The Group operates in the United Kingdom primarily through impact, using size sorting with trommels, shape sorting with its SUEZ Recycling and Recovery UK subsidiary (former SITA ballistic and aerolic separators, and by materials through UK). The Group is also active in waste collection and treatment optical sorting, overband magnets and eddy currents. activities in Sweden and Finland. In 2015, the contribution of R&R UK and Scandinavia to the XX Cap Valo 35: Sita started construction on a new multimodal platform for the recovery of waste from companies and Group’s consolidated revenues was €1.4 billion; the business municipalities in the Rennes area. Beginning in the spring unit employed over 6,530 people as of December 31, 2015. of 2016, paper, cardboard, plastic, metals, building and demolition waste and biowaste will be accepted, sorted (a) Specific features of the waste sector in the United Kingdom and recovered at the same eco-hub, then redirected to the and Scandinavia appropriate subsidiaries for recovery or recycling. United Kingdom XX Partnership with the industrialist Pierre Martinet: at La Roche-sur-Yon (85) plastic trays and plastic wrap for food Of just under 241 million metric tons of waste generated, packaging of La Belle Henriette products made by the Pierre 42% comes from building and demolition activities, 46% from Martinet Group will now be recycled into new materials at commercial and industrial activities, and 12% is generated by the Sita site. municipalities and households (source: Eurostat 2015 – 2012 data). Of the 27.5 million metric tons of household waste, 35% is Camille: Sita has initiated the development of the first XX landfilled, 44% is recycled or recovered, and 21% is incinerated carbon composites recycling solution, up to 50% of which (source: Eurostat 2015 – 2013 data). Given the rapid changes is used in the manufacturing of aircraft, in partnership in recent years, the Group believes the proportion of waste with the startup Camille. This partnership makes possible landfilled should currently be less significant, particularly under the industrialization of a technology that facilitates the the effect of measures such as taxes on volumes landfilled separation and recovery of carbon fiber, which makes up (landfill tax) and penalties for exceeding authorized quotas. to 90% of an aircraft recyclable. In 2015, the cost of landfilling one ton of active waste (not inert) Faulquemont: in June, Sita commissioned a new organic XX increased to GBP82.60 per ton. Beginning in April 2016, taxes recovery center in Faulquemont (57) with a biogas plant, applied to waste quantities landfilled will change depending on for an investment of €4.2 million. At this site, Sita recovers the consumer price index. into new energy resources organic waste from industry and distribution, from local communities and agriculture. The green energy produced is used locally and can cover more than 70% of the needs of the nearby ISMERT plant, which specializes in the washing of tanks and containers and supplies electricity to the network of the city of Metz.
(1) Gas from the natural process of degradation of non-recyclable waste.
74 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
Sweden and Finland undertook the financing of community to support projects and The Swedish waste segment represents around 156 million tons environmental initiatives in 1997. Funding is allocated by the of waste. In 2014, only 1% of household waste was landfilled, government fund for community landfills through which a 52% was recycled and the remaining was incinerated, producing portion of the landfill tax collected by Recycling & Recovery hot water for urban heating systems as well as electricity (47%). UK can be redistributed to Sita Trust to finance public interest Volumes of waste recycled increased by 10% between 2013 projects. and 2014. Furthermore, the government's will is to increase SUEZ Recycling & Recovery UK has also demonstrated its ability the recycling of organic waste from households. The number to obtain renewals of its contracts, and to pursue development of biogas reactors increased to 264 in 2014 and the rate of through complementary activities: recycling of organic waste increased by 5% between 2013 XX Solid recovered fuel (SRF): SUEZ Recycling & Recovery UK and 2014 (source: Swedish Waste Management Report 2015, is now a leading producer of SRF, through the treatment of 2014 data). commercial waste; in 2015, SUEZ Recycling & Recovery UK The Finnish waste segment represents around 91 million exported SRF to Morocco. This was the first time the SRF tons of waste. Regarding household waste, 32% is recycled or was exported outside of Europe. recovered, 42% is incinerated and 26% landfilled (Eurostat 2015 XX Refuse-derived fuel (RDF): data published by the Environment – 2013 data). In Finland, the relatively significant percentage Agency in 2015 show SUEZ Recycling & Recovery UK to be of waste from the commercial and industrial sectors may be one of the largest producers and exporters of RDF in the explained by the inclusion of waste from the mining and the UK, with around 240,000 tons exported yearly. RDF is used pulp and paper industries. Finland has traditionally depended on as a raw material in the continental European power plants the treatment of waste in landfills and less on waste recovery. that are currently underutilized. To increase the rate of waste recovery, long-term plans have been activated with the construction of energy recovery sites XX Wood chips: SUEZ Recycling & Recovery UK is one of the to provide an alternative to landfills. These actions are being largest wood recovery operator in the United Kingdom. supported by the government, which announced its plan to stop A significant amount of wood that cannot be recycled is landfilling organic waste in 2016. used as fuel (power and heat) at an energy recovery plant (biomass) operated by RWE in Scotland. 6 (b) Description of the activities of R&R UK and Scandinavia XX Climafuel: Suez Recycling & Recovery UK supplies Cemex UK, a leading English cement producer with Climafuel, R&R UK an alternative fuel made from commercial and industrial SUEZ Recycling & Recovery UK (formerly Sita UK) is a recycling waste. SUEZ Recycling & Recovery UK is currently supplying and resource management company created in 1988. It provides Cemex from a production unit located in Birmingham innovative, environmentally friendly waste management and from a second production site inaugurated in Rugby solutions to 40,000 customers in the UK. (Warwickshire) in 2015. The two sites will be able to supply up to 250,000 tons of Climafuel to the Cemex works. The In 2015, SUEZ Recycling & Recovery UK handled nearly sites are authorized to use this fuel for 65% of their needs. 9.7 million metric tons of waste at its recycling and composting facilities, landfill sites and waste-to-energy recovery plants, In 2015, SUEZ Recycling & Recovery UK also signed the when recycling and recovering more than 6.1 million metric following contracts: tons of waste. The total amount of electricity generated by XX Calderdale Council: in September 2015, R&R UK and the landfills and incinerators exceeds 930,000 MWh. community of Calderdale Council extended their contract by SUEZ Recycling & Recovery UK is active across the entire waste eight years, which is worth GBP58.8 million over the entire cycle. The company is backed by the experience of SUEZ, which period. Through this extension, significant improvements allows it to participate in all calls for tenders in this sector, can be made to the current collection and waste recycling particularly since it has significant expertise in providing services: new vehicles with greater capacity will be integrated waste services to local municipalities through private introduced into the fleet, there will be recycling options finance initiative (PFI) contracts and public-private partnerships and safety conditions will be improved. Furthermore, the (PPP). Sita Trust has distributed over GBP100 million since it new service will bring major savings to the municipality
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 75 Overview of activities 6 Description of the Group’s main activities
in upcoming years. SUEZ Recycling & Recovery UK has XX signature of new contracts with municipalities such as provided waste collection services to Calderdale Council Stockholm, Norrköping and Malung/Sälen (vast regions of since 2008. As part of the current scheme, non-recyclable skiing and recreation in Sweden); waste collection is rounded out by a weekly recycling service XX extension of numerous existing contracts; for glass, plastics, textiles and organic waste. Calderdale is among seven English municipalities whose waste recovery XX continued expansion by the Group in the area of soils rate exceeds 60%. remediation leading to an increase in tonnage of polluted soils processed; XX Maldon District Council: in November 2015, SUEZ Recycling & Recovery UK was awarded a household waste collection XX acquisition of Werpers AB, a company specialized in waste and recycling contract valued at GBP15 million over an eight- recycling and very active on the regional scale. year period. SUEZ Recycling & Recovery UK will be setting Competition in Sweden is mostly unchanged in the private up weekly collections to improve the waste recovery rate. sector, with a common interest and focus in recycling and SUEZ Recycling & Recovery UK also provides its services material recovery (metals, plastics, wood and organic waste), to the neighboring Rochford District Council, which boasts as well as energy recovery. Competition in household waste the highest municipal waste recycling rate in the United collection has increased with the arrival of Norsk Gjenvinning Kingdom. (formerly Veolia Norge) and the expansion domestically of Reno The Group estimates that SUEZ Recycling & Recovery UK is the Jorge AB and Olhssons, responding to Swedish tenders. fourth-largest private player in the United Kingdom in terms SUEZ Suomi has also continued to expand its recycling of revenues. operations by developing new recycling plants and commercial and industrial offerings. SUEZ Suomi’s positioning has also been R&R Scandinavia (Sweden and Finland) reinforced in recent years by various strategic acquisitions, SUEZ Recycling AB (former Sita Sverige), a wholly owned both in new regions and in areas where it was already subsidiary of the Group, is active across the waste cycle, active. Its structured targeting of commercial and industrial including waste sorting at customers’ premises, collection, customers has seen its revenues increase, along with the pre-treatment, recycling and treatment of all types of waste, tonnages received at its own sites, such as those in Turku and excluding potentially radioactive residues from nuclear process Helsinki. The improvement of the Vikki sorting and recycling incineration plants and the treatment of Waste Electrical and sites continued throughout 2015 and the Turku site was also Electronic Equipment (WEEE). SUEZ Suomi (former Sita Suomi), expanded to increase sorting, loading and transfer capacities. a wholly owned subsidiary of SUEZ Recycling AB, is active in the The continuing strategy changes promoting industrial waste waste collection, sorting and recycling segments. management and focusing on productivity have had a positive impact on the financial performance of the company. Finnish In 2015, through their collection activities, R&R Scandinavia waste legislation was finally amended in 2012, and in 2015 served over 2 million people and 63,000 commercial and the effects of this change were apparent with some municipal industrial customers, treating over 1 million metric tons of waste authorities changing from regions with a free choice of waste in Sweden and Finland. In Sweden, more than 900,000 metric collection providers to regions under collection contract with tons were processed at the 59 sites owned by SUEZ, with a municipal authorities. Competition in Finland is stable overall recycling rate of nearly 93%. In Finland, 140,000 metric tons in the private sector with a clear focus on recovery. Competition were treated at the sites with a recycling rate of 94%. for household waste collection continues to be very strong, SUEZ’s Swedish activities have grown organically to a certain primarily with the competitors L&T and HFT. extent in recent years by offering basic recycling solutions to commercial and industrial customers, as well as by offering . more specific solutions. It has also grown through strategic .6.5.3.3 R&R Germany and Benelux acquisitions. SUEZ Recycling AB has thus expanded its presence The Group operates in Germany, Belgium, Luxembourg and the in the various regions of the country as well as in recycling and Netherlands through its subsidiaries SUEZ Deutschland, SUEZ hazardous industrial waste management, which are significant R&R Belgium, Lamesch (Luxembourg) and SUEZ Recycling & segments in the Swedish industrial production. Recovery Netherlands. Although they operate independently Highlights of 2015: in their own markets, these various subsidiaries are attached to a common structure, R&R Benelux and Germany. This XX signature of new commercial and industrial contracts with gives them added value through various shared operations, the major players in the mechanics, retailing and paper particularly in terms of methodologies and standardization industries; primarily in waste treatment and energy management and
76 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
consolidation of collected volumes. R&R Benelux and Germany waste volumes amounting to 146 kg per year per person. Now can thus operate on more favorable terms on the secondary raw it is stipulating that industries, commercial entities and SME materials market. The organization can also provide centralized must now sort waste into 18 different streams. One underlying coordination and sharing of good practices in areas such as trend in Belgium is the success of the social/circular economy human resources, asset management, purchasing, health and of secondhand stores, repair cafés and lending or sharing safety, public affairs and communication. platforms like Peerby, Wejdelen, etc. In 2015, R&R Benelux and Germany's contribution to the Group’s In such an environment, the trend is for more sorting at source consolidated revenues totaled €1.4 billion. The business unit and recycling, with producers assuming more responsibility, R&R Benelux and Germany employed over 6,400 people at as well as partnerships between waste management players December 31, 2015. and industry to work together in a closed loop. It also becomes a real innovation challenge, requiring greater transparency in (a) Specific features of the waste sector in Germany and Benelux supporting sustainable development claims, and will demand more awareness on the part of citizens regarding their Germany, the Netherlands, Luxembourg and Belgium are consumption and attitudes toward waste. It is not improbable European leaders in waste management and recycling, and that the trends observed in SUEZ R&R's markets in Germany their regulatory frameworks are far ahead of the European and Benelux are but a glimpse of what lies in store for the rest average. In this geographical region, less than 1% of total of Europe. Recently, several initiatives on the circular economy municipal solid waste is thus sent to landfill. Most municipal have emerged. Their goal is to promote awareness of resource solid waste is recycled (on average 60%) or put through an scarcity and create strong examples of closed-loop recycling. energy recovery process (on average 40%). With a very high population density and situated in a delta, Germany the Netherlands had to deal with environmental problems Of just over 368 million metric tons of waste generated, 54% very early on. Today, over 80% of waste in the Netherlands is comes from building and demolition activities, 36% from recycled, and 16% is put through an energy recovery process commercial and industrial activities, and 10% is generated by (the remainder is sent to landfill). The government recently municipalities and households (source: Eurostat 2015, 2012 raised the targeted recycling rate to 83% by 2015; this relatively data). Less than 1% of household waste was landfilled in 2012 (1) 6 small increase represents an additional 2 million metric tons of with 35% incinerated and 65% recovered or recycled (source: waste recycled. By comparison, the European average in 2008 Eurostat 2015, 2013 data). was 38% recycled and 40% landfilled. In Germany and Benelux, waste is no longer considered as Benelux waste, but as a “source of raw materials” and an integral part of Of a total of 123 million metric tons of waste generated in the the circular economy. The significance of waste as a secondary Netherlands, 70% is from building and demolition activities, resource becomes clear when looking at the increasing global 18% from commercial and industrial activities, 8% from dependence on raw materials. The German government has municipalities and households and 4% from agriculture. Of formed a Raw Materials Agency due to resource scarcity this total, 4% is hazardous waste (Eurostat 2015 – 2012 data). in its economy. The Dutch government intends to make its Approximately 49% of household waste is incinerated, 50% industries more competitive by focusing on savings and is recovered and the remaining is landfilled (source: Eurostat sustainability. It is exploring solutions to make the country a 2015 – 2013 data). Discussions concerning deposits on plastic hub of secondary resources. It is also promoting Dutch expertise bottle resulted in a decision to maintain the current system in waste management and recycling technologies in the US. To that targets bottles containing greater than one liter of liquid. reduce the incinerated volumes in favor of recycled volumes, In addition, deposits on bottles are currently being discussed as of January 2015, the Dutch government has introduced an for small plastic bottles and cans. additional tax on incineration of €13 per ton. In Belgium, new In Belgium, discussions concerning the imposition of a deposit sorting legislation entered into effect in all of the country's on bottles was not adopted by any of the country's regions. regions. This new law has led to diminished residual household
(1) The share of household waste landfilled in Germany is probably "undervalued," because the treatment, which consists of storing waste in salt mines, is classified by the German authorities as recovery (the volumes stored in these salt mines are therefore probably included in the 65% recovered or recycled). The German government has succeeded in limiting such practices. Currently less than 1 million metric tons are put into salt mines, mainly consisting of construction and demolition waste.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 77 Overview of activities 6 Description of the Group’s main activities
Of a total of some 67 million metric tons of waste generated in is made up of 250 active partners and subcontractors that offer Belgium, 38% comes from building and demolition activities, various types of services. 54% from commercial and industrial activities, and 8% is generated by municipalities and households (Eurostat 2015 – The Netherlands 2012 data). Of this total, 3% is hazardous waste (Eurostat 2015 SUEZ Recycling & Recovery Netherlands (former Sita Nederland) – 2012 data). Regarding household waste, 1% is landfilled, 44% operates through the entire waste cycle: SUEZ Recycling & is incinerated and 55% is recycled or recovered (source: Eurostat Recovery Netherlands provided waste collection services to 2015 – 2013 data). nearly 1 million people and 75,000 commercial and industrial customers in 2015, and processed nearly 1 million metric tons (b) Description of Recycling and Recovery activities in Germany & Benelux of waste. The Group estimates that SUEZ Recycling & Recovery Netherlands is one of the three largest private operators in the Germany Netherlands. SUEZ Deutschland provided waste collection services to nearly The waste-to-energy plant in Roosendaal opened in October 5.4 million people and 15,200 commercial and industrial 2011 in the south part of the Netherlands processes over customers in 2015, and treated nearly 1 million metric tons 336,000 tons of waste per year and produces energy for of waste. 70,000 households. SUEZ Recycling & Recovery Netherlands The Group believes that it is the fourth largest private operator joined forces with Zuidelijke Land- en Tuinbouw Organisatie in in Germany for Recycling and Recovery activities. 2015 to process manure from the residual heat of the facility and thus produce organic fertilizer. The Group’s presence is concentrated in western and southern Germany, particularly in municipal collection and selective The plastics sorting line in Rotterdam that was also opened collection. It also has a solid position in the incineration in 2011 now requires modernization in as much as the new segment through its Zorbau site in the Leipzig region, as well projects obtained by SUEZ Recycling & Recovery Netherlands as in the sorting of household packaging through its recently in 2015 involve greater capacity. This facility will sort 75% of modernized site in Ochtenburg, near Koblenz. In October the country's plastic packaging. 2010, SUEZ Deutschland became the sole shareholder of In order to operate over the entire production chain, SUEZ BellandVision GmbH, a German company, which is active in Recycling & Recovery Netherlands and Chemelot Ventures the area of services and royalties relating to the recycling of designed a new sustainable plant for manufacturing polymers in industrial and large-scale distribution packaging, by acquiring 2015. QCP (Quality Circular Polymer) is an innovative production 31.6% of the outstanding capital. facility that will produce high-quality materials intended for the The wide range of services offered such as SITA.scope®, SITA. polymers industry. connect and the e-commerce sector (B2C Shop, White Label Shop, B2B Portal) contributed to the Group's success in 2015. Belgium The Group estimates that SUEZ R&R Belgium is the leading SITA.scope® supports customers in streamlining their waste operator in the Belgian waste sector due to its very solid position management processes. Analyses provided include internal in collection and treatment operations, mainly from industrial management of waste and consequently all cost factors in the and commercial waste activities. In 2015, the Group provided value chain. Solutions coming out of these analyses range from collection services in Belgium to nearly 50,000 commercial and simple changes in structure of internal collection processes to industrial customers. In all, SUEZ R&R Belgium has collected innovative recovery technologies. SITA.scope® has brought in a nearly 2.7 million tons of waste and processes that amount. A significant number of key commercial and industriaI customers total of 61% of this waste was recycled and 28% recovered for representing potential total sales of several million euros. energy, both in steam and electric networks in industry and Through SITA.connect, SUEZ Deutschland has access to a municipalities. domestic network of recycling and waste management networks. The new developments observed in the country include the In the medium term, the objective is to develop this network into implementation of a new sorting and recycling scheme for a major marketing tool for the Recycling & Recovery business plastic packaging, a new regulation on sorting and recycling in Germany. SITA.connect centrally manages subcontractors commercial and industrial waste that is more stringent and assigned to SITA.shop operations and to organizing domestic an increase in environmental taxes. SUEZ R&R Belgium customers. In addition, SITA.connect is also a tool for managing is launching specific solutions and projects to support its supplier pricing in nationwide tenders. At present, the network customers in changes brought on by these developments.
78 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
Online development of SUEZ Recycling and Recovery in Germany & Benelux ..6.5.3.4 Central Europe All SUEZ Recycling and Recovery activities in the Netherlands The Group is active in the waste sector in various Central and and Belgium integrated SAP as their ERP system in 2015. Eastern European countries: Furthermore, the use of e-commerce tools such as Sales Excellence App will be developed in collaboration with Germany. XX in Poland, through its subsidiary Sita Polska, a key player Local online stores have varying degrees of maturity, but all are in the industrial and household waste and street cleaning developing rapidly and are systematically bolstered by other sectors. In 2015, Sita Polska achieved €129 million in online activities such as blogs, etc. revenues, making it the market leader in waste in Poland. This position was reinforced in April 2013 with the award of XX www.suez-containerdienst.de: Offers waste services the PPP tender in Poznan (building and operating a nearly for private sector customers. Performance in 2015: 200,000 ton incinerator); 68,000 visitors/1,200 orders. XX in the Czech Republic, the Group is active in collecting XX www.bauschuttcontainer.de: Waste services for private and treating municipal and industrial waste. With global sector customers via other online stores that became revenues of €65.3 million, the Group estimates it is the third- one of the most important benchmarking elements of the largest private operator in the waste sector in this country. sita-shop.de site in two and one half months. The site was launched in September 2015. The Group has developed significant expertise in the treatment of hazardous waste in these countries. XX www.suez.recircle.de: A B2B portal launched in November 2015 whose objective is to reach professional customers. The waste treatment sector in Central and Eastern Europe is characterized by significant growth potential based on improved XX bouwbakkie.nl increased revenues by 17% in 2014. standards of living and the need for these countries to comply with European environmental regulations.
6.5.4 Presentation of the Group’s International activities 6
In addition to Europe, the Group operates in the water and The International division will now be organized around five waste sectors in more than 15 countries. As a result of selective geographical business units: North America, Asia, Australia, growth abroad, this position is based primarily on a strong AMEI (Africa, Middle East, India) and Europe/Latin America presence in five regions: to enhance trade efficiency and proximity with local clients. It will also include four business lines: Water Services, Waste XX North America; Services, DBO (design, build and operate of water treatment XX Latin America; plants), and Industrial Solutions to capitalize on all of the XX Asia; Group’s expertise. Each business unit will have multidisciplinary teams who will be responsible for managing and developing all the Mediterranean Basin; and XX the Group’s business for municipal and industrial customers XX the Middle East. in their assigned area. A joint organizational structure in water and waste activities This new organization aims to create and develop dynamic has generated synergies in operating expenses, and combined growth and achieve the Group’s strategic priorities product offers. In addition, depending on the country, the Group internationally by reinforcing operations in the countries where has been able to rely on its commercial growth already achieved the Group is present, establishing a presence in new areas with by each of the activities as a basis for further development, as high potential, and operating our business activities closer to in China and Australia, for example. our customers. As of January 1, 2015, SUEZ reorganized its International Division to boost sales momentum and accelerate its continued international expansion across all Group businesses.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 79 Overview of activities 6 Description of the Group’s main activities
..6.5.4.1 The Group’s activities in North America 2,400 people as of December 31, 2015 (excluding USG). SUEZ North America has developed a balanced portfolio between these two key activities which are considered complementary (a) United States (Water) by the Group. The Group operates in the management of water and SUEZ North America continues to hold an 8% market share wastewater services in the United States through SUEZ North of the private sector involved in producing and distributing America (former SUEZ environnement North America) and its drinking water and providing wastewater treatment services wholly owned subsidiaries, SUEZ Water Inc. and Utility Service in the United States (in terms of revenue). Its drinking water Group (USG). The latter is under the management control of and wastewater treatment services cover 6.6 million people Agbar (see the description of its activities in section 6.5.2.2(b)), in 21 states. In 2014, SUEZ Water Inc. had a portfolio of and is therefore booked under Water Europe. 16 “regulated” operations in six states. As part of its effort to SUEZ Water Inc. (former United Water) has facilities in 21 states, focus on its services activity and streamline its portfolio, in mainly in the Midwest and Northeast of the country, and is active July 2012 it announced plans to sell its regulated activities in two types of businesses: in Arkansas (the disposal was finalized in February 2013). In September 2012, it completed the sale of its regulated activities XX “regulated activities” (primarily in the field of drinking in Connecticut. These changes are part of the Group’s strategy water services): the water production/treatment assets on a larger scale, which also includes the effort to reduce small are operator-owned; this sector is characterized by its high contracts (the company has sold a series of contracts in the capital intensity and lower financial risk, since rates are fixed Northeastern United States to Whitewater Inc. in the past two by the regulators (Public Utility Commissions) in individual years). It now has a portfolio of about 84 contracts across the states, partly based on the investment required; country. XX service contracts (primarily in the field of wastewater The Group estimates that it is the second-largest private services): operators enter into operations and maintenance operator (1) in the water sector in the United States in terms of contracts with municipalities relating to processing sites total revenues in the two above-mentioned primary fields of or other assets that continue to be city property; this activity (“regulated activities” and service contracts). The US sector is characterized among other things by low capital water market is worth around USD103 billion (source: GWI Study, intensity and lower margins. These contracts are generally 2015) and the Group believes that private operators represent for between 3 and 10 years, although contracts have also about 8% of the operating activities sector. This sector is been signed for a longer term. SUEZ Water recently took characterized by long-term stability and increasingly high part in 40- to 50-year concession contracts (Bayonne, New quality and service expectations. It is a very fragmented market Jersey and Middletown, Pennsylvania), for which it signed a with almost 52,000 water supply systems and approximately partnership agreement with financial group Kohlberg Kravis 17,000 wastewater treatment systems, which offers major Roberts & Co (KKR) and took a 10% share in the concession. opportunities for consolidation. SUEZ Water became the concession’s operator, managing and setting up the long-term improvement investments Through its subsidiary SUEZ Treatment Solutions Inc. (ex-IDI), financed by KKR. This business model is generating a the Group is also one of the principal suppliers of treatment growing interest among municipalities. services and equipment to municipal and industrial customers. The business of SUEZ Treatment Solutions Inc. is the result of the In 2014, SUEZ Water signed a 20-year operating contract to merger of five entities acquired by the Group within its former manage the entire wastewater system for Nassau County, subsidiary Degrémont: Infilco Degrémont, WPT, Anderson, Long Island, New York, representing a population of 1.1 million Poseidon and Ameriwater. At present, the new organization inhabitants. The contract, for a total amount of USD50 million, can address a wide range of industrial and municipal customers is the largest O&M contract in the US and doubles SUEZ Water through the diversity of its technologies portfolio featuring Inc’s backlog for service contracts. Full operation became reverse osmosis, ion exchange, advanced separation, advanced effective as from January 1, 2015. filtration and dialysis systems. SUEZ Treatment Solutions Inc. In 2015, these activities contributed €959 million to the Group’s also provides services through mobile treatment units and consolidated revenues (excluding USG), with 50% from regulated Operations and Maintenance (O&M) contracts. activities, 30% from service contracts and 20% from water treatment solutions. These activities employed approximately
(1) Estimate based on the information available when drafting this document.
80 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
(b) Canada (Waste) biomethane sources results in a 66% reduction of greenhouse gas emissions coming out of the facility. In light of this In 2014, the Group acquired the remaining 40% interest in momentum, SUEZ gained two new biomethanation contracts Aecom Technology, after holding a 60% interest since 2008. in 2015, one with the city of Angers for the construction of a This company has significant management contracts in Alberta, production unit at the Baumette treatment facility and another operating the compost site in Edmonton and toxic waste with the city of Annecy. These two contracts in partnership incinerator in Swan Hill. The Edmonton contract was renewed with Prodeval will comfort SUEZ’s leadership position in the for another five-year term in 2014, and a new contract was biomethane market in France. awarded by the city to operate its materials recovery site. SUEZ North America is participating in building and operation projects SUEZ is also increasing its presence in the decarbonization for waste treatment facilities in Canada. sector through the Louveciennes and Mont-Valérien contracts, representing €4 million and €5.2 million Group's share (c) Mexico (Water) respectively. SUEZ is also launching a new offer for water conditioning Present since the mid-1960s through its Treatment Solutions intended for industrial customers as part of its innovations business, the Group first entered into a service contract for for 2015 under the name of Aqualead™. This offer combines Mexico City in 1993. the expertise and know-how of recent SUEZ acquisitions (IWM Since then, the Group has managed public services delegations in France in 2013 and B&V in the United Kingdom in 2015) through two locally incorporated companies, ASIM and TECSA, to provide products for the entire water cycle through the held jointly with GBM, a Mexican partner. treatment of discharge, including services for the conditioning ASIM and TESCA's activities are primarily expanding in Mexico of water for cooling circuits and boilers. This offer is supported City, where the Group has entered into two service contracts by a new range of green products, Aqualead™ nexgen, which with the city to cover the management of customer accounts reduces phosphorous discharges by 50% compared to and provide maintenance for the secondary drinking water traditional treatment processes. supply network and for the water meters in eight city districts An initial contract in the area of environmental protection representing one-half of the urban community. was entered into under the global agreement signed in July 6 The Group is also active in Mexico through activities conducted 2015 between SANOFI and SUEZ to improve water and waste by Water Spain (see section 6.5.2.2). management by SANOFI. It relates to the modernization and increase in capacity of the wastewater treatment plant of the The Group estimates that it is the largest private operator in biochemical site of Saint-Aubin-lès-Elbeuf (Seine-Maritime, water-related services in Mexico. France). . In Italy, SUEZ had several commercial successes in 2015. The .6.5.4.2 Group activities in the Europe and Latin America contract with the city of Trieste requires SUEZ to renew and business unit expand the Servola-Trieste purification plant (233,000 population equivalent) for a total amount of €31.3 million, of which (a) In Europe (France, Switzerland, Belgium, Spain, Italy, Portugal, the Czech €10.7 million for SUEZ. This renewal and expansion project is a result of the European Union's ruling against the city of Trieste Republic and Croatia) and in Russia for failing to adhere to the directive regarding urban wastewater SUEZ continued to position its offers on new innovative trends treatment. Work on the project began in November 2015 and will such as biomethane, decarbonization and micropollutants in continue for 18 months. Furthermore, SUEZ was tasked with the 2015. Through its Europe & Latin America business unit, SUEZ renovation and expansion of the Bardonecchia drinking water is committed to resource preservation and offers technologies filtration plant in a contract worth a total of €17.5 million, of for the production and reinjection of biomethane in the natural which €11.3 million for SUEZ. The renovated plant will provide gas distribution grids of cities. The pilot operation BioGNVal, an excellent drinking water quality to the Bassa Valle aqueduct, innovative technological tool in the purification and liquefaction which includes the Suse valley. The contract plans 550 days for of Biogas developed by Cryopur in partnership with SUEZ, has construction and six months of support and operations. Lastly, been tested on the SIAAP Seine Amont site since April 2015. in the Viterbe region, SUEZ has been operating 24 plants since Furthermore, the wastewater treatment plant of the Urban January 2015, representing 200,000 population equivalent, for Community of Strasbourg operated by SUEZ was the first in the Lazio region to reduce overly high concentrations of arsenic France to inject biomethane gas into the natural gas distribution and fluorine in the region. The contract, worth €12 million with grid in 2015, through its Biovalsan project. With over 1.6 million €8.4 million for SUEZ, also stipulates the delivery of three plants cubic meters of green gas produced yearly, energy from in 2016.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 81 Overview of activities 6 Description of the Group’s main activities
SUEZ is growing in Croatia with the 2015 Porec contract, a 4,500 cubic meters per hour reuse effort. The total amount which follows the Osijek contract awarded at the end of 2014. of the contract is €20 million, with €10 million for SUEZ, and In consortium with Strabag, SUEZ signed contracts for the the work will reduce the risk that the Volta Redonda unit will design and construction of four wastewater treatment plants pollute the Paraiba do Sul river and give CSN greater autonomy with Odvodnja, the water authority for the city of Porec. The and streamlined management of water in its industrial process. €38 million contract (of which €22 million for SUEZ) will be In the Dominican Republic, the Brazilian conglomerate 78% financed by the European Union. These four plants will be Odebrecht awarded the Punta Catalina project to SUEZ for equipped with membrane bioreactors with a total capacity of the construction and delivery of a desalination plant and a 137,500 population equivalent and will treat wastewater that demineralization system for the production of process water will subsequently be used for irrigation. for the new Hatillo electric plant located 60 kilometers from In the Czech Republic, Prague Mayor, Environment Minister and Santo Domingo. The supply contract is valued at €6.5 million SUEZ inaugurated construction on the new Prague wastewater and is one of the most important in recent years for SUEZ in treatment facility. The plant has a 1,200,000 population Latin America. equivalent capacity, or 345,000 cubic meters per day, and will subsequently be supplemented by the existing facility in Prague ..6.5.4.3 The Group’s activities in Asia that will be renovated, bringing population equivalent capacity to 1,600,000. This contract, which was signed in 2011, provides In 2015, the contribution of the Asia business unit companies, for the construction and plant operation for a total amount of excluding Pacific, to the Group’s consolidated revenues totaled €217 million, of which €56 million for SUEZ. €392 million. At December 31, 2015, the Group employed some 3,439 people in this region. (b) In Latin America (Mexico, Chile, Argentina, Brazil, Peru, Colombia and Panama) (a) China In Chile, SUEZ was awarded the contract extension for the Water wastewater treatment plant at Santiago Mapocho IV, already under SUEZ management. The extension contract was valued The Group has a presence in China through its water at €50 million on behalf of Aguas Andinas and will result in management concessions in Macau and its 32 subsidiaries increasing the plant treatment capacity from 6.6 cubic meters/ established through partnerships with local authorities for second to 8.8 cubic meters/second. Construction began in drinking water production and distribution, wastewater and January 2015 and will last 23 months. sludge treatment. It operates under several types of contracts, such as BOT contracts for building and renovating water SUEZ obtained a favorable judgment from the International treatment plants, operations and maintenance (O&M) and Center for the Settlement of Investment Disputes (ICSID) on concession contracts. April 9, 2015, which ordered the Argentine Republic to pay USD405 million for damages suffered through the termination The Group has one concession contract awarded by the of the Aguas Argentinas concession contract for water and Government of the Macau Special Administrative Region to wastewater treatment in Buenos Aires. This decision represents provide water services. This contract started in 1985 for a an important step in the process of solving this dispute. The period of 25 years and was renewed in November 2009 for a next step consists of making sure that the ICSID’s decision further 20 years. is implemented. Aguas Argentinas, a Group subsidiary, was The Group is active in the Chinese water sector primarily awarded the contract for managing water and wastewater through jointly-owned Sino-French Holdings, which was treatment services for the city of Buenos Aires in 1993. The incorporated in 1985 and has been owned since 1998 by SUEZ contract was cancelled in 2006 by the government of Argentina. and Lyonnaise Asia Water Limited and by Beauty Ocean Limited, The judgment by the ICSID came down after several years of whose obligations are guaranteed by New World Infrastructure litigation. It acknowledges SUEZ’s rights and the work carried Limited. Relations between the parties are governed by a out by Group staff in providing services for over eight million shareholders’ agreement that provides for equal representation inhabitants, two million of whom did not have running water on the company’s Board of Directors. This agreement also sets or access to a sewage system previously. forth a right of first refusal benefiting the other shareholders In Brazil, the Companhia Siderurgica Nacional (CSN) chose in the event that one of the parties should sell all or part of its SUEZ to install a cooling system that includes towers, heat holding. exchangers, filtration systems and chemical dosing as part of
82 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
The Group is continuing to strengthen its presence in China “Chongqing Sino-French Environmental Excellence Research thanks to a policy of entering into partnerships and by securing & Development Centre Company Limited” which will provide major contracts with municipal and industrial customers: applied research services, expertise and technical support to partners and third-party managers of water and environmental XX The Group has launched an industrial water production plant, a wastewater treatment plant, and an incinerator for engineering in China. hazardous waste in the Shanghai Chemical Industry Park In 2015, Sino-French maintained its growth levels and was (SCIP), the largest petrochemical industrial site in Asia. In awarded new contracts: 2006, it also witnessed the inauguration of the first Research XX In March, Sino-French signed a strategic partnership and Development Centre dedicated to industrial wastewater agreement with the city of Changshu to set up a joint venture and hazardous waste by the Shanghai city authorities. These to be called Changshu Sino-French Wastewater. The new events demonstrate the determination to explore new paths joint venture will assume operations and management for industrial cooperation and improved quality of service. of assets belonging to Changshu Jiangnan Water Affairs XX In 2008, the Group and its partner (New World) strengthened and will also participate in financing investments for their relationship with their local partner in Chongqing implementing new projects. This agreement marks the through the acquisition of a 15% interest in Chongqing extension of the partnership between Sino-French and Water Group. This equity interest decreased to 13.4% the municipal government of the city of Changshu beyond after Chongqing Water Group was listed on the Shanghai wastewater management and treatment services. Since Stock Exchange in 2010. Cooperation with the Chongqing the signature of this agreement, several projects have been Water Group was expanded in 2010 and 2011 through (i) awarded: an extension of the joint venture for water distribution, –– In May 2015, a five-year O&M contract was signed for the construction and commissioning of the new Yuelai Water management of Dongbang Wastewater Treatment Plant. treatment plant (400,000 cubic meters/day in the first and The plant treats industrial wastewater and sewage water second phases); (ii) the creation of a joint venture for the treatment services to the Changshu Dongbang District. resumption and expansion of drinking water treatment and wastewater treatment services at the Changshou Chemical –– In July 2015, a five-year O&M contract was signed with 6 Industrial Park, a major industrial development in the Changshu Jiangnan Water, the company responsible for municipality of Chongqing. In 2012, assets jointly held by operating five wastewater treatment plants, 50 pumping Sino French and Chongqing Water were restructured and stations and facilities for collecting related wastewater. regrouped within a single holding structure that is equally Changshu Jiangnan Water services cover 10 districts and owned (50%/50%). cantons in Changshu and provide services to 1 million residential, commercial and industrial customers. In 2011, Sino French began a new collaboration with Wuhan Chemical Industrial Park, Degrémont and the Shanghai –– In November, 2015 an agreement was signed with Chemical Industrial Park for the development, construction Changshu Advanced Materials Industrial Park ("Changshu and 30-year operation of the wastewater treatment plant to AMIP") to establish a joint venture to build and operate a treat all industrial discharge from the park, with a capacity wastewater treatment plant within Changshu AMIP. The of 10,000 cubic meters/day and an ultimate capacity of project is to be launched in early 2017 and will represent 60,000 cubic meters/day. a total investment of CNY 100 million during the initial phase and will provide wastewater treatment services In 2012, Sino French acquired 65% of Dayi Shangliu, a private exclusively for the park for 30 years. company with a portfolio of BOT and O&M contracts for wastewater treatment in the Sichuan province, in the fast- XX Furthermore, with regard to industrial parks, Sino-French growing region of Chengdu. This acquisition gives Sino French an signed a new contract for the supply of demineralized water operating platform capable of supporting more developments in services with Bayer in the Shanghai Chemical Industrial this dynamic region of western China through various business Park ("SCIP"). In 2017, its supply of demineralized water models including joint ventures and BOT and O&M contracts. will have increased by around 1 million cubic meters to meet its expansion demand. In 2013, the joint venture was extended to include the purchase and operation of a new treatment site, Chongzhou, also in the city The Group also operates in China through its Treatment Solutions of Chengdu. In addition, SUEZ, Sino-French Water Development business, especially in the industrial sector. At present, the and Chongqing Water Group created a new joint venture called Group has completed over 220 design-build contracts in China.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 83 Overview of activities 6 Description of the Group’s main activities
The Group feels that the water and wastewater treatment plant for hazardous industrial waste with an annual capacity sector in China will grow significantly with the steady of 60,000 metric tons at the Shanghai Chemical Industry Park participation of private operators because of the combined (SCIP). This unit is the largest of its kind in China. impact of heavy urbanization, growing industrialization, an Indeed, China’s waste sector is still young, and characterized increase in the population's standard of living and increasing by a gradual opening up to professional and international tensions surrounding the availability of water resources and operators and by strong growth in volumes and urbanization. an increase in regulations for protecting the environment and The Group therefore expects the volume of household waste th controlling pollution levels. China's 13 five-year plan drafted to increase considerably. China’s 13th five-year plan also calls for the Central Committee for National Economic and Social for a significant increase in solid municipal waste treatment Development focuses specifically on infrastructures, primary infrastructure, mainly by developing energy-from-waste plants. public services, new urbanization, environmental governance China also produces very large amounts of hazardous waste, and ecological protection. This ambitious plan promotes a type which currently does not undergo any effective, professional of development that is, more than ever, innovative, green and treatment. All the conditions for growth in this sector now seem open to foreign investment. The Group believes that it is one of to be in place, particularly with the adoption of more rigorous the most dynamic sectors in the world. environmental regulations and the establishment of regulatory In all, the Group provides drinking water services to 20 million bodies. inhabitants in China. It is one of the five largest private actors In 2013, in collaboration with the Shanghai Chemical Industrial in drinking water and wastewater treatment in China. Park Development Company Limited and the Nantong Economic and Technology Development Area (NETDA), SUEZ created Waste a new joint venture to build an integrated hazardous waste The Group has been operating in Hong Kong since 1998 in the treatment plant in Nantong (capacity to incinerate hazardous waste sector through Sita Waste Services. Sita Waste Services waste of 30,000 metric tons/year and medical waste of operates eight municipal waste transfer stations and two out of 3,300 metric tons/year). This plant will be the only one in NETDA the three strategic landfills (those two are among the largest compliant with European standards of design and construction. landfills with close to 4 million metric tons of waste landfilled Its advanced technologies are also in line with environmental per year). The Group collects nearly 568,000 tons of household, and engineering requirements at both the local and national commercial, industrial, agricultural and hospital waste in Hong levels, with strict emissions controls. Site construction work Kong and Macau every year. started in July 2014. In 2013, Sita Waste Services further expanded its activities with In 2013, SCIP Sita also signed a service agreement with the the award by Hong Kong’s Department of Drainage Services Spanish company CEPSA, which manufactures phenol, to treat to transfer sludge from the recently commissioned waste the 8,000 to 10,000 metric tons per year of hazardous waste treatment plant to a transfer site located in the north of Lantau it generates, and to build storage reservoirs for waste prior to Island. treatment. This project will increase the incineration capacity In 2014, SUEZ was awarded the operation of the first Hong Kong of SCIP Sita. organic waste treatment plant, Siu Ho Wan in North Lantau In August 2014, the Group signed a cooperative LOI: "Cooperation in Hong Kong, with a capacity of 200 tons/day. This site will Agreement for the management of hazardous waste landfills" process food waste separated at source from the industrial and with the solid and chemical waste management authority, which commercial sectors and transform this waste into biogas and is an arm of the Ministry of Environmental Protection (MEP) to compost. The site will officially be commissioned in mid‑2017. jointly develop a training center for the efficient and secure The biogas produced will generate an electricity surplus of management of hazardous waste. 14 million kWh per year which can be injected into the grid. Finally, In Taiwan, the Group operates an energy-from-waste In Macau, directly or through its subsidiary, SUEZ offers incineration plant with a capacity of 450,000 metric tons of collection and cleaning services for the entire city, and operating municipal and industrial waste per year. In recent years, the services for the landfill specialized in fly-ash from the local demand for industrial waste treatment has risen steadily. This incinerator. result stems from both the poor performance of some of the The Group has also grown in mainland China through joint other incinerators in Taiwan and the influence of government ventures with local partners. For instance, it designed, control of industrial waste treatment. oversaw the building of, and now operates an incineration
84 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
(b) Australia ..6.5.4.4 The Group’s international activities in Africa, Middle East and India Water The Group believes that the Australian water sector suffers In 2015, companies in the Africa, Middle East and India region from acute problems linked to water resources due to recurring, contributed €1 billion to the Group’s consolidated revenues. long-lasting droughts and from the impact of global warming. As of December 31, 2015, the business unit employed over This sector offers significant growth opportunities due to the 9,300 staff. increased use of desalination and reuse of post-treatment wastewater. (a) Africa Opportunities linked to the recovery of water used in the industrial and mining sectors, in particular, should grow in Water years to come. In Morocco, the Group is active in the water sector through Lydec, in which it has a 51% stake, with the remaining 49% Waste owned 34.75% by Fipar Holding and RMA Wataniya, and the remainder traded on the Casablanca Stock Exchange since Australia’s waste sector is estimated at approximately 2005. Lydec is in charge of water distribution, wastewater AUD14.6 billion (€9.6 billion) in revenues in 2014-2015 (source: treatment and the electricity supply for over three million Inside waste Industry report 2014-2015), with significant potential consumers in Casablanca, on the basis of a 30-year contract for further growth due to a population expanding at a rate of signed in 1997. In 2015, Lydec contributed €633 million to the 1.7% per year. The generation of waste per capita has decreased Group’s consolidated revenues, broken down into activities since 2012, reflecting moderate economic growth, demographic related to electricity (70%), and drinking water distribution and changes of an aging population and developments in building wastewater treatment (30%). complexes. In recent years, most governments have set targets to reduce landfilled waste. These have led to increased landfill At December 31, 2015, Lydec employed 3,563 people. taxes (imposed and regulated by each State). This increase Lydec’s main objectives for growth are the safety and quality of is intended to help reduce waste and promote recycling and the drinking water supply and management of the distribution 6 recovery. In this context, the demand for waste recycling and network, development of wastewater treatment infrastructures recovery involving sorting, composting and alternative fuel (particularly flood prevention) and, in terms of electricity, the production continues to grow. development of infrastructures and improvements in the The Group is present in the waste sector in Australia through electricity distribution network. SUEZ Recycling and Recovery Pty (former Sita Australia), which In Algeria, the Group has been present since 2006, with a contributed €780 million to the Group’s 2015 consolidated management contract to which it contributes its expertise and revenues. The Group is the second-largest player in the solid provides experts to the Société des Eaux et d’Assainissement waste segment and the recycling market in Australia. Through d’Alger (SEAAL) in order to help improve drinking water its collection services, SUEZ now serves over 55,000 commercial distribution and wastewater services for the cities of Algiers and industrial customers and some 4.6 million people in the and Tipasa. The investments planned for 2012 to 2016, which continent’s main cities. are funded by the State, amount to €900 million. A dedicated SUEZ continues to be Australia’s leader in both the ARRT program for professional and managerial knowledge transfer (advanced resource recovery treatment) market and particularly is being implemented by SUEZ. In addition, Agbar has been the MBT (mechanical biological treatment) market. SUEZ’s providing technical assistance services to SEOR (Société de services include resource recovery and recycling of household, l’Eau et de l’Assainissement d’Oran), a water and wastewater commercial and industrial waste, treatment of organic waste company since April 2008. through composting, treatment and recycling of medical In Burkina Faso, ONEA indicated its continued trust in SUEZ by waste with secure product destruction, and advanced landfill awarding it a contract for the construction of the Ziga II drinking technology. water filtration plant with a capacity of 180,000 cubic meters/ In 2015, SUEZ won numerous contracts to provide day financed by the European Investment Bank. comprehensive waste management services for major national customers, including the renewal of the Qantas Corporation. The Group also won several municipal waste collection and landfill contracts during the year.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 85 Overview of activities 6 Description of the Group’s main activities
In Kenya, Athi Water Services chose SUEZ for the construction of SUEZ was awarded the Mirfa project, which is comprised of a the first phase of the Kigoro drinking water filtration plant that contract of over €100 million for the design and construction of serves Nairobi. This 142,500 cubic meter/day capacity project a seawater desalination plant through reverse osmosis with a is being financed by the French Development Agency. This new capacity of 140,000 cubic meters per day, which will be followed contract confirms SUEZ's historic presence in Kenya, where the by a second operations and maintenance contract for the plant Group already built the Ngethu drinking water plant to serve for seven years. Nairobi in 1994. Haya Water, the Oman water authority, selected SUEZ to In Mali, SUEZ was declared the successful bidder for a contract design and build a wastewater treatment plant at Al-Amerat for the construction of a drinking water filtration plant in Kabala. with a capacity of 18,000 cubic meters per day. This contract, This new 300,000 cubic meter/day capacity plant is being worth a total of €25 million, includes a two-year operating and financed by the French Development Agency and will serve maintenance period for the station. Bamako. The State public works authority of Qatar (Ashghal) awarded SUEZ was awarded an operations and maintenance contract for SUEZ, in consortium with its Japanese partner Marubeni two wastewater treatment facilities at the Gabal El Asfar station Corporation, the new extension of the wastewater treatment and in Cairo (Egypt) for a period of four years and a total amount recycling plant in Doha West. The total amount of the contract is of €80 million. SUEZ will manage the operation of the facilities worth €180 million of which €90 million for SUEZ. This extension and their rehabilitation, thus proving how much confidence will result in increasing the plant's treatment capacity by CAPW has in the Group's level of operations know-how and its 105,000 cubic meters per day to reach 280,000 cubic meters per international expertise in water treatment. day. The plant will ultimately be able to handle the wastewater of the 1,040,000 population equivalent of the city of Doha when Waste this contract expires. This project is a continuation of the two In Morocco, the Group operates in the waste segment through contracts signed in 2005 for the design, build and operation its subsidiary Sita El Beida responsible for urban cleaning, over 10 years of an initial unit with a capacity of 135,000 cubic household waste collection, transportation to processing meters per day, followed in 2011 by its first extension to sites and an awareness-raising campaign for local residents 175,000 cubic meters per day to serve an estimated population to preserve their standard of living and through Sita Maroc, of 650,000 inhabitants. The plant is located 20 kilometers to the responsible for the management of industrial waste. east of Doha and has been in operation since March 2010, and expansion work begun in 2011 was completed in 2012. SUEZ This year, there has been strong growth in the recycling and will operate the plant until 2020. recovery businesses through the kick-off of several new contracts during the past year, such as in Meknes, Tangiers Waste and Casablanca. Sita Maroc has since 2009 managed waste at the Renault plant in Casablanca and at the new plant in Tangiers The Group is present in the waste sector in the Middle East in: since 2012. Centrale Laitière (Danone Group) has also entrusted XX the United Arab Emirates through its subsidiary Trashco, it with the management of its waste. mainly positioned in the collection of waste generated by The Group remains attentive to development opportunities, industrial and commercial activities in the Emirates of Dubai, especially in Algeria. Abu Dhabi, Sharjah and Ajman; XX Oman, through Sita Al Basheer, 60% owned with Omani (b) Middle East partners. Under this joint venture, the Group signed a contract in 2005 to operate a landfill in Muscat. The government of the Water Sultanate of Oman selected Sita Al Basheer for the design, construction and extension of the landfill at Al Amerat and The Group has a historic presence in the Middle East. It built the its operation over five years. The total value of this contract first desalination site using the reverse osmosis technique in is around €30 million. Sita Al Basheer will construct the new Saudi Arabia in 1975; entered into 20 design, build and operate cell of the landfill for non-hazardous waste at Al Amerat to (DBO) contracts in this country between 1975 and 1986; built take in all of solid municipal waste from the city of Muscat. the world’s largest hybrid desalination site in the United Arab This project is part of the continuation of an initial storage Emirates in 2003; in 2005 won the DBO contract for the largest cell with a capacity of 250,000 tons of waste operated wastewater purification plant in Qatar, intended for the reuse annually since 2010 by Sita Al Basheer. It will bring the of treated water; and opened the largest purification station in capacity of the landfill to 400,000 tons of waste annually; the Middle East with the As Samra plant in Jordan at the end of 2014.
86 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Description of the Group’s main activities 6
XX in Lebanon, SUEZ completed work and services for the a large scale through long-term contracts. In 2015, the Group contract awarded in 2013 for the rehabilitation of a landfill won six municipal contracts with an overall value of €67 million: in Saida. This landfill, located on the Mediterranean coast XX SUEZ was awarded the construction and operation of two and a real environmental burden, will be transformed into units of the drinking water production facility TK Halli, a public park, offering residents recreational areas with located 90 kilometers from Bangalore; an outdoor theater, vegetation and landscaping of the site inspired by Saida’s history and culture. XX SUEZ was also awarded a contract for the construction, design and operation of the Kengeri wastewater treatment The Group is also attentive to development opportunities, plant, located to the southwest of Bangalore; particularly in Bahrain, Kuwait, Qatar, Saudi Arabia and Turkey. XX SUEZ was awarded three contracts for the design, construction and operation of 150 compact units for drinking (c) India (Water) water production in the state of Rajasthan. Since 2009, SUEZ has actively followed developments in the SUEZ also operates in three major cities: Indian water sector, particularly the emergence, supported by plans and policies at the federal and national level, of XX in Delhi, where in 2012 the Group signed a first long-term projects in the form of public-private partnerships that are contract with India’s main water authority, the Delhi Jal aimed at improving and expanding the water supply and the Board, for the management and operation of the water distribution infrastructure and services in Indian cities. Water supply network in Malviya Nagar, an area of New Delhi with is a fundamental concern of the central Indian government, 400,000 inhabitants; which in 2013 launched a second five-year plan entitled XX in Bangalore, where SUEZ obtained a contract to improve AMRUT1 to develop essential infrastructure including access the water distribution system in 2013, focusing on network to water and wastewater systems. With consumption of yield, which was supplemented in 2015 by a leak detection water in India expected to double between now and 2050, the contract valued at €3 million; country is expressing its determination to treat wastewater and to protect rivers and underground reservoirs, the primary XX in April 2014, the city of Mumbai awarded SUEZ India a source of drinking water for millions of inhabitants. SUEZ service contract for the improvement of the drinking water 6 believes that in the water services sector, India is a promising distribution system for its 12.5 million people. This five-year market in which its know-how and expertise in the field of water contract represents total revenues of about €30 million. management and improvement services can be deployed on The Group is also attentive to opportunities in the waste segment.
6.5.5 Presentation of the Group’s other activities
Safege Safege confirmed its sales momentum in 2015 with record Safege, a wholly owned consulting subsidiary of SUEZ, provides orders. Below are a list of emblematic successes from the engineering services to municipalities, public authorities, public 1,500 contracts concluded in 2015: service agents and private and industrial customers. In 2015, XX In Myanmar, Safege signed a new sustainable city contract Safege contributed €100 million to the Group’s consolidated for three cities in the southeastern part of the country. revenues. XX In Georgia, Safege is supporting an investment program A major operator in the sustainable development activities to improve urban services underpinned by the Asian of towns and urban areas, Safege supports its customers Development Bank. in France and abroad in making town planning decisions XX Safege continues to grow in the area of energy and climate and jointly designing the infrastructure at all levels of the through the following contracts: a seawater air conditioning project: assistance with project management, design, general (SWAC) system in the northern part of Reunion island for contracting, operating support, training and audits. Clym Abyss, implementation of the energy-climate policy in Safege has nearly 779 employees and has references in more Guadeloupe, carrying out of the Tangiers-Tetouan Regional than 100 countries. Climate Plan in Morocco and Montbéliard, in France, and the Universities of Bordeaux water and energy Master Plan.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 87 Overview of activities 6 Dependence factors
XX Safege is consolidating its position as leader in the –– over 15 master plans for drinking water and wastewater deployment of ultra-fast broadband in France, a structural treatment, including for Sevran, Bar-le-Duc, Perpignan capital expenditure, by supporting the départements of the Méditerranée, Pays d’Aubagne, etc.; Morbihan, Alpes-de-Haute-Provence, Hautes-Alpes, Landes, –– the supervision and construction and renovation of water Seine-Martitime, Cher and Indre-et-Loire. networks, wastewater treatment networks and treatment XX In Poland and Bosnia, Safege pursues its development in plants in Vukovar and Porec, Croatia; design and supervision of roads and rail transport with –– the search for new water resources for Siem Raep and European Union financing. Phnom Penh, Cambodia; Safege is breaking into the private customer market with XX –– in Sri Lanka, Safege confirmed its expertise in reducing the signature of framework agreements with Areva and non-revenue water for the capital, Colombo and SNCF and has carried out Environmental and Economic Ambathale; Performance (Perform EE) diagnoses in France and Canada: –– in Cameroon, several construction supervision contracts –– the construction of the Port of Paris Seine West and the for drinking water with Camwater; port of Futuna; –– support in preparing a sector program for water in French –– framework agreements for wastewater treatment and Polynesia; rainwater management with SYAGE (Joint Syndicate for Treatment and Management of water flowing into –– in the middle of the COP21 conference in Paris, the Yerres), the Val-d'Orge Urban Community and the development of a modeling tool for country contributions. Palaiseau municipality in the Essonne département;
6.6 Dependence factors
Information on dependence factors can be found in chapter 4 of this document.
6.7 Legal and regulatory framework
The Group’s regulatory framework derives both from must be transposed into domestic law) and by legislative interdisciplinary regulations and regulations specifically related provisions specific to each country. to the business lines. The Group’s activities outside Europe are also subject to The Group’s activities in Europe are governed by European regulations on the environment, health and safety, among other legislation (European Regulations, which apply directly and things. uniformly to all Member States, or European Directives that A general presentation of the most significant applicable regulations is set out below.
88 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Legal and regulatory framework 6
6.7.1 Interdisciplinary regulations
..6.7.1.1 Regulations on the awarding of public contracts main categories. Specific award rules apply to each category. The two categories are: Generally, methods for awarding contracts vary depending on the nature of the public-private partnership (long-term XX Public contracts for services or works. These are subject to concession of public services, PFI in the United Kingdom, BOT, the Code of public contracts Ordinance No. 2015-899 dated or short-term provision of service) or the method of regulation. July 23, 2015 relating to public markets has transposed the A clear definition of the regulatory framework is of the utmost European Public Markets Directive. An application decree is importance for growth of the Group’s activities. currently being adopted. Furthermore, Decree No. 2015-1163 dated September 17, (a) European regulations 2015 modifying some thresholds related to public markets raised the threshold under which public markets can be In the European Union, contracts signed by the Group with awarded without publication or calls for tender to €25,000. local public authorities are classified as either public works or services contracts, or concession contracts. In contrast to a XX Delegation of public service (DSP) contracts. These contracts public contract, a concession is defined as a right to operate a are governed by Law No. 93-122 of January 29, 1993 public service, with transfer of a portion of the risks borne by regarding the prevention of corruption and transparency of the delegating authority to the delegated agent. economic life and public procedures (the “Sapin Law”), which defines the procedures applicable to such awards. This On February 26, 2014, the European Council and Parliament procedure involves a negotiated process. These contracts adopted Directives (2014/24/EU and 2014/25/EU) on the are used particularly in the water sector; local authorities coordination of public procurement procedures in connection (municipalities or groupings of municipalities) have the to the award of contracts for public works, and for the supply choice between direct control, the public services market, and provision of services. or delegation. In the case of DSP contracts, the delegated These directives aim to harmonize the procedures for awarding management contract defines the respective obligations of 6 public works, supply and services contracts beyond certain the delegated agent and the delegating party, as well as the thresholds, and to make procurement procedures more flexible. pricing policy; no transfer of ownership of public works to They regulate the tendering process governing the technical the delegated agent (which is only the operator) is provided; specifications, award criteria, award procedures and advertising the later is required to provide an annual technical and rules. They apply to the majority of contracts between SUEZ financial report to the contracting authority. and public authorities. A draft ordinance and a draft decree relating to concessions In addition to these two Directives on public contracts, the were submitted for consultations in September 2015 and EU has also adopted a Directive on the award of concession should be published in early 2016 with a view to taking effect contracts (2014/23/EU) to define the rules governing the on April 1, 2016. signing of concession contracts between a private partner In addition, Law No. 2014-744 of July 1, 2014 established a and a corporation (public or private). Among other things, the new mechanism for institutional partnership between the public Directive regulates the application threshold, the duration of sector and private operators, called a Unified Public Private contracts, the award criteria and the relationship between the Partnership (in France, a "Société d’économie mixte à opération public authorities and co-contractors over which they exercise unique", or "Semop"). The use of Semops allows local authorities, similar controls to those that govern their own departments, via a single tendering procedure, to select a private shareholder called “in-house” relationships. It should be noted that the water to form a limited company, which will be directly awarded a sector is excluded from the scope of application of this directive. contract to carry out a specific operation. SUEZ signed a These three Directives must be transposed by the Member document for setting up two Semops with the city of Dole, Doléa States before April 2016. Eau and Doléa Assainissement, extending over 13 years, which will provide distribution of drinking water and managing the (b) French regulations city's wastewater system beginning on January 1, 2016. French regulations in the area of public contracts are currently (c) Spanish regulations being revised as part of the transposition effort for the European directives mentioned above, which should take effect in In Spain, the award of public contracts is governed by the Royal April 2016. Decree-Law 3/2011 of November 14, 2011 reforming Law 30/2007 of October 30, 2007 on public sector contracts, which In France, public contracts – i.e. contracts agreed by public transposes EU Directive 2004/18. entities for the management of their public services, fall into two
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 89 Overview of activities 6 Legal and regulatory framework
This Decree-Law governs the more traditional methods of water resources and the land. Damage may be recognized delegated management (concessions, semi-public entities, (by administrative bodies) without any evidenced fault, even regulated and collective management) and requires them to if the facility that is the source of the damage is compliant comply with the same public information and competition with applicable licenses and authorizations. According to the standards as procurement for public works, services and supply Environmental Liability Directive, the operator is the first party contracts. to incur liability. The text of the law does however impose non- It defines the contractual arrangements of the public-private retroactivity, and will therefore only apply to damage for which collaboration contract (similar to the French public-private the generating event occurred after April 30, 2007 (the deadline partnership contract). It is intended to meet complex public for transposition by the Member States). sector needs, which are not satisfied by traditional contractual Particular vigilance is now required with regard to areas in agreements, and consists of awarding a company overall which remarkable habitats and environments are protected: the responsibility for construction, management, maintenance and “ecoregions” identified at world level, the “Natura 2000” sites in replacement, as well as a contributing to finance the project. Europe and – specific to France – sensitive rivers and corridors In addition to the Royal Decree-Law 3/2011, Law 31/2007 of or reservoirs of biodiversity defined in the “Grenelle” laws. October 30, 2007, transposes European Directive 2004/17 which In terms of criminal liability, in accordance with Directive governs the procurement procedures of entities operating in 2008/99/EC on the protection of the environment through the water, energy, transportation and postal services. This law criminal law, Member States must establish criminal sanctions defines the procedures to be applied by the entities operating that are effective, proportionate and dissuasive for serious in these sectors for public works services and supply contracts. violations of the provisions of EU law relating to the protection A forthcoming decree will soon compile all the provisions of the environment. This EU law relates in particular to the relating to public contracts into a single law which will transpose release of substances or ionizing radiation into air, soil or water, EU Directives 2014/23, 2014/24 and 2014/25. the treatment and transfer of waste, the destruction or capture of specimens of protected species of wild fauna and flora, and the commercialization of substances that will weaken the ozone (d) United States regulations layer. In the United States, the federal government plays a role in the water sector, but the individual states retain authority in The European pollutant release and transfer register the areas of resource management, regulation of services and Regulation No. 166/2006/EC established a European Pollutant investment planning. There are two broad, coexisting contract Release and Transfer Register (known as the E-PRTR Register) methods: a regulated method, comparable to the UK system, in to monitor the release of pollutants into water, air and soil at which the assets belong to the operator, and a non-regulated EU level (replacing the European Pollutant Emission Register mode, in which the local authority entrusts the management (EPER)). This register, which is an electronic database that of its assets to an operator following competitive bidding. In has been accessible to the public since November 9, 2009, is regulated activities, each state has a Public Utility Commission aimed at facilitating access to information concerning pollutant that sets both prices (for water and wastewater treatment emissions. The vast majority of waste and some wastewater services) and the return on shareholders’ equity allowed per treatment activities are affected by this regulation (although company operating in the regulated sector. For public-private certain thresholds do, however, exist) and, consequently, partnership agreements in the non-regulated sector, the rules the operators concerned must provide precise data on their for allocation of projects and operating conditions vary for each emissions every year (the initial year of reference was 2007). municipality. As a general rule, operators are selected via calls for tender. Seveso III The Seveso Directive on the control of major-accident hazards ..6.7.1.2 General environmental regulations involving dangerous substances requires Member States to ensure that all operators concerned by the Directive have (a) European law implemented a policy for the prevention of major accidents. Operators who handle hazardous substances above certain thresholds are required to regularly inform the public likely to Environmental liability be affected by the consequences of an accident, by establishing Directive 2004/35/EC on environmental liability with regard safety reports, a safety management system and an internal to the prevention and remedying of environmental damage emergency plan. Directive 2012/18/EU of July 4, 2012, known as (transposed in France as Law No. 2008-757 of August 1, 2008) “Seveso III” amends and, as from June 1, 2015, will replace the establishes a legal framework for environmental liability previous regulation (Directive 96/82/EC of December 9, 1996, founded on the “polluter pays” principle, with a view to preventing known as “Seveso II”). Among other things, it harmonizes the and remedying damage to protected species, natural habitats,
90 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Legal and regulatory framework 6
list of chemicals with that of the new classification system for supporting the investment effort necessary to achieve these hazardous substances of the CLP Regulation (1272/2008/EC). objectives as set forth in the aforementioned laws. This initiative is part of the ambitious “climate” action plan, REACH adopted by the European Council in March 2007, whose main The Registration, Evaluation, Authorization and Restriction of recommendation is a European Union commitment to reduce Chemical substances (REACH) regulation has been in force its greenhouse gas emissions by at least 20% between now since June 1, 2007. In order to offer better protection of human and 2020, a compulsory objective of 20% of renewable energy and environmental health against risks that may derive from in energy consumption within the same timeframe, and lastly chemical substances, the REACH regulation makes industry an increase of 20% in energy effectiveness (program known responsible for evaluating and managing the risks of the said as “3x20”). substances and for providing adequate safety information to On October 23 and 24, 2014, the European Council agreed users. to reform the package; consequently, it is now known as REACH involves specific communication throughout the life the “2030 Climate and Energy Package". This agreement is cycle of substances so as to guarantee regulatory compliance intended to enhance the three targets adopted in 2008 relating and to ensure that the planned uses (including at end-of-life) to greenhouse gas emissions (reform of the ETS system), are taken into account. Therefore, the Group – like all those renewable energy, and energy efficiency. in the industry – must now check with its suppliers that the As part of this package, in July 2015, the Commission published substances it uses in the context of its activities are indeed a proposal for revising the European Emissions Trading Scheme REACH-compliant. for the period 2021 to 2030. Discussions in Parliament and the Since December 1, 2010, companies must also have registered Council will begin during the first half of 2016. all substances produced above the threshold of 1,000 tons per year and per legal entity with the European Chemicals (b) French regulations Agency (ECHA), unless the product in question is exempt. The Group’s activities are affected by this registration obligation Energy Transition for Green Growth Bill in the context of the sale of recycled substances (secondary 6 raw materials), as well as for certain substances produced Law No. 2015-992 dated August 17, 2015 and the action plans in situ. The number of substances registered is very low, as the accompanying it are intended to help France make an effective majority of recycled substances sold on the market are exempt contribution in the fight against climate change and to bolster due to their similarity with existing substances. its energy independence by better balancing its various sources of supply. The Climate and Energy Package Among the drivers of this growth, the circular economy is at On December 17, 2008, the European Parliament adopted the center of the scheme. Title IV of the law, "control waste several proposals aimed at both fighting climate change and and promote the circular economy" contains measures that guaranteeing the European Union a safer and more sustainable are aimed at: energy supply. XX determining a national transition strategy toward the The “Climate and Energy Package”, as it is commonly known, circular economy that includes a "plan for scheduling the brings together: necessary resources for the primary sectors of economic activity that identify potential for preventing the use of raw a directive that modifies and extends the greenhouse gas XX materials, primary and secondary"; emissions trading scheme, from which the water and waste sectors continue to be excluded; XX improving recovery of waste by prohibiting discrimination against materials originating from recovered waste and by a decision relating to the distribution of effort among the XX promoting the production of energy stemming from waste Member States in domains that are not covered by this recovery where it is not recyclable; scheme, such as transport, construction or environmental services; XX setting specific targets for waste prevention and waste management for 2020 and 2025: XX a directive intended to promote renewable energies, such as biogas and energy produced from waste biomass and –– banning the use of plastic bags beginning on January 1, wastewater treatment byproducts; 2016, –– more precisely define the “proximity principle” in the XX a directive on the geological storage of CO2; prevention and the management of waste, provided by new guidelines concerning state aid for the conservation XX the Framework Directive on Waste (Framework Directive of the environment, published April 1, 2008 and aimed at 2008/98/EC).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 91 Overview of activities 6 Legal and regulatory framework
“Grenelle Laws” development, it is expected that China will continue to shore up In order to implement the commitments made in 2007 within its environmental policy and its regulations for protecting the the context of the Grenelle Environment Forum (“Grenelle de environment and ensuring weak growth in carbon emissions. l’environnement”), legislative proposals were adopted in 2009 In April 2015, the new version of the "Guidance Catalog for and 2010 including: Foreign Investment" published by the Commission for reform XX programming Law No. 2009-967, relating to the and national development entered into effect. This change is implementation of the Grenelle Environment Forum, known welcome as it will go further in liberalizing the Chinese market as the “loi Grenelle I” (Grenelle Law I), defined the main for foreign investment. In its modified version, the construction orientations: it translated the commitments made at the and operation of wastewater treatment plants are not only “Grenelle” into legal terms; permitted, they are encouraged. XX Law No. 2010-788 for a national environmental commitment, Furthermore, the Commission for reform and national known as Grenelle II, set out the conditions for implementing development published a "Plan for the Promotion of the Circular the commitments made in 2007. Economy" in April 2015, in which it enumerated actions to be implemented in industry, agriculture and cities. It should be The “Grenelle Laws” and the regulatory provisions noted that the law for the promotion of the circular economy supplementing them, represented both new obligations and as such took effect in 2009. Recycling and recovery of waste new opportunities for the environmental sector. by municipalities and industries are encouraged in three select In the water sector, Grenelle Law II introduced a large-scale locations, the city of Beijing, Tianjin and the province of Hebei. program for regaining water quality by forcing the various Chen Jining, appointed Minister of the Environment in early 2015, economic players to take responsibility: local authorities must has a solid scientific background and decided to actively reform meet wastewater standards, farmers must reduce their use of the system of environmental impact studies (EIS). In 2014, the pesticides, and manufacturers whose activities pollute must Ministry of Environmental Protection issued transparency fulfill new obligations. rules that require environmental authorities to make public all non-confidential information contained in environmental (c) Spanish regulations impact studies. The Minister of Environmental Protection used the shock wave caused by the disastrous explosions in Tianjin In order to implement the European Directives, several laws in August 2015 to move forward the reform of environmental regulating environmental protection have been adopted, such impact studies. as Law 26/2007 of October 23, 2007, on environmental liability, transposing Directive 2004/35/EC; Framework Law 5/2010 of The review of regulations on the protection of the environment June 22, 2010, which amended the Criminal Code to transpose took effect on January 1, 2015, even before the end of the Directive 2008/99/EC; and Royal Decree-Law 1254/1999 12th five-year plan. This revision was the first amendment since of July 16, 1999, which transposes Directive 96/82/EC. It is the law was enacted in 1989. The revision, which was supposed noteworthy that following the last environmental review of to increase obligations regarding pollution control, was hailed Spain carried out by the OECD, Spanish laws on biodiversity are as a radical reshaping of the Chinese legislative system among the most ambitious of the entire OECD area and that the regarding the environment. The more extensive criminal liability ecological footprint of the country's industrial sector remains introduced by this reform is an important change because this relatively indistinct. However, efforts must be made with regard principle authorizes the Bureau of Environmental Protection to to coordinating the various autonomous communities of the subject violators to combined fines without upper limits. country with regard to the numerous requirements contained The revised law makes it possible for certain environmental in environmental regulations. groups to file legal proceedings. In December 2015 a court in the province of Fujian ruled in favor of environmental groups (d) Chinese regulations who were suing a company that was illegally operating a quarry The draft for the 13th five-year plan covering the period of 2016 in a forested area. The court imposed fines on the company in to 2020 was adopted in October, 2015 during the 5th plenary the amount of CNY 1.46 million in reparations for loss of positive session of the 18th Central Committee of the Chinese Communist impacts of the site on the environment. Party. In accordance with its guiding principles of sustainable
92 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Legal and regulatory framework 6
The Chinese government agreed to seek out public-private on both the federal and state levels. At the federal level, the partnerships in order to keep its promises during the next Renewable Energy Target (RET) has two components: the urban and rural development phase. In March 2014 the Council Large-scale Renewable Energy Target and, for homes and of State unveiled its new urbanization plans, bringing to light communities, the Small-scale Renewable Energy Scheme. such objectives as an urbanization rate of 60% by 2020, which There are now doubts about the future of the RET given the represents around 100 million new city residents. In order number of recent reforms made to the program. However, the to confront the infrastructure requirements and financial Large-scale Renewable Energy Target presents a legislative challenges this implies for local administrations, the Ministry target of 41,000 GWh of electricity generation from renewable of Finance and the National Commission for Reform and sources by 2020. Development published their respective guidelines in 2014 The 2007 National Greenhouse and Energy Reporting Act to encourage Public-Private Partnerships (PPP), including (NGER Act) established a national framework for businesses to the waste and wastewater treatment segments. In December disclose their greenhouse gas emissions, energy consumption 2014, the Minister of Finance announced 30 PPP pilot projects and energy production. representing a total investment of CNY 180 billion for 8 new projects and 22 projects arising from transfers of local financing The Abbott and Turnbull governments maintained the Kyoto platforms. objectives set by the preceding Labor government, which required a 5% reduction in carbon emissions (compared to 2000 levels) for Australia by 2020 and, in anticipation of the (e) Australian regulations climate conference held in Paris in December 2015, committed Environmental matters in Australia traditionally fall within to emissions reductions of between 26% and 28% from now and the jurisdiction of state governments rather than the federal 2030 with relation to 2005 levels. government, which has no special jurisdiction to legislate in that The Direct Action Plan designated as the cornerstone of the domain. However, during the 1970s, there was an observable Abbott and Turnbull governments' environmental policy may trend toward granting the federal government greater power be divided into two parts: The Emissions Reduction Fund and in environmental matters. the Safeguard Mechanism. At the state level, environmental assessment is integrated into The Emissions Reduction Fund gives players in the economy 6 the decision-making process in the form of planning schemes who have access to it the ability to generate carbon credits for and licenses. Environmental protection requires that activities reducing their emissions, with a credit granted for each ton of that could have a negative impact on the environment be emissions saved. Credits are purchased by the Clean Energy licensed before they are carried out. In addition, it is mandatory Regulator, which manages a budget of AUD2.55 billion for the that work carried out by entities holding such licenses comply period of 2015 to 2020. Until now, nearly 45 million tons have with the terms thereof. Industrial activities, such as chemical been purchased, at the average price of AUD13 per ton. production, waste treatment, mining operations and intensive agriculture are affected by these rules. States may also The Safeguard Mechanism, which takes effect on July 1, 2016, implement legislative measures autonomously with regard to establishes a ceiling of authorized emissions for high CO2 the protection of endangered species, preservation of indigenous emissions infrastructures, with the goal that the emissions flora, creation of national parks and water treatment and use. reductions related to purchase by the Emissions Reduction Fund not be transferred elsewhere in the country's economy. Through the Environment Protection and Biodiversity This scheme uses the framework established by the National Conservation Act of 1999, activities that could have a Greenhouse and Energy Reporting Act. considerable environmental impact on the national level must be approved by a federal minister. This approval is given in Malcolm Turnbull replaced Tony Abbott as Prime Minister on addition to the approval by the relevant state government. The September 15, 2015. Prior to his election, Mr. Turnbull had amendment introduced by the Abbott and Turnbull governments actively supported a system of emissions quotas as leader allows for the implementation of bilateral agreements between of the opposition in 2007 and it was expected that he would the federal and state governments via a "single window" recommend a more ambitious climate policy once elected. approach with regard to environmental issues. However, shortly after assuming his duties, Mr. Turnbull promised to pursue the climate policy implemented by his Australia has taken various measures to address the energy predecessor, as well as the reduction objectives that he had set. question with a view to reducing greenhouse gas emissions
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 93 Overview of activities 6 Legal and regulatory framework
6.7.2 Regulations related to activities
..6.7.2.1 Water and could ultimately contribute to growth and job creation in Europe. A framework for this should be proposed during 2016. (a) European regulations Directive 2000/60/EC is separated into two implementation directives (known as daughter directives) which specify the Framework for EU policy on the water sector “good condition” to be reached for ground and surface water in 2015. Directive 2000/60/EC establishing a framework for the European Union’s water sector policy, as revised in 2008, is Directive 2013/29/EC, published on August 12, 2013 and aimed at restoring the quality of groundwater and surface water amending Directive 2008/105/EC relative to environmental by 2015. quality standards applicable to surface water, sets concentration thresholds for 45 chemical substances or groups of chemical In addition to this outcome objective, it sets forth requirements substances identified as a priority because of the significant with regard to the methods to be implemented: reducing risk they present to the environment and/or to human health via the release of “priority” substances, which are considered the aquatic environment. A total of 21 of these substances have to be most harmful for the environment and human health, been classified as hazardous; emissions of these substances drafting and implementing master plans and action plans, into surface water must cease by 2021. The other substances monitoring the results of the actions aimed at restoring the are subject to national reduction targets, to be defined by the quality of environments and reporting on this to the European Member States. Three pharmaceutical substances were placed Commission. on a watch list. By 2017 the European Commission will assess The directive recommends that water usage and its impact the future inclusion of pharmaceuticals among the priority be analyzed on an economic basis, and provides for increased substances. public participation and consultation. It sets the objective of full The goals of Directive 2006/118/EC on the protection of recovery of service costs and establishes the “polluter-pays” groundwater against pollution and deterioration are primarily principle. the proper chemical condition of water and the prevention or The directive also sets forth a strengthened legal and institutional limitation of the introduction of pollutants into groundwater. In framework for the water resource management policy, which France, the directive has been transposed within the context of is very similar to the French system of management through the Law on Water and Aquatic Environments (LEMA No. 2006- large river basin districts. 1772 of December 30, 2006) and the corresponding regulatory Three European Commission progress reports on measures amending the Environment Code. implementation of the directive, published on March 22, 2007, April 1, 2009 and November 14, 2012 specify this approach by Directive on drinking water recommending the establishment of river-basin management Directive 98/83/EC on the quality of water intended for plans combined with the setting up of programs of measures human consumption has raised requirements involving that are now operational in almost all EU Member States several parameters (turbidity, chlorites, arsenic, volatile (with the exception of Spain, Portugal, Greece and Belgium). organohalogenates, nickel), in particular concerning lead The third progress report indicates that the Directive’s (25 µg/l at end-2003 and 10 µg/l at end-2013), meaning that environmental objectives will not be achieved across Europe eventually no contact will be authorized between drinking water by 2015. Meanwhile, an action plan to safeguard Europe’s water and lead pipes, which is the reason for replacing all existing lead resources was published on November 14, 2012 to provide pipes and for the work required on private and public properties Member States with tools to help achieve these goals. The plan to achieve this goal. It also raised requirements regarding public urges better implementation of the Water Framework Directive information on the quality of water distributed. After consulting of 2000 but does not impose additional obligations on Member the stakeholders concerned in 2003 and 2008, the Commission States. It also proposes the issuance, by 2015, of a new EU decided in 2011 not to revise this directive, and to restrict itself regulation to make the best use of water reuse techniques. to amending the details in various annexes. A roadmap for the "maximizing of reuse of water within the In September 2014, the Commission launched a consultation on EU" initiative was published in September 2015, emphasizing drinking water quality in Europe, which will be used to support the need to establish European standards with regard to the a potential revision of Directive 98/83/EC. A study was initiated reuse of water for irrigation or industrial use. Reuse of water to determine what opportunity there is for a possible revision that is better supervised on a legislative level would result in of the directive. The results of this evaluation were published important savings in water consumption, enjoy lower hydraulic in mid-December 2015 and the various revision options are stress experienced in certain European regions, an increase in expected in May 2016. the recycling capacity of nutriments contained in wastewater
94 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Legal and regulatory framework 6
Moreover, technical appendices II and III of the directive have substances into water. Violation of these laws is subject to civil been changed by the Directive 2015/1787 of the Commission to and criminal sanctions, and the company may itself be held adapt them to technical and scientific advances. The monitoring criminally liable. of various water surfaces could now be based on a risk-based Law No. 2006-1772 on water and aquatic environments, approach if the Member States so decide, in an effort to reduce dated December 30, 2006, is intended to modernize the legal superficial analyses as much as possible, using the World framework for water management and improve water quality in Health Organization model as a guideline. While these new order to achieve the objectives of good ecological and chemical appendices provide Member States with the option of adapting status set forth in Directive 2000/60/EC by 2015. It is also their monitoring programs to requirements and what they intended to improve public water and wastewater treatment consider relevant, this decision is left to their discretion. services (access to water and transparency). Directives on wastewater treatment activities The delays observed in the application of the Directive on urban wastewater treatment (91/271/EEC) have required the Directive 91/271/EEC concerning urban wastewater treatment government to step in where local authorities have been slow introduced several major categories of obligations, including: to comply. A schedule of measures and dedicated financing XX efficiently collect and provide for secondary treatment of has been implemented within the context of the “Borloo Plan wastewater in municipalities with over 2,000 inhabitants; to standardize the treatment of wastewater from French XX define “sensitive areas” at a national level, where treatment municipalities” to meet the goal of 100% compliance by all of nitrogen and/or phosphorus is required; wastewater treatment plants before the end of 2011, as defined in the framework of the “Grenelle Law I”. The targets were XX require a high degree of reliability of wastewater treatment essentially met by the end of 2011, although work continues at systems and the obligation to monitor these systems; and some sites. A July 21, 2015 decree that took effect on January 1, XX pursue the option of using non-collective wastewater 2016 heightens obligations to contractors with regard to treatment “when the organization of a collection system is spillage from sewage systems during periods of heavy rain and not justified, whether because it is not in the best interests compliance of collection systems with standards. Furthermore, of the environment or because the cost would be excessive”, continuous monitoring requirements on networks have been 6 provided that the system provides “an identical level of increased. Finally, a certain number of instructions concerning environmental protection.” wastewater treatment plants were defined. Directive 91/676/EEC concerning the protection of waters against pollution caused by nitrates from agricultural sources is Reuse intended to protect water resources, and requires the definition With the Decree of June 25, 2014 amending the Decree of of “vulnerable areas” where codes of best agricultural practices August 2, 2010 on the use of treated urban residual water must be established. for irrigation of crops or green spaces, the government has established new technical requirements applicable to owners Directive 2006/07/EC concerns surface water that could and operators of wastewater treatment plants and irrigation serve as bathing water. Member States must provide for the systems. supervision and assessment of their bathing water. Information regarding the classification, description of bathing water and This decree includes new provisions: potential water pollution must be easily accessible to the public XX it authorizes sprinkler irrigation and watering systems: it and provided close to the area concerned. terminates the experimental application file, sets specific Both Directive 2006/44/EC on the quality of fish farming water, technical requirements, and supplements the information and Directive 2006/113/EC on the quality required for shellfish to be provided on the irrigation program; farming water, apply to water that requires protection or quality XX it provides the technical requirements for the design and improvement to be fit for raising fish and shellfish respectively. management of the distribution network, for the storage of treated wastewater, and for maintenance of the irrigation (b) French regulations or watering equipment; In France, a number of laws regulate the protection of XX as part of the quality monitoring program of treated water quality and numerous public authorities are in charge wastewater, it modifies the frequency of the periodic of implementing them. Withdrawals and discharges that monitoring of the sanitary quality levels of treated potentially have a negative impact on the quality of surface wastewater; water or groundwater are subject to authorization or declaration. XX it includes a specific rule on sanitary quality levels of treated Public authorities must therefore authorize any installation of a wastewater aimed at wastewater treatment plants with a pumping system for groundwater that exceeds predetermined low raw water load level; volumes and the law forbids, or limits, the release of various
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 95 Overview of activities 6 Legal and regulatory framework
XX it specifies the procedure to follow in case of changes to Directive 2007/60/EC. In addition, the Royal Decree of 140/2003 key elements of the authorization file: "Any changes that of February 7, 2003 on health criteria for the quality of water might cause a noticeable change in key elements of the intended for human consumption transposed Directive 98/83/ permit and described in Appendix IV must be disclosed to EC. Finally, Directive 91/271/EEC was transposed through the prefectural authority by the permit holder before its Royal Decree 11/1995 of December 28, 1995, on the rules of implementation." wastewater treatment in urban areas and by Royal Decree 509/1996 of March 15, 1996. Biomethane tariffs Meanwhile, EU Directives 91/676/EEC and 2006/7/EC Several decrees of June 26, 2014 authorized and set the feed-in were transposed, respectively, by Royal Decree 261/1996 biomethane tariffs derived from sewage sludge and wastewater. of February 16, 1996 and Royal Decree 1341/2007 of XX The first decree amends the type of inputs in the production October 11, 2007. of biomethane to include "materials, such as sludge, grease, or fluids, resulting from the treatment of wastewater in a (d) United States regulations digester." In the United States, the primary federal laws regarding XX A second decree amends the minimum purchase tariff – water distribution and wastewater treatment services are established by the Decree of November 23, 2011 – benefiting the Clean Water Act of 1972, the Safe Drinking Water Act of to wastewater treatment plants producing biomethane with 1974 and regulations issued to implement these laws by the the introduction of a new "input" premium and specific Environmental Protection Agency (EPA). Each state has the right tariff adjustments. The decree therefore provides for a to impose higher standards and stricter criteria than those third category of inputs: waste from wastewater treatment established by the EPA, and several states have done so. plants and similar, which are eligible for a "PI3" premium of The main regulatory changes of the past few years are as between 0.1 and 3.9 euro cents per kWh gross calorific value. follows:
(c) Spanish regulations In the drinking water sector, in 2002 the EPA adopted the Interim Enhanced Surface Water Treatment Rule for systems In Spain, private contract law governing water, dating from 1879, with more than 10,000 equivalent inhabitants and the Long- was entirely superseded in 1985 by public regulation provisions Term 1 Enhanced Surface Water Treatment Rule for systems under which all surface and ground water was considered as with less than 10,000 equivalent inhabitants. The purpose of belonging to the public domain. The private use of such water these regulations was to improve turbidity controls in surface requires a concession or administrative license. The Water Law water in treatment plants and to thus reinforce checks of of 1985 transposed all EU requirements contained in previously cryptosporidium content in this water. adopted European Directives. In 2006, the latter rule was updated in the form of the Long- Current water law (Royal Decree 1/2001, of July 20, 2001 Term 2 Enhanced Surface Water Treatment Rule to strengthen transposing Directive 2000/60/EC) also imposes processes protective measures on contaminants that are required for for water desalination and re-use, presented as solutions for high-risk public water systems. The EPA also strengthened the increasing the availability of water resources. As for water regulations on disinfection byproducts (Stage 2 Disinfectants savings, the provisions introduce the general obligation to and Disinfection Byproducts Rule). Finally, the Ground Water measure water consumption via standardized metering Rule establishes multiple restrictions designed to prevent systems, or, for irrigation purposes, to administratively define drinking water from being contaminated by bacteria or viruses. a usage benchmark. The proposed revisions to the standards relating to coliform To guarantee the proper ecological status of water, operating bacteria (Total Coliform Rule) should prompt those systems permits impose strict limits on authorized ecological flows and vulnerable to microbiological contamination to adopt more discharges. effective operating practices. Other significant water laws supplementing the Royal Since 2010, the EPA has developed a new strategy to protect Decree 1/2001 are: Royal Decree 849/1986 of April 11, 1986 public health against contaminants which promotes a “grouping” approving the Public Water Act, which was amended by Royal approach to contaminants, stimulates technological innovation Decree 9/2008 of January 11, 2008, to conform to Directive and strengthens the implementation of existing legislation, such 2000/60/EC and to incorporate some of the requirements of as the Toxic Substances Control Act (TSCA). In wastewater
96 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Legal and regulatory framework 6
treatment, many facilities are now required to add a third On April 16, 2015, the State Council issued a “Plan of Action for treatment stage to remove phosphorus and eliminate nutrients the Prevention and Control of Water Pollution” known as the “Ten- in order to preserve fragile environments. Many of these are Point Water Plan” (which is actually 26 detailed requirements also now required to control their toxic emissions and comply and 238 measures). The plan aims to control pollution with quality standards aimed at restoring favorable conditions discharges, promote economic and industrial transformation, for bathing and fishing in the receiving environment. As part of save and recycle resources, promote the progress of science the national emissions licensing system, the EPA uses a method and technology, use market mechanisms and enforce the law that analyzes total effluent toxicity. Under the provisions of and regulations, strengthen management and ensure the the Clean Water Act, municipalities also have to invest in the safety of the aquatic environment, and clarify responsibilities renovation of their wastewater treatment infrastructures as and encourage public participation. It sets targets for 2020, well as in the reduction of flows at source, in order to improve putting in place stricter controls on polluting companies with control of discharges – rainwater and wastewater from sewers, emission limits and providing for stricter supervision of the in particular – into the natural environment. authorities and the public. In addition, the plan also covers A new law, the Clean Water Rule, aiming to extend federal the control of pollution, sustainable water use in agriculture, protection of river networks and water supply systems by the use of municipal water, coastal water management and specifying zones falling under the Clean Water Act took effect overall protection of the ecological environment. The plan on June 28, 2015 despite the firm opposition of many players aims to gradually improve the groundwater and surface water in the U.S. economy. situation (Blue River, Yellow River and the Song Hua, Huai Hai and Liao Rivers) by 2020. One of the main actions is to clean heavily polluted water (called “dark and smelly” in big cities). For (e) Chinese regulations improved administrative efficiency, each action plan designates The decree signed by the Chinese Premier on wastewater a department head who has primary responsibility. treatment networks and facilities entered into force on January 1, 2014. Wastewater treatment has so far not been a (f) Australian regulations priority for China. However, urban flooding and water pollution have become a major issue in some areas. The decree therefore In Australia, the laws of the States and Territories grants the 6 mandates cities to plan their wastewater treatment systems right to control the allocation and use of water to the Crown, according to the climate and local geography, as well as their thus abolishing the prior Common Law rules. The extraction economic and social development. For example, under the new and use of water and the construction of infrastructure (dams, regulations, storm water drainage systems and sewers will be irrigation systems) usually require approval. separated in new construction areas. Companies in the food In 2004, the Council of Australian Governments adopted processing, pharmaceutical and construction industries must the National Water Initiative, which sets the guidelines for a now apply for wastewater discharge permits. comprehensive reform of the national water management On January 26, 2015, the Ministry of Finance and the Ministry system in all areas: accounting for water resources, knowledge of Housing and Urban and Rural Development issued a notice and storage capacities, water access rights and planning regarding the adjustment of standard wastewater treatment framework, markets and marketing of water, water pricing, fees. By the end of 2016, urban wastewater treatment fees shall integrated management, reform of urban water management, not be less than CNY0.95/ton for residential and CNY1.40/ton community partnerships and adjustments. This reform has for non-residential users such as industries. All cities, counties had the effect of detaching the rights to water from the soil and townships must fully implement the wastewater treatment and allowing water to be exchanged as a valuable asset, either fees by the end of 2015 and have operational wastewater temporarily or permanently. treatment plants within the next three years. This notice also The current reforms have also led to more bids for construction aims to strengthen the collection of wastewater treatment and operation from private operators regarding water fees via more efficient monitoring through automatic real- infrastructure such as sewage treatment plants. For example, time measurements in polluting industries and to implement in New South Wales, the Water Industry Competition Act 2006 differential pricing depending on the specific situation. The requires the construction and operation of such infrastructures taxes collected will be used for construction and maintenance and their links with the relevant water networks to be subject to of wastewater treatment plants and sludge management. licenses whose terms must be strictly adhered to by operators.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 97 Overview of activities 6 Legal and regulatory framework
..6.7.2.2 Waste employ, in order of priority, prevention, reuse, recycling, energy recovery and finally – as a last resort – landfill. An analysis In many countries, waste treatment sites are subject to laws that based on the “life-cycle” approach will, however, allow certain require service providers to obtain authorizations from public adjustments to be made within this hierarchy. At the same time, authorities to operate their sites. Obtaining these authorizations the Member States have been set ambitious recycling targets: requires specific environmental and health impact studies to 50% of municipal waste and 70% of non-hazardous construction be submitted, together with a risk assessment for the facility and demolition waste by 2020. concerned. Operators of landfills must provide specific financial guarantees (often in the form of bank guarantees) that cover The directive clarifies the definitions of recycling and recovery the restoration of the site and monitoring after the closing of and recognizes incineration with energy recovery – if certain the site (for a 30-year period in most countries). Operators must efficiency criteria are met – as a recovery operation. It also also observe specific standards with respect to discharges introduces two new notions: that of the byproduct and that of the and emissions arising from processes; incineration plants, for “end-of-waste status”; regarding the latter, more precise criteria example, are subject to regulations intended to limit emissions are currently being defined through the comitology process. of pollutants and to encourage energy recovery. Waste flows This same process was also used in 2011 to define a method are also subject to specific regulations, depending on their type. for measuring waste-recovery efficiency against targets. A reform of the directive is expected under the Circular Economy (a) European regulations Package. The new directive should bring a simplification and harmonization to the objectives of various Member States, Circular Economy Package taking into account their current situations. Furthermore, other topics that would be dealt with include greater responsibility on Following the work of the Commission in 2014 and the withdrawal the part of producers, support to green public markets, waste- of the Circular Economy Package proposed on July 2, 2014, the to-energy production plans and heightened monitoring in the new Commission announced the publication of a new and more waste sector. ambitious package incorporating a more efficient management of natural resources, in addition to better waste management. Regulations relating to cross-border waste shipment The Circular Economy Package published on December 2, 2015 aims to achieve better management of resources at European Regulation 1013/2006/EC governs cross-border shipments level through binding recycling targets for different material of waste, the objective being to provide ecologically sound flows and establishes the general framework of operation for management. The regulation establishes a system based on the waste sector through 2030. It requires the revision of six two procedures: directives on waste: the Waste Framework Directive (2008/98/ XX The Information Procedure: A simple procedure consisting EC), the packaging and packaging waste Directive (94/62/ of inserting an information document along with shipments EC), the landfill of waste Directive (1999/31/EC), the end of of waste. All non-hazardous waste intended for recovery life vehicles Directive (2000/53/EC), the waste batteries and within the European Union must be transferred by means accumulators Directive (2006/66/EC) and the waste electrical of this procedure. and electronic equipment Directive (2012/19/EU). XX The Notification and Prior Consent Procedure: A cumbersome procedure that requires prior consent of Waste Framework Directive competent authorities and the establishment of financial The Waste Framework Directive (2008/98/EC) was published guarantees. All hazardous waste intended for recovery in the OJEU on November 22, 2008. This directive simplifies within the European Union must be transferred by means existing legislation by repealing the former directive on waste, of this procedure. the directive on hazardous waste and part of the directive on the disposal of used oils. Member States had two years to transpose Regarding waste to be eliminated: the directive into national law. XX Within the EU, these cross-border shipments are subject to By establishing a new framework for waste management a prior notification and consent procedure. services in Europe, European authorities wish to encourage XX Such shipments to states not members of the EU are in national waste prevention programs and to promote recycling principle prohibited. and recovery. This regulation also incorporates Basel Convention provisions The new directive thus reinforces the principle of hierarchy on the control of cross-border hazardous waste movements in waste treatment methods, encouraging Member States to and disposal.
98 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Legal and regulatory framework 6
The regulation provides for more rigorous performance adoption of specific measures (for example: recycling, accident measures. It requires Member States to carry out inspections prevention and treatment of sites at end-of-life), and through and spot checks. It also authorizes physical controls of meeting operating requirements (for example: limits to the transferred waste, in particular the opening of containers, and emission of polluting substances and monitoring of discharges). requires Member States to notify the European Commission of The new directive introduces more stringent BREFs (best their domestic legislation on illegal transfers and corresponding available techniques Reference Documents), modifies emissions sanctions. A revision of the regulation was published in the limit values and broadens the scope of application to new types form of Regulation No. 660/2014 in the OJEU on June 27, 2014 of facilities, including recycling facilities. to mitigate the divergences and gaps identified in applying the The process of revising the BREFs on waste incineration as well regulation and inspections in Member States. This involves as waste treatment in general (adopted in 2006) is ongoing and establishing inspection plans that are regularly and consistently an initial amendment proposal should appear in early 2016 with planned to eliminate illicit waste shipments. the objective of publishing a final proposal at the end of 2016.
Directive on landfilling of waste Directives relating to specific waste Directive 1999/31/EC on landfilling waste sets the technical and Directive 94/62/EC aims to reduce the environmental impact operational requirements applicable to both landfills and the of packaging and packaging waste. This directive established waste deposited. It aims to prevent or reduce the environmental quantified targets for December 31, 2008 for the recycling and impact of the landfill of waste – in particular on surface water, recovery of packaging used in the European market: groundwater, soil, air and human health. It defines the various categories of waste (municipal, hazardous, non-hazardous XX a minimum of 60% of packaging waste must be reused or and inert) and distinguishes between three types of facilities: incinerated at energy recovery facilities; landfills for hazardous waste, landfills for non-hazardous waste XX between 55% and 80% of packaging waste must be recycled; and landfills for inert waste. XX the following objectives must be met for materials contained The objective it sets out is for Member States to reduce the in packaging waste: 60% for glass, paper and cardboard; quantity of landfilled biodegradable waste: in 2009, the quantity 50% for metals; 22.5% for plastics and 15% for wood. of biodegradable waste landfilled could not exceed 50% of total 6 The directive was revised in 2004 to clarify the definition of biodegradable waste produced in 1995, with this goal dropping the term “packaging,” then again in 2005 to allow new Member to 35% in 2016. The directive also provides that only waste that States extra time for implementation. has been subjected to prior treatment be allowed, and that decommissioned sites be subject to surveillance and analyses Directive 2002/96/EC on waste electrical and electronic for as long as the competent authorities deem necessary (a equipment (WEEE) imposes measures concerning product period of 30 years in France). design, the establishment of collection, treatment and especially recovery systems and manufacturers’ participation in these Industrial emissions directive measures in such a way as to encourage them to integrate Directive 2010/75/EU on industrial emissions, published in recycling measures into the design stage. The directive the OJEU on December 17, 2010 (deadline for its transposition introduces the principle of extended producer responsibility, was January 7, 2013), incorporates Directive 96/61/EC on making it mandatory for them to fund collection from the Integrated Pollution Prevention and Control (IPPC) along with six drop-off sites and treatment, recovery and disposal of WEEE sector-based directives, including the directive on incineration (for both households and businesses). These obligations are (2000/76/EC) and the directive on limiting emissions of certain accompanied by quantified targets for selective collection, pollutants into the air from large combustion plants (2001/80/ recovery and reuse. EC). Following a two-year deadline for transposition, the Directive 2012/19/EU entered into force on August 13, 2012, directive should come into effect in early 2014, or early 2016 amending the previous directive. Targets for collection rates for existing facilities. were thus increased to 45%, by 2016, of the average household Today, as a complement to the environmental thresholds put and commercial EEE on the market in the preceding three years, in place by the directive on the incineration and co-incineration and 65% by 2019. In addition, recycling and recovery targets, of waste, Directive 96/61/EC called the “IPPC” directive, which currently set by equipment category at between 50% and 75% provides that certain industrial and agricultural activities – one for reuse and recycling and between 70% and 80% for recovery, of which is waste services management – must be subject will be raised by 5% by 2018. Finally, the scope was expanded to a prior authorization, requiring for certain environmental to include, in principle, all electrical and electronic equipment conditions to be met. Companies are responsible for preventing (with the exception of a few equipment categories that are and reducing pollution that they might cause, through the specifically excluded).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 99 Overview of activities 6 Legal and regulatory framework
Similarly, Directive 2011/65/EU on the Restriction of Hazardous that complements the reporting and authorization systems, Substances (RoHS) in electrical and electronic equipment was known as the registration system, was introduced in 2009. It published in the OJEU on July 1, 2011. helps speed up the licensing process by replacing the public Directive 2006/66/EC lays down the rules for the collection, inquiry procedure with a public information process. Waste recycling, treatment and disposal of batteries and accumulators. is categorized according to hazard level: it can be inert, non- It prohibits the sale of certain batteries containing mercury or hazardous or hazardous. Hazardous waste is subject to strict cadmium in a proportion greater than a preset threshold, and tracking obligations throughout the entire treatment chain. sets two collection targets (25% minimum by September 26, Traceability of hazardous waste is provided by a waste tracking 2012 and 45% minimum by September 26, 2016). This directive form (BSD). was amended by Directive 2008/12/EC, which came into force Furthermore, operators of companies producing or shipping on March 30, 2008, and which specifically introduced changes waste, collection operators, transporters, traders and operators in the implementing powers of the European Commission. of centers for the transport, transfer or treatment of waste Directive 2000/53/EC on End-of-Life Vehicles (ELVs) requires must keep an updated chronological register of the production, owners of ELVs to return them to an authorized operator for shipment, reception or treatment of said waste. (R. 541-43 of destruction, on penalty of being unable to deregister their the French Environmental Code). vehicle. Destruction involves extracting all materials and optimizing their reuse, recycling, or recovering what can be Waste reduction and recovery plan recovered. The recycling rate must reach 80% and the recovery The 2013 Environmental Conference showcased the transition rate 85% as from 2006, and 85% and 95% respectively by 2015. towards a circular economy. Accordingly, the "National Waste Directive 86/278/EEC on the protection of the environment, and Prevention Program 2014-2020" was published and constitutes in particular of the soil, regulates the use of sewage sludge the "Prevention" segment of a wider "waste plan". The waste in agriculture, so as to avoid harmful effects on soil, plants, plan is currently being drafted. animals and humans. Thus, in order for sludge from wastewater This plan is expected to set the following key targets: treatment plants to be recovered for agricultural purposes, it must comply with traceability requirements regarding organic XX a 10% reduction of household and similar waste produced compounds and the various metallic trace elements that it per capita and a 4% decrease of business waste produced may contain (heavy metals such as cadmium, mercury and per unit of GDP in 2020 compared to 2010; lead). French standard NFU 44-095, drafted in 2002 and now XX a 30% reduction by 2025 and 50% by 2030 of landfilling non- applicable in France, goes further, defining a strict framework hazardous and non-inert waste by promoting its recovery; for recovery into soil conditioner of remaining substances after XX an increase to 55% in 2020 and 60% in 2025 of materials composting, produced by the treatment of wastewater or by the recovery; energy recovery should be reserved for waste that organic portion of household waste. is non-recyclable in the form of materials; and incineration without energy recovery should no longer occur. (b) French regulations In 2014, France completed the transposition of European In France, in compliance with Articles L. 511-1 et seq. of the Directive 2012/19/EU on waste electrical and electronic ICPE (Environmental Code regarding facilities Classified for equipment (WEEE). Since more types of equipment have been the Protection of the Environment), ministry and prefecture added, the collection rate was revised upward to 45% in 2016 decrees and orders define the rules governing the treatment and 65% in 2019. of waste. They specifically regulate the design, building, In 2015, France had some 15 Extended Producer Responsibility operation and monitoring after closure of these facilities. Energy (EPR) schemes, with the most recent ones covering furniture recovery units are subject to numerous restrictions, notably waste, special household waste, medical waste and gas bottles. limitations on emissions of pollutants. A third ICPE system
100 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Legal and regulatory framework 6
The Notre Law Chinese provinces and municipalities regularly adopt regulations Law No. 2015-991 of August 7, 2015 concerning the new to control the use and treatment of hazardous chemicals, while territorial organization of the French Republic modifies the level the Chinese Ministry of Environmental Protection continues to of jurisdiction with relation to the drafting of waste management actively initiate nationwide consultations on the identification, plans. Waste management plans will from now on be drawn up discharge and treatment of waste in order to develop new at the regional level, not at the departmental level. Regional regulations. prevention and waste management plans must be approved within a period of eighteen months following the enactment (d) Australian regulations of the law. Each Australian state and territory has a different approach to waste legislation. Some, like New South Wales and Victoria, have Cross-Border Shipments of Waste (CBSW) comprehensive schemes for classifying waste. Others, such For CBSW leaving France, the French Environmental Code as Tasmania, pay particular attention to the most dangerous requires that organizers or notifying entity of shipments be types of waste. Some states legislate at all levels, from waste headquartered in France (L. 541-40 of the French Environmental generation to elimination, while others only regulate the Code). elimination of waste. As from publication of Decree No. 2015-1396 of November 3, In general, licenses are required for waste treatment, recovery 2015, the authority with CBSW jurisdiction is no longer a and elimination. The terms of a given license generally stipulate département center (DREAL), but rather a national one (PNTTD). the type of waste that a center may receive. Violations often Consequently, all CBSW notification documents must be occur when waste is eliminated in a plant other than the one forwarded to that center. for which the permit was obtained and that is authorized for given operations. Transporters of certain types of waste must (c) Chinese regulations also hold permits that may be obtained in accordance with the various environmental regulations of the different states and The 13th five-year plan for 2016 to 2020 should continue territories. to promote the adoption and stricter application of waste 6 removal and treatment policies in the interest of environmental Some waste must be traced as it crosses Australia. Each state protection and the well-being of the population. has different legislation with regard to the type of waste that must be monitored. Authorizations to transport waste from one In early 2015, the Chinese Ministry of the Environment published state or territory to another must be obtained prior to shipment temporary guidelines for screening risks concerning soil from the jurisdiction where the shipment is being sent. contamination in country planning. This document supplements the standard techniques for managing contaminated sites, The Hazardous Waste Regulation of Exports and Imports Act including technical recommendations for soil remediation of 1989 requires obtaining a permit for hazardous waste to be that were published by the Ministry of the Environment imported to or exported out of Australia. Some of this waste in 2014. These recommendations are consistent with the must then be traced during movement in Australia. decontamination requirements of similar programs in countries The fragmentation of the Australian market results in different with more developed environmental regulations. frameworks for markets between the states and the territories In September 2014, the National Development and Reform and incurs added costs, more complex exchanges of information Commission (NDRC), the Ministry of Finance, and the Ministry of and in some case even adverse effects. Environmental Protection jointly issued rules on the nationwide The National Waste Policy approved in 2009 sets regulations implementation of differentiated tariff policies targeting in the area of waste management and resource recovery by pollutants discharged by industrial companies. The measure 2020 in six key areas and identifies 16 strategic priority actions will raise the taxes collected for pollutant discharges by national that will be feature a national and cohesive approach. These and local authorities in order to reallocate these sums to fund strategies will take the form of actions on the national level that environmental protection measures and policies. will be carried out in close collaboration and under the authority of one or more jurisdictions.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 101 Overview of activities 6 Group environmental, corporate and social responsibility policy
6.8 Group environmental, corporate and social responsibility policy
Since the 2001 NRE (New Economic Regulations) law, French XX environmental policy (section 6.8.1); listed companies must report on their environmental and XX employee relations policy (section 6.8.2); social impact in their management report. The Grenelle Law II (Article 225) reinforces these obligations by specifying the XX corporate social commitments to sustainable development information that companies must report in three areas: (section 6.8.3).
6.8.1 Environmental management
SUEZ, a major player in the management of resources and contributes to the purification of wastewater. Through high- the circular economy, operates in several sectors: water, performance management of resources and smart solutions, waste and consulting. In this regard, it deals with the following the Group streamlines use in order to sustainably preserve this environmental issues: resource. SUEZ purifies water to render it drinkable, desalinates ocean water and manages sludge treatment and the treatment XX reducing tension on natural resources through the preservation of water and raw materials resources; and recycling of wastewater. For waste management, SUEZ provides solutions for the XX supporting strong world population growth and urbanization trends, which exert heavy pressure on local resources, in recycling, management and recovery of materials, energy and particular those in emerging countries; biologic elements from all types of waste. The Company pursues one primary objective: produce new resources. XX the fight against climate change, for which the Group has set three objectives: mitigate the causes of climate change, SUEZ is thus a major contributor to efforts to reduce nuisances adapt to its consequences like drought and flooding and and hazards and to preserve resources and habitats. build new alliances to foster the emergence of climate- Furthermore, the Group is continuously innovating in accordance responsible models; with its commitment to "improve the environmental footprint of our facilities and our services" in its Sustainable Development XX environmental preservation, involving: oceans, fresh water reservoirs, air, soil and control of potential impacts and all and Corporate Social Responsibility Roadmap for 2012 to types of pollution (noise, vibration, odor, visual discomfort, 2016. This is part of reducing pressure on the environment etc.) that may be caused by the operation of water and waste and nuisances resulting from operations of industrial and waste treatment plants; and water treatment sites it manages, which, like all industrial activities, are governed by national and local environmental XX controlling energy use and developing renewable energies; protection regulations. XX protection of biodiversity. The risk of an impact on natural areas and resources generated SUEZ's customers cover a very wide spectrum: by projects the Group manages are thus assessed, controlled and reduced via a control process through the mechanisms of local authorities with which water and waste management XX environmental management at facilities. contracts are signed, as well as community residents – the end users of these services; Potential environmental pollution or damage expose the Group to various risks, which are likely to generate additional costs, but professional clients, including industrial and service XX also affect its image and reputation. These risks are identified companies, managers of industrial parks, urban development and managed as part of an overall risk management process companies, natural heritage managers and farmers. that the Group implements (see sections 4.1.2 and 4.2.2.). For water, SUEZ provides protection of this resource and of habitats, guarantees the production of drinking water and
102 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
..6.8.1.1 Environmental management Where risks are identified, action plans to minimize the potential impact of a near-miss or environmental accident are The Group has implemented a process aimed at improving implemented and monitored until their conclusion. its environmental management, minimizing the impacts of its activities and being proactive in its approach. Furthermore, Section 4.2.2 of this Reference Document describes the complying with local, regional and national regulations is an management mechanisms for reducing industrial and ongoing concern: environmental risks. the Group develops innovative solutions in order to offer XX ENVIRONMENTAL MANAGEMENT SYSTEMS CERTIFICATION customers – whether municipalities or businesses – solutions that will deal with their environmental problems The Group encourages the organizations in charge of efficiently and at the lowest possible cost, and to more the services it offers to obtain ISO 14001 certification or effectively assume the water and waste management equivalent, according to international standards. Environmental responsibilities entrusted to them by legislative authorities; Management Systems certification is especially advanced in the Waste segment. In the Water segment, business units XX the Group constantly monitors the adequacy of all the plants may prefer to implement other certifications, such as those and services it provides or manages to ensure that they related to quality management (ISO 9001), health and safety meet the growing demands of environmental regulations. It (OHSAS 18001), food safety (ISO 22000), energy management also anticipates new legislation in order to be in the optimum (ISO 50001), or asset management (ISO 55000). position to meet the expectations of its customers and interested parties; THE ENVIRONMENT IN THE GROUP’S 2012-2016 SUSTAINABLE XX it encourages its subsidiaries to implement their own DEVELOPMENT ROADMAP environmental policies in line with the shared principles defined for the entire Group based on their activities, local The environment is an integral part of the Group’s Sustainable economic conditions, and the needs of their industrial and Development and Corporate Social Responsibility Roadmap municipal customers. for 2012-2016. Approved at the end of 2012 by the SUEZ Management Committee, new quantified objectives and 6 ENVIRONMENTAL AND INDUSTRIAL RISK MANAGEMENT progress objectives were formalized around three priorities and 12 commitments. The four commitments specific to the SUEZ has to take extreme care in monitoring environmental and environmental domain are grouped in Priority No. 1 "Innovate industrial risks. SUEZ's environmental management is reviewed to develop our activities and assist our clients in becoming annually by the Board of Directors’ Ethics and Sustainable leaders in terms of economic and environmental performance". Development Committee. In 2014, the Environmental Risks Management Policy was expanded to include Industrial Risks Commitment No. 1: Help our customers to better manage the water cycle and approved by General Management. as a whole This policy applies to all business units and to central services. Quantified targets It addresses risks which may be of accidental or natural origin. XX Reduce losses from drinking water networks to prevent They may be due to human or organizational factors, equipment wastage of a volume of water equivalent to the annual breakdowns or malicious acts, including: consumption of a city of 2 million inhabitants; XX all types of pollution (air, soil, aquatic environments) or XX Aim to equip more than 20% of our customers with smart environmental nuisance (noise, vibration, odor, visual meters. discomfort, etc.); XX environmental damage as well as property damage and Progress objective personal injury caused by fire, explosion, machine breakage, XX Expand the reuse of treated wastewater. natural disaster, collapse of structures, etc. This policy is consistent with the Global Risk Management and Commitment No. 2: Help our clients to optimize the management and Health and Safety policies. recovery of their waste
It clarifies the scope, policies and resources to be implemented Quantified target and the respective roles of the business units and headquarters. By 2016, achieve a ratio in Europe of two metric tons of It also aims to define the Group’s management rules and to XX waste intended for recovery for every one metric ton of specify the environmental and industrial standards that are to waste intended for disposal. be applied worldwide.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 103 Overview of activities 6 Group environmental, corporate and social responsibility policy
Progress objective Progress objectives XX Develop production and marketing channels for solid XX Improve the energy efficiency of drinking water production substitution fuel. and wastewater treatment plants at equivalent service levels; Commitment No. 3: Improve the environmental footprint of our facilities XX Increase the energy output/energy consumption ratio for and services. the Water business (indicator: kWh of energy generated/ kWh of energy consumed). Quantified targets XX By 2016, achieve a ratio of two metric tons of greenhouse Commitment No. 4: Improve customer satisfaction and trust gas emissions avoided for every one metric ton emitted (Recycling and Recovery Europe scope); Quantified targets XX Increase the production of useful energy in the Recycling XX Target rate of 80% customer (consumer) satisfaction in the and Recovery Europe scope by 15% (about 700 GWh more Water business; than in 2011), equal to the annual power consumption of XX Aim for a client (companies and local authorities) satisfaction over 100,000 Europeans; rate of 80% in the Waste business. XX Biodiversity: increase the number of regulatory and voluntary action plans implemented at sensitive sites in or Progress objective near protected areas. XX Increase the number of contracts including environmental performance objectives and quality of service.
The table below shows the results of indicators verified by the Statutory Auditors with reasonable assurance at SUEZ level.
Indicators 2015 data Production of useful energy by the Group’s activities (Recycling and Recovery Europe scope (a)) (XXX) 5,855 GWh Ratio of energy production/energy consumption (primary and secondary sources (c)) of the Group’s Water business (XXX) 7.84% Direct greenhouse gas (GHG) emissions from Recycling and Recovery activities in Europe (a), from processes or equipment owned or controlled by SUEZ, and indirect emissions associated with the consumption of electricity and heat by SUEZ and the consumption of fuel of its suppliers (XXX) 4.9 Mt CO2 eq. Technical yield of the networks (XXX) (b) 77.2%
See meaning of (XXX) in section 6.8.1.8. (a) The Recycling and Recovery Europe scope consists of SUEZ's European subsidiaries and all of Recycling and Recovery France’s international subsidiaries. (b) The scope for this indicator is Agbar, Lyonnaise des Eaux France, Suez Water Inc. and Lydec. (c) Primary energy is the energy available in the environment and used directly without processing (e.g. oil, gas, etc.). Secondary energy is the energy obtained by the transformation of primary energy (e.g. electricity).
Furthermore, SUEZ General Management adopted 12 new EMPLOYEE TRAINING AND INFORMATION ON ENVIRONMENTAL PROTECTION climate commitments in August 2015 in order to extend its The Group keeps its employees informed about its positioning, climate objectives to 2020 and 2030, extend their geographic performance, actions and best practices for promoting coverage to all Group activities and align them with the objective environmental protection via its intranet, Annual Report on determined by the Intergovernmental Group of Climate Experts, the Group's Environmental and Corporate Social Contribution, which consists of maintaining average climate warming below management reports and dedicated meetings. Related 2°C (See section 6.8.1.5). These commitments now make up the training is also provided. Specifically, the Group has launched "Climate" section of the future Sustainable Development and “Ambassador”, its first “Serious Game”, the purpose of which is Corporate Social Responsibility Roadmap of the Group, which to help all employees, particularly new recruits, to understand will be adopted in 2016 and will extend from 2016 to 2020. the Group’s businesses and challenges, especially those
104 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
involving sustainable development. In an urban environment, SUEZ monitors its subsidiaries’ environmental activities and “Ambassador” simulates relationships between water and ensures that best practices are shared. waste, the environment and society. The employee plays the SUEZ has also been continuing its efforts to increase the central role, aiming to achieve and maintain a high level of reliability of its environmental data since 2003, which is customer satisfaction by resolving various problems. audited by third parties. The aim is to make this non-financial At the subsidiary level, training and information activities reporting process an increasingly effective guidance tool for tailored to the local context are also organized. supporting the aims of the Group’s Sustainable Development The employee representative bodies of the Group and its and Corporate Social Responsibility Roadmap, as well as a tool primary subsidiaries are also regularly informed of the progress used in discussions regarding the ongoing improvement of its achieved by the Group in the areas of sustainable development non-financial performance. and environmental protection. The reporting exercise carried out in 2015 again contributed to a process of continual improvement of procedures for gathering ORGANIZATION AND OPERATIONAL AND ENVIRONMENTAL PERFORMANCE and disseminating information, particularly on the environment. MEASUREMENT AND CONTROL SYSTEMS Since 2003, SUEZ has employed a special reporting system ..6.8.1.2 Health protection to manage the deployment of its environmental and industrial actions, control environmental and industrial risks and keep WATER: ALWAYS BE A FEW STEPS AHEAD REGARDING THE QUALITY OF stakeholders informed about its environmental performance DISTRIBUTED WATER and operating results. This system was developed on the basis of recommendations arising from the work performed Concern for consumers’ health is the reason for implementing at international discussion forums like the Global Reporting major control mechanisms within the Group, as well as for the Initiative (GRI) or the World Business Council for Sustainable use of methods and tools to prevent a potential health crisis. Development (WBCSD). It meets the requirements of the NRE Self-monitoring programs for water quality in the system are law and covers the information required by Article 225 of the generally speaking superior to regulatory requirements and the French Grenelle Law II of July 12, 2010 and its implementing Group's sites are equipped with remote surveillance systems or 6 decree of April 24, 2012. 24-hour operational alert systems. Service continuity is ensured by organizing work and especially through on-call systems. Indicators for measuring and improving environmental and operating performance are reported to headquarters, and the In addition to this prevention policy, the Group has developed results are relayed via business intelligence applications. The crisis management procedures in liaison with local authorities indicators show the progress made and provide an overall view for accidental deterioration of water quality in municipal water as well as specific views of each of the activity units, which are systems. comparable within the Group (benchmarking-type analysis). Regulations concerning distributed water quality parameters In an annual Environmental and Industrial Compliance letter, are constantly changing in relation to the emergence of new the CEOs of SUEZ business units and subsidiaries express their risks. Aside from bacteriological and physicochemical criteria, commitment to the following: certain “emerging” substances (i.e. chemical molecules, endocrine disruptors, etc.) are of particular concern to experts XX The data conveyed through the reporting process have been and operators in the water and environment sector. The Group audited and are deemed fair and consistent. has put in place specific research programs in this area so as XX The Group’s Environmental and Industrial Risk Management to be better able to understand, analyze, monitor and handle Policy is applied. Significant risks are identified and such new molecules, while participating in public debate on appropriate action plans are established, quantified and the subject. monitored. The Group is also committed to developing partnerships with Information regarding environmental and operational local municipalities, industrial players and farmers to ensure performance by the Group is communicated in the Annual qualitative protection of water resources in river basins. Report on the Group's Environmental and Corporate Social Furthermore, treating wastewater in facilities managed by the Contribution and the SUEZ Annual Report, as well as through Group contributes to significantly reducing content of polluting reports published by its business units. substances such as organic matter, nitrogen, phosphorous, etc. Headed up by its network of Environmental and Industrial Risks that is discharged into the environment and that likely alters Officers and its annual technical and performance reports, the quality of water resources.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 105 Overview of activities 6 Group environmental, corporate and social responsibility policy
WASTE: CONTROL NOXIOUS EMISSIONS INTO THE ATMOSPHERE Water is a very unevenly distributed resource that must be protected. Some countries have already experienced water In the Waste segment, polluting atmospheric emissions are stress situations, which are harder to manage when the country due mainly to the incineration of hazardous and non-hazardous is at a low level of economic development. By 2025, two thirds waste. They are monitored constantly in accordance with of the world’s population may be living in regions affected by local, regional and/or national regulations. NOx, SOx and dust strains in the water supply, particularly the Middle East and emissions are monitored locally and appear among the data certain regions of Africa, Asia and Latin America. collected in annual environmental reports of the Group. Reduction of water usage has received particular attention WATER AND WASTE: LIMITING NOISE, ODOR AND VISUAL POLLUTION throughout the world, through demand management programs. These include infrastructure measures (reducing leaks) and SUEZ has recently developed a service called “NOSE”, which other measures targeting user behavior: putting in place rate objectively evaluates and models the impact of the olfactory structures to encourage water saving, awareness campaigns footprint of wastewater collection and treatment activities or to combat waste. In addition, the objectives of such programs sites, sludge recovery or waste management on local residents. increasingly exceed the mere optimization of economic This service enables the Group to suggest solutions for efficiency (reducing costs of consumable materials), and include controlling the olfactory footprint, by keeping it below the level careful management of the resource as an end in itself. The of two units of odor per cubic meter (UO.m3) and thus meeting use of “non-conventional” water resources is expected to regulatory requirements (footprint below the threshold of five grow significantly. In particular, the reuse of wastewater for units of odor per cubic meter) when these exist. agricultural and industrial purposes, the upkeep of public parks, and even the replenishment of groundwater reserves, is likely Specific measures to prevent or treat odors can thus be planned to increase significantly in the years to come. from the design phase of the facilities. Through its activities as a drinking water and wastewater For existing facilities, preventive and corrective measures are treatment services operator, the Group’s contribution to the implemented to limit olfactory, noise and visual nuisances. The protection of water resources and ecosystems falls into three following examples illustrate these actions: specific categories: design and installation of dedicated treatment units; XX XX optimization of existing water resources by close status XX installation of biogas capture and processing systems; monitoring, ongoing precautionary sampling and encouraging XX operational practices to minimize the generation and users to consume water intelligently. The Group innovates dispersion of odors; constantly to limit water wastage, since the resource is scarce and increasingly costly to produce, particularly in XX application of masking agents (e.g., in the working areas of highly water-stressed regions, by recommending smart landfills in operation); metering solutions to help users control water use, reducing XX measurement and verification of compliance with regulatory leaks in water distribution systems or by suggesting geo- thresholds for day/night noise levels; filtration techniques that consist of injecting purified surface water into underwater reservoirs. Furthermore, awareness soundproofing of technical facilities and noisy machines; XX initiatives encourage users to change their behavior and use XX use of hybrid or all-electric waste collection vehicles; water more responsibly; XX integrating works into surrounding landscapes. XX qualitative protection of water resources to prevent deterioration. Preventing pollution by controlling the quality ..6.8.1.3 Conservation of resources of water released into the environment, by monitoring the quality of protected zones, entering into partnerships for the qualitative protection of water resources in river basins are WATER CONSERVATION key priorities of the Group in protecting water resources; Population growth, changing eating habits and the resulting XX making alternative resources available. Reuse of treated agricultural demand for water, and the inadequacy of cleanup water in compliance with the most stringent health systems have resulted in growing pressure on water resources. standards, for agricultural, industrial and municipal use, In addition, climate change is introducing the risk of increased as well as desalination of seawater are all recommended tension in a growing number of regions, particularly through solutions in situations where they are relevant. increasing incidences of droughts.
106 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
Even though water use in the Group's industrial processes is Because its business is the treatment, recovery and elimination very low in contrast to the volumes managed by the drinking of solid waste, the volume of waste produced by the Group’s water production business, this use is still subject to local activities and its consumption of raw materials are very streamlining actions. SUEZ contributed to the establishment of limited. Specific action plans aimed at reducing waste have the Business Alliance for Water and Climate, in partnership with nevertheless been implemented in the various subsidiaries. CDP, the World Business Council for Sustainable Development These different plans at the local, regional and national levels and the CEO Water Mandate of the United Nations Global reflect local characteristics of the various contracts. Compact, whose purpose is gather industrial players together The Group places particular emphasis on reducing volumes to commit to assessing and reducing their water use footprints. of sludge from the treatment plants it manages that are not recovered by sustained materials recovery methods like THE WASTE RECOVERY BUSINESS composting or spreading "clean" sludge as a soil enriching In the waste sector, SUEZ provides circular economy solutions agent in agriculture, or energy recovery, via the production of such as recycling and materials recovery, in addition to energy biogas, incineration or co-incineration. and biologic recovery processes from all types of waste, with the objectives of creating new resources, producing SOIL REMEDIATION renewable energy and reducing greenhouse gas emissions of The Group's range of services includes remediation of polluted the Group's customers. These activities contribute to removing soils. These treatments are conducted either onsite or by the correlation of economic growth with the consumption of excavating and transporting the soil to an appropriate Group raw materials and thus to generating cascading reductions in facility. The Group has developed multi-modal treatment greenhouse gas emissions linked to production and use modes. platforms that are capable of treating most of the pollutants The Group thus operates several types of facilities, such as: encountered, including hydrocarbons, non-biodegradable organic substances, organic materials and heavy metals. XX voluntary drop-off centers/household waste recycling centers; This treatment is performed under close environmental supervision and ensures traceability, which makes all parties XX sorting and recycling centers; in the chain more accountable. 6 XX production facilities for Solid Recovered Fuels (SRF); The Group also engages in activities that have an impact on XX disassembly and dismantling facilities: waste electrical land use, particularly its landfill operations. The rehabilitation and electronic equipment, end-of-life vehicles, bulky waste, of landfills following their closing is part of their business furniture, etc.; plans and can be carried out by Group companies in view of XX facilities for reprocessing of specific, pre-sorted recyclable transforming them into landscaped or recreational areas for materials: transformation into secondary raw materials. local communities. Biological treatment also represents opportunities for recovery: ..6.8.1.4 Controlling energy XX composting platforms: household waste, urban and industrial sludge, green waste, livestock sludge, grease, etc.; ENERGY EFFICIENCY XX mechanical and biological treatment. Use of electricity by the Group's Water business and consumption In accordance with the objectives of the Group's Sustainable of fuel for its collection vehicles are the two items representing Development and Corporate Social Responsibility Roadmap for a preponderant portion of the Group's energy use. 2012 to 2016, SUEZ has set the objective of improving materials recovery rates and production of energy from household, As part of the Group's Sustainable Development and Corporate commercial and industrial waste, developing production and Social Responsibility Roadmap for 2012 to 2016, SUEZ committed sales channels for solid substitution fuels and augmenting the to improving energy efficiency of drinking water production GHG emitted/GHG avoided ratios related to its waste activities. plants and wastewater treatment stations everywhere it operates, at equivalent service levels. Furthermore, as part of SUEZ is continuing to develop solutions for eliminating non- its 12 commitments for the climate adopted in August 2015, the recoverable residual waste, i.e. which cannot be transformed Group made increases in energy performance of all of the sites into new resources, in ways that respect the environment and it manages, together with streamlining waste collection logistics are affordable.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 107 Overview of activities 6 Group environmental, corporate and social responsibility policy
and bolstering its "clean vehicles" policy, two fundamental incineration plants, methanization plants and biogas recovery levers of its commitment to reduce GHG emissions over the from landfills has continually increased in recent years. entire scope of its operations by 2030 (see section 6.8.1.5). An improvement objective was also set for the Water segment: It should nonetheless be noted that the sites managed by increase the energy output/energy consumption ratio for the SUEZ are occasionally obliged to increase their use of energy Water business (indicator: kWh of energy generated/kWh of to improve services rendered, e.g. treating pollution more energy consumed). effectively or increasing proportions of waste recovered, or These two indicators are described in more detail in due to heightened regulatory protective obligations related to section 6.8.1.1 of this document. environmental protection. Improving the energy efficiency of its processes is therefore a challenge. It should also be noted that among the 12 new SUEZ commitments for the climate adopted in August 2015, there The Group strives to improve the energy efficiency of all is a commitment to increase the Group’s renewable energy processes it manages. The Group focuses on reducing production by 10% between now and 2020 (see section 6.8.1.5) consumption linked to its waste collection, transportation and through a substantial increase in its production of biogas. urban wastewater activities, for which it operates a fleet of approximately 12,000 heavy and light trucks. It strives to reduce In this regard, a promising new avenue is the recovery of biogas fuel consumption by optimizing collection rounds (frequency derived from wastewater treatment processes that is injected and distance traveled, for example) and by introducing new into the natural gas system. This process has recently been engines and alternative fuels, as well as by training drivers to authorized in France and it has resulted in the recovery of biogas drive more economically. from the Strasbourg Metropolitan wastewater treatment station that since mid-2015 has supplied some 5,000 households. In waste treatment facilities, examples of actions implemented include purchasing green energy, implementing new technologies, installing variable speed mechanisms, controlling ..6.8.1.5 Climate change mitigation and adaptation policies consumption through metering, correcting the power factor and using new lighting systems (solar, LED, etc.). REGULATORY FRAMEWORK FOR CLIMATE CHANGE In the water sector, context-specific action plans are also in In recent years, there has been a significant increase in place, including: renovating facilities and introducing more regulations on reducing greenhouse gas emissions on the efficient equipment, implementing variable-speed pump global and on the European Union level in particular. systems; installing systems to modulate pressure in drinking water supply networks, establishing automated tools for The institutional framework regulating carbon constraints is the checking treatment processes and creating inspection plans result of the United Nations Framework Convention on Climate to identify potential energy savings. Change dated May 9, 1992, the Kyoto Protocol of December 11, 1997 and, in Europe, Directive 2003/87/EC of the European The Group monitors changes in energy regulations, at European Parliament and of the Council of October 13, 2003 relating to level, such as the EU Energy Efficiency Directive, the Energy- the European Union Emissions Trading Scheme (EU ETS). Climate Package, etc. and on the national level, in France, such as the energy transition for green growth bill of August 17, In Europe, the Energy-Climate Package concluded by the 2015. Its subsidiary Lyonnaise des Eaux is seeking ISO 50001 European Council on October 23, 2014 also contains European certification for 2016 in all of its businesses to address the climate objectives up to 2030 to include a 40% reduction of new regulatory framework in France regarding the obligation greenhouse gas emissions, a 27% increase in energy efficiency of companies to carry out energy audits. and the achievement of a 27% share of renewable energy in the European Union energy mix. Today, all actions taken by the Group in this area are in line with these regulations. In France, the Energy Transition for Green Growth Bill of August 17, 2015 includes new commitments for 2030 in line with the objectives of the Energy-Climate Package: a 40% PRODUCING ENERGY reduction in GHG emissions with relation to 1990 emissions Commitment No. 3 of the above-mentioned Sustainable levels and an increase in the share of renewable energy in the Development and Corporate Social Responsibility Roadmap French energy mix, to 32% of final energy consumption in the includes a quantified objective of increasing the production of country. The law also stipulates the publication of information useful energy by 15% (about 700 GWh of additional production) by companies regarding financial risks linked to climate change between 2011 and 2016 in the Recycling and Recovery Europe and the measures a company is taking to reduce them by scope, equal to the annual power consumption of over implementing a low carbon strategy in all the components of 100,000 Europeans. The total useful energy produced (sum its activities. of electrical energy produced and thermal energy sold) from
108 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
Decree No. 2011-829 (Article 75 of the Grenelle Law II) of Paris Agreement also refers. The text also recognizes the key July 11, 2011 together with the law of December 24, 2015 role of non-state organizations, including companies and cities relating to greenhouse gas emissions and the EU Climate and in the deployment of the solutions and commitments necessary Energy Package (CEP) requires companies with more than for the effective reduction of greenhouse gas emissions and 500 employees to produce an annual greenhouse gas emissions adaptation to the consequences of climate change. It also report every four years. This decree sets the framework of legal encourages the creation of voluntary coalitions on thematic obligations and defines the content of the report and how it topics identified as priorities, such as protection of water must be made available. resources. Finally, the Paris Agreement adopted unanimously by the 196 parties present on December 12, 2015 at the end of the SUEZ'S CARBON PROFILE st 21 Conference of Parties (COP21) to the UN Framework Because the activities of its water and waste businesses use Convention on Climate Change confirms the objective to limit energy, but also because these businesses contain deposits that the increase in temperatures by the end of the century to less are still insufficiently exploited in terms of renewable energy than 2°C compared to pre-industrial times. This agreement production and secondary raw materials, SUEZ, true to its represents a major milestone in international negotiations on determination to lead by example, is innovating incessantly to climate because for the first time, all countries are committing mitigate its impacts on the climate and promote the solutions to the reduction of their greenhouse gas emissions according that are part of the momentum of local circular economies. to their national circumstances, through communication to the United Nations of their Intended Nationally Determined In 2015, SUEZ contributed to helping its customers to avoid emitting more greenhouse gases (9.2 million Teq CO ) than it Contributions (or INDCs). These commitments should lead to 2 emitted via its businesses (8.2 million Teq CO ). the multiplication of public climate policies and stimulate the 2 creation of innovative carbon pricing mechanisms, to which the
SUEZ emissions in 2015, in Teq CO2 Emissions avoided by SUEZ customers in 2015, in Teq CO2 Waste 6,152,324 Waste 9,021,887 6 Water 2,006,363 Water 159,158 TOTAL 8,158,687 TOTAL 9,181,045
The Group’s emissions may be broken down as follows: Energy recovery by means of:
XX In its waste businesses: 6,152,924 metric tons of CO2 XX incineration of municipal or industrial waste, equivalent, i.e. 75% of total Group emissions. Up to 95% of XX burning biogas recovered from landfills, these emissions are direct, resulting from fugitive methane emissions released when waste is landfilled or from XX recovery of biogas produced from wastewater. greenhouse gases produced through incineration. SUEZ answers yearly to the Carbon Disclosure Project rating XX In its water and wastewater business: 2,006,363 metric agency's efforts to evaluate transparency of companies with regard to information concerning their carbon profile and the tons of CO2 equivalent, i.e. 25% of total Group emissions. These emissions are primarily indirect (81%): they result performance of their climate action plan. In 2015, CDP awarded essentially from the use of electricity in water treatment SUEZ a rating of 99 B, up four points from 2014. In addition, processes. SUEZ is one of 15 European companies that best incorporates the climate factor in its business, according to a 2015 study To help its customers avoid greenhouse gas emissions, SUEZ carried out by the bank Oddo. promotes materials and energy recovery processes. Materials recovery by means of: SUEZ'S 12 NEW COMMITMENTS FOR THE CLIMATE XX waste recovery, sorting and recycling, For SUEZ, the fight against climate change is an absolute XX composting, priority. As part of its Sustainable Development roadmap for 2008-2012, then for 2012-2016, the Group already set recovery of residual waste from incineration of non- XX greenhouse gas reduction and water conservation objectives. hazardous waste, XX production of combustible solid recovered fuel.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 109 Overview of activities 6 Group environmental, corporate and social responsibility policy
As an extension of the effort already achieved in this area, SUEZ These commitments aim to: General Management adopted 12 new commitments for the XX continue efforts to diminish the Group's carbon footprint climate in August 2015, for 2020 and 2030. XX promote the circular economy model that structurally These commitments extend over all of the Group's activities reduces greenhouse gas emissions and protects resources worldwide and contribute to registering its businesses in a trajectory compatible with the objective of warming lower than XX adapt to the consequences of climate change on water 2°C by the end of the century, which was adopted by the Paris COP21 conference in December 2015 and which complies with the United Nations Sustainable Development objectives adopted in September 2015.
The 12 commitments are the following:
Pillar 1: Mitigate the causes of climate change
Commitments Resources implemented Commitment No. 1 Supply systems for collecting and recovering biogas for all of the landfills the Group Reduce GHG emissions over the entire scope of manages. activities by 30% in 2030 compared to 2014 Increase the energy performance of the Group's businesses. Streamline waste collection logistics and bolster the "green vehicles" policy. Commitment No. 2 Strengthen circular economy solutions: recycling and materials recovery, energy recovery Make our customers avoid emitting 60 million from waste in the form of electricity or heat production or production of solid recovered fuels. tons of GHG by 2020 Commitment No. 3 Develop partnerships with industries that consume large quantities of plastics to co-build Double the volume of recycled plastics by 2020 customized solutions that result in high-quality recycled plastics Commitment No. 4 Between now and 2020, enhance biogas production capacities stemming from the treatment Increase the production of renewable energy by of waste and wastewater. 10% by 2020
Pillar 2: Adapt to the consequences of climate change on water
Commitments Resources implemented Commitment No. 5 Deploy studies to evaluate climate risks and operational solutions for preventing risks from Systematically recommend to our customers extreme climate events such as drought and flooding. resiliency plans for addressing the impact of climate change Commitment No. 6 Multiply the use of water prior to discharge into the environment for irrigation and resupply Promote different uses of water that multiply of underground reservoirs; seawater desalination solutions. alternative water availability threefold between now and 2030, compared to 2014 Commitment No. 7 Develop smart technologies for application to controlling water use and improving Save the equivalent of the water use of a city of performance of drinking water distribution networks. 2 million inhabitants by 2020
110 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
Pillar 3: Develop climate-responsible models
Commitments Resources implemented Commitment No. 8 Include the carbon price in Capex decisions. Adopt an internal price for carbon in 2016 Make Group expertise available to customers with regard to the impact of current and future pricing systems for carbon on business models, and on value creation for low carbon solutions. Commitment No. 9 Experiment with new climate-responsible models. Mobilize to face the increase of carbon pricing Support the World Bank concept of “Put a Price on Carbon”. Commitment No. 10 Share feedback with Group customers and with all economic players in society related to Commit to the circular economy implementing local loops of the circular economy. Commitment No. 11 Carry out awareness actions with the general public to follow on the COP21 Solutions French Contribute to awareness campaigns regarding initiative relating to solutions for the climate to support the sustainable city concept. solutions for the climate Commitment No. 12 Take into account recommendations by global climate, scientific and economics experts in Set up a Committee of experts on Climate developing Group strategies and setting its sustainable development policy. Transition for relays to SUEZ General Management
Every year beginning with 2016, the progress of the 12 Climate Carbon Pricing Leadership Coalition of the World Bank when it commitments will be assessed by an independent expert and was established in 2015. will be included in the new Group Sustainable Development In preparing for the COP21 conference, SUEZ collaborated with Roadmap. The results of this assessment will be made public. several professional organizations and coalitions committed SUEZ is also committed to making what it has learned from to combating climate change, such as the World Business its process available to its stakeholders using an open source Council for Sustainable Development, Caring for Climate, 6 logic, so all those who wish to may benefit from this feedback. which stemmed from the UN Global Compact initiative and These shared good practices will contribute to implementing We Mean Business. Since the United Nations Catalyze Action new climate-responsible alliances. climate summit in September 2014, these organizations have contributed to structuring company commitments in favor SUEZ'S CONTRIBUTION TO THE 21ST CONFERENCE OF PARTIES IN PARIS of the climate, formalized under United Nations Framework Convention on Climate Change through the establishment of SUEZ, as an official partner of COP21, designed the waste the Non-State Actor Zone for Climate Action (NAZCA). streams from the Le Bourget site and assumed responsibility for their recovery, aiming for a 100% recovery rate for the It is in this context that the Group developed its 12 climate waste. The Group was also a founding member of the COP21 commitments under which it participates in several joint Solutions initiative, in partnership with Vivapolis, the French initiative, including: sustainable city brand internationally. This initiative aimed XX aligning greenhouse gas reduction targets with the "two to promote climate solutions by non-government players, degrees" trajectory; including companies, and resulted in the organization of an committing to climate policy in a responsible manner; exhibition at the Grand Palais during the COP21 event. XX making its greenhouse gas emissions a matter of public The Group is also convinced that its action for the climate should XX knowledge, including its risks linked to climate change and be part of a process based on exchanges of perspective with its low carbon strategy in financial documents; all stakeholders. setting an internal carbon price. For several years now, the Group has been committed to XX drawing up its recommendations to public authorities in the Furthermore, in cooperation with the French authorities, Jean- area of climate policies, especially with regard to calculating Louis Chaussade, CEO of SUEZ, participated in the COP21 greenhouse gas emissions, promoting circular economy Business Dialogues set up in Paris, New York and Tokyo by solutions and endorsing carbon pricing. SUEZ has been behind the Executive Secretary of the United Nations Framework the World Bank concept of "Put a Price on Carbon" since it was Convention on Climate Change. launched in 2014, which aims to promote the implementation Several initiatives launched by SUEZ were introduced at the of a tariff on carbon emissions worldwide. The Group joined the COP21 conference.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 111 Overview of activities 6 Group environmental, corporate and social responsibility policy
Through the impetus of the French and Peruvian governments most sensitive sites with relation to biodiversity conservation, a and with the support of CDP, CEO Water Mandate of the United monitoring of the natural environment and the implementation Nations Global Compact and the World Business Council for of local action plans adapted to the features of the natural Sustainable Development, SUEZ also established the Companies environment and the type of pressures exerted by facilities Alliance for Water and Climate Change. The purpose of this managed by the Group. SUEZ relies for this purpose on coalition is to get industrial operators to commit to assessing numerous expert partnerships with organizations specializing and reducing their water footprint. The project was introduced in natural protection; in France, this includes the Muséum by the CEO of SUEZ on December 2, 2015 during the Lima- national d'histoire naturelle, France Nature Environnement, and Paris Action Agenda (LPAA) Resilience day, a UN process the Ligue de Protection des Oiseaux. institutionalized in the Paris Agreement, whose purpose is to Commitment No. 3 of the 2012-2016 Group Sustainable catalyze commitments and solutions of companies and civic Development Roadmap, "Improve the environmental footprint of groups into action for the climate. our facilities and services", includes in its quantitative objectives As part of the Lima-Paris Action Agenda, the CEO of SUEZ was "increasing the number of regulatory and voluntary action plans also asked by the Executive Secretary of the United Nations implemented at sensitive sites in or near protected areas". Framework Convention on Climate Change and by the Presidency Finally, SUEZ commitment plans for the National Biodiversity of the COP21 conference to give a presentation on the water and Strategy (NBS) were acknowledged by the French Minister of oceans issue during the Action Day on December 5, 2015, which the Ecology, Sustainable Development and Energy in 2014. was set up to spotlight the most emblematic commitments and initiatives taken by nations and non-government players. It is based on three objectives: The initial conclusions of the working group on the circular XX promote a framework of internal actions that promote economy launched by AFEP and chaired by SUEZ were also biodiversity; introduced during the COP21 event. XX integrate biodiversity in Research and Innovation programs; In addition, SUEZ funds various research organizations that XX share knowledge and contribute to public awareness contribute to the fight against climate change, including the campaigns. Ellen MacArthur Foundation, the Circular Economy Institute, the Research Chair Elsa-Pact on life cycle analysis, and the French . Climatology Society. .6.8.1.7 Environment-related expenditure
..6.8.1.6 Protection of biodiversity and ecosystems EXPENDITURE RELATED TO THE PROTECTION OF THE ENVIRONMENT By the very nature of its activities, the Group has a direct impact SUEZ acts to protect biodiversity for local authorities and on the environment. It is therefore not relevant to distinguish industry. The Group’s activities in offering water and waste between spending that impacts the environment directly and treatment solutions limit the physical, chemical and biological spending that impacts it indirectly. impact that human activities would have on the environment, if not for the services provided by the Group. Furthermore, the In accordance with European regulations, the Group records Group is integrating in an increasingly systematic manner the provisions intended to cover the expenses of the long-term issue of the conservation and enhancement of natural heritages monitoring of landfills after their closure. Other provisions are into the environmental management processes of the sites it also recorded to deal with potential environmental risks: manages. This is accomplished through an inventory of the
Indicators 2015 data Provisions for site closure and post-closure €571.1 million Provisions for environmental risks €5.7 million Provisions for the dismantling of non-nuclear facilities €11.6 million
112 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
..6.8.1.8 Reporting methodology and scope Water business lines The report covers all the activities of the water cycle, including SUEZ operates a variety of business activities that rely on the treatment and distribution of drinking water, the collection extremely varied technical processes, from waste collection and and treatment of wastewater, as well as sludge treatment and transfer with a fleet of several thousand vehicles, to chemical, recovery. thermal, biological and mechanical processes carried out at several thousand facilities. This broad technical diversity 2/ Reporting tool complicates the task of defining, distributing and smoothing indicators, as well as collecting and computing statistical Since 2003, SUEZ has been using an online computer-based data. SUEZ is continuing its efforts to achieve greater rigor environmental reporting system. This software facilitates and provide reliable, audited data, in order to report on the the management and documentation of the environmental improvement of its performance. reporting scope, the input, control and consolidation of indicators, the publication of reports, and finally, the provision METHODOLOGICAL ASPECTS OF 2015 REPORTING of the documentation needed to collect data and monitor the reporting process. Regarding the environmental data published in this report, the following information should be noted: 3/ Procedures For its environmental reporting, SUEZ uses the procedures, 1/ Scope tools and supporting documents available online. Depending The figures published in this report relate exclusively to fully on the organization and distribution of current responsibilities, consolidated companies whose operations are controlled by SUEZ's procedures and IT tools are directly deployed through SUEZ. When a company becomes fully consolidated, 100% the central management of the business units. The process of its environmental data are incorporated, irrespective of for the reporting and validation of information at lower levels the percentage held by the Group in its capital. The scope of (subsidiaries, regional offices and operational sites) is organized consolidation is set on June 30 of each year. For disposals in accordance with internal procedures and checks put in place occurring after that date, the entity is expected to fill in the by each business unit. Internal procedures and IT tools tailored 6 environmental questionnaire with the data available up until to each local organization are used at these levels. the date of disposal. Acquisitions completed after June 30 A Group-wide network of Environmental and Industrial are not normally taken into account. Legal entities included Risk Officers formally appointed by each reporting entity within the scope of environmental reporting are those whose is responsible for applying all of the procedures and activity is relevant in terms of environmental impact (therefore instructions. The working procedures and instructions at excluding financial, construction and engineering entities). Only Group level provide a detailed description of the various entities that have industrial operations and on which SUEZ has phases for gathering, checking, consolidating, validating and a determining technical and operation influence are included communicating environmental data to the corporate entity within the scope of reporting. Comparisons between reporting responsible for organizing the process. They are supported by periods are made on a like-for-like basis. Scope limitations may technical documents laying down methodological guidelines be applied to certain published variables. These are indicated for calculating certain indicators. in each case.
Waste business 4/ External audit Waste management includes collection, sorting and recycling, For 2015, the Group engaged the specialized services of the material, biological or energy recovery, incineration, landfilling, Statutory Auditors to verify four environmental variables and the treatment of hazardous waste, including soil (shown by the symbols XXX) and obtain a reasonable level of remediation. Closed landfills are not included in the published assurance. A total of 35 primary indicators are considered in indicators. calculating these four variables. The nature of the work and findings of the Statutory Auditors can be found in section 6.8.4 of this Reference Document.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 113 Overview of activities 6 Group environmental, corporate and social responsibility policy
6.8.2 Employee relations policy
The table below presents the employment-related disclosures as defined in the decree implementing Article 225 of the Grenelle law II and their corresponding sections in this Reference Document:
Subject/Disclosure Corresponding chapter(s) and section(s) Employment XX the total number and breakdown of employees by gender, age XX Chapter 17, sections 17.2.1 and 17.2.5 and geographical area XX new hires and layoffs XX Chapter 17, section 17.2.2 (New hires/Departures) XX compensation and changes thereto XX Chapter 17, section 17.2.2 (Compensation) Organization of work XX the organization of working time XX Chapter 17, section 17.2.2 (Working hours) XX absenteeism XX Chapter 17, section 17.2.2 (Absenteeism) Employee relations XX the organization of employee dialogue, including procedures XX Chapter 17, sections 17.1.3 (Employee relations), and 17.2.4 for informing, consulting and negotiating with staff XX review of collective bargaining agreements XX Chapter 17, sections 17.1.3 (Employee relations), and 17.2.4 Health and safety XX health and safety conditions at work XX Chapter 17, sections 17.1.5 and 17.2.2 (Workplace safety) XX review of agreements with trade unions or employee XX Chapter 17, sections 17.1.3 (Social relations), 17.1.5 and 17.2.2 representatives on health and safety in the workplace (Workplace safety) XX accidents at the workplace, including their frequency and XX Chapter 17, section 17.2.2 (Workplace safety) severity, as well as professional illnesses Training XX training policies implemented XX Chapter 17, section 17.1.3 (Training) XX total number of training hours XX Chapter 17, section 17.2.3 Equal opportunity XX measures taken to promote gender equality XX Chapter 17, sections 17.1.3 (Social relations), 17.1.4, 17.2.1 and 17.2.2 (Breakdown of employees by gender/Compensation), and 17.2.3 XX measures taken to promote the employment and integration XX Chapter 17, sections 17.1.4 and 17.2.2 (Disabled workers) of the disabled XX anti-discrimination policy XX Chapter 17, section 17.1.4
“Promotion of and compliance with the core conventions of the International Labor Organization” is addressed in the next section (chapter 6, section 6.8.3).
114 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
6.8.3 Corporate commitments to sustainable development
SUEZ is strongly committed to developing the attractiveness of The Group is a signatory to the Inter-Company Relations Charter the areas where it operates to bolster the local economy, acting (Credit Mediation) and the SME Pact, two schemes that will bring through the four commitments constituting the third priority of it into closer collaboration with SMEs. SUEZ also participates in its Sustainable Development Roadmap for 2012-2016 "Innovate competitiveness clusters related to its activities and is involved to grow our business and make our customers leaders in in the work of COSEI (Strategic Orientation Committee of Eco- environmental performance". The Group's businesses are at Industry Sectors). the core of environmental and social issues and thus contribute SUEZ contributes to regional development through its local to the momentum of the regions by sharing value with local procurement policy, with SMEs representing one quarter of companies and creating jobs. The Group’s commitments are procurement in France, particularly as it relates to the sheltered broken down along the following four lines. employment sector (see the section below on subcontracting and suppliers). Contribute to a responsible economy through local employment and development Lastly, SUEZ is committed to an ambitious employment policy in the regions in which it operates, with the aim of offering young Regional, economic and social impact of operations people from deprived neighborhoods one-to-one support so that Working towards more sustainable development implies they can find permanent work or become entrepreneurs in their environmental, economic and social responsibilities for the own right. This commitment is reflected in the Group’s “Equal Company in the regions where it operates. It is for this reason opportunities, social progress and commitment” program, which that one of the commitments of the Sustainable Development promotes access to jobs and economic and social insertion. Roadmap for 2012-2016 is entitled “Contribute to a responsible The Group’s main subsidiaries deploy regional development economy through local employment and development”. and employment programs (Sita Rebond, Lyonnaise des Eaux SUEZ aims to contribute to a responsible economy through local Disability Initiative, etc.) in their own particular territories. These employment and development by leveraging several kinds of societal action plans are developed in consultation with local 6 drivers. The primary driver involves a responsible purchasing stakeholders. In addition, SUEZ has created the “Maison pour policy, which binds the Group’s subcontractors and suppliers to Rebondir” (literally, the “Bounce-Back House”, a halfway-house its Sustainable Development Policies, contributes to the overall program) to support people in difficulty, to create social links sector’s progress, and encourages the emergence of eco- and to energize economically depressed neighborhoods by industries. The second driver involves creating and maintaining helping young people to find steady jobs or set up their own jobs, either directly or through collaborating with social economy businesses. This project, supported by the SUEZ Initiatives Fund, organizations, and with organizations that employ people with is fully consistent with the Group’s public service commitment. disabilities. Lastly, there is the integration of young people Finally, in accordance with the commitment to "Contribute into the world of work. The DIVERSITY “Equal opportunities, to a responsible economy through local employment and social progress, commitment” program, which was entered development" of its Sustainable Development and Corporate into competition for the French government’s "Diversity" Social Responsibility Roadmap for 2012-2016, the Group has label in 2014 and is supported by Human Resources, gets the agreed to work with its stakeholders on assessing the economic Purchasing Department involved to increase the percentage and social consequences of its activities and its CSR policy in the of purchases made by these structures. Diversity specialists regions where it operates. An initial pilot study of the monetizing and purchasers work toward the goal of further increasing of these consequences was carried out in 2014 with its Eaux du purchases from social and circular economy sources, especially Nord subsidiary within the Nord-Pas-de-Calais region. On the companies that employ only disabled people and provide them basis of the feedback from this experiment, in 2015, the Group with special facilities and support. These internal discussions, developed a tool to spread this calculation method to each to which companies in the sector are occasionally invited to of its French establishments. A similar tool, which would be attend, help to increase staff awareness, inform them of the applicable in each of the countries in which the Group operates, regulatory and legal framework, dedicated platforms that list is currently being reviewed. such suppliers and the categories of purchases that may be made from such companies. Subcontracting and suppliers SUEZ continues to strengthen relations with the social and Through its nearly €6 billion in purchasing from 85,000 suppliers, circular economy in France. As a result, the Group entered into a SUEZ has extraordinary strategic leverage. The Group wants partnership with the Social Entrepreneurs Movement (MOUVES) to be an actor and partner of its suppliers in the integration in 2015 with the intention of promoting mutual understanding of Corporate Social Responsibility issues. Since 2014, SUEZ between SUEZ and the socially oriented companies in the has been developing an ambitious responsible purchasing regions where they operate in France and contributing to the performance project to structure its process on a Group-wide emergence of local solutions to social and environmental scale and: requirements. XX contribute to the integration of suppliers into new services and the circular economy;
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 115 Overview of activities 6 Group environmental, corporate and social responsibility policy
XX optimize resources, implement "win-win"/mutually the Company’s environmental impact and require suppliers to beneficial relationships and partnerships with suppliers; comply with sustainable development clauses. XX promote support to SMEs and promote diversity among The Purchasing Department oversees the coordination of suppliers (workplace integration, companies that employ relationships and negotiations with the Group’s strategic only disabled people). suppliers. It specifically ensures that they comply with The Purchasing Department guides supplier relationships by sustainable development principles. A risk management adopting a governance mechanism with a strategic vision that process for social and environmental responsibility is aims to: specifically applied to 100 of the Group’s major suppliers. The contracts signed by SUEZ subsidiaries with their suppliers XX contribute to the operational performance of the Group; include environmental, social and societal criteria that require XX be a model for creating synergies in the Group; suppliers to comply with the Group’s Code of Ethics. XX be an ambassador to suppliers of Group values and As a signatory of the Responsible Supplier Relations Charter Corporate Social Responsibility commitments. (formerly the Inter-Company Relations Charter) since 2012, and the SME Pact since 2013, SUEZ is part of a procurement The Procurement Policy defines the principles and rules partnership with its suppliers, particularly SMEs. A mediation applicable to the management of purchasing and suppliers for process is also in place to address any difficulties SMEs may the entire Group. It is based on five points: scope of purchases, have in making themselves heard as part of their relations with roles and responsibilities of each party, mandatory principles the Group. They are first invited to inform the SUEZ Purchasing for competitive purchasing, supplier management, and the Department before resorting to the Inter-company Mediation Group’s internal purchases. It is developed throughout the mechanism for conflicts or unresolved disputes. procedures and operating methods detailed within subsidiaries and legal entities. The governance of supplier relations outlines Through its procurement policy, SUEZ also contributes to principles for supplier risk management. The principal objective the development of the sheltered employment sector and is to mitigate risks by determining risk criteria and the practices integrating job seekers through economic activity. The that should be applied. An initial risk mitigation can be carried DIVERSITY “Equal opportunities, social progress, commitment” out via a new supplier qualification procedure. The qualification program supported by Human Resources gets the Purchasing procedure is used for the purchasing categories determined to Department involved in increasing the percentage of purchases be critical for the Company. General information, commercial carried out from these structures. requirements, financial results and solvency, validity of legal documents and certificates, and practices in the areas of health Promote access to essential water and wastewater services and safety and CSR are all analyzed closely. In order to avoid all risk, all active suppliers are also monitored for: Offer access solutions to services The activities that the Group has been conducting in management of financial risk, to include financial solvency, XX developing countries since 1990 have provided drinking water investment ratios, etc.; to 14.1 million people and sewage systems to 7.1 million XX management of the legal risk, including legal documents, people. SUEZ has been officially committed to promoting certificates, etc.; implementation of the right of access to water and wastewater XX management of business and corporate risk; systems since that right was recognized by the United Nations in 2010. This commitment will be integrated directly into the XX management of risks in the area of health, safety and CSR. Group's new Sustainable Development Roadmap for 2016-2020. Supplier classification determines how frequently risks are SUEZ has thus contributed to the achievement of Millennium monitored. Scores for financial, solvency and environmental Development Goals and intends to increase its participation in risk are collected in the supplier database and updated daily the achievement of new Sustainable Development objectives. by an outsourced service provider. The expertise developed by the Group regarding access to basic SUEZ is committed to behaving toward suppliers with fairness, services, which has been consolidated under the "Services for transparency and impartiality, in accordance with regulations All" program since 1999 and deployed on every continent, now and according to the rules and principles of its Ethics Charter. puts SUEZ in a position to offer a full range of solutions for addressing the problem of access to water and wastewater SUEZ requires its business partners, suppliers and systems, in both developed and developing countries. subcontractors to implement practices that are compatible with the Group’s ethical, environmental and social commitments by In developed countries, SUEZ offers to assist its customers means of its Code of Ethics, Ethics Handbook and the Ethical in the determination and establishment of social water Guide to Supplier Relations. The Group uses a responsible policies that aim to guarantee access to service for persons in purchasing policy. The Group also operates a responsible economic difficulty. All programs are defined in concert with procurement policy based on joint efforts to cut costs, reduce local actors, whether they involve implementing a mediation
116 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
and social assistance program, setting up special pricing or In this respect, all SUEZ employees must ensure that their creating subsidy mechanisms, in order to address the specific words and actions are non-discriminatory, particularly in terms challenges of the region in the best manner possible. As an of age, gender, ethnic, social or cultural origin, religion, political example, in Dunkirk, France, a progressive pricing system was or union affiliation, lifestyle choices, physical characteristics set up that distinguishes between vital, useful and comfort or disability. water use. A symbolic price is applied progressively for the Our approach to Human Rights is fully integrated with our Ethics first 75 cubic meters used, which are considered vital; beyond management procedures: this volume, pricing increases progressively. XX Risk assessment and control; In order to address the major issues facing cities in developing countries regarding access to services, the Group has made the XX Application of appropriate policies; expertise and experience it has acquired available to customers XX Training; to improve and extend services in disadvantaged neighborhoods Verification and follow-up through internal and external with no services. The Group's know-how in the subject was XX audits and compliance procedures; especially of use in Argentina, in South Africa and Morocco, and more recently in India, where it combined knowledge of XX Alert procedures to respond to incidents. water businesses with mastery of social engineering practices In order to avoid the risk of destabilizing the Group's ethics to ensure good understanding in a local context, involvement policy by developing an isolated policy for human rights of communities throughout the project and establishment of issues, the Group decided to strengthen all of its policies and technical and sales solutions appropriate to the circumstances. its organizational structure by integrating it fully into issues As a result, the Water for Slums program, which was launched related to Human Rights. in July 2014 in Mumbai with the purpose of providing better water access conditions to 750,000 inhabitants of the city's An action plan was agreed upon jointly in 2015 by all of the slums by 2019, ultimately identified five separate neighborhood concerned departments (Human Resources, Purchasing, profiles and defined as many solutions processes for them. Information Systems and Sustainable Development). This action plan is based on a cross-functional approach that includes 1) The Group is convinced that the transfer of know-how and assessing existing risks and policies, 2) launching a study on 6 improving of skills at the local level are decisive elements in the development of regulations and standards on the domestic fighting unequal access to basic services, and it encourages and international levels, 3) proposing an improvement plan that innovative public-private partnerships through the discovery aims to enhance the Group’s actions in three areas: of solutions suitable to the issues and challenges of the local players. XX Working conditions (non-discrimination, promoting diversity, health and safety, social dialogue) throughout the Group's Human rights entire supply chain. The companies that make up SUEZ have long been committed XX The emerging issue of data protection, with particular to a culture of human rights and human dignity. attention to identifying and analyzing risks related to Smart Systems and data management. SUEZ’s action principles are in line with international standards, in particular: XX Right to water and wastewater systems: on the Group scale or the scale of some of its subsidiaries: For several years, XX the Universal Declaration of Human Rights, and additional SUEZ has been developing specific expertise to establish pacts; the right to water and wastewater systems and deployed it XX the International Labor Organization (ILO) conventions; in several parts of the world. While political determination XX the Guidelines for Multinational Enterprises adopted by the and responsibility are decisive elements in recognizing Organization for Economic Cooperation and Development and implementing a right of access to water and SUEZ (OECD); has no intention to overstep its own responsibilities, the Group nonetheless wishes, as a major operator in water XX the United Nations Convention against Corruption. and wastewater systems, to commit itself to promoting and Employees are asked to ensure that neither they nor colleagues displaying its desire to offer solutions that enable this to or Group entities take actions or decisions that harm the occur, while fully respecting the roles and responsibilities of integrity or dignity of any person. The Group also strives to each entity involved, especially its customers. To accomplish consistently defend human rights in sensitive situations, for this, a vast undertaking is currently in progress to define example, by upholding the rules on protection of property in a commitment that the Group could take on to ensure the sensitive regions of the world. promotion of this right.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 117 Overview of activities 6 Group environmental, corporate and social responsibility policy
Work together on solutions and engage in open dialogue with our In order to promote dialogue with stakeholders at all echelons stakeholders of the Company, (subsidiaries, entities and contracts), the Sustainable Development Department has been developing Stakeholder relations a method for planning and engaging in dialogue over several Dialogue with stakeholders is essential for our operational years in the form of a software package called the Stakeholder performance. The Group identified this as the fourth priority Toolkit, to be used by internal managers to identify stakeholders, in its Sustainable Development Roadmap for 2008-2012: discern their expectations and initiate a dialogue process and “Involve all stakeholders in fostering our development”. This actions with them on subjects of interest. A new version of commitment was included in the new 2012-2016 Sustainable this method was developed in 2014 that takes into account Development Policy in Commitment No. 10: “Work together on three years of user feedback and the most recent standards, solutions and engage in open dialogue with our stakeholders”. particularly in terms of analyses of the material issues. This update, as well as the drafting of a methods guide intended SUEZ actively participates in collective initiatives that promote for managers, will help pursue the industrialization of the the adoption of a shared language and guidelines regarding process within the Group. SUEZ is offering various training dialogue with stakeholders. programs for local coordinators regarding its implementation. On the international level, the Group is a member of the steering Two new training modules were developed in 2014 and tested committee of the Water Governance Initiative of the OECD. through pilot training sessions in 2015. The Group also offers a Within this context, SUEZ jointly oversaw the completion of a “mobilization program”, which is a change management method study on dialogue between water management stakeholders implemented by operational managers to support their teams published by the OECD in 2015 (Stakeholder Engagement for when dealing with changes that may affect their Company, such Inclusive Water Governance) and also supported the adoption of as the start or renewal of contracts, reorganization of staff, water governance guidelines intended for OECD Member States periods of media-driven tension, etc. (OECD Principles on Water Governance). All of these tools are available to operational staff on a voluntary In France, SUEZ also participated in the development of Principes basis. The Sustainable Development Department supports them directeurs pour un dialogue constructif avec les parties prenantes in the establishment of dialogue with stakeholders at the local (Guidelines for Constructive Dialogue with Stakeholders) under level. the aegis of Comité 21 and contributed to drafting the "Guide méthodologique pour un dialogue constructif avec les parties Reputation management prenantes" (a methodological guide for constructive dialogue As part of its activities, SUEZ has a strong responsibility toward with stakeholders), published in 2015. its stakeholders and remains very attentive to the manner in SUEZ is careful to integrate these guidelines into its internal which they perceive its activities. For the Group, reputation procedures and to structure its dialogue with stakeholders on is not only a matter of communication, it spans many areas the Group scale, based on relevant issues with regard to its and should involve numerous roles in the Company. It involves scope of activities. For this reason, since 2015, the Group has managing controversies, understanding how they arise and been designing and deploying a robust methodology to perform acting on them to improve our processes and determine the a “materiality analysis” to identify the most important issues key questions to which SUEZ can offer solutions. in its various markets, with regard to four criteria: financial This is why SUEZ has been implementing a reputation impact of issues, control, societal interest and expectation management strategy since January 2014 to structure and levels of stakeholders. In 2015, SUEZ launched a broad share this objective within the entire Company. This strategy online consultation with varied stakeholders (internal parties, is steered by a Reputation Management Director who works investors, customers, business partners and competitors, within the Sustainable Development Department. Many SUEZ governments and regulators, civil society, the educational and subsidiaries have already implemented strategies in this area. research community and the media) and the general public, Nonetheless, the introduction of the single brand in 2015 in which it assembled the opinions of 5,000 respondents in increases the need to listen to and analyze the perceptions of 49 countries through its surveys. This consultation was used stakeholders on different markets with different mentalities and to verify whether the most relevant issues for stakeholders to act on them in order to adapt our range of services and our were taken into account and processed in the strategic thinking manner of operating to their requirements. SUEZ’s reputation of the Company. These results will be of special assistance management strategy consists in basing its recommendations in developing the upcoming SUEZ Sustainable Development on the experience and tools developed by its subsidiaries and Roadmap, in relation with the expectations of stakeholders, and sharing them extensively within the Group, while simultaneously renewing dialogue mechanisms on the Group scale, such as the reinforcing them. regular stakeholder sessions with a panel of stakeholders that has been in place since 2007.
118 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
The Group action plan revolves around four objectives: it intends to reinforce the skills of local players and address the challenges of urban growth in partnership with specialist XX Assess players and by calling on the extensive know-how of the –– Integrate a Reputation Risk Method within our business Group’s employees. In this way, the Group set the objective process (risk analysis, Operations Committee). of training over 100 professionals and managers in water –– Assess and adapt our monitoring tools. and wastewater treatment services between 2012 and 2016. This training is provided to: –– Define a reputation dashboard to be implemented on different levels. –– operators of water and wastewater system services in developing countries through the ParisTech chair "SUEZ Act XX – Water for All"; since its establishment in 2009, this chair –– Develop an understanding of what reputation is, its has trained over 120 people from four continents; importance and how each employee can act on it. –– young people in developing countries through e-learning –– Develop a reputation management method and tools, with courses supported by training scholarships for UNESCO- a published guide. IHE courses. –– Implement our method and Stakeholders Toolkit software XX The SUEZ Initiatives Fund has an annual budget of €4 million. for planning and dialogue engagement with stakeholders This fund fulfills one of the Group’s solidarity commitments in our subsidiaries. under the Sustainable Development Roadmap for 2012- –– Implement two training modules: one on managing 2016. reputation on the site level, the other on managing It has set several priorities: reputation on a national or international level (multi- –– to support and assist with projects to provide access activity). to basic services – water, wastewater and waste XX Share management – for the poor in developing countries; –– Increase the level of sharing of information on reputation –– to support urgent action, especially through Aquassistance, issues for the Group. the Group’s employee volunteer association; 6 –– Share thematic notes on basic societal issues and new –– to support and assist with projects to integrate types of mobilization, like crowdsourcing. disadvantaged populations in France, through employment XX Manage alerts and controversies and training; –– Monitor and address controversies and crises. –– to increase the skill levels of local players and share their know-how, especially by means of academic partnerships –– Monitor the issues of our activities of most significance to for training water and wastewater professionals in stakeholders (see "materiality analysis "above). emerging countries (see below); Spread and share our expertise and knowledge –– to stimulate innovation, mainly through the SUEZ Initiatives Award at the Institut de France. Partnership and sponsorship initiatives With its partners, the Fund ensures that conditions exist To reinforce its regional roots and affirm its social responsibility for lasting improvements to the living standards of credentials, the Group operates a partnership and sponsorship populations concerned by the projects, and that the results policy based on support, dialogue and innovation. The actions are sustainable. supported by SUEZ focus on three main themes: XX In addition, in 2013 the Group signed a partnership Solidarity, in the area of essential services, especially through agreement with the Fédération française des banques the SUEZ Initiatives Fund, in line with the commitment “Promote alimentaires (French Federation of Food Banks) that access to essential water and wastewater services” of the combines volunteering skills with encouragement for Group’s Sustainable Development Roadmap for 2012-2016. Group employees to contribute to the Federation’s actions XX The Company intends to bolster its contribution in meeting by volunteering their skills. the challenge of providing sustainable access to water, Environment and biodiversity, through actions focused on wastewater and waste management services using the protecting the environment on sites that the Group operates and experience it has gained in this area. In these three areas, raising public awareness of these subjects, in accordance with
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 119 Overview of activities 6 Group environmental, corporate and social responsibility policy
the commitments to “Improve the environmental footprint of our the UN Global Compact initiative and We Mean Business. facilities and services” and “Spread and share our expertise and Since the United Nations Catalyze Action climate summit in knowledge” of the Group’s Roadmap for 2012-2016. September 2014, these organizations have contributed to structuring company commitments in favor of the climate, XX As an example, the Group’s commitment to biodiversity in France, which was recognized as a National Biodiversity formalized under the United Nations Framework Convention Strategy (SNB) by the French Minister for the Environment, on Climate Change through the establishment of the Non- Sustainable Development and Energy, features partnership State Actor Zone for Climate Action (NAZCA) platform, on and sponsorship initiatives that include participation in which SUEZ posted its 12 new commitments for the climate external working groups and specialized associations at the end of 2015. such as OREE, C3D (College of Directors for Sustainable Contribution to local development, in accordance with the Development) and EpE (Enterprises for the Environment). commitment in the Group’s Sustainable Development Roadmap Since 1997 in the United Kingdom, the Sita Trust fund has for 2012-2016 to “Contribute to a responsible economy through supported 3,750 environmental projects amounting to a total local employment and development”. of €140 million. Since 2010, SUEZ has been working with the XX In France, SUEZ has created the “Maison pour Rebondir” France Nature Environnement NGO to develop joint actions (literally, the “Bounce-Back House”, a halfway-house in the area of protecting water resources and conserving program) to support people in difficulty, to create social links biodiversity on sites operated by the Company. SUEZ has and to energize economically depressed neighborhoods by also contributed to partnerships with the National Park of helping young people and women to find steady jobs or set Guadeloupe, the League for the Protection of Birds (LPO) up their own businesses. This project, supported by the SUEZ and the Museum of Natural History to promote biodiversity Initiatives Fund, is fully consistent with the Group’s public in the waste treatment facilities that it manages. Lastly, the service commitment. SUEZ R&R France also incorporates an Agbar Foundation manages a number of projects linked to insertion structure via economic activity, SITA Rebond, which environmental protection, such as the restoration of surface specializes in assisting people in difficulty to get back into water along the Llobregat river. the workforce through waste management jobs. Since 2015, SUEZ has been a partner in World Ocean XX XX In November 2014 the Group signed a partnership agreement Day, an event set up by the International Oceanographic with MOUVES (Movement of Social Entrepreneurs) to Commission of UNESCO. This partnership is a confirmation promote the development of joint solutions between its of the Group's commitment to the struggle against coast subsidiaries and social entrepreneurship and solidarity and marine waters pollution. SUEZ is also a partner of the schemes in France based on new business models that th 7 Continent, Expedition MED, Goodplanet and Surfrider address social problems in the regions and that respond to Foundation Europe NGOs. the logic of economic performance. The Group also supports For SUEZ, the battle against climate change is an absolute several other structures that promote the social and priority, and the Group is also convinced that its action for solidarity economy, such as SOS Group and the association the climate should be part of a process based on exchanges Convergences. of perspective with all of the stakeholders. Furthermore, the Group supports several academic SUEZ, as an official partner of COP21, which took place partnerships in the area of economic and social sciences in Paris-le Bourget from November 30 to December 12, (the “City” Chair of Ponts ParisTech, the University Paris- 2015, as a contribution of its business skills, designed Dauphine Chair for the Economy of Public-Private the waste streams from the Le Bourget site and assumed Partnerships), access to water in emerging countries (the responsibility for their recovery, aiming for a rate of 100% of ParisTech “SUEZ ENVIRONNEMENT – Water for All” Chair in recovered waste. The Group was also a founding member of Montpellier), training for water professionals (UNESCO-IHE the Solutions COP21 initiative, in partnership with Vivapolis, Institute for Water Education in Delft and the “Management the French brand for the sustainable city internationally. of Water & Waste projects” Chair at ENGEES in Strasbourg). This initiative strove to promote climate solutions by non- The Group also supports various social science research government players, especially companies, and resulted in projects every year. the organization of an exhibition at the Grand Palais during the COP21 event. Ethics in practice SUEZ furthermore collaborated with several professional SUEZ has made ethics an indispensable element of its global organizations and coalitions committed to combating climate performance improvement. The Group’s policy in this respect change, such as the World Business Council for Sustainable is described in section 4.2.5 of the present document. Development, Caring for Climate, which stemmed from
120 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
Lobbying The Group is included in the register of interest representatives SUEZ engages in ongoing dialogue with public institutions at in the EU institutions and publishes the following information local, national, European and international levels. As a part of each year on the European Commission’s website: the Group’s its lobbying activities, the Group regularly communicates with centers of interest, its membership of associations linked with European institutions through position statements, direct contact the EU, costs of activities for representing interests to European and participation in professional bodies and think tanks. The institutions and the amounts and sources of financing received main issues addressed include such general subjects as public- from European Union institutions. sector contracts, adapting to and combating climate change, Furthermore, in 2013 it adopted an internal code of conduct efficient management of natural resources, and sustainable to guarantee the use of responsible practices in the area of production and consumption. They also cover issues that are lobbying, in line with its Code of Ethics. This code of conduct more directly related to the Group’s daily operations, such as the is implemented as part of the ethics system described in implementation of the Water Framework Directive, the Waste section 4.2.5 of the present document. Framework Directive, the Industrial Emissions Directive and inspection of waste transfer operations.
6
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 121 Overview of activities 6 Group environmental, corporate and social responsibility policy
6.8.4 Independent verifier's report on consolidated social, environmental and societal information presented in the management report
To the shareholders, XX to express, at the request of the Company, a reasonable In our quality as an independent verifier accredited by the assurance conclusion that the information selected by the COFRAC (1), under the number 3-1050, and as a member of Company and identified by the symbol XXX in chapters 6.8 the network of one of the Statutory Auditors of the company and 17 of the management report, has been established, in SUEZ ENVIRONNEMENT COMPANY, we present our report on all material aspects, in accordance with the Criteria. the consolidated social, environmental and societal information Our verification work was undertaken by a team of twelve established for the year ended on the 31/12/2015, presented people between October 2015 and February 2016 for an in chapters 6.8 and 17 of the management report, hereafter estimated duration of twenty weeks. referred to as the “CSR Information,” pursuant to the provisions We conducted the work described below in accordance with of the Article L. 225-102-1 of the French Commercial Code (Code the professional standards applicable in France and the Order de commerce). of May 13, 2013 determining the conditions under which an independent third-party verifier conducts its mission, and in ..Responsibility of the Company relation to the opinion of fairness and the reasonable assurance report, in accordance with the international standard It is the responsibility of the Board of Directors to establish ISAE 3000 (2). a management report including CSR Information referred to in the Article R. 225-105-1 of the French Commercial Code (Code de commerce), in accordance with the protocols used 1. ATTESTATION OF PRESENCE OF CSR INFORMATION by the Company, composed of protocols for HR, Health and We obtained an understanding of the Company’s CSR issues, Safety, and Environment (hereafter referred to as the “Criteria”), based on interviews with the management of relevant and of which a summary is included in chapters 6.8 and 17 departments, a presentation of the Company’s strategy on of the management report and available on request from the sustainable development based on the social and environmental Company’s Sustainable Development Department, Human consequences linked to the activities of the Company and its Resources Performance Department and Health and Safety societal commitments, as well as, where appropriate, resulting Department. actions or programmes. We have compared the information presented in the management ..Independence and quality control report with the list as provided for in the Article R. 225-105-1 of the French Commercial Code (Code de commerce). Our independence is defined by regulatory requirements, the Code of Ethics of our profession as well as the provisions in In the absence of certain consolidated information, we have the Article L. 822-11 of the French Commercial Code (Code verified that the explanations were provided in accordance de commerce). In addition, we have implemented a quality with the provisions in Article R. 225-105-1, paragraph 3, of the control system, including documented policies and procedures French Commercial Code (Code de commerce). to ensure compliance with ethical standards, professional We verified that the information covers the consolidated standards and applicable laws and regulations. perimeter, namely the entity and its subsidiaries, as aligned with the meaning of the Article L. 233-1 and the entities which ..Responsibility of the independent verifier it controls, as aligned with the meaning of the Article L. 233-3 of the French Commercial Code (Code de commerce) with the It is our role, based on our work: limitations specified in the Methodological Note in chapters XX to attest whether the required CSR Information is present 6.8.1.8 and 17.2.6 of the management report. in the management report or, in the case of its omission, Based on this work, and given the limitations mentioned above, that an appropriate explanation has been provided, in we confirm the presence in the management report of the accordance with the third paragraph of R. 225-105 of the required CSR information. French Commercial Code (Code de commerce) (Attestation of presence of CSR Information); XX to express a limited assurance conclusion, that the CSR Information, overall, is fairly presented, in all material aspects, in according with the Criteria (Fairness report regarding CSR Information);
(1) Scope available at www.cofrac.fr. (2) ISAE 3000 – Assurance engagements other than audits or reviews of historical information.
122 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Overview of activities Group environmental, corporate and social responsibility policy 6
2. LIMITED ASSURANCE ON CSR INFORMATION and the compilation of the information, and also verified their coherence and consistency with the other information Nature and scope of the work presented in the management report; We undertook interviews with around thirty people responsible XX at the level of the representative selection of entities that for the preparation of the CSR Information in the Sustainable we selected (2), based on their activity, their contribution to Development Department, Human Resources Performance the consolidated indicators, their location and a risk analysis, Department and Health and Safety Department, in charge of the we undertook interviews to verify the correct application of data collection process and, if applicable, the people responsible the procedures and undertook detailed tests on the basis of for internal control processes and risk management, in order to: samples, consisting in verifying the calculations made and linking them with supporting documentation. The sample XX assess the suitability of the Criteria for reporting, in relation selected therefore represented on average 50% of the to their relevance, completeness, reliability, neutrality, and headcount and between 48% and 94% of quantitative understandability, taking into consideration, if relevant, environmental information (3). industry standards; For the other consolidated CSR information, we assessed their XX verify the implementation of the process for the collection, consistency in relation to our knowledge of the Company. compilation, processing and control for completeness and consistency of the CSR Information and identify the Finally, we assessed the relevance of the explanations procedures for internal control and risk management provided, if appropriate, in the partial or total absence of certain related to the preparation of the CSR Information. information. We determined the nature and extent of our tests and We consider that the sample methods and sizes of the samples inspections based on the nature and importance of the CSR that we considered by exercising our professional judgment Information, in relation to the characteristics of the Company, allow us to express a limited assurance conclusion; an its social and environmental issues, its strategy in relation to assurance of a higher level would have required more extensive sustainable development and industry best practices. verification work. Due to the necessary use of sampling techniques and other limitations inherent in the functioning of For the CSR Information which we considered the most any information and internal control system, the risk of non- 6 important (1): detection of a significant anomaly in the CSR Information cannot XX at the level of the consolidated entity and of the Sustainable be entirely eliminated. Development Department, the Human Resources Performance Department and of the Health and Safety Conclusion Department, we consulted documentary sources and Based on our work, we have not identified any significant conducted interviews to corroborate the qualitative misstatement that causes us to believe that the CSR Information, information (organisation, policies, actions, etc.), we taken together, has not been fairly presented, in compliance implemented analytical procedures on the quantitative with the Criteria. information and verified, on a test basis, the calculations
(1) Environmental information (quantitative information): Energy production and energy consumption (primary and secondary sources) of the Group's water activities, Renewable energy production of the Group’s waste and water activities, Electricity consumption by the Group’s waste activities, Direct greenhouse gas (GHG) emissions from waste activities, from processes or equipment owned or controlled by the Group, and indirect emissions from waste activities associated with the consumption of electricity and heat by the Group, Indirect greenhouse gas (GHG) emissions from the Group’s water activities, Contribution to avoided GHG emissions of the Group’s waste and water activities, Technical yield of the networks of the Group’s water activities. Social information (quantitative information): Total headcount, Breakdown of workforce by status (manager; non manager), % of women in the workforce, % of female managers, Breakdown of workforce by age, Turnover, Voluntary turnover, Number of hires under permanent contracts, Number of hires under fixed-term contracts, Hiring rate, number of training hours during the year, % of trained employees, Gross salary, Frequency rate of occupational accidents with sick leaves, Severity rate of workplace accidents with sick leaves, Number of fatalities. Societal information (quantitative information): Annual amount of funds allocated by the SUEZ Initiatives Fund, Number of water/wastewater services professional in developing countries trained by the SUEZ Initiatives Fund. (2) Social information: Agbar, Lydec, Lyonnaise des Eaux France, SITA CZ, Sita Blanca, Sita El Beida, SUEZ Deutschland, SUEZ Recycling & Recovery Netherlands, SUEZ Recycling & Recovery UK, Sita Waste Services, Sita Centre Est, SUEZ Water Inc., Sita Île-de-France. Environmental information: Lyonnaise des Eaux France, SUEZ Water Inc., Agbar, Sita France, SUEZ Recycling & Recovery Netherlands, SUEZ Suomi (Finland), Sita Polska, SUEZ Recycling & Recovery UK and SUEZ Recycling & Recovery Pty (former Sita Australia). (3) 72% of the direct and indirect greenhouse gas (GHG) emissions of the Group (Carbon Profile).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 123 Overview of activities 6 Group environmental, corporate and social responsibility policy
3. REASONABLE ASSURANCE ON A SELECTION OF CSR INFORMATION by the XXX sign in the chapters 6.8 and 17 of the management report. Nature and scope of work We consider that this work allows us to express a reasonable Regarding the information selected by the Company and assurance opinion identified by the XXX sign in the chapters 6.8 identified by the sign XXX in the chapters 6.8 and 17 of the and 17 of the management report. management report, we undertook work of the same nature as those described in paragraph 2 above for the CSR Information Conclusion considered the most important, but in a more in-depth manner, In our opinion, the information selected by the Company and in particular in relation to the number of tests. identified by the XXX sign in the chapters 6.8 and 17 of the The sample selected represents 50% of the headcount and management report has been established, in all material between 66 and 94% of the environmental information identified aspects, in compliance with the Criteria.
Paris-La Défense, February 23, 2016 French original signed by: Independent Verifier Ernst & Young et Associés Alexis Gazzo Bruno Perrin Partner, Sustainable Development Partner
124 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Organizational Chart7
7.1 Simplified Group organization as of December 31, 2015 126
7.2 Presentation of the Group’s main subsidiaries 127
7.3 Relations with subsidiaries 127
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 125 Organizational Chart 7 Simplified Group organization as of December 31, 2015
7.1 Simplified Group organization as of December 31, 2015
SUEZ ENVIRONNEMENT COMPANY (S.A.)
100%
SUEZ environnement (S.A.S.)
Recycling & Recovery Europe Water Europe International
100% 100% 100% Sita France Degrémont OIS 100% LDE France 100% 100% 100% Suez Water Inc.* SUEZ UK* SUEZ Recycling 100% and Recovery UK* 40% Suez North America* 100% USG SUEZ Recycling 60% 100% and Recovery 100% SUEZ Safege Deutschland* 100% Sita Waste Deutschland* Acque Services 100% Toscane 75% SUEZ Recycling 25% 100% SFWD and Recovery 100% Netherlands* Suez Italia* Nuove Acque 50% Sino French 28.2% Holdings 85% Macao Water 100% SUEZ Holding 100% 12.4% ACEA Belgium* 100% SE India 100% Hisusa 100% 49% 100% Degrémont S.E. España Middle East 91.3% 8.7% 100% Agbar 100% Sembsita 100% SUEZ Recycling and 28.36% SUEZ R&R SUEZ Recycling Sita CZ Sita Polska Pacific Recovery Holdings Pty* Belgium* AB* Aguas Andinas 51% 100% Lydec
100% SUEZ Suomi Waste Morocco
* subsidiaries having already changed their name due to rebranding (in 2015 and 2016)
126 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Organizational Chart Relations with subsidiaries 7
7.2 Presentation of the Group’s main subsidiaries
The presentation of the Group’s main subsidiaries is found in chapter 6 of this document. Note 28 to the consolidated financial statements in chapter 20.1 gives the list of the Group’s main companies.
7.3 Relations with subsidiaries
SUEZ ENVIRONNEMENT COMPANY is a holding company. As of The Group has established a centralized cash management December 31, 2015, its sole shareholding was 100% of the share system for its main French and international subsidiaries, which capital of SUEZ environnement SAS. It carries the Group’s bond optimizes net cash positions at SUEZ environnement SAS level. debt (see chapter 10.3 of this Reference Document). Other cash flows within the Group consist primarily of loans On January 1, 2008, a tax consolidation group was created in granted by SUEZ environnement SAS to some of its subsidiaries. France between the Company and the subsidiaries in which In addition to cash flows related to cash management and it holds at least 95% of the capital. As a result of this tax financings, SUEZ environnement SAS receives dividends from group, SUEZ ENVIRONNEMENT COMPANY and each of the tax its subsidiaries; for fiscal year 2014, these dividends totaled group member companies have entered into tax consolidation €554.2 million, and were almost fully paid out in 2015. agreements. Every year, subsidiaries might leave or enter the consolidated tax group. When subsidiaries enter the In addition, SUEZ environnement SAS provides different types tax group, new agreements are concluded between SUEZ of services to other subsidiaries of the Group. In 2015, the total ENVIRONNEMENT COMPANY and each subsidiary entering the amount invoiced by SUEZ environnement SAS for these services group. amounted to €224.6 million. 7
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 127 128 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Real estate and equipment8
8.1 Group real estate and equipment 130
8.2 Environmental constraints that may affect the Group’s use of its fixed assets 133
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 129 Real estate and equipment 8 Group real estate and equipment
8.1 Group real estate and equipment
The Group operates several drinking water production plants, wastewater treatment plants and water distribution and wastewater collection networks. The Group also operates a number of waste treatment plants: incineration plants, sorting plants, landfills, composting platforms, hazardous waste treatment plants, etc. Information on some facilities and plants operated by the Group as of December 31, 2015, is provided in the table below:
Sector Country City/Area/State Activity Capacity WATER Australia Anstey Hill Production of drinking water 313,000 m3/day Happy Valley Production of drinking water 850,000 m3/day Hope Valley Production of drinking water 273,000 m3/day Perth Desalination plant 155,000 m3/day Sydney Production of drinking water 3,000,000 m3/day Bangladesh Saidabad Production of drinking water 280,000 m3/day Chile Santiago Production of drinking water 2,900,000 m3/day Santiago Wastewater treatment 1,340,000 m3/day China Baoding Production of drinking water 260,000 m3/day Changshu Production of drinking water 875,000 m3/day Chongqing Production of drinking water 876,000 m3/day Chongqing Tangjiatuo Wastewater treatment 400,000 m3/day Macao Production of drinking water 330,000 m3/day Qingdao Production of drinking water 726,000 m3/day Sanya Production of drinking water 245,000 m3/day Shanghai SCIP Production of industrial water 200,000 m3/day Tanggu Production of drinking water 280,000 m3/day Tanzhou Production of drinking water 150,000 m3/day Tianjin Production of drinking water 500,000 m3/day Zhengzhou Production of drinking water 300,000 m3/day Zhongshan Production of drinking water 1,000,000 m3/day Colombia Cartagena Production of drinking water 270,000 m3/day Egypt Gabal El Asfar Wastewater treatment 625,000 m3/day Alexandria Wastewater treatment 819,000 m3/day Spain Alicante Wastewater treatment 135,000 m3/day Barcelona Production of drinking water 900,000 m3/day Barcelona Wastewater treatment 525,000 m3/day El Prat Wastewater treatment 315,000 m3/day Granada Production of drinking water 286,000 m3/day Murcia-ESTE Wastewater treatment 121,000 m3/day Santander Wastewater treatment 159,000 m3/day Valladolid Wastewater treatment 214,000 m3/day
130 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Real estate and equipment Group real estate and equipment 8
Sector Country City/Area/State Activity Capacity WATER France Aubergenville Production of drinking water 132,000 m3/day Bordeaux Wastewater treatment 210,000 m3/day Bordeaux Production of drinking water 547,000 m3/day Clos de Hilde Wastewater treatment 100,000 m3/day Dijon Production of drinking water 125,000 m3/day Dijon Wastewater treatment 84,000 m3/day Grimonpont Wastewater treatment 285,000 m3/day La Feyssine Wastewater treatment 91,000 m3/day Le Pecq-Croissy Production of drinking water 160,000 m3/day Marseille (SERAM) Wastewater treatment 325,000 m3/day Mont Valérien Production of drinking water 108,000 m3/day Morsang Production of drinking water 225,000 m3/day Mougins Sicasil Production of drinking water 242,000 m3/day Nantes (Tougas) Wastewater treatment 111,500 m3/day Nice (Haliotis) Wastewater treatment 220,000 m3/day Strasbourg Wastewater treatment 242,000 m3/day Valenton Wastewater treatment 800,000 m3/day Viry-Châtillon Production of drinking water 120,000 m3/day India Bandhup Production of drinking water 990,000 m3/day Bisalpur Production of drinking water 400,000 m3/day Chembarambakkam Production of drinking water 530,000 m3/day Okhla Wastewater treatment 136,000 m3/day Rhitala Wastewater treatment 182,000 m3/day Sonia Vihar Production of drinking water 635,000 m3/day TK-Hali Production of drinking water 950,000 m3/day Indonesia Jakarta Production of drinking water 500,000 m3/day 8 Morocco Casablanca Production of drinking water 165,000 m3/day Casablanca Wastewater treatment 950,000 m3/day Mexico Ciudad Juarez Norte Wastewater treatment 140,000 m3/day Ciudad Juarez Sur Wastewater treatment 170,000 m3/day Panama Panama Wastewater treatment 238,000 m3/day Qatar Doha West Wastewater treatment 175,000 m3/day Czech Republic Brno Production of drinking water 193,000 m3/day United Kingdom Bristol Production of drinking water 552,000 m3/day Taiwan Kaohsiung Production of drinking water 450,000 m3/day USA Delaware Production of drinking water 136,000 m3/day Haworth Production of drinking water 610,000 m3/day Idaho Production of drinking water 356,000 m3/day Indianapolis Wastewater treatment 454,000 m3/day Jackson Wastewater treatment 473,000 m3/day Jersey City Production of drinking water 303,000 m3/day New Rochelle Production of drinking water 340,000 m3/day New York Production of drinking water 219,000 m3/day Springfield Wastewater treatment 254,000 m3/day
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 131 Real estate and equipment 8 Group real estate and equipment
Sector Country City/Area/State Activity Capacity RECYCLING Germany Neuwied Sorting and composting center 150,000 t/year AND Zorbau Energy recovery from waste 300,000 t/year RECOVERY Australia Cairns Composting 125,000 t/year Eastern Creek Non-hazardous landfill 550,000 t/year Epping Composting 65,000 t/year Kemps Creek Sorting/recycling center 135,000 t/year Lucas Heights Non-hazardous landfill 575,000 t/year Mindarie Mechanical and biological treatment 100,000 t/year Newline Road Non-hazardous landfill 200,000 t/year Raymond Terrace Sorting/recycling center 40,000 t/year Wingfield Sorting/recycling center 150,000 t/year Belgium Beveren ROX Energy recovery from waste 380,000 t/year Bruges Non-hazardous waste sorting and transfer station 84,000 t/year Brussels Energy recovery from waste 450,000 t/year Grimbergen Treatment of bottom ash 120,000 t/year Maasmechelen Sorting center 82,000 t/year Sleco – Beveren Energy recovery from waste 466,000 t/year Canada Edmonton Composting center 300,000 t/year China Hong Kong – NENT Non-hazardous landfill 810,000 t/year Hong Kong – WENT Non-hazardous landfill 2,300,000 t/year Hong Kong – West Kowloon Waste transfer center 990,000 t/year Shanghai SCIP Hazardous industrial waste incineration 60,000 t/year France Argenteuil Energy recovery from waste 185,000 t/year Bègles Energy recovery from waste 252,000 t/year Bessières Energy recovery from waste 170,000 t/year Carrières-sur-Seine Energy recovery from waste 140,000 t/year Créteil Energy recovery from waste 235,000 t/year Gennevilliers Pre-treatment of household waste 190,000 t/year Hersin-Coupigny Non-hazardous landfill 600,000 t/year La Roche-Molière Non-hazardous landfill 500,000 t/year Lagny Energy recovery from waste 150,000 t/year Les Aucrais Non-hazardous landfill 300,000 t/year Lyon Energy recovery from waste 165,000 t/year Pont-de-Claix Hazardous industrial waste incineration 80,000 t/year Roussillon Hazardous industrial waste incineration 115,000 t/year Satolas Non-hazardous landfill 300,000 t/year Vedène Energy recovery from waste 180,000 t/year Villeparisis Hazardous landfill 250,000 t/year Villeparisis Treatment of polluted soil 60,000 t/year Villers-Saint-Paul Energy recovery from waste 156,000 t/year Ivry-sur-Seine Energy recovery from waste 680,000 t/year
132 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Real estate and equipment Environmental constraints that may affect the Group’s use of its fixed assets 8
Sector Country City/Area/State Activity Capacity RECYCLING Netherlands Roosendaal Energy recovery from waste 260,000 t/year AND Amsterdam Non-hazardous waste transfer station 52,000 t/year RECOVERY Poland Radom Pre-treatment of industrial waste 95,000 t/year Ryman Non-hazardous landfill 220,000 t/year Starol – Chorzow Production of RDF 250,000 t/year Czech Republic Spovo Hazardous waste incineration 18,500 t/year Nemcice Hazardous and non-hazardous landfill 55,000 t/year United Kingdom Billingham-Teesside Energy recovery from waste 390,000 t/year Cleveland Energy recovery from waste 756,000 t/year Clifton Marsh Non-hazardous landfill 525,000 t/year Fareham Pre-treatment of non-hazardous waste 300,000 t/year Kirklees (Huddersfield) Energy recovery from waste 136,000 t/year Path Head Non-hazardous landfill 220,000 t/year Sidegate Lane Non-hazardous landfill 400,000 t/year Stoneyhill Non-hazardous landfill 100,000 t/year Whinney Hill Non-hazardous landfill 700,000 t/year Sultanate of Oman Mascate Non-hazardous landfill 700,000 t/year Taiwan Ren Wu Energy recovery from waste 400,000 t/year
At the beginning of a project, the client awards the Group the Group may or may not be the legal owner, but it almost always right to use pre-existing buildings and facilities, which are made controls the assets needed for the operations and provides for available for the duration of the contract. For the duration of the their maintenance and renewal, as necessary. contract, and depending upon the legal systems involved, the
8 8.2 Environmental constraints that may affect the Group’s use of its fixed assets
Environmental issues that may affect the use of the various facilities fully owned or operated by the Group are described in section 6.8.1 of this Reference Document.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 133 134 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial Review9
9.1 General Information 136 9.1.1 Introduction 136 9.1.2 Significant events in the period 136
9.2 Analysis of income statements 138 9.2.1 Explanations on main income statement items 138 9.2.2 Comparison of fiscal years ended December 31, 2015 and 2014 139
9.3 Financing and net debt 143 9.3.1 Cash flows in fiscal years 2015 and 2014 143 9.3.2 Net debt 147 9.3.3 Return on capital employed (ROCE) 148
9.4 Provisions 149
9.5 Contractual commitments 150 9.5.1 Commitments relating to Group financing 150 9.5.2 Contractual investment commitments 151 9.5.3 Lease-related commitments given 151 9.5.4 Operation-related commitments given 152
9.6 Parent Company financial statements 152
9.7 Outlook 152
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 135 Financial Review 9 General Information
The following financial review for the Group should be read in conjunction with the consolidated financial statements set out in chapter 20.1 of this document.
9.1 General Information
9.1.1 Introduction
In 2015, SUEZ recorded revenues increasing by +5.7%, due Net financial debt stood at €8,083 million at December 31, 2015. in particular to the vitality of its Water and International Net debt rose by +12.5% compared to December 31, 2014. It businesses. amounted to 118.8% of total equity at the end of 2015 versus Current operating income increased by +10.3% and EBITDA 102.6% at the end of 2014. Net debt/EBITDA was 2.9 at rose by +4.1% (see section 9.2.2 for details about these changes). year‑end 2015. Net income Group share amounted to €408 million, down by A dividend of €0.65 per share, for a total amount of (2) €10 million, or -2.3%, compared to 2014. €352.7 million , will be proposed to the SUEZ ENVIRONNEMENT COMPANY Shareholders’ Meeting convened to approve Free cash flow (1) before disposals and development capex was the financial statements for the fiscal year ending €1,047 million, down -4.2% compared with 2014. December 31, 2015.
The table below shows the key figures of the statement of financial position for the years 2015 and 2014:
In millions of euros 2015 2014 restated Non-current assets 19,592.5 18,991.5 Current assets 8,039.1 7,863.3 TOTAL ASSETS 27,631.6 26,854.8 Shareholders’ equity, Group share 5,419.8 5,486.2 Non-controlling interests 1,385.6 1,518.5 Other liabilities 20,826.2 19,850.1 TOTAL LIABILITIES 27,631.6 26,854.8
9.1.2 Significant events in the period
STRENGTHENING OF THE GROUP’S POSITIONS IN THE INDUSTRIAL Poseidon is a Canada-based company specialized in the design WATER MARKET and manufacture of compact and innovative flotation separation equipment for industrial water treatment. Acquisition of Poseidon The company generates annual revenues of CAD12.7 million The Group acquired Poseidon for CAD27.4 million (approximately (approximately €9 million). €20 million) in early 2015.
(1) The Group uses the free cash flow indicator to measure cash generated from existing operations before development capex. The reconciliation of cash generated from operations before financial expenses and income tax to free cash flow is presented in section 9.3.1 of this document. (2) Based on the number of shares as of December 31, 2015, excluding treasury shares.
136 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial Review General Information 9
Acquisition of B&V Group April 9, 2015. The ICSID ordered the Argentine Republic to pay The Group acquired B&V Group on February 2, 2015 for USD405 million for damages suffered through the termination GBP12.6 million (approximately €17 million). of the Aguas Argentinas concession contract for water and wastewater treatment in Buenos Aires. B&V Group is a British company specializing in chemical products for water treatment and equipment and services for In early August 2015, this decision was appealed by the the industrial sector. Argentine Republic before an ad hoc ICSID Committee. The company generates annual revenues of GBP11.7 million Aguas Argentinas, a Group subsidiary, was awarded the contract (approximately €16 million). for managing water and wastewater treatment services for the city of Buenos Aires in 1993. The contract was cancelled in 2006 by the government of Argentina. SUEZ IS BRINGING TOGETHER ALL OF ITS ACTIVITIES UNDER A SINGLE BRAND TO ACCELERATE ITS DEVELOPMENT On December 4, 2015, the ICSID handed down its decision and ordered the Argentine Republic to pay USD211 million to With operations in 70 countries, the SUEZ group uses 40 brands the shareholders of Aguas Provinciales de Santa Fe for the (Sita, Degrémont, Lyonnaise des Eaux, Agbar, Aqualogy, United termination of the concession contract. Water, Ondeo Industrial Solutions, SAFEGE, etc.) following international development and the integration of new business Aguas Provinciales de Santa Fe, a Group subsidiary, was awarded lines. the services management contract for water and wastewater in several cities of the province of Santa Fe. The contract was Since March 12, 2015 all the Group’s trademarks were federated terminated in 2006 by the government of Argentina. under a single brand: SUEZ environnement, focusing on the sustainable Managment of resources. ACQUISITION OF NANTAISE DES EAUX SERVICES On July 28, 2015, the Board of Directors decided to complete this transformation by transitionning from SUEZ environnement The Group acquired Nantaise des Eaux Services on April 28, to SUEZ, a short, strong name full of history. 2015 through its subsidiary Lyonnaise des Eaux; which specializes in drinking water production and distribution and The costs incurred by the rebranding and change of visual wastewater collection and treatment. identity are presented on a separate line of the income statement. The company operates mainly in the western part of France and in Guadeloupe; it had revenues of €38 million in 2014. NEW ISSUE AND REDEMPTION OF OUTSTANDING UNDATED DEEPLY SUBORDINATED NOTES SUEZ SIGNS AN AGREEMENT TO ESTABLISH A MAJOR ENVIRONMENTAL SERVICES PLAYER IN CHINA On March 30, 2015, SUEZ ENVIRONNEMENT COMPANY successfully completed a third issue of undated deeply On December 31, 2015, SUEZ and its partner New World Services subordinated notes in the amount of €500 million, following (NWS) finalized a cooperation agreement with Chongqing Water an inaugural issue in September 2010 and a subsequent issue Assets Management Co (CWA) to establish a major player in in June 2014. water and waste in China, Derun Environment. The new notes will bear a fixed interest rate of 2.5%, revised for Under this agreement, CWA's contribution to Derun Environment the first time in seven years following the issue on the basis of was a stake of 36.6% in Chongqing Water Group, a company the five-year swap rate, then every five years thereafter. listed on the Shanghai Stock Exchange, as well as 67.1% of the shares of Chongqing Sanfeng, a company that operates 9 Funds raised from this issue were partly used for the redemption waste-to-energy projects and provides related equipments and repayment of hybrid bonds issued in September 2010 and services. For their part, SUEZ and NWS contributed their bearing an interest rate of 4.82% for a nominal amount of 13.4% joint stake in Chongqing Water Group (CWG) to Derun €450 million. Environment in addition to a sum of cash. Upon completion of Following these two transactions, the Group’s outstanding the agreement, CWA owns 74.9% of Derun Environment and hybrid bonds amounted to €1 billion as at December 31, 2015. SUEZ and NWS own 25.1%. Derun Environment thus has a 50.04% stake in Chongqing ARBITRATION WITH THE REPUBLIC OF ARGENTINA: A FAVORABLE OUTCOME Water Group, whose market capitalization amounts to CNY FOR SUEZ 44.8 billion (€6.3 billion) at December 31, 2015, and 67.1% of SUEZ obtained a favorable judgment from the International Chongqing Sanfeng. The purpose of Derun Environment is to Center for Settlement of Investment Disputes (ICSID) on be a development platform for environmental services in China.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 137 Financial Review 9 Analysis of income statements
Upon completion of this transaction, the Group holds a SUEZ STRENGTHENS ITS POSITION IN AUSTRALIA BY ACQUIRING significant influence in both Derun Environment and CWG. THE SEMBCORP’S MINORITY STAKE IN SEMBSITA PACIFIC PTE LTD In accordance with the terms of IAS 28 “Investments in On September 18, 2015, SUEZ and Sembcorp Industries signed Associates and Joint Ventures”, the interest formerly held an agreement for the acquisition by SUEZ of Sembcorp's 40% in Chongqing Water Group was revalued on the date when stake in Sembsita Pacific, a company that owns 100% of Sita significant influence was exercised. Australia, for the amount of AUD458 million (approximately The revaluation gain on that date is recorded in the consolidated €312 million). income statement in the amount of €127 million. This transaction is an opportunity for SUEZ to accelerate its development through the full integration of its water, waste BOND ISSUES and construction activities in Australia, while simultaneously developing cross-selling activities and pursuing operational The Group's financial policy aimed at optimizing the cost of debt synergies in the short term. and extending maturities was continued in 2015. This transaction is financially accretive for SUEZ and is SUEZ ENVIRONNEMENT COMPANY issued several bonds in a compliant with the selective financial investment criteria total amount of €750 million as a part of this strategy. followed by the Group.
9.2 Analysis of income statements
9.2.1 Explanations on main income statement items
REVENUES PURCHASES Revenues generated by water supply are based on volumes Purchases primarily include purchases of unpurified water delivered to customers that are either individually metered intended for treatment prior to delivery to customers, as well and invoiced or estimated based on the output of the supply as purchases of equipment, parts, energy, combustibles and networks. recyclable materials. The price for wastewater services and wastewater treatment is either included in the water distribution invoice or is sent in OTHER OPERATING INCOME AND EXPENSES a separate invoice to the local authorities or industrial client. Other operating income includes reinvoicing direct charges and Revenues arising from waste collection are generally based on overheads. the tonnage collected and the service provided by the operator. Other operating expenses primarily include costs relating to Revenues from other forms of waste treatment (primarily subcontracting and other external services, maintenance and sorting and incineration) are based on volumes processed and repair costs for waste collection and treatment equipment, services rendered by the operator, plus the additional revenues production costs, water and waste treatment costs and from recovery operations, such as the sale of raw materials administrative costs. This item also includes other routine for sorting centers (paper, cardboard, glass, metals, plastics, operating expenses such as rental expenses, external personnel etc.) and the sale of energy (electricity or heat) for incinerators. costs, commissions and fees to intermediaries, and taxes other than corporate income tax. Revenues from engineering, construction and service contracts are determined using the percentage of completion method. Depending on the contract concerned, the stage of completion CURRENT OPERATING INCOME may be determined either based on the proportion that costs Current operating income is an indicator used to present a incurred to date bear to the estimated total costs of the contract, certain level of operating performance. It is a subtotal that or on the physical progress of the contract based on factors facilitates interpretation of the Group’s performance by such as contractually defined stages. excluding elements which, in the Group’s view, are insufficiently
138 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial Review Analysis of income statements 9
predictable due to their unusual, irregular or non-recurring Current operating income /(loss) nature. These elements relate to asset impairments, disposals, scope effects, restructuring costs and mark-to-market of - Net depreciation, amortization and provisions trading instruments. - Share-based payments (IFRS 2) (a) - Net disbursements under concession contracts (b) EBITDA + Share in net income of equity-accounted companies considered The Group uses EBITDA to measure its operating performance as core business and its ability to generate operating cash flows. EBITDA
EBITDA is not defined in IFRS and does not appear directly in (a) This item includes the allocation of stock options, bonus shares and payments the Group’s consolidated income statement. Current operating made by the Group in relation to Company savings plans (including employer’s income can be reconciled with EBITDA as follows: matching contributions or matching shares). (b) This item corresponds to the sum of the renewal expenditure relating to concessions and to changes in assets and liabilities for concession renewals.
The reconciliation of current operating income to EBITDA for 2015 and 2014 is set out in Note 3.4.1 to the consolidated financial statements (chapter 20.1 of this Reference Document).
9.2.2 Comparison of fiscal years ended December 31, 2015 and 2014
In millions of euros 2015 2014 Revenues 15,134.7 14,324.1 Purchases (2,945.5) (2,833.1) Personnel costs (3,818.4) (3,656.4) Depreciation, amortization and provisions (1,091.9) (1,097.7) Other operating income and expenses (6,163.8) (5,725.7) CURRENT OPERATING INCOME 1,115.1 1,011.2 Mark-to-market on operating financial instruments 0.6 (0.6) Impairment on property, plant and equipment, intangible and financial assets (80.4) (105.2) Restructuring costs (71.4) (58.0) Scope effects 0.9 82.4 Other gains and losses on disposals and non-recurring items 4.1 0.2 Costs related to rebranding and visual identity (27.5) - 9 INCOME FROM OPERATING ACTIVITIES 941.4 930.0 Share in net income of equity-accounted companies considered as core business 266.4 243.5 of which: share in net income of joint ventures 179.8 167.4 of which: share in net income of associates 86.6 76.1 INCOME FROM OPERATING ACTIVITIES AFTER SHARE OF NET INCOME OF EQUITY- ACCOUNTED COMPANIES CONSIDERED AS CORE BUSINESS 1,207.8 1,173.5 Financial expenses (510.6) (516.6) Financial income 89.1 110.9 NET FINANCIAL INCOME (LOSS) (421.5) (405.7) Income tax expense (173.0) (173.1) Share in net income of other equity-accounted companies - 5.8 NET INCOME 613.3 600.5 OF WHICH NON-CONTROLLING INTERESTS 205.7 183.3 NET INCOME GROUP SHARE 407.6 417.2
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 139 Financial Review 9 Analysis of income statements
OTHER INCOME ITEMS
In millions of euros 2015 2014 EBITDA 2,751.1 2,643.6 EBIT 1,380.9 1,254.7
REVENUES
In millions of euros 2015 2014 Change % change Water Europe 4,677.1 4,476.5 200.6 4.5% Recycling and Recovery Europe 6,356.8 6,323.5 33.3 0.5% International 3,997.6 3,422.2 575.4 16.8% Other 103.2 101.9 1.3 1.3% REVENUES 15,134.7 14,324.1 810.6 5.7%
SUEZ posted revenues of €15,135 million in 2015, up +5.7%. Water Europe posted organic revenue growth of +3.2% This growth is the result of the following elements: (+€142 million): XX Organic growth of +€388 million (+2.7%) broken down as XX Water France and Other Europe showed strong organic follows: growth of +1.1%, (+€25 million). This change is primarily due to the development of new services and to growth of –– growth in the International segment of +9.3% due to the vitality of all areas and all business lines; volumes following a positive summer; Agbar saw organic growth of +5.2% (+€117 million) mainly –– Water Europe displayed growth of +3.2% stemming from XX more positive changes in volume than the medium-term driven by price increases in Spain and Chile and by the trends in all countries, favorable tariff indexations in Chile increase in volumes of drinking water sold in Chile. and the development of the Advanced Solutions business; XX The scope effect amounted to +0.2%, or +€8 million. –– the Recycling and Recovery Europe segment experienced Changes in foreign currencies against the euro had a positive -1.1% in negative growth, featuring upward business impact on revenues (+€50 million or +1.1%) due mainly to the trends in the United Kingdom/Scandinavia and Benelux/ depreciation of the Chilean peso. Germany regions, but a drop in business in France. Recycling and Recovery Europe XX Favorable scope effects in the amount of +€69 million, up +0.5%, primarily due to the first consolidation of Process The Recycling and Recovery Europe segment contributed Group, B&V and Poseidon. €6,357 million to Group revenues in 2015, up €33 million (+0.5%) versus 2014. XX Favorable exchange rate impacts of +2.5% (+€354 million) due especially to the depreciation of the euro against the The segment continues to suffer from the adverse effect of US dollar and the British pound. lifeless industrial production in Europe and has been impacted by the significant drop in secondary raw materials prices of As of December 31, 2015, the Group generated 34% of its -21% for metals and -11% for plastics. However, new processing revenues in France and 31% outside Europe. capacities have been commissioned in the United Kingdom that have slightly increased volumes treated by +0.2%. Water Europe The Water Europe segment contributed €4,677 million to Group However, the situation is different in each country: an revenues in 2015, up €201 million (an increase of +4.5%). improvement in the UK/Scandinavia (+3.3% organic growth) and in the Benelux/Germany area (+2.2%), but a decline in France (-4.0%) and in Central Europe (-1.4%).
140 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial Review Analysis of income statements 9
The scope effect amounted to +0.1%, or +€7 million. XX Australia is growing by +1.6%, up +€15 million at constant Changes in foreign currencies against the euro had a positive exchange rates and scope of consolidation. This performance impact on revenues (+€94 million or +1.5%) due mainly to the is a result of both continued growth in volumes of waste appreciation of the British pound. treated (+4.8%) and an increase in the price of services, despite an adverse impact stemming from a drop in the oil International and gas business. The International segment contributed €3,998 million to Group Changes in foreign currencies against the euro had a positive revenues in 2015, up €575 million (+16.8%) versus 2014. impact on revenues (+€209 million or +6.1%) due mainly to the appreciation of the US dollar. Organic growth rose by +€313 million (+9.1%), reflecting the following trends: OPERATING EXPENSES XX Asia recorded very rapid increase of +21.5% (+€62 million) at constant exchange rates and scope of consolidation, Purchases based on growth in volumes of waste processed, increases Purchases amounted to €2,946 million in 2015, up €113 million in prices, especially for energy recovery and the beginning (+4.0%) versus 2014. of new construction contracts. XX North America displayed very strong growth of +12.2%, Personnel costs up +€89 million at constant exchange rates and scope of Personnel costs were €3,818 million in 2015, up €162 million consolidation, driven essentially by the start of the Nassau (+4.4%) versus 2014 (for a breakdown of personnel expenses, contract and an increase in volumes of water sold in the see Note 4.2 to the consolidated financial statements presented United States. in chapter 20.1 of this Reference Document). XX Africa/Middle East/India business unit is growing by +10.9%, up +€95 million, at constant exchange rates and scope of Depreciation, amortization and provisions consolidation; business in these regions has been assisted Net allocations to depreciation, amortization and provisions by the launching of new construction contracts in the Middle amounted to €1,092 million in 2015, down €6 million from 2014. East, notably the Mirfa project, as well as by increased water volume sales in Morocco (+0.9%). Other operating income and expenses XX The Europe/Latam (Latin America) business unit is showing Other operating income and expenses were -€6,164 million in a clear increase of +9.2%, or +€54 million, at constant 2015, a stark increase in expenses of €438 million versus 2014. exchange rates and scope of consolidation, the result of good performance of operations in all regions excluding France, which is lagging.
CURRENT OPERATING INCOME
In millions of euros 2015 2014 Change % change Water Europe 544.2 532.5 11.7 2.2% Recycling and Recovery Europe 231.7 259.5 (27.8) -10.7% 9 International 363.6 323.0 40.6 12.6% Other (24.4) (103.7) 79.3 76.5% CURRENT OPERATING INCOME 1,115.1 1,011.2 103.9 10.3%
The Group’s current operating income was €1,115 million in Water Europe 2015, up €104 million compared to 2014. This increase breaks The Water Europe segment contributed €544 million to the down as follows: Group’s current operating income in 2015, up +€12 million XX an organic growth of +€52 million (+5.2%); (+2.2%) versus 2014. This change is the result of a strong increase in volumes and rate indices in Chile, coupled with cost XX a scope effect of +€2 million (+0.2%); streamlining efforts, and it includes a modest exchange rate XX an exchange rate gain of +€50 million related primarily to gain of +€15 million. the depreciation of the euro against the Chilean Peso and the US dollar.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 141 Financial Review 9 Analysis of income statements
Recycling and Recovery Europe International The Recycling and Recovery Europe segment contributed The International segment contributed €364 million to the €232 million to the Group’s current operating income in 2015, Group’s current operating income in 2015, up €41 million down -€28 million (-10.7%) versus 2014. This change is the (+12.6%) versus 2014. this change is partly due to an exchange result of cost streamlining efforts that partially offset a mixed rate gain of +€32 million. economic climate in Europe, and includes a modest exchange rate gain of +€3 million.
EBITDA
In millions of euros 2015 2014 Change % change Water Europe 1,321.3 1,245.0 76.3 6.1% Recycling and Recovery Europe 766.4 743.0 23.4 3.1% International 797.2 728.1 69.1 9.5% Other (133.8) (72.5) (61.3) -84.6% EBITDA 2,751.1 2,643.6 107.5 4.1%
The Group’s EBITDA was €2,751 million in 2015, up +€108 million and equipment in the Recycling and Recovery Europe and Water (+4.1%) compared to 2014, with an organic growth of +0.3%. Europe operating segments.
INCOME FROM OPERATING ACTIVITIES Restructuring costs Income from operating activities in 2015 was €941 million, up In 2015, restructuring costs totaled -€71 million, against +€11 million, or +1.2%, versus 2014. -€58 million in 2014. At December 31, 2015, this item mainly included costs for adaptation plans related to the business The main items behind reconciliation between current operating slowdown in the Recycling and Recovery Europe and income and income from operating activities are detailed below. International segments.
Impairment on property, plant and equipment, intangible Costs of rebranding and visual identity and financial assets In 2015, outsourced service providers worked on changing the Impairment on property, plant and equipment, intangible brand and visual identity of the Company. Fees for this work, and financial assets for 2015 came to -€80 million, against together with costs for changing the brand and the Company's -€105 million in 2014, a change of €25 million. In 2015, as in visual identity, amounted to €27.5 million at December 31, 2015. 2014, this item mainly recognized impairment of property, plant
NET FINANCIAL INCOME
In millions of euros 2015 2014 Change % change Cost of net debt (363.4) (374.8) 11.4 +3.0% Other financial income and expenses (58.1) (30.9) (27.2) -88.0% NET FINANCIAL INCOME (421.5) (405.7) (15.8) -3.9%
The Group posted a net financial income of -€421.5 million The cost of net debt was -€363.4 million, versus -€374.8 million in 2015, an erosion of -€15.8 million compared with 2014 (see in 2014, with an average rate of 4.19% versus 4.45% in 2014. Note 6 to the consolidated financial statements in chapter 20.1 The average term of net debt was 6.9 years at the end of 2015. of this Reference Document).
142 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial Review Financing and net debt 9
INCOME TAX EXPENSE NET INCOME GROUP SHARE The Group’s income tax expense in 2015 was -€173 million. Net income Group share amounted to €408 million, down by This amount is stable in relation to 2014 (-€173 million in 2014). €10 million, or -2.3%, compared to 2014. The difference between the Group’s effective tax rate in 2015 (33.3%) and the prevailing rate in 2015 in France (38.0%) is mainly due to lower tax rates in the various countries where the Group operates.
9.3 Financing and net debt
9.3.1 Cash flows in fiscal years 2015 and 2014
In millions of euros 2015 2014 Cash flows from/(used in) operating activities 1,991.5 1,973.1 Cash flows from/(used in) investing activities (1,350.3) (860.3) Cash flows from/(used in) financing activities (811.1) (1,277.6) Impact of changes in foreign exchange rates and other 0.1 22.2 TOTAL CASH FLOW FOR THE PERIOD (169.8) (142.6) Cash and cash equivalents at the beginning of the year 2,248.8 2,391.4 Cash and cash equivalents at the end of the year 2,079.0 2,248.8
CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES
In millions of euros 2015 2014 Change % change EBITDA 2,751.1 2,643.6 107.5 4.1% + Net disbursements under concession contracts (271.5) (277.9) 6.3 2.3% + Impairment of current assets (11.5) (34.5) 23.0 66.7% + Impact of restructuring operations (52.9) (82.3) 29.4 35.7% 9 + Dividends received from joint ventures and associates 102.4 280.1 (177.7) -63.4% - Net allocation to provisions for employee benefits (64.7) (23.1) (41.6) -180.1% + Acquisition costs of subsidiaries - (2.1) 2.1 -100.0% + Costs linked to rebranding (27.5) - (27.5) - - Share in net income of equity-accounted companies considered as core business (266.4) (243.5) (22.9) -9.4% CASH FLOWS GENERATED FROM OPERATIONS BEFORE INCOME TAX AND FINANCIAL EXPENSES 2,159.0 2,260.3 (101.3) -4.5% Tax paid (153.8) (163.1) 9.3 5.7% Change in working capital requirement (13.7) (124.1) 110.4 89.0% CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES 1,991.5 1,973.1 18.4 0.9%
Cash flows from operating activities amounted to €1,991 million in 2015, up by €18 million versus 2014.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 143 Financial Review 9 Financing and net debt
This change mainly reflects: the drop in dividends received from joint ventures and associates (-€178 million) due to the exceptional nature of XX improvement in the change of working capital requirements of +€110 million; income from the disposal of the CEM by SFH in 2014, which was paid out by SFH in the form of dividends; XX a drop in cash flows from operations before financial and income tax expenses (-€101 million), primarily related to XX a drop in tax paid of + €9 million.
CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES
In millions of euros 2015 2014 Change % change Investments in property, plant and equipment and intangible assets (1,276.5) (1,076.6) (199.9) -18.6% Financial investments (141.5) (194.3) 52.8 27.2% Including acquisitions of entities net of cash and cash equivalents acquired (112.3) (178.9) 66.6 37.2% Including acquisitions of available-for-sale securities (29.2) (15.4) (13.8) -89.6% Disposals of property, plant and equipment and intangible assets 54.1 47.2 6.9 14.6% Disposals of entities net of cash and cash equivalents sold 55.7 79.6 (23.9) -30.0% Disposals of available-for-sale securities 11.9 47.4 (35.5) -74.9% Interests received on non-current financial assets 7.6 13.0 (5.4) -41.5% Dividends received from non-current financial assets 10.7 29.3 (18.6) -63.5% Change in loans and receivables issued by the Company and others (72.3) 194.1 (266.4) -137.2% CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES (1,350.3) (860.3) (490.0) -57.0%
Cash flows used in investing activities were -€1,350 million Maintenance and development capital expenditure and free cash flow as of December 31, 2015, versus -€860 million as of Within “Investments in property, plant and equipment and December 31, 2014. intangible assets”, the Group distinguishes: Total investments in property, plant and equipment and XX maintenance capital expenditure, corresponding to intangible and financial assets were up by +€147 million, investments incurred to replace equipment and machinery resulting from the rise in property, plant and equipment and operated by the Group, as well as investments made in order intangible assets, primarily with an increase of +€85 million to comply with new regulations; and with relation to the previous year in investments in regulated (1) businesses in the USA and in Chile, and several specific XX development capital expenditure , corresponding to major investment projects such as the construction of new investments incurred to build new facilities for operation. waste recycling capacities in the United Kingdom for a total of €30 million, the new IT system for invoicing in Water France in the amount of €24 million and €20 million as part of a water contract in Marseille.
(1) Total development capital expenditure (€631.0 million in 2015 versus €482.4 million in 2014) breaks down as follows in 2015: €301.4 million for the Water Europe segment, €140.0 million for the Recycling and Recovery Europe segment, and €189.6 million for the International segment.
144 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial Review Financing and net debt 9
The maintenance capital expenditure as of December 31, 2015 and 2014 is presented in the following table:
In millions of euros 2015 2014 TOTAL MAINTENANCE CAPITAL EXPENDITURE(a) (645.5) (594.2) Of which maintenance capital expenditure (615.6) (650.8) Of which change in maintenance asset supplier debt (b) (29.9) 56.6
(a) The total amount of maintenance capital expenditure breaks down as follows in 2015: €231.2 million for the Water Europe segment, €253.4 million for the Recycling and Recovery Europe segment, €144.3 million for the International segment and €16.6 million for the Other segment. The breakdown was as follows as of December 31, 2014: €216.3 million for the Water Europe segment, €223.7 million for the Recycling and Recovery Europe segment, €143.4 million for the International segment and €10.8 million for the Other segment. (b) Change in trade payables concerning the acquisition of maintenance-related property, plant and equipment and intangible assets.
The Group uses free cash flow as an indicator to measure cash generation from the Group’s existing operations before development capital expenditure. The reconciliation of cash generated from operations before income tax and financial expenses with free cash flow as of December 31, 2015 and 2014 is presented in the following table:
In millions of euros 2015 2014 Cash flows from operations before financial income and income tax 2,159.0 2,260.3 Total maintenance capital expenditure (645.5) (594.2) Change in working capital requirement (13.7) (124.1) Tax paid (153.8) (163.1) Financial interest paid (351.4) (362.8) Financial interest received from cash and cash equivalents 27.5 33.9 Interests received on non-current financial assets 7.6 13.0 Dividends received from non-current financial assets 10.7 29.3 Other 6.7 0.2 FREE CASH FLOW 1,047.1 1,092.5
Free cash flow came to €1,047 million at December 31, 2015 In 2015, the breakdown of free cash flow by segment was as against €1,093 million at December 31, 2014, a decline of follows: €45 million. In 2014, free cash flow included the cash impact XX Water Europe segment: €680.1 million; of +€129 million from the disposal of CEM, which was repaid in the form of dividends paid by SFH, a company consolidated XX Recycling and Recovery Europe segment: €322.0 million; by the equity method. XX International segment: €179.8 million; 9 XX Other segment: -€134.9 million.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 145 Financial Review 9 Financing and net debt
CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES
In millions of euros 2015 2014 Change % change Dividends paid (571.2) (581.4) 10.2 1.8% Repayment of borrowings (789.4) (1,379.5) 590.1 42.8% Change in financial assets at fair value through income 11.5 27.8 (16.3) -58.6% Financial interest paid (351.4) (362.8) 11.4 3.1% Financial interest received on cash and cash equivalents 27.5 33.9 (6.4) -18.9% Flows on financial derivatives qualifying as net investment hedges and compensation payments on financial derivatives (103.1) (28.9) (74.2) -256.7% Increase in borrowings and long-term debt 1,256.4 944.2 312.2 33.1% Increase/decrease in share capital - 109.7 (109.7) -100.0% Partial redemption of undated deeply subordinated notes (457.9) (312.4) (145.5) -46.6% Issue of undated deeply subordinated notes net of issuance costs 494.5 493.5 1.0 0.2% Issue of OCEANE (equity component) - 35.2 (35.2) -100.0% Purchase/sale of treasury shares (0.2) (35.5) 35.3 99.4% Change in share of interests in controlled entities (327.8) (221.4) (106.4) -48.1% CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES (811.1) (1,277.6) 466.5 36.5%
Cash flows used in financing activities amounted to -€811 million XX net impact of transactions concerning undated deeply at December 31, 2015, up +€467 million from December 31, subordinated notes in the amount of +€36.6 million; 2014. XX acquisition of Sembcorp's direct stake in Sembsita Pacific Cash flow from financing activities in 2015 of -€811 million is for -€312 million. due mainly to: The reconciliation of the changes in financial debt (excluding XX the September 2015 bond issue with a nominal amount of derivatives) presented in Note 13.2.1 of chapter 20.1 of this €500 million, and a 10-year maturity; document, for +€706.7 million, to the increase in borrowings and long-term debt of +€467.0 million presented in the consolidated XX -€386 million in cash dividends paid by SUEZ ENVIRONNEMENT COMPANY, including €27 million related statement of cash flows, consists of the following items: to the coupon of the undated deeply subordinated notes, and XX Cash flow from derivatives of -€111.9 million; €9 million corresponding to the French 3% tax on dividends XX Changes in fair value and amortized cost of -€0.5 million; distributed; XX Foreign exchange adjustments of -€100.4 million; XX -€184 million corresponding to dividends paid to non- controlling interests by other Group companies; XX Other items for -€26.9 million.
146 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial Review Financing and net debt 9
9.3.2 Net debt
NET DEBT AS OF DECEMBER 31, 2015 AND 2014
In millions of euros 2015 2014 Change % change Bonds 7,435.0 6,462.4 972.6 15.1% Commercial paper 786.5 854.0 (67.5) -7.9% Draw-downs on credit facilities 127.2 272.1 (144.9) -53.3% Borrowings under finance leases 333.8 370.8 (37.0) -10.0% Other bank borrowings 727.6 718.2 9.4 1.3% Other borrowings 182.1 119.0 63.1 53.0% TOTAL BORROWINGS 9,592.2 8,796.5 795.7 9.0% Overdrafts and current accounts 570.1 647.1 (77.0) -11.9% TOTAL OUTSTANDING BORROWINGS 10,162.3 9,443.6 718.7 7.6% Financial assets measured at fair value through income excluding financial derivative instruments (59.9) (62.5) 2.6 4.2% Financial assets relating to financing - (2.5) 2.5 100.0% Cash and cash equivalents (2,079.0) (2,248.8) 169.8 7.6% TOTAL NET FINANCIAL DEBT (EXCLUDING DERIVATIVE FINANCIAL INSTRUMENTS AND AMORTIZED COST) 8,023.4 7,129.8 893.6 12.5% Impact of derivative financial instruments and amortized cost 59.8 55.8 4.0 7.2% NET DEBT 8,083.2 7,185.6 897.6 12.5%
Net debt was €8,083 million as of December 31, 2015, versus XX losses on net investment hedge derivatives generated an €7,186 million as of December 31, 2014. This increase was increase of €103.1 million in net debt; mainly due to: XX excess cash generated by the Group’s activities generated XX the payment of cash dividends to shareholders of SUEZ a decrease in net debt of €471.1 million. ENVIRONNEMENT COMPANY amounting to €359.3 million Net debt amounted to 118.8% of total equity at the end of 2015 (tax of 3% on distributions of €9.0 million included); versus 102.6% at the end of 2014. The Net Debt/EBITDA ratio XX the payment of cash dividends to minority shareholders of was 2.9 at year-end 2015, up in comparison to year-end 2014 subsidiaries amounting to €183.9 million; (2.7 at December 31, 2014). XX the purchase of 40% of Sembcorp's shares in Sembsita for As of December 31, 2015, the Group had undrawn confirmed 9 the amount of €311.7 million (AUD485 million); credit facilities of €2,021.1 million. XX the exchange rate variations resulted in an increase of €203.5 million in net debt;
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 147 Financial Review 9 Financing and net debt
9.3.3 Return on capital employed (ROCE)
ROCE is calculated by dividing net operating profit after taxes Current tax used in the calculation of NOPAT is the tax payable (NOPAT) for the period (see details below) by the opening capital on recurring operations and does not include the tax due on employed adjusted for the scope effects on aprorata temporis non-recurring operations. basis as well as for material foreign exchange rate effects.
The calculation of NOPAT, capital employed and return on capital employed for 2015 and 2014 are presented in the following tables:
In millions of euros 2015 Published in 2014 EBIT 1,380.9 1,254.7 Share in net income of other equity-accounted companies - 5.8 Dividends 9.7 24.9 Interest and income from receivables and current assets 12.5 15.4 Other financial income and expenses (68.8) (56.4) Income tax expense (166.5) (142.8) NOPAT 1,167.8 1,101.6
In millions of euros 2015 Published in 2014 Goodwill (net) 3,261.9 3,094.9 Property, plant and equipment and intangible assets (net) 12,285.1 12,064.0 Available-for-sale securities 163.7 297.5 Investments in associates 747.7 507.2 Investments in joint ventures 421.3 436.3 Provisions (1,697.6) (1,769.1) Impact of material foreign exchange fluctuations and scope effects 559.6 68.1 Other (885.9) (607.1) CAPITAL EMPLOYED AT JANUARY 1 (a) 14,855.8 14,091.8
(a) Opening capital employed, adjusted for material scope and foreign exchange effects.
The amount for available-for-sale securities used to calculate XX net other assets and other liabilities of -€2,979.0 million; the capital employed does not include changes in the fair value XX actuarial gains and losses on pensions of +€72.0 million; of financial assets recognized in equity. XX loans and receivables at amortized cost of +€840.0 million; “Other” of -€885.9 million includes: and net trade receivables and payables of +€918.9 million; XX XX inventories of +€262.2 million.
148 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial Review Provisions 9
In millions of euros NOPAT Capital employed ROCE (a) 2015 1,167.8 14,855.8 7.9% Published in 2014 1,101.6 14,091.8 7.8%
(a) To be compared to the weighted average cost of capital (WACC) estimated at 6.3% for 2015 (same for 2014).
ROCE by segment breaks down as follows: XX in 2014: Water Europe segment: 7.1%, Recycling and Recovery Europe segment: 4.4%, International and Other: 13.2%. XX in 2015: Water Europe segment: 7.7%, Recycling and Recovery Europe segment: 5.3%, International and Other: 10.8%;
9.4 Provisions
The movements in provisions between December 31, 2015 and December, 31, 2014 are presented in the following table:
Change
In millions of euros 2015 2014 €M In % Pensions and other post-employment and long term benefits 671.1 774.3 (103.2) -13.3% Sector-related risks 85.4 113.6 (28.2) -24.8% Warranties 24.0 24.9 (0.9) -3.6% Disputes, claims, and tax risks 168.6 172.2 (3.6) -2.1% Site restoration 571.1 556.6 14.5 2.6% Restructuring costs 47.0 25.4 21.6 85.0% Other contingencies 384.6 327.7 56.9 17.4% TOTAL PROVISIONS 1,951.8 1,994.7 (42.9) -2.2%
The main provisions as of December 31, 2015 were the following: XX provisions for other contingencies, which amounted to €385 million in 2015, up €57 million compared to XX provisions for pensions and other post-employment and long-term benefits, which in 2015 were €671 million, down December 31, 2014. Under this item are mainly included -€103 million compared to December 31, 2014, of which miscellaneous employee-related and environment-related 9 +€72 million constituted actuarial gains. For a detail of contingencies, and various business risks; provisions for pensions and other post-employment and XX provisions for disputes, claims, and tax risks amounted long term benefits, see Note 18 to the consolidated financial to €169 million in 2015, down -€4 million compared to statements in chapter 20.1; December 31, 2014; XX provisions for site restoration, which amounted to XX provisions for sector-related risks, which totaled €85 million €571 million in 2015, up €15 million from December 31, in 2015, down -€28 million compared to December 31, 2014. 2014. The purpose of these provisions and the methods This item primarily includes provisions for risks relating to for calculating them are explained in Note 17.4 to the court proceedings involving the Argentinean contracts and consolidated financial statements (chapter 20.1 of this to warranties given in connection with divestments that are Reference Document); likely to be called upon.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 149 Financial Review 9 Contractual commitments
9.5 Contractual commitments
9.5.1 Commitments relating to Group financing
FINANCIAL DEBT The Group’s total outstanding financial debt and its repayment schedule as of December 31, 2015 are set out in the following table:
In millions of euros Total 2016 2017 2018 2019 Beyond 2019 Total borrowings 9,592.2 1,171.8 632.4 446.8 1,049.1 6,292.1 Overdrafts and current accounts 570.1 570.1 OUTSTANDING FINANCIAL DEBT 10,162.3 1,741.9 632.4 446.8 1,049.1 6,292.1
SECURED PLEDGED AND MORTGAGED ASSETS Assets pledged and mortgaged as collateral for borrowings amounted to €9.4 million at December 31, 2015 against €124.7 million at December 31, 2014. The maturities of these commitments are as follows:
In millions of euros December 31, 2015 December 31, 2014 2015 - 0.9 2016 0.5 0.1 2017 0.3 0.1 2018 0.1 0.1 2019 0.1 0.1 Beyond 8.4 123.4 TOTAL 9.4 124.7
FINANCING COMMITMENTS Financing commitments provided or received by the Group in respect of the fiscal years ended on December 31, 2015 and December 31, 2014 are presented in the following table:
In millions of euros December 31, 2015 December 31, 2014 Personal securities provided for borrowings 1,055.8 1,091.1 TOTAL COMMITMENTS GIVEN 1,055.8 1,091.1 Financing commitments received 2,021.1 2,368.9 TOTAL COMMITMENTS RECEIVED 2,021.1 2,368.9
Commitments received related to financing mainly concern undrawn confirmed credit facilities. Personal securities cover the repayment of the principal amount and interest on the debt if the latter is not recognized as a liability on the Group’s statement of financial position. Guarantees are also provided in the context of the receivables securitization program for up to €396 million.
150 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial Review Contractual commitments 9
9.5.2 Contractual investment commitments
CONTRACTUAL COMMITMENTS TO INVEST IN PROPERTY, PLANT, AND EQUIPMENT In the ordinary course of their operations, certain Group companies have also entered into commitments to purchase, and related third parties to deliver, property, plant, and equipment. These commitments break down by maturity as follows:
In millions of euros December 31, 2015 December 31, 2014 2015 - 133.9 2016 237.7 43.5 2017 118.5 55.0 Beyond 190.3 70.4 TOTAL 546.5 302.8
This change is primarily a result of the increase in investment OTHER CONTRACTUAL INVESTMENT COMMITMENTS commitments for property, plant and equipment at Agbar The Group made various commitments to invest in intangible in the amount of +€142 million related to new investments, assets, and to a lesser extent to the purchase of equity including Mapocho, and the increase in investments in investments, in the total amount of €426 million as of SUEZ Recycling & Recovery UK of +€94 million on the Surrey December 31, 2015. These other investment commitments Eco Park project. amounted to €501 million as of December 31, 2014.
9.5.3 Lease-related commitments given
COMMITMENTS RELATED TO FINANCE LEASES The main finance leases entered into by the Group concern the incineration plants of Novergie and Torre Agbar as a result of Agbar taking over in 2010, the rights and obligations of the finance lease previously linking Azurelau to Caixa, the owner and financial leaseholder of the building. The future minimum lease payments under these leases were as follows as of December 31, 2015 and 2014:
Future minimum lease payments Future minimum lease payments at Dec. 31, 2015 at Dec. 31, 2014
In millions of euros Undiscounted value Discounted value Undiscounted value Discounted value During year 1 54.5 53.9 51.1 50.6 9 During year 2 and up to year 5 inclusive 207.1 200.7 236.6 226.7 Beyond year 5 97.0 79.7 115.9 94.3 TOTAL 358.6 334.3 403.6 371.6
COMMITMENTS RELATED TO OPERATING LEASES Future minimum lease payments under non-cancellable operating leases can be analyzed as follows:
In millions of euros December 31, 2015 December 31, 2014 During year 1 211.8 231.7 During year 2 and up to year 5 inclusive 504.3 410.4 Beyond year 5 401.5 356.8 TOTAL 1,117.6 998.9
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 151 Financial Review 9 Parent Company financial statements
9.5.4 Operation-related commitments given
Commitments given in relation with operations amounted to performance bonds given on the signature of contracts or €3.2 billion as of December 31, 2015, versus €2.7 billion in concession arrangements. The increase of €0.5 billion is 2014. They concern guarantees given by the Group in respect primarily due to new guarantees on the Nassau contract in of contracts and markets, including bid bonds accompanying the United States and new guarantees in the United Kingdom, tender offers, advance payment bonds and completion or the Netherlands and Germany.
9.6 Parent Company financial statements
See chapter 20.3 of this Reference Document, which also includes the position of accounts payable by maturity.
9.7 Outlook
See section 6.3.4 of this Reference Document.
152 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Cash and Shareholders’ Equity10
10.1 Company shareholders’ equity 154
10.2 Source and amount of the issuer’s cash flows and description of cash flows 154 10.2.1 Cash flow from operating activities 154 10.2.2 Cash flows from investing activities 155 10.2.3 Cash flows from financing activities 155
10.3 Borrowing terms and issuer’s financing structure 155 10.3.1 Debt structure 155 10.3.2 Major transactions in 2015 156 10.3.3 Group rating 156
10.4 Restrictions on the use of capital 156
10.5 Expected sources of financing to meet commitments relating to investment decisions 157 10.5.1 Contractual commitments 157 10.5.2 Expected sources of financing 157
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 153 Cash and Shareholders’ Equity 10 Company shareholders’ equity
10.1 Company shareholders’ equity
Total shareholders’ equity at December 31, 2015 amounted to outstanding undated deeply subordinated notes in the amount €6,805.4 million, down €199.3 million compared to December 31, of +€36.6 million and by the acquisition by SUEZ from Sembcorp 2014. This change includes the impact of dividend payments of its 40% stake in Sembsita Pacific for -€311.7 million (see in cash for fiscal year 2014 in the amount of -€527.3 million Note 2.8 of chapter 20.1 of this Reference Document for more and -€26.5 million paid as coupon relating to the undated on details on these transactions). deeply subordinated notes. It also includes foreign exchange Group net debt (including amortized cost and impact of derivative adjustments (+€115.6 million), changes in actuarial gains and instruments) was €8,083 million as of December 31, 2015, losses (+€75.9 million), and net income for fiscal year 2015 versus €7,186 million as of December 31, 2014. Consequently, (+€613.3 million). In addition, in 2015, total shareholders’ the net debt/EBITDA ratio was 2.9 as of December 31, 2015. equity was affected by the new issue and redemption of
10.2 Source and amount of the issuer’s cash flows and description of cash flows
10.2.1 Cash flow from operating activities
CASH FLOW FROM OPERATIONS BEFORE FINANCIAL INCOME/(EXPENSE) AND INCOME TAX
In millions of euros 2015 2014 Gross change in % Water Europe 1,035.8 974.2 6.3% Recycling and Recovery Europe 632.8 663.3 -4.6% International 492.5 602.8 -18.3% Other (2.1) 20.0 -110.5% TOTAL 2,159.0 2,260.3 -4.5%
Cash flows from operations before financial income/(expense) and income tax came to €2,159 million at December 31, 2015, down -4.5% compared with 2014. In total, operating activities generated a cash surplus of nearly €2.0 billion in 2015.
154 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Cash and Shareholders’ Equity Borrowing terms and issuer’s financing structure 10
10.2.2 Cash flows from investing activities
Cash flows from investing activities in 2015 totaled XX development capital expenditure of €631.0 million €1,350 million and included: (€482.4 million in 2014), broken down by segment as follows: €301.4 million for the Water Europe segment, XX financial investments of €141.5 million (€194.3 million in 2014), including €36.5 million for acquisitions in the Water €140.0 million for the Recycling & Recovery Europe segment Europe segment, €41.4 million in the Recycling and Recovery and €189.6 million for the International segment. Europe segment, €53.2 million in the International segment Disposals in 2015 represented €121.7 million, versus and €10.4 million in the Other segment; €174.2 million in 2014. In 2015, the primary impact came from the collection by Lyonnaise des Eaux France of the proceeds XX maintenance capital expenditure of €645.5 million (€594.2 million in 2014), including €231.2 million for the from the sale of SADET that took place in 2014. Water Europe segment, €253.4 million for the Recycling In total, cash flows from investing activities resulted in a & Recovery Europe segment, €144.3 million for the cash outflow of €1,350 million in 2015, versus an outflow of International segment and €16.6 million for the Other €860 million in 2014. segment;
10.2.3 Cash flows from financing activities
This figure includes the dividends paid in cash for 2015 of subsidiaries to non-controlling interests in the amount of €571.2 million (1), compared to €581.4 million in 2014. These €179.3 million and withholding taxes in the amount of include dividends paid by SUEZ ENVIRONNEMENT COMPANY to €6.1 million. Net financial interest paid totaled €323.9 million its shareholders in the amount of €359.3 million, including in 2015, versus €328.9 million in 2014. Total cash flows from €9.0 million for the French 3% tax on dividends distributed, as financing activities generated a €0.8 billion cash outflow in 2015, well as the coupon for the undated deeply subordinated notes versus a €1.3 billion cash outflow in 2014. for €26.5 million. It also includes the dividends paid by certain
10.3 Borrowing terms and issuer’s financing structure
10.3.1 Debt structure
Outstanding financial debt (excluding amortized cost and the Including amortized cost and the impact of derivatives, 50% of effect of derivatives) at December 31, 2015 was €10,162 million net financial debt was denominated in euros, 19% in US dollars, versus €9,444 million at December 31, 2014, and breaks down 5% in pound sterling, 14% in Chilean pesos and 7% in Hong Kong as follows: dollars at the end of 2015. In 2014, it was 53% denominated in euros, 18% in US dollars, 6% in pound sterling, 14% in Chilean XX bonds (mainly subscribed by the parent company SUEZ 10 ENVIRONNEMENT COMPANY) in the amount of €7,435 million pesos and 4% in Hong Kong dollars. (€6,462 million in 2014); 58% of gross debt (outstanding financial debt) and 76% of net financial debt is fixed rate. The Group’s 2015 objective was XX commercial paper in the amount of €786 million (€854 million in 2014); to implement a dynamic distribution between the various reference rates, taking into account changes in the market. XX bank borrowings in the amount of €855 million (€990 million The average cost of net debt was 4.19%, versus 4.45% in 2014. in 2014); and As in 2014, the average term of net debt was 6.9 years at the XX other borrowings and current accounts totaling end of 2015. €1,086 million (€1,138 million in 2014).
(1) The €571.2 million above correspond to the dividends paid in cash in 2015, while the €553.8 million presented in the consolidated statement of changes in shareholders’ equity correspond to the dividends approved by shareholders in 2015 (see chapter 20.1 of this document).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 155 Cash and Shareholders’ Equity 10 Restrictions on the use of capital
10.3.2 Major transactions in 2015
The Group's financial policy aiming at optimizing the cost of XX In addition, on December 2, 2015, SUEZ ENVIRONNEMENT debt and extending maturities was pursued in 2015. COMPANY restructured a private placement issued in 2009 On January 14, 2015, the Company’s Board of Directors also in the amount of €250 million, with an interest rate of 5.20%, authorized the renewal of the €6 billion Euro Medium-Term maturing in 2017. The instrument now matures in 2027 and Notes program and the use of a €1.5 billion issuance package. bears an interest rate of 1.904% from 2017 to maturity. SUEZ ENVIRONNEMENT COMPANY issued several bonds as a SUEZ ENVIRONNEMENT COMPANY also successfully issued part of this strategy: undated deeply subordinated notes (“TSSDI” in French) for an amount of €500 million with a coupon of 2.5%. Furthermore, XX On June 26, 2015, SUEZ ENVIRONNEMENT COMPANY issued a bond in the amount of €200 million, with a variable interest SUEZ ENVIRONNEMENT COMPANY redeemed outstanding rate (Euribor 3M + 0.2%), maturing in 2017. TSSDI from the tranche issued in 2010 for a nominal value of €450 million. XX On June 30, 2015, SUEZ ENVIRONNEMENT COMPANY issued a private placement in the amount of €50 million, at an As for the previous 2010 and 2014 TSSDI issues, this new line interest rate of 2.25%, maturing in 2030. is not recognized under financial debt since it meets the IAS 32 requirements to be recorded in equity. XX On September 10, 2015, SUEZ ENVIRONNEMENT COMPANY issued a bond in the amount of €500 million, with an interest rate of 1.75%, maturing in 2025.
10.3.3 Group rating
SUEZ ENVIRONNEMENT COMPANY has its senior debt rated by Moody’s applied the following main adjustments to the Group’s Moody’s rating agency. The rating confirmed on July 31, 2015 net debt: is A3 for long-term debt and Prime 2 for short-term debt, along XX addition of funding shortfall on pension liabilities (see with a stable outlook. chapter 20.1, Note 18); XX addition of the present value of future minimum payments on operating leases (see chapter 20.1, Note 20).
10.4 Restrictions on the use of capital
As of December 31, 2015, the Group had undrawn confirmed relevant company to maintain a minimum level of debt coverage credit lines (which may be used for such purposes as back- (with respect to the principal amount and interest), which is up credit facilities for commercial paper program) totaling measured by the DSCR (debt service cover ratio), or, with €2,021.1 million. respect to interest, by the ISCR (interest service cover ratio). Some loans contracted by Group subsidiaries or by SUEZ With regard to project financing, lending banks may also require ENVIRONNEMENT COMPANY on behalf of its subsidiaries include that the concerned company maintains an actuarial ratio for clauses requiring specific ratios to be maintained. Such ratios, debt coverage for the remaining term of the loan, called the as well as their levels, are known as financial covenants and are LLCR (loan life cover ratio). Within the context of other financing, agreed to with the lenders, and may be revised during the term lending banks may also require the relevant company to of the loan. The liquidity risk arising from the Group’s possible observe a balance sheet ratio, which generally takes the form breach of financial covenants is described in section 4.1.3.3 of of a debt to equity ratio. this Reference Document. The Group has implemented a semi-annual procedure for For most loans relating to subsidiaries and involving negotiation monitoring its financial covenants that involves the CFOs of of financial covenants, the lending banks usually require the the major subsidiaries sending representation letters, indicating
156 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Cash and Shareholders’ Equity Expected sources of financing to meet commitments relating to investment decisions 10
(i) whether the subsidiary or other legal entities supervised default situations may occur at the next half-year closing. The by this subsidiary have, as of the last account closing, been in letters of representation must include an appendix listing the default or potential default situations (situations likely to become loan agreements, including covenants, types of covenants, and default situations contingent upon a decision of the lenders or the consequences to the borrower in the event of a breach of the expiry of time limits), or (ii) whether default or potential such covenants.
10.5 Expected sources of financing to meet commitments relating to investment decisions
10.5.1 Contractual commitments
The following table shows outstanding borrowings maturities as of December 31, 2015:
Amount per period
In millions of euros Less than 3 months 3 months to 1 year 1 to 5 years More than 5 years Total Outstanding borrowings 1,151.3 590.6 2,700.9 5,719.5 10,162.3
10.5.2 Expected sources of financing
As of December 31, 2015, the Group had €1,568.8 million in The Group anticipates that its future financing needs for major available cash (consisting of €2,079.0 million in cash and cash capital investments will be covered by its net cash, future cash equivalents, €59.9 million in financial assets valued at fair value flows from operating activities and possibly the use of available through income, net of bank overdrafts and liabilities current credit facilities. account for €570.1 million) and €2,021.1 million in unused Liquidity at December 31, 2015 is sufficient to cover medium- confirmed credit facilities, including €125.5 million due to expire term cash requirements and the split between net cash and in 2016. unused confirmed credit facilities is optimized to minimize carrying costs.
10
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 157 158 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Research and Innovation, trademarks, patents and licenses11
11.1 Research and Innovation 160
11.2 Patents and trademarks 165 11.2.1 Patents 165 11.2.2 Trademarks 165
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 159 Research and Innovation, trademarks, patents and licenses 11 Research and Innovation
11.1 Research and Innovation
In order to provide specific contributions to the resource dedicated to start-ups, research partnerships, etc., to adapt to revolution, SUEZ bases its strategy on an ambitious Research the maturity of the technologies presented to the Group and and Innovation policy. This policy strongly differentiates the to the size of the companies or university teams with which Group’s offering and helps its customers to become more we work. Through these partnered projects, we have access efficient and high-performing in environmental management to knowledge and technologies that complement our internal within their sectors and in the proper use of resources. SUEZ expertise and accelerate the time-to-market of innovative addresses recent public demand for better use of natural products and solutions. This helps us to better control our resources and pollution reduction, as well as increasingly R&D costs by sharing the risks and benefits of our partners’ stringent regulatory changes in regions of the world. By achievements. contributing to the growing requirements and commitments Communicating and promoting our innovations is an important of cities and industrial entities in these areas, SUEZ creates part of our researchers’ activities, and is subsequently taken new products and services that act as future growth relays up by our sales forces. for the Group. In all, over 400 researchers, experts and technicians around the Research focused on the key scientific and technical issues of world – in our R&D centers or the expert networks developed our activities serves to expand our knowledge, strengthens our by our technical centers – are active in the Group’s Research skills and meets new technical challenges, supporting progress and Development. The main centers of expertise and research both in water (advanced analytical methods, new treatment are located in France (Le Pecq-Croissy and Bordeaux), Spain processes, environmental expertise, etc.) and changes in the (Barcelona), the United States (Richmond) and China (Shanghai) businesses of recycling and recovery (biological and thermal and beginning this year, in Singapore. processes, energy recovery, recycling, waste to new sources of raw materials, etc.). Their missions range from technical assistance to the operations teams, to implementing advanced research programs that Another aspect of the Group’s commitment to Research and pave the way for the Group’s future activities, expertise and Development seeks to guarantee continuous improvement of technologies. Our teams also participate in the development of our procedures and processes to increase the performance IT software business solutions in particular in decision-making and productivity of our business lines and to thus obtain better support for operators, in operational data analysis tools for economic performance. water distribution networks, for wastewater and stormwater Research and Development, including technical assistance collection networks or for introducing sensors and onboard activities, are drivers for perfecting our expertise. Assigning intelligence in waste collection activitiy. teams to each business unit fosters a culture of technology In Spain and Chile, the Group has set up its research activities within the Group, based on shared skills, expertise and through research centers dedicated to water (CETAQUA) that programs. Our programs, aligned with the Group’s and its Agbar had established in the form of foundations in Barcelona, operational entities' strategy and ambitions, are important Santiago de Compostela, Malaga and more recently, in Santiago, elements of the technological assets and technical expertise Chile. These teams work in close concert to the academic world, that set SUEZ apart. participate in numerous research efforts and are essential The Group invests heavily in Research and Development, in partners of other teams in the Group that are more focused on the continuous improvement of processes and in high level development. They are involved in numerous European projects technical assistance. It thus aims to increase the operational in close collaboration with Spanish or European universities, performance of activities through innovative industrialized contributing to the Group’s scientific and technical outreach. practices and through dynamic guidance of its network of In addition, every year, the Group sets up a World Congress experts regarding their most remarkable know-how. Overall, of Business Lines that assembles over 1,200 employees and it represents a globally stable effort of €74 million. Our Research certain customers and partners. The Group uses the occasion and Innovation policy is executed through a variety of programs to share best practices, innovations and feedback. The Congress and projects developed in the Group’s research and development is also the occasion for awarding the SUEZ Innovation Trophies. (R&D) centers, and through a strong commitment to “open This competition is open to all employees. It is a direct part of innovation”. It consists of seeking innovations from external the participatory innovation process set up by SUEZ and it is partners to shorten our development times and accelerate the helpful in distinguishing the most innovative projects with a marketing of our products and services. good strategic scope and high potential for developing new This partnerships policy takes various shapes, including business, growth and differentiation. The SUEZ Innovation technological tests, direct investments or investments via funds Trophies are reflections of the most innovative initiatives and
160 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Research and Innovation, trademarks, patents and licenses Research and Innovation 11
technologies that highlight talents, know-how and expertise in XX Group performance, industrialization and efficiency; the Group. In 2015, the Innovation Trophies were awarded to XX City of Tomorrow, Climate Change; 30 projects across six categories: XX Management, Human Resources and Health and Safety; XX New products and services – Municipal market; XX Ideas for new businesses – Breakthrough innovation. XX New products and services – Industrial market;
Advanced research
The Group defined a limited number of priorities for innovation that is currently being industrialized. Through this technology, in order to prepare our business for future challenges and to it is possible to extract ferrous and non-ferrous metals in an differentiate the technical and economic performance of the economically relevant manner. These metals are subsequently proposed solutions. recovered for use in the metallurgy industry. The final, more These priorities include, for example, the set of actions inert ash is suitable for use as backfill or roadbed for road conducted on the wastewater treatment business line with the surfaces. purpose of developing solutions to eliminate micropollutants The Group is also working on recovering the organic portion of in the effluent from the treatment stations or the evolution of waste in order to extract both energy content for transformation the process chain to make treatment stations run on positive into biogas and the residual organic portion for compost energy, optimizing the use of wastewater carbon sources as a to be used in agriculture and horticulture. The Group has source of energy to produce biogas. The Bouillides wastewater recently developed its biogas purification technologies for treatment plant in Sophia-Antipolis (France) was the first producing biomethane that is now injected into gas networks installation to implement a treatment method for eliminating for distribution. It can be used to provide private citizens micropollutants in wastewater. Likewise, in early 2015, the city and industrial operators who are aware of the greenhouse of Lausanne (Switzerland) awarded the Group the construction gas emissions issues with perfectly biogenic methane that contract for its new wastewater treatment facility. The facility contributes nothing to global warming. In order to pursue will also provide treatment for standard pollution elements such further research in the area of recovery, the Group decided as carbon, nitrogen and phosphorous, and it will eliminate all to set up a laboratory dedicated to biowaste in 2016. This residual chemical pollutants such as micro-polluting chemical new laboratory will concentrate on developing extraction, molecules (medical residue for example) in water that is treated. purification and biowaste transformation procedures. Recent Once purified, this water can be discharged into Lake of Geneva. scientific advances in microbiology, like metabolomics and This new facility will include all of the patented technologies metagenomic analyses, have created the opportunity to revisit emerging from recent innovation processes in the Group for the digestion or methanization processes and to optimize treating this residue. the functioning of bacterial consortia in action in industrial In the area of waste, the recycling of raw materials is a priority for digesters. This very advanced research contributes directly to the Group, in accordance with the European Directive on waste the operational performance of our anaerobic digestion reactors management, which establishes a hierarchy that encourages for wastewater sludge and other types of organic waste. These the reuse, recycling and recovery (of energy, for example) over same techniques are also used for wastewater treatment elimination. In this way, recycling plastics and using resins projects for which new bacterial systems are explored or for from the recycling of products at the end of their useful lives projects designed to enhance the organic fraction of waste. requires new skills in the area of formulating and characterizing In industry, advanced treatment requirements of water plastic materials. To accomplish this, the Group is relying on produced in the oil industry led to the creation of a laboratory its new PLAST’Lab® in Le Pecq (France). This laboratory works dedicated to this type of complex effluents, the Oil & Gas lab. The with industrial customers to develop resins with a high rate works are designed to create new solution for more effective of recycled materials. These resins are subsequently used in and more robust treatment, by adapting membrane and commercial products such as packaging, window mullions, absorption processes used in water treatment to this industry. furniture, etc. In 2015, the laboratory developed a recycled A development phase during which patents will be obtained for 11 PVC resin whose whiteness and surface appearance were innovative treatment options will be followed over the following comparable to virgin resins and could consequently be used months by the achievement of the objective of testing these in visible construction pieces. new procedures in the field under actual industrial conditions, In incinerated municipal waste, the ashes contain inert minerals, to allow oil industries to release water that is free of organic but also a lot of metals that could be recovered. The Group pollutants into the environment or to better reuse process water has developed a patented technology for extracting metals for injecting and stimulating well production.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 161 Research and Innovation, trademarks, patents and licenses 11 Research and Innovation
Applied research
Applied research is conducted in the Group’s research and XX Deriving raw materials from waste excellence centers, or, in the case of certain cutting-edge In its waste business, SUEZ has launched major programs to technology topics, in the technical centers within our plants improve the treatment of solid waste based on the recovery or operational centers managed by the Group. Pilot programs of materials (plastics recycling), organic waste (compost, for industry and demonstrators of new solutions are executed digestion) or the energy recovery of waste (alternative fuels on the field, in close collaboration with operational personnel from the solid fraction of waste). These innovative programs who contribute their expertise to foster innovation. They thus have made the Group a leading player today in these different help to show our customers the benefits of these innovations areas. under conditions near to real industrial installations and thus contribute to accelerating their adoption on the market through In upstream sorting methods, the Group is also working on convincing preliminary industrial trials. improving automated sorting techniques, such as demolition waste sorting with automated detection of the nature of The main objectives of applied research are: the waste and their sorting by robotic arms. The aim of this XX Energy optimization and greenhouse gas reduction research is to reduce the difficulty of the operators’ task, and to In water and waste, many programs are now dedicated to increase the overall economic efficiency of sorting and improve reducing greenhouse gas emissions, optimizing energy use, the recycling rates of the sectors concerned. and developing the potential of renewable energy. These Research efforts are also intensifying in the recycling of programs are designed to meet the increasing demand from materials to meet market expectations. To achieve this, close our customers for the most energy-efficient technology for upstream coordination with manufacturers is essential. treating water and waste. They must thus generate substantial In partnership with its industrial customers, the Group is operational cost reductions. developing methods for dismantling large equipment, such As an example, biogas is produced by the anaerobic digestion of as aircrafts and cars. Such methods emphasize the reuse of sludge at wastewater treatment plants and by the fermentable parts and recycling of materials (metals and carbon fiber, for fraction of household waste, namely at landfills. Its capture and example). use can produce energy and help to reduce the environmental In Belgium, SUEZ has formed a partnership with SIBELCO footprint of SUEZ’s activities, as well as those of its customers. GREEN SOLUTIONS, a world leader in the supply of minerals Its exploitation allows the production of energy. The Group's to the glass industry, to launch its High 5 Recycling Group, the R&D is working on this major issue to increase efficiency in first facility in the world to separate the stream of incoming producing biogas. It also contributes to developing technologies glass waste into four distinct glass colors, clear, green, amber for purifying biogas to recover energy in the form of heat and and "dead leaf". The challenge is to offer the glass industry electricity. products in the four colors of glass requested for the production In Strasbourg, France, the Group is participating in the European of bottles or other glass packaging such as jars and containers. Biovalsan project, which is the first initiative in France for the The transformation of plastic waste into fuel has been injection of biomethane derived from wastewater treatment industrialized to produce 8,000 tons a year of liquid fuel. This plants into public gas networks. In Valenton, near Paris, the is the first time in the world that this has been done at this Group has developed a pilot cell in cooperation with the SIAAP scale. These fuels are now marketed for their energy value as for the production of BioLNG to be used to fuel a fleet of utility a replacement for heating fuel and in the future for automobile vehicles, with emissions that are completely neutral with regard fuels, once authorizations have been obtained. This initial to greenhouse gases. industrial unit in Avonmouth (United Kingdom) is still in its In addition, SUEZ devotes considerable effort to energy savings start and adjustment phase, corresponding to its first months of schemes in operating its facilities through more efficient industrial production. Significant improvements to the process dehydration-drying of sludge, energy recovery from waste initially tested in the pilot project have been implemented, incineration units and the use of renewable energy. resulting in improvements in the yields and quality of products. Patents were obtained, increasing the Group's intellectual
162 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Research and Innovation, trademarks, patents and licenses Research and Innovation 11
property in these domains. The Group also invested in advanced and validate new integrated approaches, methodologies and sorting technologies for plastic waste, which required the processes to better manage and recycle water in the chemical development of specific processes to ensure the absence of industry, and possibly to extend this to other industrial sectors. some halogenated plastics incompatible with downstream The challenge is to reduce water abstraction by 20 to 40%, cracking processes or with required quality of finished aqueous discharges by 30 to 70%, the energy employed for products. Cleaning of used plastic has also been optimized to these treatments by 15 to 40%, and associated costs up to 60%. yield a high-quality deposit, usable by the subsequent chemical XX Optimization of water distribution network management transformation units. In 2014, the Group launched Aquadvanced®, a performance XX Use of new resources for water management software application for drinking water networks. In June 2014, Masdar, the future green city in Abu Dhabi, awarded The program is focused on three major themes: identification the construction and operation of a pilot seawater desalination and classification of assets; management and maintenance of plant to SUEZ, which can be powered by renewable energies these assets; and continuous monitoring of the networks by with low environmental impact. This is a major challenge for analyzing real-time data from the various sensors installed this region, which is faced with the prospect of strong increases across the distribution networks. This is smart management in its population and heavy urbanization, as well as to sustained of water networks, and is the future of optimized management. economic development, even though it has very limited water Water operators thus have a unique performance measurement resources. and decision-support tool. This tool can be deployed very SUEZ is the world leader in reverse osmosis desalination quickly, and many cities (Barcelona, Casablanca, Macau, etc.) processes, with over 250 plants built. It is engaged in this where the Group operates are already equipped with this project with some of its most innovative partners, Dow Water tool. New customers, interested in this innovation, have the and Process Solutions, which have developed an innovative opportunity to test it through pilot deployments as it has been membrane-based ultrafiltration technology and reverse done in California or in many Asian cities. ® osmosis, and ADIONICS , an innovative liquid/liquid deionization With the acquisition of the New Zealand company Derceto technology. in 2015, Aquadvanced® has acquired an energy optimization Meanwhile, SUEZ, in cooperation with the Masdar Institute of module. Other complementary modules will be integrated Science and Technology and the ENGIE Laborelec research subsequently. These are currently being developed or adapted center, is currently studying how to desalinate seawater through at our research centers. The next module relates to water solar energy, with the goal of developing desalination plants quality. that are fully powered by renewable energies. These projects In order to provide information necessary to steering our aim to test and develop innovative technologies in the area facilities continuously, as Aquadvanced® can do, it is necessary of desalination that could secure access to water and reduce to install intelligent, reliable and low energy use sensors in energy use, while conforming with Emirati objectives of energy our distribution networks. The purpose of the SENSORlab savings. The final objective will be to implement these eco- technological platform, installed at the Cirsee in the Paris energy technologies in large-scale desalination units. region, is to qualify sensors available on the market and develop XX Development of new technologies for industry new ones. To achieve this, SUEZ is working in partnerships with The chemical industry has substantial potential for improving specialized industrialists (Grundfos and s::can). its environmental effectiveness, linked to the management of XX Health and environmental risks industrial waters that it consumes or produces. To provide the highest safety standards of the water distributed SUEZ participated in the European project E4Water, which to its customers’ faucets at all times, the Group continues to brings together, within a consortium of 19 partners, major invest heavily in research programs related to drinking water chemistry industrialists, water treatment experts, research quality. This research currently allows us to incorporate the centers and universities, in order to overcome the obstacles latest advances in risk assessment related to mixtures of to integrated and effective water management at energy level. micropollutants in our procedures. Current studies with the In this consortium, SUEZ is committed to specific projects best French and international teams on the biological effects associating two of its industrial customers, Total Refining & of long-term exposure to low doses of micropollutant mixtures Chemicals and Procter & Gamble. Robust industrial processes aim to determine whether additional progress in treatment came out of this research and steering phase and are beginning performance is necessary. SUEZ, with the help of university 11 to receive recommendations for use and implementation by teams, is also evaluating the effectiveness and consumer health certain industrial operators on their sites with the greatest benefits of its plans for the prevention of health risks. water restrictions. The main objectives are to develop, test
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 163 Research and Innovation, trademarks, patents and licenses 11 Research and Innovation
XX Smart Metering The Group has also launched Open Innovation actions designed The substantial efforts made in developing the offer of the Group to stimulate, promote and co-finance innovative projects in the in the remote reading of water meters have made the Group technical, commercial and management fields. a leader in this area. In this way, SUEZ has already contracted Such projects can translate into venture capital for innovative the installation of nearly 2.5 million meters for monitoring start-ups, through SUEZ Ventures (former Blue Orange), the individual water use. The technology was also chosen by GrDF corporate investment fund set up by the Group in 2010. to use on some 11 million gas meters in France, by means of From its establishment, SUEZ Ventures (former Blue Orange) an integrated solution in GazPar meters. The technology was has been used by the Group to detect over 1,000 innovative tested on a limited scale in 2015, involving several thousand start-ups, including COGEBIO and SIGRENEA: meters in the Chongqing region in China and in Singapore. Initial results have been highly satisfactory and demonstrated the –– COGEBIO is a young company from Lyon (France) which has effectiveness of the 169 MHz technology of the Group for the developed a solution for biomass recovery by gasification. remote reading of water meters. Tests will continue into 2016 From a variety of agriculture and forestry by-products, the in view of adopting this technology into Chinese standards, GASCLEAN gasifier can profitably produce clean synthesis with the objective of rapidly implementing them on the local gas, directly convertible into energy, while respecting the market. In Singapore, in addition to measuring consumption strictest regulations on atmospheric emissions. Buoyed for invoicing purposes, new services are being developed and by its first commercial successes, COGEBIO will extend tested with pilot customers. the use of GASCLEAN to recovering energy from waste (wood waste, compost, etc.); In France, new prevention services for users or operators are currently being developed, especially in the area of consumption –– SIGRENEA is a young company from Orleans (France) forecasting or excessive consumption detection. This provides which has developed a hardware and software solution for ensuring a protection service or to propose solutions to to make “smart” drop-off containers, to remotely monitor reduce water consumption, which contributes to protecting (fill levels, temperature, number of openings, etc.) and resources and precludes the need for capacity investment by to allow for scheduling the collection truck rounds. our customers. Having operations in several municipal authorities and manufacturing companies has proved positive in terms of XX Strengthening and accelerating innovation through our costs by improving operation control. Following this first partners success, SIGRENEA now works on the direct repatriation of The Group maintains many partnerships with a variety of key information at truck level, and a program of development players in science and technology: of other applications (open dumpsters, compactors, etc.). –– public players, such as the University of Bordeaux, the At the end of 2015, SUEZ Ventures helped via a capital increase University of Barcelona, IRSTEA, CNRS, the University the development of Intent Technologies, a young company of Tsinghua (Beijing), the Harbin Institute of Technology established in 2011 that developed a software package for (China), etc.; building managers, service providers and manufacturers of equipment working in the construction industry. The software –– skills and innovation networks such as competitiveness clusters Axelera (environmental chemistry), Advancity package can be used to facilitate operations, share data and (sustainable cities and mobility), and DREAM (sustainability provide personalized services from a single platform on which of water resources, renewable energy and natural all professionals, residents, services and building equipment environments), which will address eco-technologies for are brought together. the water industry, as well as the Montpellier and Alsace In 2010, the Group also created "the Technological Tests", Lorraine competitiveness clusters (inland water quality) a system for exploring more mature technologies offered and European networks (Water Supply and Sanitation by larger companies, which can be used to determine what Technology Platform, Climate-KIC); technologies can be transferred toward our businesses. –– with the Public Utility Board (PUB) of Singapore, a lengthy Since their inception, over 70 “Technological Tests” had been collaboration resulted in the signature of a memorandum funded, mainly in partnership with start-ups and small and of understanding in 2015 and the inauguration of a new medium-sized companies. Some tests have been used to Skills and Research Center in Singapore especially develop demonstrators; others have proven very successful dedicated to Smart Water. and have already led to the actual marketing of new solutions, Such partnerships allow the Group to leverage its research and for example for sludge conditioning, optimized maintenance development efforts while benefiting from collaborative work of drinking water drilling, or the collection of household waste. with some of the best research teams or operators in the world. At the end of 2015, some 15 technologies in all have been implemented or are in a marketing process.
164 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Research and Innovation, trademarks, patents and licenses Patents and trademarks 11
11.2 Patents and trademarks
In 2015, SUEZ launched an intellectual properties action plan and relevance to the strategy, which requires centralizing the with the primary purposes of standing out from the competition process of filing patents in the Intellectual Property Department. through ownership of innovative proprietary technologies and The plan should also improve reactivity in patent filing decisions protecting the business by better anticipating the risks that and in formalizing and registering know-how, and result in the third-party intellectual property rights bear on the freedom to systematic use of patent documentation and the inclusion of exploit certain technologies. intellectual property deliverables at a phase upstream of each This plan should result in an increase in the size of the innovation project. Group's patent portfolio, both in terms of size and in quality
11.2.1 Patents
The Group's patents portfolio comprises 333 families of Patent applications come from inventions achieved during patents, i.e. some 2,000 national patents registered in more research work or innovation projects of the Group, in areas such than 70 countries worldwide. as the distribution of drinking water, wastewater systems, wet In 2015, SUEZ filed 39 new patent applications.These wells, treatment of municipal or industrial wastewater, relating applications originated from diverse sources: they came out to the oil industry, the dehydration of sludge and the material of the Cirsee and LyRE research centers of the Group, as well as or energy recovery of waste. from the technical center of the BUs based in France, Australia, The Group's portfolio of patents is largely comprised of patents Belgium, China, Spain and the United States, reflecting the of processes with a growing percentage of patents on products. innovation momentum of the Group and its local presence. Waste recycling and recovery activities are developing more Since 2015, the Group has decided to centralize its intellectual and more new solutions, integrating innovative technologies property strategy and to bring the entire process under the that are protected by patent applications. Note that over 25% supervision of one department backed up by several qualified of filings in 2015 concern smart technologies that mix IT and patent engineers who are European agents, in order to communications technologies with the more traditional sectors professionalize and increase the Group's capacity for defending at SUEZ. its intellectual property. This rich and varied technologies portfolio – with or without patents – represents a significant and reliable intangible asset for the Group.
11.2.2 Trademarks
Regarding institutional trademarks held by SUEZ and its Apart from the "institutional" trademarks, at the end of 2015, subsidiaries, 2015 was the year during which the Group SUEZ was at the head of a portfolio of over 650 "products" adopted a single brand. Accordingly, to reinforce its visibility trademarks, protecting such product names as "Aquadvanced" and readability by all of its stakeholders, the Group chose the and "Densadeg", as well as technological platforms like name "SUEZ" to replace all of its brands, including Lyonnaise "Memlab" and "Corr-box", or of services. In 2015, applications des Eaux, Degrémont, Sita, SAFEGE, Ondeo Systems, Ondeo for 28 new "products" trademarks were filed. Industrial Solutions and others.
11
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 165 166 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Information on trends12
The major trends that have affected the Group’s activities since the close of the latest fiscal year are described in chapters 6 and 9 of this Reference Document.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 167 168 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Profits forecasts or estimates13
SUEZ's objectives for 2016 (1), in a still uncertain macroeconomic context in Europe, are: XX Organic revenue growth of 2% or more; XX Organic growth of EBIT in excess of growth in revenues; XX Free cash flow: approximately €1 billion; XX Net debt/EBITDA ratio maintained at around 3. Pursue an attractive dividend policy: XX Dividend greater than or equal to €0.65 per share for 2016 (2). The Group reiterates its ambition of achieving €3 billion (3) in EBITDA in 2017. The description of the change in the economic and financial environment and assumptions applied by the Group is described in section 6.3.4 of this Reference Document.
(1) Excluding the impact of exceptional summer volume in Water Europe of €20 million; based on stability in industrial production in Europe in 2016 and with the budget assumption of stable prices of raw materials. (2) Subject to the approval of the 2017 Shareholders' Meeting. (3) Based on a macroeconomic improvement in Europe in 2017, at constant exchange rates compared to mid-February 2015 and accounting and tax standards unchanged from January 1, 2015.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 169 170 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management14
14.1 Composition of governance and management bodies 172 14.1.1 Governance structure of the Company 172 14.1.2 Composition of the Board of Directors 172 14.1.3 Management bodies 191
14.2 Conflicts of interest within administrative bodies and General Management 193
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 171 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
14.1 Composition of governance and management bodies
14.1.1 Governance structure of the Company
The Company is a limited company with a Board of Directors Lastly, after Mr. Jean-Louis Chaussade decided to go on pension which has decided to opt, since its listing on the stock exchange in July 2014, the Board of Directors reiterated its choice to in July 2008, for separating the functions of Chairman and Chief separate the two functions and decided to confirm Mr. Jean- Executive Officer. Louis Chaussade’s appointment as Chief Executive Officer. Gérard Mestrallet was then appointed Chairman of the Board A brief description of the main provisions of the bylaws and and Jean-Louis Chaussade, Chief Executive Officer. After being internal rules for the Board of Directors, particularly its reelected as Directors by the Shareholders’ Meeting of May 24, functioning methods and its powers, is provided in chapter 21.2, 2012, the Board of Directors also reappointed them as Chairman “Memorandum of association and bylaws”. of the Board and Chief Executive Officer, respectively. Governance of the Group, the composition of the Board of Following the expiration of the Shareholders’ Agreement on Directors and its committees, their organization and work, are July 22, 2013, the Board reaffirmed the decision to separate the detailed in the Chairman’s report on the Company’s governance two functions, and confirmed Gérard Mestrallet and Jean-Louis and internal control and risk management procedures for Chaussade in their respective roles as Chairman of the Board the year ended December 31, 2015, prepared in accordance and Chief Executive Officer. with Article L. 225-37 of the French Commercial Code (the “Chairman’s report”), presented in chapter 16.4 of this Reference Document.
14.1.2 Composition of the Board of Directors
Since the beginning of 2015, the following changes have taken The Board of Directors therefore has 18 members on the place in the composition of the Board of Directors: date of this document. In addition, one representative of the Social and Economic Unit (Unité économique et sociale) of SUEZ XX appointment by the European Works Council of Mr. Enric Amiguet i Rovira on February 11, 2015 as Director appointed environnement attends Board meetings. upon proposal of the employees; Detailed information on the composition of the Board of Directors can be found in section 1.1 of the Chairman’s Report XX co-optation as Director of Ms. Judith Hartmann on July 28, 2015, replacing Ms. Penelope Chalmers Small, who in chapter 16.4 of this Reference Document. resigned, until the end of the latter’s term of office, i.e. until The information below shows the composition of the Board the Shareholders’ Meeting called to approve the financial of Directors, which has 18 members, as well as individual statements for the fiscal year ending December 31, 2017; information about each of the Directors (including the offices and positions held by the Directors during the last five years). XX co-optation as Director of Mr. Pierre Mongin on February 2, 2016, replacing Mr. Alain Chaigneau, who resigned, until the end of the latter’s term of office, i.e. until the Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2017.
172 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Composition of governance and management bodies 14
Gérard MESTRALLET 14 67 years old Main position: French Chairman and CEO of ENGIE Business address: Offices and positions held at the Company: ENGIE Chairman of the Board of Directors Tour T1 Chairman of the Strategy Committee 1, place Samuel-de-Champlain Number of SUEZ ENVIRONNEMENT COMPANY shares held: Faubourg de l’Arche 15,787 (of which 2,000 shares as a loan granted by ENGIE) 92930 Paris-La Défense, France
Biography: Gérard Mestrallet, born on April 1, 1949, is a graduate of École polytechnique and École Nationale d’Administration. After occupying various positions in the Treasury Department and in the office of the Minister of Economics and Finance, Mr. J. Delors, Gérard Mestrallet joined the Compagnie Financière de SUEZ as a Project Manager. In 1986, he was appointed Executive Vice-President for industrial affairs. In 1991, Mr. Mestrallet was appointed Executive Director and Chairman of the Management Committee of Société Générale de Belgique. In 1995, he became Chairman and Chief Executive Officer of Compagnie de SUEZ. Gérard Mestrallet was appointed Chairman and Chief Executive Officer of GDF SUEZ (now ENGIE) following the merger between SUEZ and Gaz de France on July 22, 2008. He is also President of the Association Paris EUROPLACE, Member of the International Councils of the Mayor of Shanghai and Beijing, Director of Tongji University (Shanghai) and recipient of an Honorary Doctorate from Cranfield University (UK).
List of other major offices and positions held during the last five years
Current Chairman and Chief Executive Officer ofENGIE Chairman of the Board of Directors of ENGIE Energy Services*, Electrabel* (Belgium) and GDF SUEZ E.M.T.* (Belgium) Director of International Power* (United Kingdom) and of Société Générale Member of the Supervisory Board of Siemens AG Expired during the last five years Various offices held at companies of the ENGIE Group and the SUEZ group Director of Pargesa Holding SA (until May 6, 2014) Director of Saint-Gobain (until June 4, 2015)
* Companies belonging to the ENGIE Group. In bold: listed companies.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 173 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
Jean-Louis CHAUSSADE
64 years old Main position: French Chief Executive Officer of SUEZ ENVIRONNEMENT COMPANY Business address: Offices and positions held at the Company: SUEZ Director and Chief Executive Officer TOUR CB21 Number of SUEZ ENVIRONNEMENT COMPANY shares held: 16, place de l’Iris 73,900 shares 92040 Paris-La Défense, France 9,685.6 units of the Company mutual fund, "classic" formula and 9.4 units of the "multiple" formula, as part of the Sharing 2011 and Sharing 2014 Employee Shareholding Plans
Biography: Jean-Louis Chaussade, born on December 2, 1951, has an engineering degree from ESTP (1976) and holds a Master’s degree in Economics (Sorbonne, 1976). He is also a graduate of the Institut d’Études Politiques de Paris (1980) and of AMP at Harvard Business School (1988). He first joined Degrémont in 1978 and was subsequently appointed Chief Operating Officer of Degrémont Espagne in Bilbao in 1989. During this period, he was also appointed Director of Aguas de Barcelona. Mr. Chaussade was also appointed Chief Executive Officer of Dumez Copisa Spain in 1992. In 1997 he was appointed Chief Operating Officer of Lyonnaise des Eaux in South America, and Chief Operating Officer of SUEZ for South America. He was appointed Chairman and Chief Executive Officer of Degrémont in 2000 and, in 2004, Deputy CEO of SUEZ and Chief Executive Officer of SUEZ environnement. He has been Chief Executive Officer of SUEZ ENVIRONNEMENT COMPANY since July 23, 2008. Jean-Louis Chaussade has been a director of Criteria Caixa S.A.U. since October 19, 2011. He is co-Chairman of the France-China Committee and is also Chairman of the France - Arabian Peninsula Council of Businessmen within the MEDEF.
List of other major offices and positions held during the last five years
Current Chairman of the Board of Directors of Sino-French Holdings Ltd* (Hong Kong) Director of Criteria Caixa S.A.U. (Spain) Expired during the last five years Director of ACEA (Italy) (until April 2013) Chairman of the Supervisory Board of the Institute of Economic Forecasting of the Mediterranean World (IPEMED) (until December 5, 2013) Various offices held at companies of the SUEZ group
* Companies belonging to the SUEZ group. In bold: listed companies.
174 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Composition of governance and management bodies 14
Nicolas BAZIRE 14 58 years old Main position: French Chief Executive Officer of Groupe Arnault SAS Business address: Offices and positions held at the Company: Groupe Arnault Independent Director 22, avenue Montaigne Member of the Audit and Financial Statements Committee, 75008 Paris the Appointments and Governance Committee and the Strategy Committee Number of SUEZ ENVIRONNEMENT COMPANY shares held: 2,099 shares
Biography: Nicolas Bazire, born on July 13, 1957, is a graduate of the French Naval Academy and Institut d’Études Politiques de Paris, and studied at École Nationale d’Administration. Mr. Bazire was an auditor and then an auxiliary judge at the Cour des Comptes. In 1993, he became Chief of Staff and special assistant to Prime Minister Édouard Balladur. Managing Partner of Rothschild & Cie Banque from 1995 to 1999, Mr. Bazire was then appointed Chairman of the Partnership Board. He has served as Chief Executive Officer of Groupe Arnault SAS since 1999.
List of other major offices and positions held during the last five years
Current Chief Executive Officer of Groupe Arnault SAS Chief Executive Officer and Permanent Representative of Groupe Arnault SAS* to the Board of Directors of Financière Agache SA* Vice-Chairman of the Supervisory Board of Les Échos SAS* Director of LVMH Fashion Group*, LVMH Moët Hennessy-Louis Vuitton S.A.*, Louis Vuitton pour la création*, Financière Agache Private Equity SA*, Agache Développement SA*, Europatweb SA*, Carrefour S.A., Groupe Les Échos SA* and Atos Member of the Supervisory Board of Montaigne Finance SAS* and Semyrhamis SAS* Manager of Les Chevaux de Malmain SARL Member of the Board of Directors of SBD (Monaco) Expired during the last five years Chairman of Société Financière Saint-Nivard SAS, Director of IPSOS SA, Tajan SA and Go Invest SA (Belgium) Member of the Supervisory Board of Lyparis SAS and of Rothschild et Cie Banque SCS
* Companies belonging to the LVMH/Arnault Group. In bold: listed companies.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 175 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
Gilles BENOIST
69 years old Main position: French Director Business address: Offices and positions held at the Company: SUEZ Independent Director TOUR CB21 Member of the Audit and Financial Statements Committee, 16, place de l’Iris the Compensation Committee and the Strategy Committee 92040 Paris-La Défense, France Number of SUEZ ENVIRONNEMENT COMPANY shares held: 3,000 shares
Biography: Gilles Benoist, born on December 12, 1946, has a degree in Law and is a graduate of the Institut d’Études Politiques de Paris and École Nationale d’Administration. In 1981, he was appointed Chief of Staff of the Minister of the Economy and Finance. In 1983, he became an auxiliary judge at the Cour des Comptes. From 1987 to 1991, he was General Secretary of Crédit Local de France, a member of the Executive Committee, and advisor to the Deputy CEO of Caisse des Dépôts et Consignations before being appointed Director of Central Services of Caisse des Dépôts et Consignations in 1991. From 1993 to July 1998, Mr. Benoist was General Secretary, a member of the Executive Committee and Director of Human Resources of Caisse des Dépôts et Consignations. He was Chairman of the Management Board of CNP Assurances from 1998 and Chief Executive Officer and Director from July 2007 to June 2012.
List of other major offices and positions held during the last five years
Current Member of the Supervisory Board of Louis Dreyfus Holding BV (Netherlands) Member of the Supervisory Board of Compagnie Internationale André Trigano Member of the Supervisory Board of GIMAR and Cie Chairman of the Board of Directors of Inverewe Credit Opportunities Master Fund ICAV (Dublin) Expired during the last five years Director and Chief Executive Officer ofCNP Assurances Various offices held at CNP Assurances group companies Member of the Management Committee of Caisse des Dépôts et Consignations group Member of the Supervisory Board of CDC IXIS Director of ISODEV
In bold: listed companies.
176 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Composition of governance and management bodies 14
Valérie BERNIS 14 57 years old Main position: French Deputy CEO of ENGIE for Communications, Marketing and Business address: Environmental and Social Responsibility ENGIE Member of the General Management Committee of ENGIE Tour T1 Offices and positions held at the Company: 1, place Samuel-de-Champlain Director Faubourg de l’Arche Member of the Appointments and Governance Committee 92930 Paris-La Défense, France and of the Ethics and Sustainable Development Committee Number of SUEZ ENVIRONNEMENT COMPANY shares held: 2,608 (of which 2,000 shares as a loan granted by ENGIE)
Biography: Valérie Bernis, born on December 9, 1958, is a graduate of Institut Supérieur de Gestion of Paris and Université des Sciences Économiques of Limoges. Ms. Bernis has been a member of the Office of the French Minister of Economics, Finance and Privatization (1986-1988), Director of Communications at Cerus (1988 - 1993) and Press and Communication Officer for the French Prime Minister (1993-1995). She was subsequently Director in charge of Communication of the Compagnie de Suez (1995-1997), Deputy Director for Financial Communications of the Suez Lyonnaise des Eaux (1997-2001), Chairwoman and CEO of Paris Première television station (1999-2004), and Deputy CEO and member of the Executive Committee of SUEZ for Communications and Sustainable Development (2001-2008). Since July 2008, Ms. Bernis has been a member of the Executive Committee of GDF SUEZ in charge of Communications and Institutional Relations (2008-2011). Since May 1, 2011, Valérie Bernis has been a member of the Management Committee and Deputy CEO of ENGIE (formerly GDF SUEZ) in charge of Communications and Marketing and, since 2013, in charge of Communications, Marketing and Environmental and Social Responsibility.
List of other major offices and positions held during the last five years
Current Director of Atos and Occitane International SA Member of the Supervisory Board of Euro Disney S.C.A. Director of l’Occitane International SA Vice Chairwoman of the ENGIE Foundation* Director of ENGIE New Ventures SA* President of ENGIE Rassembleurs d’Energie*. Expired during the last five years Various offices held at companies of the ENGIE Group Director of Cegid Group (until July 2013) Member of the Board of Directors and of the Audit Committee of Bull (until October 23, 2013)
* Companies belonging to the ENGIE Group. In bold: listed companies.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 177 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
Harold BOËL
51 years old Main position: Belgian Chief Executive Officer of Sofina S.A. Business address: Offices and positions held at the Company: SOFINA Independent Director Rue de l’Industrie, 31 Member of the Strategy Committee 1040 Brussels Number of SUEZ ENVIRONNEMENT COMPANY shares held: Belgium 2,000 shares
Biography: Harold Boël, born on August 27, 1964, has a degree in Materials Sciences engineering from École polytechnique fédérale in Lausanne, Switzerland. He held management positions in the steel industry at Usines Gustave Boël, at Corus MultiSteel and Laura Metaal Holding. Harold Boël is currently Chief Executive Officer of Sofina S.A.
List of other major offices and positions held during the last five years
Current Chief Executive Officer of Sofina SA Director of Biomérieux, MérieuxNutrisciences, Caledonia Investments plc (United Kingdom), Société de Participations Industrielles*, Sodavi*, Domanoy, United World Colleges Belgium, asbl. Expired during the last five years Managing Director of Henex S.A.* (resigned on May 7, 2014) Director of Electrabel (term of office expired on April 15, 2014) Non-voting Director of Biomérieux (until May 30, 2012) Director of François Charles Oberthur Fiduciaire (until April 23, 2012), of Union Financière Boël (resigned on December 5, 2011) and Oberthur Technologies (resigned on December 1, 2011)
* Companies belonging to the same group. In bold: listed companies.
178 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Composition of governance and management bodies 14
Delphine ERNOTTE CUNCI 14 49 years old Main position: French Chairwoman of France Télévisions Business address: Offices and positions held at the Company: France Télévisions Independent Director 7, esplanade Henri-de-France Chairwoman of the Ethics and Sustainable Development 75015 Paris, France Committee and member of the Audit and Financial Statements Committee Number of SUEZ ENVIRONNEMENT COMPANY shares held: 2,000 shares
Biography: Delphine Ernotte Cunci, born on July 28, 1966, was appointed as Director by the Shareholders’ Meeting of May 24, 2012. She is a graduate of École Centrale Paris. Ms. Ernotte Cunci joined the France Telecom group in 1989 in various operational roles throughout the group, particularly in research and development. She then extended her career into business management, as Director of the distribution agency and Regional Director for Centre Val-de-Loire, before becoming the Company’s Communication and Sponsorship Director for France. From 2010 to August 2014, she was Deputy Chief Executive Officer of the France Telecom/Orange Group and Executive Director of Orange France in charge of operations for the France Telecom Group in France. She has been Chairwoman of France Télévisions since August 22, 2015.
List of other major offices and positions held during the last five years
Current Chairwoman of France Télévisions Member of the Board of Directors of the École Centrale de Paris and of Le Cent-Quatre, a cultural institution Chairwoman of the Board of Directors of École Nationale Supérieure de la Photographie in Arles Expired during the last five years Deputy CEO of France Telecom/Orange Group and Executive Director of Orange France
In bold: listed companies.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 179 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
Lorenz d’ESTE
60 years old Main position: Belgian Managing Partner of E. Gutzwiller & Cie Business address: Offices and positions held at the Company: COBEPA Independent Director Rue de la Chancellerie, 2 Chairman of the Compensation Committee, member of the 1000 Brussels Appointments and Governance Committee and the Ethics Belgium and Sustainable Development Committee Number of SUEZ ENVIRONNEMENT COMPANY shares held: 2,139 shares
Biography: Lorenz d’Este was born on December 16, 1955. After his studies at the University of Saint Gallen in Switzerland, he subsequently obtained a Master’s degree in Economics and Politics from the University of Innsbruck, Austria. He joined the Swiss bank E. Gutzwiller & Cie in 1983, first as a banking executive and then as Manager, and has been Managing Partner of E. Gutzwiller & Cie, Banquiers since 1990. He has also served as advisor to the Executive Management Committee of BNP Paribas since 1999.
List of other major offices and positions held during the last five years
Current Director of Six Group (Switzerland) Expired during the last five years -
In bold: listed companies.
180 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Composition of governance and management bodies 14
Isidro FAINÉ CASAS 14 73 years old Main position: Spanish Chairman of CaixaBank Business address: Offices and positions held at the Company: La Caixa Director and member of the Strategy Committee Avenida Diagonal 621-629 Number of SUEZ ENVIRONNEMENT COMPANY shares held: Torre 1 – Piso 23 2,000 shares 08028 Barcelona Spain
Biography: Isidro Fainé Casas, born on July 10, 1942, has been Chairman of CaixaBank since 2009 and a member of its Board of Directors since 2000. He is Chairman of the Board of Trustees of La Caixa banking foundation and Chairman of Criteria Caixa. He holds a Doctorate in Economics, an International Senior Managers Program certificate in Business Administration from Harvard Business School, and is a graduate in Senior Management from the IESE Business School. He is a member of the Royal Academy of the Economy and Finance and the Royal Academy of Doctors. He began his professional career in the banking sector as Investment Manager for Banco Atlántico in 1964 and was appointed as General Manager of Banco de Asunción in Paraguay in 1969. On his return to Barcelona, he held various management positions in financial entities: Director of Human Resources at “Banca Riva y Garcia” (1973), Advisor and Managing Director of “Banca Jover” (1974) and Managing Director of “Banco Unión” (1978). In 1982, he joined La Caixa as Deputy CEO, subsequently taking on various positions. In April 1991, he was appointed Executive Assistant Managing Director and then, in 1999, Chief Executive Officer of the bank, of which he served as Chair from June 2007 to June 2014. Isidro Fainé Casas is Vice-President of Telefónica, first Vice-President of “Repsol” and Director of “Banco BPI” and of “The Bank of East Asia”. He currently chairs “Confederación Española de Cajas de Ahorros” (Spanish Confederation of Savings Banks) and is Vice-President of the “European Savings Banks Group” (ESBG) and of the “World Savings Banks Institute”. He is also Chairman of the “Confederación Española de Directivos y Ejecutivos” (Spanish Confederation of Directors and Executives) and of the Spanish section of the “Club de Roma y del Círculo Financiero” (Club of Rome and of the Financial Group). He is also a member of the “Consejo Empresarial para la Competitividad” (Business Council for Competition).
List of other major offices and positions held during the last five years
Current Chairman of the Board of Trustees of “La Caixa” banking foundation Chairman of CaixaBank* and of Criteria Caixa* Vice-President of Telefónica* First Vice-President of Repsol* Director of Gas Natural*, Banco BPI* and The Bank of East Asia*. Expired during the last five years Director of Grupo Financiero Inbursa Second Vice-President of Sociedad General de Aguas de Barcelona Director of Abertis*
* Companies belonging to “La Caixa” group or in which “La Caixa” holds a stake In bold: listed companies.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 181 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
Judith HARTMANN
46 years old Main position: Austrian Deputy CEO in charge of Finance of ENGIE Business address: Offices and positions held at the Company: ENGIE Director Tour T1 Member of the Audit and Financial Statements Committee. 1, place Samuel-de-Champlain Number of SUEZ ENVIRONNEMENT COMPANY shares held: Faubourg de l’Arche 2,000 (as a loan granted by ENGIE) 92930 Paris-La Défense, France
Biography: Judith Hartmann received a Master’s in International Business Administration and a Doctorate in Economics from WU Vienna University of Business Administration & Economics. She began her career in 1993 at the Canadian Department of Transportation in Ottawa. In 1997, she joined the Finance Department at Walt Disney Europe in France. In 2000, she moved to GE where she worked in various jobs over 12 years: first in Finance at GE Healthcare Europe in France, then at the GE Healthcare headquarters in the United States, until 2004 when she became Finance Director for a subsidiary of GE Healthcare. In 2007, she moved to GE Water Europe in Belgium, the Middle East and Africa (GE Energy). She was appointed Finance Director in 2009 in Brazil, then Chief Executive Officer of GE Healthcare Latin America. In 2001, she became Finance Director of GE Germany. Since 2012, she has been Chief Financial Officer and member of the Management Committee of the German Bertelsmann Group and non-executive Director of the RTL Group, and member of the Board of Directors of Penguin Random House LLC and of Gruner & Jahr AG & Co KG until the end of 2014. In 2015, she joined ENGIE as Deputy CEO in charge of Finance and is also a non-executive Director at Unilever.
List of other major offices and positions held during the last five years
Current Non-executive Director at Unilever (United Kingdom) Expired during the last five years Director at Penguin Random House LLC (United States) and at Gruner & Jahr AG & Co KG (Germany) Non-executive Director at the RTL Group
In bold: listed companies.
182 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Composition of governance and management bodies 14
Isabelle KOCHER 14 49 years old Main position: French Deputy Chief Executive Officer, Chief Operating Officer and Business address: Director of ENGIE ENGIE Offices and positions held at the Company: Tour T1 Director 1, place Samuel-de-Champlain Member of the Strategy Committee Faubourg de l’Arche Number of SUEZ ENVIRONNEMENT COMPANY shares held: 92930 Paris-La Défense, France 4,100 (of which 2,000 shares as a loan granted by ENGIE)
Biography: Isabelle Kocher, born on December 9, 1966, was co-opted as a Director by the Board of Directors on February 7, 2012 (appointment ratified by the Shareholders’ Meeting of May 24, 2012). She is a graduate of the École Normale Supérieure (ENS-Ulm) and a member of Corps des Mines. In 1997 she was appointed Budget Officer for Telecommunications and Defense at the Ministry of the Economy. She was industrial affairs advisor to the Prime Minister’s Office between 1999 and 2002. In 2002, she joined the SUEZ Group, where she held various positions (from 2002 to 2005 in the Strategy and Development Department; from 2005 to 2007 as Director of Performance and Organization; from 2007 to 2008 as Chief Operating Officer of Lyonnaise des Eaux; from 2009 to October 2011 as Chief Executive Officer of Lyonnaise des Eaux, in charge of water development in Europe). From October 2011 to November 2014, she was Executive Vice-President and CFO of ENGIE. Since November 12, 2014, Isabelle Kocher has been Deputy CEO and Chief Operating Officer and Director of ENGIE.
List of other major offices and positions held during the last five years
Current Director of Axa, ENGIE Energie Services* and International Power Plc* Expired during the last five years Various offices held at companies of the SUEZ group Director of Arkema (until July 31, 2012)
* Companies belonging to the ENGIE Group. In bold: listed companies.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 183 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
Ines KOLMSEE
46 years old Main position: German Member of the Management Board in charge of Energy Business address: Provider's Technology division at EWE AG SUEZ Offices and positions held at the Company: Tour CB21 Independent Director 16, place de l’Iris Member of the Strategy Committee 92040 Paris-La Défense, France Number of SUEZ ENVIRONNEMENT COMPANY shares held: 2,000 shares
Biography: Ines Kolmsee, born on April 4, 1970, was appointed as Director by the Shareholders’ Meeting of May 22, 2014. She holds several engineering degrees (TU Berlin, Germany and École des Mines de Saint-Etienne, France), as well as an MBA (INSEAD Business School – France/Singapore). From 2004 to 2014, she served as Chief Executive Officer of SKW Stahl-Metallurgie Group, specializing in chemistry and deploying activities worldwide. In 2010, she founded her own company in the rural electrification sector. In May 2015, she joined EWE AG, one of the largest companies in the energy sector in Germany as Chief Technology Officer (CTO). She is also a Director of Umicore SA. Previously, she held several positions, including Chief Financial Officer at Arques Industrie AG.
List of other major offices and positions held during the last five years
Current Director of Umicore SA (Belgium) Member of the Management Board in charge of the Technology division at EWE AG (since May 1, 2015) Expired during the last five years Member of the Supervisory Board of Fuchs Petrolub AG (from 2011 to 2015) Member of the Supervisory Board of Deutsche Telekom (2015) Chief Executive Officer of SKW Stahl-Metallurgie Group (from 2004 to 2014)
In bold: listed companies.
184 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Composition of governance and management bodies 14
Anne LAUVERGEON 14 56 years old Main position: French Chairwoman of ALP SA Business address: Offices and positions held at the Company: ALP Independent Director 13, rue du Docteur Lancereaux Chairwoman of the Appointments and Governance 75008 Paris, France Committee and member of the Compensation Committee Number of SUEZ ENVIRONNEMENT COMPANY shares held: 2,570 shares
Biography: Anne Lauvergeon, born on August 2, 1959, is Chief Engineer from École des Mines, former student of École Normale Supérieure and also has a degree in Physics. She started her career in 1983 in the steel industry at Usinor. In 1984, she was tasked with chemical safety-related issues in Europe for the Commissariat à l’Énergie Atomique (CEA), the French nuclear energy authority. From 1985 to 1988, she was in charge of sub-soil administration in Ile-de-France. In 1988, she was appointed Deputy Department Head at the Conseil Général des Mines. In 1990, Ms. Lauvergeon was appointed Special Assistant for International Economy and Trade to the President of France, and in 1991 she was named Deputy Chief of Staff and Sherpa to the President of France for the organization of international summits (G7/G8). In 1995, she joined Lazard Frères as Managing Partner. In March 1997, Anne Lauvergeon joined the Alcatel group as Deputy CEO of Alcatel Télécom. In 1998, she joined the Alcatel Group’s Executive Committee, where she oversaw all of the Group’s international business activities and was responsible for the Group’s industrial shareholdings in the defense, energy, transport and nuclear sectors (Thomson, CSF, Alstom and Framatome). From June 1999 to July 2011, Ms. Lauvergeon was appointed Chairwoman and Chief Executive Director of COGEMA (now Areva NC). She founded Areva in June 2001 and from July 2001 to June 2011 she was Chairwoman of the Areva Group’s Executive Board. Since 2011, Anne Lauvergeon has been the Chair of ALP SA, a consultancy services firm. In 2013, Anne Lauvergeon was appointed Chairwoman of the Innovation Commission 2030. In 2014, she was appointed Chairwoman of the Board of Directors of Sigfox.
List of other major offices and positions held during the last five years
Current Director of American Express (USA), Airbus Group and Rio Tinto (Australia) Chairwoman of the Board of Directors of Sigfox and of BoostHEAT. Expired during the last five years Chairwoman of the Executive Board of Areva (until June 2011) Director of Total (until May 29, 2015) Director of Vodafone (until July 2014) Director of GDF SUEZ (until April 2012)
In bold: listed companies.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 185 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
Pierre MONGIN
61 years old Main position: French Deputy CEO and General Secretary of ENGIE Business address: Offices and positions held at the Company: ENGIE Director Tour T1 Member of the Compensation Committee 1, place Samuel-de-Champlain Number of SUEZ ENVIRONNEMENT COMPANY shares held: Faubourg de l’Arche 92930 Paris-La Défense, France
Biography: Pierre Mongin was born on August 9, 1954 and holds a Master’s degree in Economics from the University of Paris I, he is graduated from the Institut d’Études Politiques in Paris and from the École Nationale d’Administration (Voltaire Class). In 1980, he held the position of Sub-Prefect in the Ain, Ariège and Yvelines departements. In 1984, he became Technical Adviser for the National Police in the French Ministry of the Interior, then Advisor to the Minister of the Interior for local municipalities, before becoming Chief of staff to the Deputy Minister for Local Municipalities. He was in charge of administrative and financial affairs and relations with the Paris Council at the Paris Prefecture of Police from 1988 to 1993. In 1993, he was Chief of staff to Prime Minister Édouard Balladur and Advisor for French Overseas Territories. In April 1993 he was appointed Prefect, first in the Eure-et-Loir, then in the Vaucluse, and in 1995, Prefect of the Auvergne region and in Puy de Dôme from 1995 to 2004. In 2004, he was Chief of staff to the Minister of the Interior, then in 2005 he was Chief of staff to Prime Minister Dominique de Villepin. From 2006 to 2015, he was Chairman and CEO of the RATP metro system in Paris. He has been Deputy CEO and General Secretary of ENGIE since July 1, 2015.
List of other major offices and positions held during the last five years
Current Director of ENGIE Energie Services*, of the ENGIE Foundation (France)* and Electrabel (Belgium)* Director of CMA-CGM Member of the Steering Council for the Chambord estate. Expired during the last five years Chairman and CEO of RATP (2006 to 2015)
* Companies belonging to the ENGIE Group.
186 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Composition of governance and management bodies 14
Guillaume PEPY 14 57 years old Main position: French Chairman of the Management Board of SNCF Business address: Offices and positions held at the Company: SNCF Independent Director 2, place aux Étoiles Chairman of the Audit and Financial Statements Committee 93633 La Plaine-Saint-Denis, and member of the Strategy Committee France Number of SUEZ ENVIRONNEMENT COMPANY shares held: 2,087 shares
Biography: Guillaume Pepy, born on May 26, 1958, studied at the École Nationale d’Administration and is a Legal Advisor at the Conseil d’État (France’s highest administrative court). Mr. Pepy has served in various positions at SNCF-Fench Railways (Director of Main line Services, then Director of Investments, Economy and Strategy and Chief Executive Officer since 2003) as well as in government Ministries (technical advisor to Michel Charasse, Chief of Staff for Michel Durafour and then Chief of Staff for Martine Aubry). Since February 26, 2008, Guillaume Pepy has served as Chairman and Chief Executive Officer of SNCF.
List of other major offices and positions held during the last five years
Current Chairman of the Management Board of SNCF Chairman and CEO of the Board of Directors of SNCF Mobilités Member of the Supervisory Board of Systra Expired during the last five years Various offices held at SNCF group companies
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 187 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
Jérôme TOLOT
64 years old Main position: French Member of the Management Committee and Deputy CEO of Business address: ENGIE for European entities, excluding regulated and global ENGIE Énergie Services activities Tour Voltaire Offices and positions held at the Company: 1, place des Degrés Director 92059 Paris – La Défense Cedex, Number of SUEZ ENVIRONNEMENT COMPANY shares held: France 35,634 (of which 2,000 shares as a loan granted by ENGIE)
Biography: Jérôme Tolot, born on January 4, 1952, has a degree from INSEAD and Institut d’Études Politiques de Paris and holds a DESS in Economics. Mr. Tolot joined Lyonnaise des Eaux in 1982 as Financial Controller, after beginning his career at the consulting firm McKinsey and INDOSUEZ bank. He was then successively Deputy CEO for Finance and Development at Degrémont, Director and Chief Executive Officer of the GTM and VINCI groups, and Chairman and Chief Executive Officer of Sita. In 2002 he was appointed Deputy CEO and member of the Management Board of SUEZ. Since 2005, he has been Director and Chief Executive Officer of SUEZ Énergie Services, which became ENGIE Énergie Services. Since July 22, 2008, he has been a member of the Executive Committee of ENGIE. Jérôme Tolot has been a member of the Management Committee and Deputy CEO of ENGIE since May 1, 2011. Since January 1, 2016, he has been responsible for European entities, excluding regulated and global activities.
List of other major offices and positions held during the last five years
Current Chief Executive Officer and Director of ENGIE Énergie Services* Member of the Supervisory Board of Savelys* Chairman of the Board of Directors of Société Monégasque de l’Électricité et du Gaz – SMEG* (Monaco), Cofely Fabricom SA * (Belgium), and ENGIE E.S.I.*(Belgium) Director of ENGIE University*, Axima Concept*, Cofely Italia SPA* (Italy), ENGIE Energy Services España* (Spain), INEO*, Cofely Nederland NV* (Netherlands) and Tractebel Engineering* (Belgium) Director of the ENGIE Foundation Permanent Representative of ENGIE to the Board of Directors of Compagnie Parisienne de Chauffage Urbain - CPCU*. Expired during the last five years Various offices held at companies of the ENGIE Group
* Companies belonging to the ENGIE Group. In bold: listed companies.
188 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Composition of governance and management bodies 14
..Directors representing employees 14 Enric Xavier AMIGUET I ROVIRA
47 years old Main position: Spanish Project development at the Customer Management Business address: Department of Agbar, a subsidiary of SUEZ SUEZ Offices and positions held at the Company: Tour CB21 Director elected by employees (nominated by the European 16, place de l’Iris Works Council) and member of the Ethics and Sustainable 92040 Paris-La Défense, France Development Committee Number of SUEZ ENVIRONNEMENT COMPANY shares held: 73 shares
Biography: Enric Amiguet i Rovira, born on November 21, 1968, is a graduate of the Catalan School of Public Relations. He joined Aguas de Barcelona in 1996, where he has held various positions. He started out in the Office of the Chairman as Head of Protocol, Public Relations and Press. In 2002, he joined the Incidents Department, where he was responsible for customer relations. He then worked in the Online and Green Marketing Department. Since 2010, he has held project development roles within the Customer Management Department.
List of other major offices and positions held during the last five years
Current – Expired during the last five years –
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 189 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
Agatta CONSTANTINI
51 years old Main position: French Project Manager at SUEZ Business address: Offices and positions held at the Company: SUEZ Director elected by employees (nominated by the France Tour CB21 Group Works Council) and member of the Compensation 16, place de l’Iris Committee 92040 Paris-La Défense, France Number of SUEZ ENVIRONNEMENT COMPANY shares held: 30 shares 132.4 units of the Company mutual fund, "classic" formula and 121.4 units of the "multiple" formula, as part of the Sharing 2011 and Sharing 2014 Employee Shareholding Plans
Biography: Agatta Constantini, born on February 23, 1965, holds a diploma in secretarial studies and communication. She joined Lyonnaise des Eaux in 1993 as a receptionist. She then became a switchboard operator. She participated in the creation of network scheduling in 1999 and held various positions there until 2007. She was appointed store manager in 2007 and senior purchasing technician in 2008. Agatta Constantini is currently a project manager at SUEZ.
List of other major offices and positions held during the last five years
Current – Expired during the last five years –
190 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Composition of governance and management bodies 14
Pursuant to the Code of Conduct on the use of inside information XX has participated as a manager in any bankruptcy, and securities trading, as approved by the Board of Directors on receivership or liquidation in the last five years; June 28, 2012, and under which the Company’s Directors are 14 XX has been incriminated or received an official public sanction required to disclose conflicts of interest annually, no member by statutory or regulatory authorities; of the Board of Directors has disclosed to the Company that he or she: XX has been barred by a court of law from acting as a member of an administrative, management or supervisory body of XX has family ties with other members of the Company’s Board any issuer or participating in the management or business of Directors (including the Chief Executive Officer); of any issuer in the last five years. XX has been convicted for fraud in the last five years;
14.1.3 Management bodies
In order to successfully perform his mission, the Chief Executive Marie-Ange Debon, born May 18, 1965, is a graduate of HEC and Officer is assisted by a Management Committee, which is an ENA, and has a Master’s degree in law. In 1990, she started her analysis and decision-making body that examines the Group’s career as a magistrate at the Cour des comptes. She then joined major decisions and strategic objectives, and meets every two France 3 and was Management Director, then Deputy CEO for weeks. The composition of the Management Committee was Resources. In 1998, she joined the Thomson group as Deputy changed in 2015 and, as of December 31, 2015, included eight Chief Financial Officer and as of July 2003 General Secretary. members besides Jean-Louis Chaussade: She joined SUEZ environnement in 2008 as General Secretary Jean-Marc Boursier, born October 5, 1967, worked as a in charge of Legal and Audit. Since 2009, she has also been Statutory Auditor for Mazars in Paris and London between responsible for Water and Waste projects, IT Systems, Risks/ 1993 and 1999. He holds a civil engineering degree from Investments, Insurance and Purchasing. She has been a Director Telecom SudParis and a master’s degree in international of Technip since 2010. She was also a member of the Collège de finance from École des Hautes Études Commerciales (HEC l’Autorité des marchés financiers since 2008 and Chairwoman Paris). Mr. Boursier joined the SUEZ group in 1999 as financial of the MEDEF Corporate Law Committee from 2009 to 2013. In controller for Sita France. He became Head of Financial Control April 2013, Marie-Ange Debon was appointed Deputy CEO in for Sita in 2000 and then Head of Financial Control and Mergers charge of International business (Industrial Solutions, North & Acquisitions for Sita in 2001. He was appointed Director of America, Africa/Middle East/India, Asia, Australia and Europe/ Planning and Control for SUEZ environnement in 2002, and was Latin America Regions). appointed Chief Financial Officer for SUEZ environnement in Angel Simon, born November 9, 1957, holds a degree in civil 2004. In April 2013, Jean-Marc Boursier was appointed Deputy engineering (Ingeniero de Caminos, Canales y Puertos) from the CEO in charge of Finance and Purchasing. He also supervised Universidad Politécnica in Barcelona (1980) and an MBA from Safege, SUEZ environnement’s engineering subsidiary, and ESADE. From 1989 to 1995 he was Director of the Barcelona was responsible for directing performance improvement plans. Urban Community. He joined Agbar in 1995 as the Group’s Since September 1, 2015 he has been Group Deputy CEO for representative in Portugal before being appointed in 1998 as the Recycling and Recovery business in Europe. Chief Executive Officer of the International segment for the Christophe Cros, born August 3, 1959, was a magistrate at Water and Wastewater division. In 1999, he became Head of the Cour des comptes (1985-1989) and then Head of Financial Aguas Andinas, S.A. in Chile, one of the largest wastewater Organization for the Centre National des Caisses d’Épargne. companies in Latin America, which provides services to more Mr. Cros studied at École Nationale d’Administration (ENA), and than six million inhabitants of Santiago and its surrounding is a graduate of Institut d’Études Politiques de Paris and holds communities. In 2002, he was appointed Chief Executive Officer a Master’s degree in Economics from Université de Paris I. of Aguas de Barcelona and of the Agbar Group’s Water and He joined the SUEZ group in 1991, where he became Chief Wastewater division, and in September 2004 he became Chief Financing and Treasury Officer in 1993. From 1995 to 1998, he Executive Officer of the Group. Since June 2010, Angel Simon was Chief Operating Officer, then Chairman and Chief Executive has served as Chairman of Aguas de Barcelona (Agbar). This Officer of Crédisuez, the division covering all the Group’s real holding company, which brings together over 150 companies, estate activities. He was appointed Chief Operating Officer of has operated in the water cycle and systems sector for more Sita in 1999, and took over all its European activities in 2002. than 140 years. Following its global expansion (to Chile, the He was responsible for SUEZ’s Recycling and Recovery Europe UK, Peru, Colombia, Algeria, Cuba and Mexico), Agbar serves activities and Chief Executive Officer of Sita France. In April more than 37 million people worldwide. Angel Simon is also 2013, Christophe Cros was appointed Deputy CEO in charge of the Chairman of Aqualogy, the integrated water solutions brand the Waste Europe business. Since September 1, 2015 he has launched by Agbar. In April 2013, Angel Simon was appointed been Group Deputy CEO for Finance. Deputy CEO in charge of the Water Europe business.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 191 Governance, management and supervisory bodies and General Management 14 Composition of governance and management bodies
Jean-Yves Larrouturou, born October 17, 1961, holds degrees Denys Neymon, born June 18, 1960, worked for 10 years in from the École Centrale in Paris and the École Nationale the construction industry (Bouygues Group) as Director of d’Administration. He began his career at the Treasury Human Resources. In 2002, Mr. Neymon joined the Group as Department, within the Ministry of Economy and Finance. the Director of Human Resources of Degrémont. He has degrees In 2003, he joined the France Télécom Orange group where in law (1983) and Human Resources (1984). He has served as he was General Secretary and Deputy CEO. On June 3, 2013, Human Resources Director for SUEZ environnement since 2004 Mr. Larrouturou was appointed General Secretary of the SUEZ and CEO of Treatment Solutions since September 1, 2015. group. He is responsible for the following functions: governance, Frédérique Raoult, born July 13, 1966, is a graduate of the preparation of Board meetings and Board Committee meetings, Institut d’Études Politiques de Paris and holds a Master’s degree Legal, Audit, Risks, Insurance, Ethics (as the Group’s Ethics in History. She has held a number of communication positions Officer), Real Estate and General Resources. relating to the environment within the Group. In 1997, she Thierry Mallet, born September 4, 1960, is a graduate of joined Degrémont as Director of Communications. She has been École Polytechnique (1980), and École Nationale des Ponts et Director of Communications for SUEZ environnement since Chaussées (1985) and also holds a Master of Sciences degree 2004 and a member of SUEZ environnement’s Management from the Massachusetts Institute of Technology (MIT). He started Committee since January 1, 2009. In April 2013, Frédérique his career working for the French Ministry of Transport from Raoult was appointed Director of Sustainable Development and 1987 to 1989. He then moved to the Générale des Eaux group, Communications. where he held different positions and was in charge of water The Company also has a Management Committee, which is a activities in Spain from 1995 to 1997 and in North America from Group policy management and implementation body that meets 1997 to 1999. He joined Degrémont in December 2002 as Chief approximately every two months. It consists of 23 members: Operating Officer, where he worked closely with Jean-Louis the 9 members of the Executive Committee and the 14 heads Chaussade, at that time Chairman and Chief Executive Officer. of the main Business Units and representatives of the support He became Chief Executive Officer in June 2004, a position he functions. Its exact composition is detailed on the Company held until October 2009, when he was appointed Chairman. website (www.suez-environnement.com) On October 1, 2009, Thierry Mallet was named Deputy CEO in charge of the International segment. Since April 15, 2013, he has served as Director of Innovation and Industrial Performance for the SUEZ group.
192 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Governance, management and supervisory bodies and General Management Conflicts of interest within administrative bodies and General Management 14
14.2 Conflicts of interest within administrative bodies and General Management 14
The Company has put in place various mechanisms to prevent –– a period of 15 days prior to the publication of the any conflict between the private interests of its Directors and Company’s first- and third-quarter results, until two days those of the Company. after their publication; The Director’s Charter (as annexed to the Board of Directors’ XX recalls the obligation for Directors and certain executives Internal Regulations) stipulates that every Director must inform of the Group to report transactions involving the Company’s the Board of any conflict of interest, even potential, in which he shares; or she could be directly or indirectly involved. In the event that XX establishes the obligation for Directors to make an annual a Director cannot avoid being in conflict of interest, he or she declaration of interests, indicating in particular any potential must refrain from participating in discussions and any decisions conflict of interest that could exist between their duties to on the relevant matters. the Company and other duties or private interests. In addition, in 2012, on the recommendation of the Appointments As regards the annual declaration of interests made by each and Compensation Committees, the Board of Directors also Director at the end of 2015, no member of the Board of Directors adopted a Code of Conduct on the prevention of insider trading, (including the Chief Executive Officer) notified the Company of which: any conflict of interest between their duties to the Company XX recalls the laws and regulations on insider dealing and and other duties or private interests. market abuse; Furthermore, to the Company’s knowledge, as of the date of XX sets blackout periods during which insiders must not trade this Reference Document, no member of the Board of Directors in the Company’s shares, including: or the Chief Executive Officer enjoy benefits as a result of service contracts between them and the Company or any of –– a period of 30 days prior to the publication of the Company’s annual and interim results until two days after its subsidiaries. their publication, and
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 193 194 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Compensation and benefits15
15.1 Compensation and benefits in kind 196 15.1.1 Total compensation of the Chief Executive Officer 196 15.1.2 Compensation of Management Committee members 198 15.1.3 Compensation of Directors 199 15.1.4 Long-term incentive plans 201 15.1.5 Components of compensation due or awarded in 2015 to each Corporate Officer, submitted for the opinion of the shareholders 207
15.2 Amounts provisioned by the Company and its subsidiaries for the payment of pensions, retirement benefits, and other benefits to members of the Management Committee 209
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 195 Compensation and benefits 15 Compensation and benefits in kind
15.1 Compensation and benefits in kind
15.1.1 Total compensation of the Chief Executive Officer
..Compensation policy proposals to the Board of Directors, based on surveys and analyses of the market practices of comparable companies, The compensation of the Chief Executive Officer is composed and takes a global approach to all elements of compensation, of various elements: including: XX an annual fixed compensation; XX determining the fixed compensation; XX benefits in kind; XX defining the quantitative and qualitative criteria for XX an annual variable compensation based on the achievement determining the variable compensation, as well as their of qualitative and quantitative criteria; application; XX long-term incentives, via the allocation of performance XX awarding long-term incentive that may be in the form shares or variable cash compensation based on achieving of performance shares (number of shares allocated, internal and external multi-year targets. performance conditions, allocation rules, etc.) or multi-year variable compensation in cash. In accordance with the Board of Directors’ Internal Regulations, the Compensation Committee plays an important role in The Board of Directors relies on these recommendations determining all elements of the Chief Executive Officer’s and proposals to approve all elements of the Chief Executive compensation. The Committee makes recommendations and Officer’s compensation.
..Compensation for 2015 The tables below summarize the compensation of the Chief Executive Officer, the Company’s sole Corporate Officer, according to the model defined by the AFEP-MEDEF Code and the AMF recommendation of December 10, 2009 as amended on December 17, 2013.
SUMMARY TABLE OF COMPENSATION, STOCK-OPTIONS AND PERFORMANCE SHARES ALLOCATED TO THE CORPORATE OFFICER – GROSS AMOUNTS (IN EUROS)
Jean-Louis Chaussade, Chief Executive Officer Fiscal year 2015 Fiscal year 2014 Fiscal year 2013 Compensation due for the fiscal year (see breakdown below) 1,700,665 1,674,951 1,502,249 Value of multi-year variable compensation awarded during the fiscal year 277,360 292,379 - Value of stock-options allocated during the fiscal year - - - Value of performance shares allocated during the fiscal year (details in section 15.1.4 below) - - 327,600 TOTAL 1,978,025 1,967,330 1,829,849
196 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Compensation and benefits Compensation and benefits in kind 15
SUMMARY TABLE OF COMPENSATION FOR THE CORPORATE OFFICER (IN EUROS)
Amounts in fiscal year 2015 Amounts in fiscal year 2014 Amounts in fiscal year 2013 Jean-Louis Chaussade, Chief Executive Officer Due Paid (a) Due Paid (a) Due Paid (a) Fixed compensation 750,000 (b) 750,000 (b) 750,000 (c) 750,000 (c) 750,000 750,000 Variable compensation 940,292 909,421 909,421 736,790 736,790 648,854 15 Long- Term variable compensation ------Exceptional compensation ------Directors’ fees ------Benefits in kind 10,373 10,373 15,530 15,530 15,459 15,459 TOTAL 1,700,665 1,669,794 1,674,951 1,502,320 1,502,249 1,414,313
(a) Variable compensation paid corresponds to the variable compensation in respect of year n-1. (b) Including €110,749 under the general social security retirement plan (CNAV) and under the mandatory supplementary pension plans (AGIRC and ARRCO). (c) Including €46,146 under the general social security retirement plan (CNAV) and under the mandatory supplementary pension plans (AGIRC and ARRCO).
The gross fixed compensation for Mr. Jean-Louis Chaussade has After reviewing the level of achievement of the aforementioned remained unchanged since 2009 and amounts to €750,000 for criteria, which cannot be made public for confidentiality 2015. Since August 1, 2014, the amount of the annuities paid reasons, and on the recommendation of the Compensation to Mr. Jean-Louis Chaussade under the general social security Committee, the Board of Directors set the variable portion of retirement plan of the National Pension Fund (CNAV) and under the compensation for fiscal year 2015, paid in 2016, to €940,292, the mandatory supplementary pension plans ARRCO and AGIRC representing an overall level of achievement of 112% for the has been deducted from the amount paid by the Company and quantitative criteria and 119% for the qualitative criteria. the total fixed compensation actually paid in 2015 by SUEZ The 2014 variable portion, paid in 2015, was €909,421. ENVIRONNEMENT COMPANY to Mr. Jean-Louis Chaussade was €639,251, to which is added the amount received from his In addition to the fixed and variable compensation mentioned mandatory pension plan (€110,749). above, 2015 benefits in kind totaled €10,373, corresponding to a company car. The Company also provided Mr. Chaussade with In addition to this fixed compensation, a variable portion ranging a cell phone and a laptop computer. from 0% to 145% of the total fixed compensation is paid, with the achievement of set objectives corresponding to a variable portion equal to 80% of the fixed compensation. ..Long-term variable compensation 2015 This variable portion of the compensation was determined At its meeting of January 14, 2015, the Board of Directors on the basis of budget-based quantitative criteria (75%) and decided to award to the Chief Executive Officer a long-term qualitative criteria (25%). The details of these criteria, the variable compensation for fiscal year 2015, as part of a plan expected achievement level of which was pre-established by which also benefits to 1,779 other people within the Group. the Board of Directors at its meeting of February 24, 2015, on This long-term variable compensation covers a maximum the recommendation of the Appointments and Compensation amount of €750,000 (€375,000 in the event that the objectives Committee, are shown below. set are achieved at 100%) and provides, as the case may be, for The quantitative criteria include the financial indicators of the a payment in cash in 2018, subject to the level of achievement of Group for 2015: EBITDA (5%), recurring net income (30%), free performance conditions, determined by the Board of Directors, cash flow (20%) and ROCE (20%). The targets that must be met in fiscal years 2015 to 2017. This compensation is also subject under the quantitative criteria cannot be disclosed publicly for to an obligation to reinvest 15% of the net amount actually confidentiality reasons. The qualitative criteria, representing received in 2018 in SUEZ ENVIRONNEMENT COMPANY shares, the remaining 25% is related to the “COMPASS” optimization until the number of shares held represents 150% of his annual program, to the implementation of environmental, ethics and fixed compensation. industrial risk action plans, to the health and safety results and Detailed information on this long-term variable incentive plan to the execution of the strategic plan. is available in section 15.1.4 of this Reference Document.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 197 Compensation and benefits 15 Compensation and benefits in kind
..Other benefits The annual pension resulting from supplementary group pension plans to be paid to Mr. Chaussade (once he is no longer Chief Executive Officer) will be €276,376.08, or 16.25% RETIREMENT AND HEALTHCARE COVERAGE of his 2015 annual compensation (including fixed and variable No specific supplementary retirement plan has been established compensation owed by the Company). for the Corporate Officer. Mr. Chaussade thus benefited from the Mr. Chaussade is also eligible for benefits under the Company’s supplementary Group retirement plan, with set premiums and current mandatory Group health care plans. benefits, applicable to employees of the Company and some of its subsidiaries. EMPLOYMENT CONTRACT AND SEVERANCE PAY Mr. Chaussade decided to receive benefits under all of his pension plans as of August 1, 2014, including the defined As of December 31, 2015, Mr. Chaussade did not have an contribution and defined benefit pension plans of the SUEZ employment contract and did not benefit from any severance group. He, however, decided to waive any pension payments pay or other compensation under a no-competition clause. under these supplementary plans until his current functions as Chief Executive Officer come to an end.
Compensation or benefits due or that may become due Supplementary pursuant to termination or a Compensation due under a Employment contract retirement plan change in duties no-competition clause Corporate Officers Yes No Yes No Yes No Yes No Jean-Louis Chaussade Director and Chief Executive Officer X X X X Start of term of office: 07/23/2008 End of term of office: at the end of his directorship, or at the 2016 Shareholders’ Meeting for fiscal year 2015
15.1.2 Compensation of Management Committee members
The Management Committee has nine members since June to Mr. Jean-Louis Chaussade under the mandatory pension 2013, versus eight previously. plans totaling €110,749). All the members of the Management Committee in office as of The table below specifies the fixed and variable amounts paid December 31, 2015 (refer to section 14.1.3 of this document), to Management Committee members over the last three years including the Chief Executive Officer, received in 2015 total (amounts in euros). It does not include the valuation of the long- gross compensation of €7,259,459 (excluding annuities paid term incentive plans to which they are entitled.
Year of payment Total fixed portion Total variable portion Total compensation 2013 3,449,367 2,365,874 5,815,241 2014 3,892,277 2,968,918 6,861,195 2015 3,846,098 3,413,361 7,259,459
Changes in total compensation of members of the Management Added to the compensation described above is an amount Committee between 2014 and 2015 are primarily due to corresponding to employee profit-sharing and incentive increases in the amounts paid for the variable portions, in bonuses, which totaled €53,433 paid to the entire Management relation to a better degree of achievement of objectives. Committee in 2015 for fiscal year 2014. This amount was €43,240 in 2014 for 2013.
198 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Compensation and benefits Compensation and benefits in kind 15
15.1.3 Compensation of Directors
The compensation of Directors (excluding the Chief Executive XX a variable portion of €2,000 per meeting for each Director Officer) consists only of Directors’ fees. eligible to receive Directors’ fees and of €4,000 per meeting Mr. Mestrallet received no compensation for his term as for the Chairman of the Board of Directors; Chairman of the Board of Directors of SUEZ ENVIRONNEMENT XX a variable portion of: 15 COMPANY, apart from Directors' fees, which amounted to –– €2,000 per meeting for each of the members of the Board €68,751 for 2015. Mr. Mestrallet, as well as the other Directors of Directors’ committees, appointed on the recommendation of ENGIE, have received Directors' fees directly since 2015 because they pay individual –– €4,000 per meeting of the Committee that they chair income tax. Before that, Directors' fees allocated to them were for the Chairman of the Appointments and Governance paid to ENGIE. Committee, the Compensation Committee, the Strategy Committee and the Ethics and Sustainable Development Mr. Jean-Louis Chaussade, Chief Executive Officer of the Committee, Company, does not receive any Directors’ fees for his SUEZ ENVIRONNEMENT COMPANY directorship. The Directors –– €6,000 per meeting of the Audit and Financial Statements representing employees, appointed pursuant to Article 10 of Committee for the Chairman of the Committee. the Company Bylaws, do not receive any Directors’ fees either. The variable portion for attending a meeting of the Board of The total amount for Directors’ fees set by the Combined Directors or of a Committee is reduced to €1,000 if attendance Shareholders’ Meeting of May 22, 2014 was €700,000. is by means of telecommunication (phone, videoconference), except in exceptional circumstances. Since fiscal year 2014, the Directors’ fees are allocated according to the following rules, with the understanding that a These distribution rules mean that the variable amount related proportional reduction of the amount of Directors’ fees is applied to the Directors’ attendance at Board and Committee meetings in the event that the amount has been exceeded, and that the is greater than the annual fixed amount allocated thereto, in Board may decide to share, depending on the attendance rate compliance with the AFEP-MEDEF Code. of each Director, in the unpaid balance in the event that the For fiscal year 2015, 16 Directors received Directors’ fees. amount has not been used in full: XX a fixed annual portion of €15,000 per Director;
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 199 Compensation and benefits 15 Compensation and benefits in kind
The following table shows Directors' fees allocated to Directors, calculated in accordance with the above rules and approved by the Board of Directors at its meeting of January 14, 2015.
2014 2015 Board member Directors’ fees paid (a) Directors’ fees paid (a) Gérard Mestrallet, Chairman of the Board of Directors (b) €61,058 €68,751 Jean-Louis Chaussade, Chief Executive Officer and Director - - Gérald Arbola (c) €18,500 - Nicolas Bazire €57,058 €53,627 Gilles Benoist €48,058 €55,919 Valérie Bernis (b) €33,058 €36,022 Harold Boël (d) €39,058 €38,459 Alain Chaigneau (b) €41,058 €45,042 Penelope Chalmers Small (b) (e) €29,058 €25,042 Jean-François Cirelli (b) (f) €21,125 - Delphine Ernotte Cunci, Chairwoman of the Ethics and Sustainable Development Committee €61,058 €51,627 Lorenz d’Este, Chairman of the Appointments and Compensation Committee and then of the Compensation Committee €56,058 €57,627 Isidro Fainé Casas €4,558 €35,314 Judith Hartmann(b) (h) - €13,126 Isabelle Kocher (b) €39,058 €32,168 Ines Kolmsee (i) €16,558 €37,022 Anne Lauvergeon (j), Chairman of the Appointments and Governance Committee €6,558 €47,043 Guillaume Pepy, Chairman of the Audit and Financial Statements Committee €87,058 €65,043 Olivier Pirotte (k) (l) €42,500 - Amaury de Sèze (m) €9,500 - Jérôme Tolot (b) €29,058 €38,168 TOTAL €699,995 €700,000
(a) Gross amounts before any mandatory fixed levies, social security contributions or withholding tax, as applicable. Directors’ fees for the second half of 2014 were paid in January 2015; Directors’ fees for the second half of 2015 were paid in February 2016. (b) Directors’ fees owed for 2014 paid to Directors appointed under recommendation of ENGIE were paid to ENGIE. Directors’ fees for 2015 were paid to them directly for tax reasons (for beneficiaries who are French tax residents). (c) Gérald Arbola’s directorship ended at the Shareholders’ Meeting of May 22, 2014. (d) The Directors’ fees were paid to SOFINA. (e) Penelope Chalmers Small resigned her directorship with effect from July 28, 2015. (f) Jean-François Cirelli resigned his directorship with effect from November 11, 2014. (g) Isidro Fainé Casas was co-opted as Director on October 29, 2014. (h) Judith Hartmann was co-opted as Director on July 28, 2015. (i) Ines Kolmsee was appointed as Director by the Shareholders’ Meeting of May 22, 2014. (j) Anne Lauvergeon was co-opted as Director on October 29, 2014. (k) Olivier Pirotte resigned his directorship with effect from October 29, 2014. (l) The Directors’ fees were paid to Groupe Bruxelles Lambert. (m) Amaury de Sèze resigned his directorship with effect from May 22, 2014.
200 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Compensation and benefits Compensation and benefits in kind 15
15.1.4 Long-term incentive plans
GENERAL ALLOCATION POLICY the form of stock options, performance shares or payment in cash, the total of this variable long-term compensation The Board of Directors, following a proposal of the Appointments is subject to the achievement of performance conditions. In and Compensation Committee (then the Compensation addition, all long-term incentives that may be awarded to the Committee) confirmed the Company's long-term compensation 15 Chief Executive Officer in the future would also be subject to policy in 2015. The Board of Directors, without rejecting the multi-year performance conditions. principle of allocation of performance shares (the Company having ended the allocation of stock options in 2012), decided in Law No. 2006-1770 of December 30, 2006 to promote employee 2015 to implement a long-term compensation plan based on a profit-sharing and shareholding and laying down a range of cash payment, fully subject to the achievement of performance economic and social provisions (known as the “Loi Balladur” conditions evaluated over several years. The objective of long- (Balladur Law)), imposes restrictions on the availability of shares term incentive, which is awarded during the first quarter of the resulting from the exercise of stock options and performance fiscal year, is to associate certain categories of employees or shares granted to Corporate Officers under plans introduced Corporate Officers with the Company’s future growth and value since January 1, 2007. creation, to retain them and recognize their performance. These Pursuant to Articles L. 225-185 and L. 225-197-1 of the French categories include: Commercial Code, the Board of Directors resolved that, for the XX executives and senior managers ("Top Executives"), including duration of his term of office, Mr. Chaussade will retain 25% of members of the Management Committee and the Executive the shares from exercised options and performance shares Committee, as well as high-potential managers and experts allocated under various SUEZ ENVIRONNEMENT COMPANY ("A Beneficiaries"); and plans, up to a total of 150% of his fixed annual compensation. On the recommendation of the Compensation Committee, the employees who demonstrate outstanding performance but XX Board of Directors also resolved to combine the payment of a do not fall within the above categories ("B Beneficiaries"). long-term variable compensation in cash to the Chief Executive The long-term variable compensation awarded to the B Officer with a share reinvestment obligation of 15% of the net Beneficiaries and A Beneficiaries, excluding Top Executives, is amount received by the end of the plan, until the number of subject to achieving an internal performance condition (related shares held by the Chief Executive Officer represents 150% of to the Group’s financial performance). The long-term variable his fixed annual compensation, thus satisfying the objective set compensation awarded to Top Executives is itself subject to an out by the recommendations of the AFEP-MEDEF Code that the internal performance condition and, cumulatively, to an external Chief Executive Officer should hold a large and growing number performance condition (related to the relative performance of of Company shares. the Company’s share price or of the Total Shareholder Return In addition, for performance shares allocated, the number of of the Company) for a proportion of attributed benefits that shares allocated to Corporate Officers may not exceed 5% of increases with the hierarchical level of the beneficiary. The the shares allocated. long-term variable compensation awarded to A Beneficiaries is also subject to non-financial performance conditions based on The Board of Directors must also ensure that the value (as the percentage of women in management. These performance derived from the consolidated financial statements) of the conditions are evaluated over a period of several years. variable long-term incentive allocated to the Chief Executive Officer in any fiscal year does not represent an excessive The Board of Directors, following a recommendation by percentage of his total compensation (including the value of the Compensation Committee, confirmed this policy while this variable long-term incentive). stipulating that beginning in 2016, the internal conditions applicable to long-term compensation plans will be linked to Pursuant to the Code of Conduct on the use of inside information audited financial indicators, which will be published by the and securities trading, as approved by the Board of Directors Company and in line with forecasts and/or objectives published on June 28, 2012, on the recommendation of the Appointments by the Company. and Compensation Committee, the Chief Executive Officer may not engage in trading in Company shares, including the ALLOCATION POLICY FOR CORPORATE OFFICERS sale of shares resulting from the exercise of stock options or allocation of performance shares if he is in possession of inside The total compensation of the Chief Executive Officer includes information, as well as during the following blackout periods: a long-term component that may take the form of performance shares or a cash payment. The Company ended the allocation XX a period of 30 days prior to the publication of the Company’s of stock options in 2012. annual and interim results until two days after their publication; and Regarding the long-term variable compensation paid by the Company to the Chief Executive Officer since 2009, either in
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 201 Compensation and benefits 15 Compensation and benefits in kind
XX a period of 15 days prior to the publication of the Company’s subject to the achievement of performance conditions, differing first and third-quarter results, until two days after their according to the beneficiary profile and more demanding publication. for the Corporate Officer as well as for the members of the Finally, the Chief Executive Officer has agreed not to engage in Management Committee and of the Executive Committee and hedging transactions with respect to the performance shares the Top Executives of the Group. For this category, consisting of or stock options that he receives from the Company. 138 beneficiaries, the plan is subject to the application of two cumulative conditions: LONG-TERM VARIABLE COMPENSATION IN CASH AWARDED IN 2015 XX an internal performance condition based on the Group’s cumulative recurring net income for the fiscal years 2015 On the proposal of the Appointments and Compensation to 2017 inclusive (noting that the achievement of the target Committee, the Board of Directors of SUEZ ENVIRONNEMENT goal set by the Board of Directors only gives rise to the COMPANY, at its meeting of January 14, 2015, decided on the payment of 50% of the part of the amount subject to this principles of the 2015 long-term variable compensation plan condition); taking the form of a payment in cash subject to the achievement of performance conditions. The purpose of this plan is to XX a market performance condition based on the level of Total continue its policy of associating staff to the future development Shareholder Return (TSR) of the SUEZ ENVIRONNEMENT of the business and to the creation of value and to build the COMPANY share compared to the average TSR of the loyalty of executives and senior managers, as well as high- companies comprising the DJ Eurostoxx Utilities index over potential executives and experts (“A Beneficiaries”) and also to the period from January 1, 2015 to December 31, 2017. reward employees who demonstrate outstanding performance The above criteria would be applied as follows, with the but do not fall within the above categories (“B Beneficiaries”). understanding that the target objective for internal conditions The Plan concerns 1,780 beneficiaries for a total maximum corresponds to the objectives as they appear in the Group's amount payable of €15 million. It provides for a payment in 2018 mid-term plan:
Minimum Triggering threshold Target Maximum Remarks internal condition No allocation if the Allocation of 25% if Allocation of 50% if Allocation of 100% if Linear calculation (related to recurring achievement level is the achievement level the target objective is the achievement level between milestones net income) less than 90% of the is greater or equal achieved. is greater or equal target objective. to 90% of the target to 120% of the target objective. objective. external condition No allocation if change Allocation of 50% Allocation of Allocation of 110% Linear calculation (related to TSR) in TSR is less than 90% if change in TSR 100% if change in if change in TSR between milestones of the Index TSR. is greater or equal TSR is greater or is greater or equal to 90% of change equal to change to 110% of change in the Index TSR. in the Index TSR. in the Index TSR.
Furthermore, the amount that could be paid in 2018 to this 2015 to 2017. Note that the 469 "Other A Beneficiaries" are also category of person depending on the level he achieved for the subject to the management parity condition. two performance conditions stated above, could be increased The long-term compensation plan provides for the loss of or reduced by 10% as a function of the level of parity in the entitlement to payment in the event of resignation or termination management team on December 31, 2017. due to gross negligence or serious misconduct; payment is The Board of Directors thus allocated long-term variable maintained in other cases of termination of employment compensation to the Chief Executive Officer of €750,000, which (retirement, disability, death). was fully subject to the two cumulative performance conditions Finally, the plan provides, for the Corporate Officer and the other stated above, i.e. internal and market performance conditions, members of the Management Committee (CODIR), an obligation as well as to the parity in management condition. of reinvestment in SUEZ ENVIRONNEMENT COMPANY shares For the 469 “Other A Beneficiaries” and 1,173 “B Beneficiaries”, of 15% of the net amount that will actually be received in 2018, the amount of the variable long-term compensation to be paid in until the number of shares held represents 150% of the fixed 2018 will depend on the level of achievement of the two internal annual compensation for the Corporate Officer and 100% of performance conditions relating half to the Group’s cumulative the fixed annual compensation for the other members of the recurring net income for fiscal years 2015 to 2017 inclusive Management Committee. and half to the cumulative EBITDA of the Group for fiscal years
202 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Compensation and benefits Compensation and benefits in kind 15
STOCK OPTION PLANS share capital were all the options to be exercised. The Company has never set up a stock subscription plan. The Company did not offer any new stock option plans in 2015. In accordance with the Company’s long-term incentive policy, As of December 31, 2015, the number of outstanding stock no stock option plans have been set up since December 2010. options was 1,891,063, representing 0.35% of the Company’s
STATUS OF THE PERFORMANCE CONDITIONS APPLICABLE TO THE STOCK OPTION PLANS 15
Proportion of shares delivered Applicable performance conditions Level of achievement relative to the initial allocation December 17, 2009 Plan (a) Company stock price evolutions from 0% Management Committee and December 17, 2009 to December 16, 2013 Executive Committee: 30% compared to the CAC 40 and Euro Stoxx Utilities Other beneficiaries: 50% indices Group’s cumulative recurring net income for 90% fiscal years 2009 to 2012 Plan of December 16, 2010 Company stock price evolutions from 0% Corporate Officer, Management December 16, 2010 to December 15, 2014 Committee and Executive compared to the CAC 40 and Euro Stoxx Utilities Committee: 0% indices Top Executives: 17.5% Other beneficiaries: 50% Group’s cumulative recurring net income for 0% for the Corporate fiscal years 2010 to 2013 Officer 35% for the other beneficiaries
(a) The Chief Executive Officer was not a beneficiary under this stock purchase option plan.
STOCK OPTIONS ALLOCATED TO THE CORPORATE OFFICER IN 2015
Valuation of stock options based on the method used for the consolidated Number of options financial statements allocated during Plan Type of option (in euros) the fiscal year Exercise price Exercise period Jean-Louis Chaussade, Chief Executive Officer No options were awarded to the Corporate Officer by the Company in fiscal year 2015.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 203 Compensation and benefits 15 Compensation and benefits in kind
STOCK OPTIONS SUBSCRIBED OR EXERCISED BY THE CORPORATE OFFICER IN 2015
Number of options exercised Plan during the fiscal year Exercise price Jean-Louis Chaussade, Chief Executive Officer The Corporate Officer exercised no Company stock options during fiscal year 2015.
STOCK OPTIONS GRANTED TO THE FIRST 10 ELIGIBLE NON-CORPORATE OFFICERS AND OPTIONS EXERCISED BY THEM
Total number of options awarded/shares subscribed or purchased Weighted average price Plan Options granted in 2015 by the Company or any company Not applicable – No stock options within the scope of option awards, to the 10 employees of granted in 2015 the Company or any other company within this scope, who received the highest number of such options (aggregate information) Options held by the Company and the aforesaid companies 80,983 €15.49 12/17/2009 exercised during fiscal year 2015 by the 10 employees of the issuer and these companies who purchased or subscribed to the highest number of such options (aggregate information) 17,675 €14.20 12/16/2010
SUMMARY AND FEATURES OF ACTIVE STOCK OPTION PLANS AS OF DECEMBER 31, 2015
2009 Plan 2010 Plan Date of authorization by the Shareholders’ Meeting May 26, 2009 May 26, 2009 Date of Board of Directors’ meeting December 17, 2009 December 16, 2010 Type of option Purchase Purchase Total number of shares that may be purchased (initial allocation) 3,464,440 2,944,200 Of which by the Corporate Officer (initial allocation) - 120,300 Total number of beneficiaries 984 977 Starting point for exercise of the options December 17, 2013 December 16, 2014 Expiration date December 16, 2017 December 15, 2018 Purchase price (in euros) 15.49 14.20 Number of options exercised as of December 31, 2015 292,489 145,291 Aggregate number of options canceled or forfeited 1,957,641 2,122,156 Stock options outstanding as of December 31, 2015 1,214,310 676,753 Of which for the Corporate Officer - -
PERFORMANCE SHARE PLANS No new performance share plan has been set up in 2015. As of December 31, 2015, the maximum number of outstanding performance shares was 618,033 representing 0.11% of the Company’s share capital, were all the shares to be vested.
204 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Compensation and benefits Compensation and benefits in kind 15
STATUS OF PERFORMANCE CONDITIONS APPLICABLE TO THE PERFORMANCE SHARE PLANS
Proportion of shares delivered Applicable performance conditions Level of achievement relative to the initial allocation December 17, 2009 Plan For the Corporate Officer: Company stock price evolutions from 0% 0% December 17, 2009 to December 16, 2013 15 compared to the CAC 40 and Euro Stoxx Utilities indices (on 100% of the shares) Group’s cumulative recurring net income for 90% fiscal years 2009 to 2012 (on 50% of the shares) For the other beneficiaries: 100% 100% Group EBITDA for 2011 December 16, 2010 Plan Group’s cumulative recurring net income for 0% for the Corporate Officer Corporate Officer: 0% fiscal years 2010 to 2013 35% for the other Other A Beneficiaries: 35% beneficiaries Company stock price evolutions from 100% December 16, 2010 to December 15, 2014 compared to the CAC 40 and Euro Stoxx Utilities indices Group EBITDA for fiscal year 2012 32% B Beneficiaries: 32% March 15, 2012 Plan (a) Group’s cumulative recurring net income for 39% Top Executive: 39% fiscal years 2012 to 2014 Other A Beneficiaries: 27.5% Company stock price evolutions from March 14, 100% 2012 to March 13, 2015 compared to the CAC 40 and Euro Stoxx Utilities indices Cumulative Group EBITDA for fiscal years 2012 16% B Beneficiaries: 16% and 2013 March 27, 2013 Plan Group’s cumulative recurring net income for 114% Corporate Officer, fiscal years 2013 to 2014 Management Committee, Executive Committee and Top Company stock price evolutions from January 1, 100% Executive: 114% 2013 to February 27, 2015 compared to the Other A Beneficiaries: 94% CAC 40 and Euro Stoxx Utilities indices Cumulative Group EBITDA for fiscal years 2013 74% B Beneficiaries: 74% and 2014
(a) The Chief Executive Officer and the members of the Management Committee and of the Executive Committee were not beneficiaries of this performance action plan.
PERFORMANCE SHARES ALLOCATED TO THE CORPORATE OFFICER IN 2015
Value of shares based on Number of shares the method used for the awarded during consolidated financial statements Availability Performance Plan the fiscal year (in euros) Vesting date date conditions Jean-Louis Chaussade, Chief Executive Officer No performance shares granted to the Corporate Officer in 2015
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 205 Compensation and benefits 15 Compensation and benefits in kind
PERFORMANCE SHARES FULLY VESTED DURING 2015 FOR THE CORPORATE OFFICER
Number of shares Plan Vesting date that became available Vesting conditions Jean-Louis Chaussade, Chief Executive Officer (1) March 27, 2013 March 30, 2015 68,400 (a)
(1) All of the shares allocated to the Chief Executive Officer, which could be increased to a maximum number of 72,000, were subject to a service condition up to the end of the vesting period and to both of the following performance conditions: XX an internal performance condition based on the consolidated Group’s cumulative recurring net income in 2013 and 2014; XX an external performance condition, specifically SUEZ ENVIRONNEMENT COMPANY’s stock market performance compared to the performance average of the CAC 40 and DJ Eurostoxx Utilities indices over the period from January 1, 2013 to February 27, 2015.
The shares may be sold as from March 30, 2017, provided Mr. Chaussade holds 25% of the vested shares up until the end of his term as Chief Executive Officer.
PERFORMANCE SHARES THAT BECAME AVAILABLE TO THE CORPORATE OFFICER DURING THE FISCAL YEAR
Number of shares Plan Vesting date that became available Vesting conditions Jean-Louis Chaussade, Chief Executive Officer No performance shares became available during 2015
PERFORMANCE SHARES GRANTED TO THE FIRST TEN ELIGIBLE NON-CORPORATE OFFICERS
Total number of performance shares granted Plan Performance shares granted by the Company in fiscal year 2015 to the 10 non-Corporate Officer employees of the Group (aggregate information) No performance shares granted in 2015
SUMMARY AND FEATURES OF PERFORMANCE SHARE PLANS AS OF DECEMBER 31, 2015
2009 Plan 2010 Plan 2012 Plan 2013 Plan Date of authorization by the Shareholders’ Meeting May 26, 2009 May 20, 2010 May 20, 2010 May 24, 2012 Date of Board of Directors’ meeting December 17, 2009 December 16, 2010 March 15, 2012 March 27, 2013 Maximum number of performance shares initially granted 173,852 829,080 828,710 1,578,120 Of which for the Corporate Officer 28,800 24,060 - 72,000 Number of beneficiaries 1,071 2,124 1,995 1,773 Vesting date of shares For French tax residents February 28, 2012 (a) December 16, 2014 (c) March 16, 2015 (e) (f) March 30, 2015 (h) For foreign tax residents February 28, 2014 December 16, 2014 March 15, 2016 March 28, 2017 Date of transferability of shares For French tax residents February 28, 2014 December 16, 2016 (d) March 16, 2017 (g) March 30, 2017 For foreign tax residents February 28, 2014 (b) December 16, 2014 March 15, 2016 March 28, 2017 Number of performance shares canceled or forfeited - - 433,498 312,859 Number of performance shares fully vested 130,438 251,532 146,759 895,681 Of which by the Corporate Officer - - - 68,400 Performance shares outstanding at December 31, 2015 - - 248,453 369,580
(a) Also applies to tax residents of Belgium, Spain and Italy. (b) For tax residents in Spain and Italy the date of transferability was February 28, 2015. (c) The vesting date for "B Beneficiaries" who are French tax residents was March 1, 2013. (d) The date of transferability for "B Beneficiaries" who are French tax residents was March 1, 2015. (e) Also applies to tax residents of Belgium, Spain and Italy. (f) The vesting date for "B Beneficiaries" who are tax residents of France, Spain and Italy was March 17, 2014. (g) The date of transferability for “B Beneficiaries” who are French tax residents is March 17, 2016. For “B Beneficiaries” who are tax residents of Spain and Italy, the date of transferability is March 17, 2017. (h) Also applies to tax residents of Belgium and Spain.
206 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Compensation and benefits Compensation and benefits in kind 15
15.1.5 Components of compensation due or awarded in 2015 to each Corporate Officer, submitted for the opinion of the shareholders
The AFEP-MEDEF Code, as revised in November 2015, awarded for fiscal year 2014 to Gérard Mestrallet with a 99.76% recommends submitting for the opinion of the Shareholders’ vote and the 12th resolution on the compensation components Meeting the compensation components due or awarded to each due or awarded for fiscal year 2014 to Jean-Louis Chaussade 15 Corporate Officer of the Company for the last fiscal year. with a 94.92% vote. Accordingly, the shareholders will be asked, at the Shareholders’ Meeting of April 28, 2016, to vote on the compensation Components of compensation due or awarded for fiscal year 2015 to th components due or awarded for 2015 to Gérard Mestrallet, Gérard Mestrallet, Chairman of the Board of Directors (14 resolution) Chairman of the Board of Directors, and to Jean-Louis With regard to Mr. Gérard Mestrallet, no compensation was paid Chaussade, Chief Executive Officer. to him by the Company during 2015, except the Directors' fees allocated to him for that year, in the amount of €68,751 (1). The Shareholders’ Meeting of May 12, 2015 approved the 11th resolution on the compensation components due or
Components of compensation due or awarded for fiscal year 2015 to Jean-Louis Chaussade, Chief Executive Officer The shareholders will be asked, at the Shareholders’ Meeting of April 28, 2016 (15th resolution) to vote on the following compensation components due or awarded for fiscal year 2015 to Jean-Louis Chaussade, Chief Executive Officer:
Components of compensation due or awarded for fiscal year 2015 Amounts or value Detail Fixed compensation €750,000 This is the gross fixed compensation for fiscal year 2015, unchanged since 2009. Since August 1, 2014, the date of liquidation of his pension rights, the amount of pension paid to Mr. Chaussade under the mandatory pension plan (€110,749 In 2015) has been deducted from the amount of the fixed compensation paid by the Company. Annual variable €940,292 XX At its meeting of February 23, 2016, on the recommendation of the Compensation Committee, compensation the Board of Directors adopted the annual variable compensation for Jean-Louis Chaussade for fiscal year 2015 which amounts to €940,292, or 125% of his fixed compensation, compared to €909,421 for fiscal year 2014. XX Mr. Chaussade’s variable compensation may represent between 0% and 145% of his fixed compensation and has been determined on the basis of: –– quantitative criteria previously set by the Board of Directors in February 2015, based on the 2015 budget. These criteria represent 75% of the overall weight of the variable part and are related to EBITDA (5%), free cash flow (20%),recurring net income (30%), and ROCE (20%); and –– qualitative criteria, which account for 25% of the overall weight of the variable part and that are related to the “COMPASS” cost savings program, the implementation of environmental, ethics and industrial risk action plans, the health and safety results and the execution of the strategic plan. Deferred variable N/A Mr. Chaussade is not entitled to deferred variable compensation. compensation
(1) The Directors' fees allocated to Mr. Gérard Mestrallet were paid directly to ENGIE until 2014. They are now paid to him because they are subject to individual income tax.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 207 Compensation and benefits 15 Compensation and benefits in kind
Components of compensation due or awarded for fiscal year 2015 Amounts or value Detail Long-term variable No amount is due XX At its meeting of January 14, 2015, the Board of Directors decided to award Mr. Chaussade long compensation for fiscal year term variable compensation for fiscal year 2015, of a maximum amount of €750,000, or 100% of 2015. his annual fixed compensation, and providing, as the case may be, for a cash payment in 2018. (IFRS value in XX The amount to be paid to Mr. Chaussade in 2018 depends on the level of achievement of the the consolidated following two cumulative performance conditions: statements: –– an internal performance condition based on the Group’s aggregate recurring net income €277,360) from 2015 to 2017; –– a market performance condition based on the level of Total Shareholder Return (TSR) of the SUEZ ENVIRONNEMENT COMPANY share compared to the average TSR of the companies comprising the DJ Eurostoxx Utilities index over the period from January 1, 2015 to December 31, 2017. Furthermore, the amount that could be paid to Mr. Jean-Louis Chaussade in 2018 depending on what level he achieves for the two performance conditions stated above, could be increased or reduced by 10% as a function of parity in the management team on December 31, 2017. XX Under the long-term variable compensation plan, Mr. Chaussade is also subject to an obligation to reinvest 15% of the net amount actually received in 2018 in the Company’s shares, until the number of shares that he holds represents to 150% of his annual fixed compensation. Exceptional N/A Mr. Chaussade is not entitled to exceptional compensation. compensation Stock options, N/A No allocation was made during fiscal year 2015. performance shares or any other item relating to long-term compensation Directors’ fees N/A Mr. Chaussade does not receive Directors’ fees. Value of benefits of all €10,373 Mr. Jean-Louis Chaussade has a Company car. kind Severance pay N/A Mr. Jean-Louis Chaussade will receive no severance pay in the event of termination of his office. Compensation due under N/A Mr. Chaussade is not entitled to compensation under a non-competition clause. a non-competition clause Insurance and healthcare Mr. Jean-Louis Chaussade is covered by the Company’s current mandatory group healthcare plans. plans Supplementary No payment XX Mr. Chaussade was covered by the Group supplementary retirement plans applicable to SUEZ retirement plan environnement employees: a mandatory group defined contribution plan under Article L. 441-1 of the French Insurance Code and a supplementary variable group defined benefit pension plan. XX Mr. Chaussade decided to liquidate all of his pension plans as of August 1, 2014, including collective defined contribution and defined benefit pension plans. He did, however, decide to waive any pension payments under these supplementary plans until his current functions as Chief Executive Officer come to an end. XX The annual pension resulting from supplementary group pension plans to be paid to Mr. Chaussade (once he is no longer Chief Executive Officer) will be €276,376.08, or 16.25% of his 2015 annual compensation (including fixed and variable compensation payable by the Company).
208 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Compensation and benefits Amounts provisioned by the Company and its subsidiaries for the payment of pensions, 15 retirement benefits, and other benefits to members of the Management Committee
15.2 Amounts provisioned by the Company and its subsidiaries for the payment of pensions, retirement benefits, and other benefits to members of the Management Committee 15 As of December 31, 2015, the total provisioned retirement €10.9 million, versus €10.4 million in 2014. This change stems obligations for the members of the Management Committee, primarily from the corresponding commitment to an additional including tax on employer contributions, amounted to year for vesting in the beneficiaries' scheme.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 209 210 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Functioning of Governance and Management Bodies16
16.1 Terms of office of members of the Board of Directors 212
16.2 Information on service contracts between members of the Company’s governance and management bodies and the Company or any of its subsidiaries 213
16.3 Committees of the Board of Directors 213
16.4 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code 214
16.5 Report of the Statutory Auditors on the Report of the Chairman of the Board of Directors 230
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 211 Functioning of Governance and Management Bodies 16 Terms of office of members of the Board of Directors
16.1 Terms of office of members of the Board of Directors
The following table shows the dates of first appointment and the expiration dates of the terms of office of the current Company’s Directors:
Date of first Start date of current Name and title appointment term of office Term of office expiration date Gérard Mestrallet, Chairman December 5, 2007 May 24, 2012 Shareholders’ Meeting called to approve the financial statements of the Board of Directors for the fiscal year ending December 31, 2015 Jean-Louis Chaussade, Director December 5, 2007 May 24, 2012 Shareholders’ Meeting called to approve the financial statements and Chief Executive Officer for the fiscal year ending December 31, 2015 Nicolas Bazire, Director July 15, 2008 May 12, 2015 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2018 Gilles Benoist, Director July 15, 2008 May 22, 2014 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2017 Valérie Bernis, Director July 15, 2008 May 12, 2015 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2018 Harold Boël, Director July 15, 2008 May 24, 2012 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2015 Delphine Ernotte Cunci, May 24, 2012 May 24, 2012 Shareholders’ Meeting called to approve the financial statements Director for the fiscal year ending December 31, 2015 Lorenz d’Este, Director July 15, 2008 May 12, 2015 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2018 Isidro Fainé Casas, Director October 29, 2014 October 29, 2014 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2015 Judith Hartmann, Director July 28, 2015 July 28, 2015 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2017 Isabelle Kocher, Director February 7, 2012 May 12, 2015 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2018 Ines Kolmsee, Director May 22, 2014 May 22, 2014 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2017 Anne Lauvergeon, Director October 29, 2014 May 12, 2015 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2018 Pierre Mongin, Director February 2, 2016 February 2, 2016 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2017 Guillaume Pepy, Director July 15, 2008 May 22, 2014 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2017 Jérôme Tolot, Director July 15, 2008 May 22, 2014 Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2017 Agatta Constantini, Director December 12, 2014 December 12, 2014 December 11, 2018 representing employees (a) Enric Xavier Amiguet i February 11, 2015 February 11, 2015 February 10, 2019 Rovira, Director representing employees (a)
(a) Directors representing employees appointed pursuant to Article L. 225-27-1 of the French Commercial Code and Article 10 of the Company Bylaws.
212 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Functioning of Governance and Management Bodies Committees of the Board of Directors 16
In accordance with the recommendations of the AFEP-MEDEF XX the ratification of the co-optation of Mr. Pierre Mongin as Corporate Governance Code for listed companies, since 2010, Director to replace Mr. Alain Chaigneau, who resigned; one third of all the directorships are renewed each year, over XX the appointment of Ms. Miriem Bensalah Chaqroun as a a three-year period. Director; The Shareholders’ Meeting of April 28, 2016 will be called to XX the appointment of Ms. Belén Garijo as a Director; vote on: XX the appointment of Mr. Guillaume Thivolle as a Director, upon XX the renewal of the terms of office of Ms. Delphine Ernotte proposal of the shareholder employees, in accordance with Cunci and Messrs. Gérard Mestrallet, Jean-Louis Chaussade, the provisions of Article 10.3 of the Company Bylaws. and Isidro Fainé Casas, for four years; XX the ratification of the cooptation as Director of Ms. Judith Hartmann to replace Ms. Penelope Chalmers Small, who 16 resigned;
16.2 Information on service contracts between members of the Company’s governance and management bodies and the Company or any of its subsidiaries
To the knowledge of the Company, as of the date of this Reference Document no member of the Board of Directors or the Chief Executive Officer enjoy benefits as a result of service contracts between them and the Company or any of its subsidiaries.
16.3 Committees of the Board of Directors
In accordance with Article 15 of the Company Bylaws, the Board There are thus five committees as of July 28, 2015: the of Directors may decide to set up committees responsible for Strategy Committee, the Audit and Financial Statements studying issues that the Board or its Chairman may ask them Committee, the Ethics and Sustainable Development to investigate. Committee, the Appointments and Governance Committee and In this context, the Board of Directors decided to set up the Compensation Committee. Their respective missions are four committees at its meeting of July 23, 2008: a Strategy described in the Internal Regulations of the Board of Directors. Committee, an Audit and Financial Statements Committee, The composition of these committees and their missions are an Ethics and Sustainable Development Committee and an also described in the Report of the Chairman of the Board of Appointments and Compensation Committee. The Board of Directors in chapter 16.4 of this Reference Document. Directors, in its meeting on July 28, 2015, decided to split the Appointments and Compensation Committee into two separate committees, the Appointments and Governance Committee and the Compensation Committee.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 213 Functioning of Governance and Management Bodies 16 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code
16.4 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code
This report has been prepared in accordance with Article L. 225- in the Shareholders’ Meeting and the factors likely to have an 37 paragraph 6 et seq. of the French Commercial Code. impact in the event of a takeover bid. In the first part (1), it presents the composition of the Board In the second part (2), it reports on the internal control of Directors, the application of the principle of balanced and risk management procedures implemented by SUEZ representation of women and men within it, the conditions ENVIRONNEMENT COMPANY. for preparing and organizing the Board’s work, the limits on This report was approved by the Board of Directors on the powers of the Chief Executive Officer, the principles and February 23, 2016, on the recommendation of the Appointments rules approved by the Board of Directors to determine the and Governance Committee for the part relating to corporate compensation and benefits paid to Corporate Officers, the governance, the Compensation Committee for the part relating Corporate Governance Code to which the Company voluntarily to compensation of Corporate Officers and by the Audit and adheres, as well as the rules governing shareholder participation Financial Statements Committee for the part relating to internal control and risk management.
1. Corporate Governance
SUEZ ENVIRONNEMENT COMPANY (hereinafter the “Company”) several occasions and most recently in July 2015 (the “Internal is a French public limited company (société anonyme) with a Regulations”). A Directors’ Charter, which specifies the rights Board of Directors, governed by applicable French laws and and duties of the Directors, was adopted and appended to the regulations as well as by its corporate Bylaws. Internal Regulations (the “Directors’ Charter”). As required by law and the Company Bylaws, and to clarify The Company Bylaws and Internal Regulations, the main the rules governing the Board’s operations, the respective elements of which are described in chapter 21.2 of the Reference powers of the Chairman of the Board of Directors, the Chief Document, as well as the Directors’ Charter, are available at the Executive Officer and the Board of Directors, as well as the Company’s registered office and can be viewed online on the composition and duties of its committees, the Board adopted Company’s website (www.suez.com). a set of internal regulations in 2008, which was amended on
1.1 Composition of the Board of Directors
The Board of Directors is thus composed, as of the date of this to introduce them to the activities of the Group. With reference Report, of 18 Directors. to the Directors representing employees, a specific training The following changes occurred since the beginning of 2015: program is in progress, primarily concerning governance issues, the activities of the Group and the issues falling within XX the appointment by the European Works Council of Mr. Enric the competence of the Board, including the financial aspects and Xavier Amiguet i Rovira as a Director representing employees, health and safety subjects. This program also includes linguistic on February 11, 2015, in accordance with Article 10 of the training and interpersonal skills development modules. Company Bylaws; The Bylaws provide for a four-year term of office for Directors XX the co-optations as Director of Ms. Judith Hartmann on and require every Director to hold at least 2,000 Company July 28, 2015 to replace Ms. Penelope Chalmers Small, who shares, unless otherwise provided by law, especially with resigned, and of Mr. Pierre Mongin on February 2, 2016, to reference to the Directors representing employees. replace Mr. Alain Chaigneau, who resigned. Jean-Louis Chaussade, Chief Executive Officer, is the only The new Directors met with the Group’s senior management. Director with executive functions within the Group. Visits to sites operated by the Group were also organized in order
214 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Functioning of Governance and Management Bodies Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code 16
In 2015, there was no Director representing shareholder its composition. The members of the Board formulated, in this employees on the Board of Directors. However, due to the fact context, the recommendations which aim principally for a more that the employee shareholders held more than 3% of the international Board with a greater proportion of women, as Company’s share capital on December 31, 2014, a modification well as the strengthening of the representation of the industrial of the Bylaws was adopted at the Shareholders’ Meeting of sector world. The Appointments and Compensation Committee May 12, 2015 to allow for the appointment by the Shareholders’ (then the Appointments and Governance Committee) has since Meeting of April 28, 2016, of a Director representing the then carried out a recruitment process that meets these criteria, employee shareholders, in accordance with Article L. 225-23 examined several applications and submitted proposals to the of the Commercial Code. Board. In 2014 and 2015, three women with substantial professional The composition of the Board of Directors at the date of this report experience in the industrial sector joined the Board of is as follows: Directors. Mrs. Ines Kolmsee, a German citizen, has been 16 XX eight independent Directors: appointed Director replacing Mr. Gérald Arbola, whose term Nicolas Bazire, Gilles Benoist, Harold Boël, Delphine Ernotte expired, Ms. Anne Lauvergeon, a French citizen, and Ms. Judith Cunci, Lorenz d’Este, Ines Kolmsee, Anne Lauvergeon and Hartmann, an Austrian citizen, were co-opted as Directors, Guillaume Pepy; replacing respectively Mr. Olivier Pirotte and Ms. Penelope Chalmers Small, who resigned. XX six Directors appointed on the proposal of ENGIE: The agreement with Criteria Caixa in July 2014 has also resulted Gérard Mestrallet, Chairman of the Board of Directors, in the co-optation of a Director: Mr. Isidro Fainé Casas, a Spanish Valérie Bernis, Judith Hartmann, Isabelle Kocher, Pierre citizen, President of CaixaBank (and having international Mongin and Jérôme Tolot; working experience namely in the banking sector and the XX the Chief Executive Officer: financing of major projects, until now, the Board did not benefit from such experience). Jean-Louis Chaussade; Furthermore, in accordance with the modifications to the one Director appointed on the proposal of La Caixa: XX Bylaws adopted at the Shareholders' Meeting of May 22, 2014, Isidro Fainé Casas; two Directors representing employees, a French citizen and a XX two Directors representing employees: Spanish citizen (as these two countries are those in which the Group has the most significant presence in terms of revenues Agatta Constantini and Enric Xavier Amiguet i Rovira. and staff) also joined the Board of Directors. The appointment Details of the terms of office and functions of Directors can be of a Director representing shareholder employees will also be found in chapter 14.1 of the Reference Document. submitted for approval to the Shareholders' Meeting on April 28, 2016. Staggered schedule of renewals Accordingly, changes in the composition of the Board of In line with the best governance practices and in accordance Directors in 2014 and 2015 have helped to strengthen the with the recommendations of the AFEP-MEDEF Code, the Board diversity of Directors’ profiles. of Directors, at its meeting of February 24, 2010, on the proposal In particular, the proportion of women on the Board of Directors of the Appointments and Compensation Committee, decided to has increased from 5.6% as of December 31, 2009 to 39% put in place a staggered renewal by the Shareholders’ Meeting as of December 31, 2015. Without taking into account the of the terms of office of Directors by third. Directors representing employees, in accordance with the The terms of five Board members (of the 16 members appointed recommendations of the AFEP-MEDEF Code, this proportion by the Shareholders’ Meeting) will therefore expire at the was 37.5% at December 31, 2015. If the Shareholders' Meeting Shareholders’ Meeting of April 28, 2016. approves the renewal of term and nomination recommendations Details of directorships can be found in chapter 16.1 of the made to it on April 28, 2016, the proportion of women will be Reference Document. 44%, higher than the rate of 40% recommended by the AFEP- MEDEF Code to be achieved during the 2016 Shareholders' Diversity and gender balance Meeting and that the law requires for the 2017 Shareholders' Meeting. At its meeting of October 27, 2010, the Board of Directors, on the recommendation of the Appointments and Compensation The Board also includes six Directors of foreign nationality, Committee, undertook to review diversity issues within the which is 33.3% of its members (taking into account the Board, especially gender balance. The review has continued Directors representing employees). Five different nationalities and, in relation to the self-assessment conducted at the are represented on the Board of Directors. beginning of 2014, the Board reiterated its desire to diversify
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 215 Functioning of Governance and Management Bodies 16 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code
Independence of Directors XX confirm the non-independent status of the following The independent status of some Directors (as defined by the directors: AFEP-MEDEF Code) was reviewed in early 2016 by the Board –– Mr. Jean-Louis Chaussade, Chief Executive Officer, of Directors, on the recommendation of the Appointments and –– Ms. Valérie Bernis and Ms. Isabelle Kocher and Messrs. Governance Committee. Gérard Mestrallet, Chairman, and Jérôme Tolot, as To carry out this review, the Board of Directors referred to the members appointed on the proposal of ENGIE, who holds definition of the AFEP-MEDEF Code which considers that “a 33.55% of the share capital of the Company, Director is independent if (s)he has no relationship of any kind with –– Mr. Isidro Fainé Casas, in view of his office as Chairman the Company, its Group or its management that could compromise of Criteria Caixa, where Mr. Jean-Louis Chaussade is a his/her freedom of judgment”, and took into account all the Director; criteria of that Code. Specifically, a Director must not: XX qualify Ms. Agatta Constantini and Mr. Enric Xavier Amiguet be an employee or Officer of the Company or an employee XX i Rovira, as non-independent Directors representing or Director of a company within its scope of consolidation employees, because of their status as employees of a and must not have been one during the previous five years; subsidiary of the Company; XX be an Officer of a company in which SUEZ ENVIRONNEMENT XX qualify Ms. Judith Hartmann and Mr. Pierre Mongin as non- COMPANY directly or indirectly holds a directorship, or in independent Directors appointed on the proposal of ENGIE, which an employee appointed as such or a Corporate Officer who holds 33.55% of the share capital of the Company. of the Company (currently or within the previous five years) holds a directorship; In accordance with the AFEP-MEDEF Code, as amended in November 2015, the Appointments and Governance Committee, be, or have a direct or indirect relation with, a customer, XX then the Board of Directors evaluated the significance of supplier or corporate or investment banker: business relationships maintained by the Company (and its –– of significance to the Company or its Group; or subsidiaries) with the companies (and their subsidiaries) to –– whose business has a significant share provided by the which the Directors are related according to the following Company or Group; criteria: XX have close family ties with a Corporate Officer; XX the proportion of business conducted between the Group and such Companies, both in terms of purchases and XX have been a Statutory Auditor of the Company during the revenue, which is far below 1%; previous five years; XX the type of position held by the Director concerned, executive XX have been a Director of the Company for more than 12 years. or not; Directors representing major shareholders of the Company may XX the type of services performed and the way of contracting, be considered independent provided that they do not exercise by tender or by mutual agreement. control over the Company. If a Director exceeds a threshold of 10% of the share capital or voting rights, the Board, based on On the basis of this analysis, business relationships between the Appointments and Compensation Committee’s report, must the Group and the companies (and subsidiaries) in which systematically review the independent status of the Director(s) Directors meeting all other criteria of independence have a concerned, taking into account the Company’s ownership role in management or a directorship were not considered to structure and whether or not there may be conflicts of interest. be significant. On this basis, the Board of Directors, on the recommendation of The Board of Directors is therefore composed of 50% the Appointments and Governance Committee, decided, at its independent Directors, without taking into account the Directors meeting of February 23, 2016, in relation to the review of this representing employees, in accordance with the AFEP-MEDEF Chairman’s Report, to: Code. XX confirm the independence of eight Directors: Delphine Directors’ Charter Ernotte Cunci, Ines Kolmsee and Anne Lauvergeon as well The Directors’ Charter, annexed to the Board of Directors’ as Nicolas Bazire, Gilles Benoist, Harold Boël, Lorenz d’Este Internal Regulations, contains guidelines to which each and Guillaume Pepy; Director must adhere in order to fully exercise their functions, ensuring the full effectiveness of their personal contribution, in accordance with the rules of independence, ethics and integrity.
216 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Functioning of Governance and Management Bodies Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code 16
The Charter states that each Director must act in the Company’s that a Director cannot avoid being in conflict of interest, he interest and must represent all shareholders. It also reminds or she must refrain from participating in discussions and any them of the principles of independence, duties of expression, decisions on the relevant matters. loyalty, discretion, confidentiality, professionalism, commitment, In June 2012, on the recommendation of the Appointments and the collegiality and efficiency of the Board’s work. and Compensation Committee, the Board also adopted a In addition, the Directors’ Charter stipulates that every Director Code of Conduct on the prevention of insider trading, the must inform the Board of any conflict of interest, even potential, main provisions of which can be found in chapter 14.2 of this that might directly or indirectly affect him or her. In the event Reference Document.
1.2 General Management 16
1.2.1 METHOD OF EXERCISING GENERAL MANAGEMENT risk profile. The following in particular are considered material: transactions involving a commitment in The Board of Directors meeting of July 23, 2008 opted to excess of €350 million, agreements, transactions and dissociate the functions of the Chairman of the Board from settlements in case of a dispute if the amount is greater those of the Chief Executive Officer, whose respective missions than €100 million; and are clearly defined in the Company Bylaws and the Board’s Internal Regulations. –– transactions that fall outside the Company’s stated strategy. The decision to separate the two roles and the nominations of Gérard Mestrallet and Jean-Louis Chaussade, respectively In addition, at its meeting of September 24, 2013, and in as Chairman of the Board of Directors and Chief Executive the context of the end of the Shareholders’ Agreement, the Officer, has been confirmed on various occasions by the Board Board of Directors specified that any acquisition, investment of Directors and for the last time at its meeting of July 29, 2014. or disposal of an investment worth over €100 million (other than maintenance capital expenditure), as well as 1.2.2 DUTIES OF THE CHAIRMAN OF THE BOARD OF DIRECTORS any "standard" financing transactions with banks or on the bond market amounting to over €700 million must have the In accordance with the law and Article 3 of the Internal Board’s prior approval. Regulations, the Chairman of the Board of Directors organizes In addition, the Chief Executive Officer may grant securities, and manages its work and reports on it to the Shareholders’ XX endorsements and guarantees up to a total amount granted Meeting. The Chairman ensures that the Company’s governing by the Board of Directors, which in 2015 was €500 million, bodies operate properly and, in particular, that the Directors with an added secondary limit of €100 million per transaction. are able to carry out their duties. Beyond these two limits, the Chief Executive Officer must request the prior approval of the Board of Directors. 1.2.3 LIMITS OF THE CHIEF EXECUTIVE OFFICER’S POWERS XX The Chief Executive Officer consults the Appointments The Chief Executive Officer holds the most extensive powers and Governance Committee prior to any appointment of a to act, under all circumstances, on behalf of the Company. He member of the Management Committee. exercises those powers within the limit of the corporate purpose To successfully perform his duties, the Chief Executive Officer and subject to (i) the powers granted by law to Shareholders’ is assisted by a Management Committee composed of nine Meetings and the Board of Directors, and (ii) internal limits on members whose biographies are provided in section 14.1.3 of executive powers. the Reference Document and are available on the Company’s In this regard, the Internal Regulations define the limits on the website (www.suez.com). The Chief Executive Officer is also powers of the Chief Executive Officer, which are summarized assisted by an Executive Committee, composed of the nine below. members of the Management Committee and the 14 Heads of XX The Chief Executive Officer shall submit the following to the the business units and support functions, details of which are Board of Directors for prior approval: available on the Company’s website (www.suez.com). –– material transactions likely to affect Group strategy or modify its financial structure, scope, activities or
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 217 Functioning of Governance and Management Bodies 16 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code
1.3 Preparation and organization of tasks performed by the Board of Directors and the specialized Committees
1.3.1 FUNCTIONING AND TASKS OF THE BOARD OF DIRECTORS plan and the adoption of a single brand for SUEZ and the acquisition of this brand. The Board of Directors has Internal Regulations which, beyond the provisions of the law and the Company Bylaws, set out the The Board also renewed the Chief Executive Officer’s annual rules on the composition, role and powers of the Board of authorization to issue securities, endorsements and guarantees, Directors and its committees. The main aspects of the Internal and approved guarantee projects of amounts greater than the Regulations concerning the Board of Directors’ operations are Chief Executive Officer’s authorization threshold. Finally, it described in section 21.2.2.1 of this Reference Document. regularly reviewed the work of its various committees.
The Internal Regulations were first adopted by the Board of Performance assessment of the Board of Directors and committees Directors on July 23, 2008 at the time of the Company’s initial public offering. These Internal Regulations were amended by As part of the work carried out by the Board of Directors to the Board of Directors at its meeting of February 7, 2012. It improve its own composition, performance, organization and was decided, in the interest of good corporate governance, to relations with its committees, individual self-assessment update the Internal Regulations, mainly to strengthen the roles questionnaires were sent to each Director in January 2016, of the committees (especially that of the Audit and Financial which addressed the Board’s composition and performance, Statements Committee), to update and clarify certain provisions the relations between the Board and its committees, and relating to the Board’s operations and the limits on the Chief the composition and performance of each Committee. Executive Officer’s powers and, finally, to establish a Directors’ This questionnaire, which takes into account the standard Charter. This document sets out the terms and conditions questionnaire issued by AFEP and MEDEF, was prepared by under which the Directors are to perform their duties, their the Appointments and Governance Committee and reviewed by contribution to the work of the Board and its committees, the an external consultant at the end of 2015. The written answers rights and resources granted to the Directors, and the rules on submitted were supplemented by a personal interview with the confidentiality, independence, ethics and integrity, which are an external consultant, which also had the objective of evaluating intrinsic part of their functions (see section 1.1 of this report). the individual contribution of the Directors. Answers provided The Internal Regulations were also updated on July 30, 2013, by the Directors will be submitted anonymously by the external to take into account the end of the Shareholders’ Agreement consultant to the Appointments and Governance Committee. relating to the Company on July 22, 2013, and on July 28, The self-assessment report will then be presented by the Chair 2015, in order to split the Appointments and Compensation of this Committee to the Board of Directors. Committee into two separate committees, the Appointments and Governance Committee and the Compensation Committee. 1.3.2 SPECIAL COMMITTEES The Board of Directors is supported by five committees Activities of the Board of Directors in 2015 as of July 28, 2015: the Audit and Financial Statements The Board meets as often as the interests of the Group require. Committee, the Appointments and Governance Committee, In 2015, the Board met 12 times (including two meetings on the the Compensation Committee, the Strategy Committee and the day of the Shareholders’ Meeting and excluding the Directors’ Ethics and Sustainable Development Committee. Previously, it strategy seminar mentioned below), with an attendance rate of was supported by four committees, as the Appointments and 85.3% (80.7% in 2014). Governance Committee and the Compensation Committee The main issues addressed included a business review, the were grouped into a single Appointments and Compensation Group’s financial position and results (review of annual, half- Committee. yearly and quarterly performance, analysis and updating of The Internal Regulations set out the rules governing the earnings forecasts), the Group’s funding status (borrowings, composition and role of each Committee. available cash, simple and hybrid bond issues), the renewal Minutes from each meeting of these various committees were of the share buyback program, governance issues (changes in submitted to the Board of Directors and, where appropriate, the composition of the Board of Directors and its committees, recommendations were made for decisions within the Board’s splitting of the Appointments and Compensation committees remit. into two separate committees, training of Directors elected by employees), the establishment of a long-term compensation
218 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Functioning of Governance and Management Bodies Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code 16
The Audit and Financial Statements Committee consolidated financial statements and prevents any potential breach of those rules; Composition –– requests details of any change in the scope of consolidation The composition of the Audit and Financial Statements and, where necessary, obtains all required explanations; Committee was changed in 2015. Ms. Isabelle Kocher left this Committee and Ms. Judith Hartmann and Mr. Gilles Benoist –– whenever it deems it necessary, meets with the Statutory joined it. The Audit and Financial Statements Committee is now Auditors, General management, Finance department composed of five members: Mr. Guillaume Pepy, Chairman, members, internal auditors and any other member of Ms. Delphine Ernotte Cunci and Ms. Judith Hartmann and management; these hearings may take place, where Messrs. Nicolas Bazire and Gilles Benoist. necessary, without the presence of General management; With Delphine Ernotte Cunci, Guillaume Pepy, Nicolas Bazire –– ensures the quality of procedures to guarantee compliance and Gilles Benoist qualifying as independent, the proportion with stock exchange regulations; 16 of independent Directors is 80% of the Committee members, –– is informed annually on financial strategy and on the including the Chairman, in line with the recommendations of terms and conditions of the Group’s main financial the AFEP-MEDEF Code. As described in the biographies of the transactions; and members of the Audit and Financial Statements Committee in –– is periodically informed about the Group’s tax situation. chapter 14 of the Reference Document, all Committee members have appropriate financial and/or accounting competency XX As regards the external auditing of the Company, the based on their education or functions and as defined by Article Committee: L. 823-19 of the French Commercial Code. Delphine Ernotte –– ensures that both the statutory and consolidated financial Cunci, Judith Hartmann, Nicolas Bazire, Gilles Benoist and statements are audited by the Company’s Statutory Guillaume Pepy occupy or once occupied positions of Chief Auditors; Executive Officer in large corporations. –– operates the selection process when appointing or The Committee may request the assistance of outside experts. renewing Statutory Auditors, taking into account the offers of various contemplated audit firms, formulates Missions an opinion on the audit fees for legally prescribed audit The Audit and Financial Statements Committee assists assignments and submits the result of this selection in the the Board of Directors in ensuring the accuracy and fair form of a recommendation to the Board of Directors; the presentation of SUEZ ENVIRONNEMENT COMPANY's statutory Committee also examines issues regarding the possible and consolidated financial statements and the quality of dismissal of Statutory Auditors; the internal control procedures and information provided to –– supervises the rules for referring work other than financial shareholders and financial markets. The Committee presents statement auditing to the Statutory Auditors and, more opinions and recommendations in the areas described below generally, monitors compliance with the principles that to the Board of Directors. guarantee the independence of the Statutory Auditors; The Board of Directors specifically entrusts the Committee with –– pre-approves any mission entrusted to the Statutory the following assignments, consistent with the assignments Auditors that goes beyond legal audit and that incurs fees defined for the Audit Committee by Article L. 823-19 of the exceeding an amount it shall set; French Commercial Code. The Company also refers to the report of the working group on Audit Committees published by the –– each year, examines with the Statutory Auditors the audit AMF on July 22, 2010. fees paid by the Company and the Group to entities from the network to which the Statutory Auditors belong, their As regards the financial statements, the Committee: XX audit schedule, the conclusions reached by the latter, –– monitors the financial information preparation process; their recommendations, and the follow-up of these –– reviews, before publication, the draft annual and interim recommendations; and financial statements, the activity and income report and –– arbitrates, where necessary, on issues that may arise any financial statements (including forecasts) drawn up between the Statutory Auditors and General Management for specific major transactions and significant financial in the course of their work. press releases, before they are circulated to the Board or XX As regards internal control and auditing of the Company, publicly released; the Committee: –– assesses the relevance and permanence of the accounting –– evaluates the efficiency and quality of the Group’s internal rules and principles used in preparing the statutory and control systems and procedures;
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 219 Functioning of Governance and Management Bodies 16 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code
–– examines, with the Heads of Internal Audit, the audit In addition, the Committee was asked to discuss earnings schedules and action plans involved in internal audit, forecasts and updates, cash flow projections, and the the conclusions of these audits and actions, and the management’s outlook reports. An overview of the off-balance- recommendations and their follow-up, without General sheet commitments of the Group, for which a reporting is issued Management necessarily being present; for the consolidated half-year and annual accounts, was also carried out by the Finance Department. –– is informed by General Management, or by any other means, of any complaints from third parties or any The Committee supervised the execution of the 2015 internal internal information critical of the Company’s accounting audit plan and the main conclusions of the most significant documents or internal control procedures, as well as the audits. The Committee also reviewed and monitored progress in procedures put in place for this purpose and the remedies the internal control plans defined in conjunction with the main for such claims or criticisms; Group entities. The Committee also reviewed the internal audit and internal control plans for 2016. –– entrusts Internal Audit with any assignment it deems necessary. The Committee analyzed the risk presentation prepared by the Management Committee assisted by the Risk and Investment XX As regards risks and commitments, the Committee: Department, as well as the measures taken to manage identified –– evaluates the efficiency and quality of the Group’s systems risks. The Committee regularly took stock of the major litigation and procedures for evaluating and managing risks; cases in progress. The Committee also reviewed the Group’s –– is regularly updated on the Group’s financial and cash tax position, particularly in view of the developments that took position and major commitments and risks; place in 2015, as well as the insurance policy. –– is regularly informed on the Group’s main disputes. In 2015, the Committee approved the fees paid to the Statutory Auditors. The Committee also approved beforehand the Activity in 2015 tasks assigned to the Statutory Auditors outside their audit The Audit and Financial Statements Committee met five times responsibilities. Furthermore, at its request, the Committee in 2015, with an attendance rate of 77.3%. In accordance with may meet with the Statutory Auditors without Company’s the AFEP-MEDEF Code, the Committee generally meets no management being present. later than two days before the Board of Directors’ meeting. In addition, the Committee’s files are circulated to its members The Appointments and Governance Committee several days before each meeting. The Committee regularly Composition hears the management of the Company in charge of matters included in the scope of competence of the Committee: Deputy The Appointments and Governance Committee is composed of CEO in charge of Finance, General Secretary, Director of Internal four members: Ms. Anne Lauvergeon, Chairwoman, Ms. Valérie Audit, Director of Risk and Investment, Group Legal Director, Bernis and Messrs. Nicolas Bazire and Lorenz d’Este. Director of Accounting, Consolidation, Tax and Internal Control, With Anne Lauvergeon, Lorenz d’Este and Nicolas Bazire Director of Treasury and Capital Markets, Director of Corporate qualifying as independent, the proportion of independent Planning and Finance. The Statutory Auditors generally take Directors is 75% of the Committee members, in line with the part in all Audit and Financial Statements Committee meetings. recommendations of the AFEP-MEDEF Code. The main issues discussed by the Committee were as follows: The Chief Executive Officer is not a member of the Appointments the review of the annual accounts as of December 31, 2014, the and Governance Committee, in accordance with the AFEP- half-year accounts as of June 30, 2015, the quarterly results MEDEF Code. He participates in Committee meetings when and press releases relating thereto, the financing and debt the succession plan for the main executives of the Group is situation (a specific prior analysis of redemption and issuance discussed. He is also involved in the selection process of new of hybrid bonds having been carried out), and the analysis of Directors. In any event, the Chief Executive Officer has not the acquisition process for the SUEZ brand. attended the debates concerning his situation. The Statutory Auditors presented to the Committee the essential elements of the Company’s results and the main decisions taken.
220 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Functioning of Governance and Management Bodies Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code 16
Missions The Compensation Committee The Appointments and Governance Committee is charged by Composition the Board of Directors to: The Compensation Committee is made up of five members: regularly review the principles and independence criteria XX Messrs. Lorenz d’Este, Chairman, Gilles Benoist and Pierre relating to Board of Directors members considered to be Mongin and Ms. Anne Lauvergeon and Ms. Agatta Constantini. independent Directors; In accordance with AFEP-MEDEF Code recommendations, examine all applications for appointment to a seat on the XX a Director representing employees is thus a member of this Board of Directors or as a Board observer, where applicable, Committee. and to formulate an opinion and/or recommendation to the Board of Directors on these applications; As Messrs. Lorenz d'Este and Gilles Benoist and Ms. Anne Lauvergeon are independent Directors, the Committee has a formulate all pertinent recommendations regarding the 16 XX representation of 75% independent Directors, not taking into composition of Committees; account the Director representing employees. XX prepare, in due course, recommendations for the successor to the Chief Executive Officer and, where necessary, the Missions Chairman of the Board of Directors; The Committee is charged with: XX prepare the discussions of the Board of Directors regarding XX setting the Chief Executive Officer’s targets each year, the appointment of one or more Chief Operating Officers; which will subsequently serve as a reference in assessing XX periodically review the succession plan for members of the his performance and in determining the part of his Management Committee and the main executives; compensation that is performance-based and to assess the level at which these performance criteria were achieved at ensure that the Company applies rules in the XX the proper time; area of governance, especially AFEP-MEDEF Code recommendations; XX making recommendations to the Board of Directors on compensation, retirement and employee benefit schemes, formulate recommendations on governance issues that fall XX benefits in kind, and other cash entitlements, including, under the competence of the Board of Directors, especially when applicable, the allocation of a multi-year variable with regard to implementing differentiated rights for certain compensation in the form of stock subscription or purchase categories of shareholders. options of the Company, as well as the allocation of bonus The Committee is also consulted on appointments to positions shares or cash for the Chairman, Chief Executive Officer, and within the Management Committee. It is informed beforehand if applicable, for Deputy CEOs; of the changes to managerial structures in the Group and of XX preparing the Board’s work on issues related to employee changes in its senior executives. shareholding and long-term compensation plans; Finally, the Committee is tasked by the Board of Directors with XX making recommendations to the Board of Directors on the issuing an opinion on any new office that the Chief Executive compensation of members of the Board of Directors and, if Officer might consider holding in a listed French or foreign applicable, any Board observers. company. The Committee was also informed of any new office held by a Director in a listed company, French or foreign Activity in 2015 (including on a Committee). In 2015, the Committee met once, with an attendance rate of (1) Activity in 2015 100% . In 2015, the Appointments and Governance Committee met once The Committee (or, prior to July 28, 2015 the Appointments and with an attendance rate of 100% (1). Compensation Committee), reviewed the variable compensation of the Chief Executive Officer, compensation of the Management The main issues dealt with by the Committee (or, prior to July 28, Committee and the amounts and distribution of Directors' fees, 2015, by the Appointments and Compensation Committee) were as it does yearly. Finally, the Committee examined the long-term governance issues such as the self-assessment on functioning cash compensation plan. of the Board and its Committees, the review of independence of the Directors, the review of the composition of the Board of Directors and of its Committees, the issue of training for Directors elected by employees, the oversight of designation of candidates for appointment by the Shareholders' Meeting of a Director representing shareholder employees and the succession plan for the Management Committee and the Executive Committee.
(1) Prior to the splitting of the Committee into two Committees on July 28, 2015, the Appointments and Compensation Committee met twice with an attendance rate of 100%.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 221 Functioning of Governance and Management Bodies 16 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code
The Strategy Committee Missions The Ethics and Sustainable Development Committee ensures Composition compliance with the individual and collective values on which During 2015, the composition of the Strategy Committee the Group bases its actions and the rules of conduct that all changed, as Ms. Ines Kolmsee was appointed a member of staff members must follow. the Committee. These values include the Group’s specific responsibilities with The composition of the Strategic Committee is: Mr. Gérard respect to environmental protection and improvement and Mestrallet, Chairman, Ms. Isabelle Kocher and Ms. Ines Kolmsee, sustainable development. The Group ensures that the necessary Messrs. Nicolas Bazire, Gilles Benoist, Harold Boël, Isidro Fainé procedures are in place to: Casas and Guillaume Pepy. XX update the Group’s current Ethics Charter and ensure that Since Ms. Ines Kolmsee and Messrs. Nicolas Bazire, Gilles it is circulated and applied; Benoist, Harold Boël and Guillaume Pepy are independent ensure that French and foreign subsidiaries implement the Directors, 62.5% of the Committee are independent Directors. XX Group’s Ethics Charter, taking into account the domestic Missions legal and regulatory framework of the country where they carry out their business; The Strategy Committee gives its opinion and submits a recommendation to the Board of Directors concerning: XX carry out training programs intended to support the circulation of the Group’s Ethics Charter; XX the strategic objectives set by the Board of Directors or proposed by the Chief Executive Officer; XX obtain from the various Group companies information on the solutions they have selected for issues presented to all significant projects submitted to the Board of Directors XX their own committee. involving internal and external growth, divestment, strategic agreements, alliances and partnerships. The Ethics and Sustainable Development Committee reviews and evaluates: Upon presentation of a report by the Chief Executive Officer, the Committee carries out a strategy review once a year, which it XX the Group’s sponsorship and philanthropic initiatives; submits in due time to the Board of Directors. XX the health and safety policies implemented, including their objectives and results; Activity in 2015 XX the risk management systems and policies involving In 2015, the Strategy Committee met three times with an corporate social responsibility and sustainable development. attendance rate of 95.5%. The main issues addressed by the Committee related to changes in the competitive environment Activity in 2015 and markets, innovation, strategic and financial perspectives In 2015, the Committee met three times, with an attendance and the preparation of the strategic seminar for the Board of rate of 100%. Directors. The main topics discussed by the Committee were the health All the Directors met in November 2015 for a one-day strategy and safety policy with the 2014 review and the draft action seminar at which they reviewed developments relating to plan to be implemented in 2015, the environmental and implementing the Group strategy, key development areas as industrial risk management policy, drinking water quality and well as the aspects of innovation and human resources and the conformity of discharge water, regulations and research investment and divestment plans being considered. in the area of micropollutants, Group solutions in the area of The Ethics and Sustainable Development Committee desalination, the societal elements of the Group's offers and the 2014 review of sustainable development indicators and the Composition outlook for 2015. During 2015, the composition of the Ethics and Sustainable The ethics policy was also reviewed with the presentation of Development Committee changed, as Mr. Enric Xavier Amiguet the Ethics Officer’s 2014 report and the 2015 action plan. In i Rovira, Director representing employees, was appointed as addition, the Committee examined the policy on professional and a member of the Committee. The Committee now has four compensation equality, the policy for diversity and the actions to members: Delphine Ernotte Cunci, Chairwoman, Valérie Bernis, be implemented, as well as the social reporting at December 31, Lorenz d’Este and Enric Xavier Amiguet i Rovira. 2014. The Committee also reviewed the monitoring or psycho- social risks. Finally, the Committee reviewed the action plans of With Delphine Ernotte Cunci, Chairwoman and Lorenz d’Este the Group for the Paris COP21 Climate Conference, as well as qualifying as independent, the proportion of independent the ratings attributed to the Group by Vigeo and Robeco SAM. Directors is 67% of the Committee members, excluding the Director representing employees.
222 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Functioning of Governance and Management Bodies Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code 16
1.4 Principles and rules agreed upon by the Board of Directors for determining compensation and benefits of any kind for Corporate Officers
This point is addressed in detail in chapter 15 of the Reference calculate the compensation and benefits of any kind awarded Document. to the Company’s Chief Executive Officer. It should be noted that on October 28, 2008, the Board of At its meeting of July 30, 2013, the Board of Directors affirmed, Directors indicated its intention to comply with the AFEP-MEDEF on the recommendation of the Appointments and Compensation Code's recommendation on corporate governance of listed Committee, that it adheres to the revised AFEP-MEDEF Code. companies, as it relates to the principles and rules applied to 16 1.5 Corporate Governance Code
The Company follows the corporate governance recommendations of October 6, 2008 relating to the recommendations defined by the French Association of Private compensation of the Corporate Officers, which are perfectly Companies (AFEP) and the Movement for the Companies of consistent with the policy of transparency that the Company France (MEDEF) in the AFEP-MEDEF corporate governance code supports. The Company also reaffirmed that it referred to the for listed companies (hereinafter the “AFEP-MEDEF Code”). The AFEP-MEDEF Code, as amended in June 2013, at the Board of latest version of this Code, dated November 2015, can be viewed Directors’ meeting of July 30, 2013. The Company referred to the on the website www.medef.fr. latest version of the AFEP-MEDEF Code published in November At its meeting of October 28, 2008, the Board of Directors 2015 for the preparation of this Chairman’s report. acknowledged and fully accepted the AFEP-MEDEF
The Company follows the AFEP-MEDEF Code in its entirety; the few variances are described in the following table:
Recommendations SUEZ ENVIRONNEMENT COMPANY's practice and justification Periodic meeting of Directors without the presence of the Executive The Board considers that the practice of the Chief Executive Officer not and internal Directors in order, inter alia, to assess the performance of participating in the deliberations of the Board (and, where appropriate, the Chief Executive Officer and to reflect on the future of management of the committees) concerning his personal situation and performance (Item 10.4 of the AFEP-MEDEF Code) is sufficient to fulfill the purpose of this recommendation.
1.6 Specific terms and conditions governing shareholder participation in Shareholders’ Meetings
The terms and conditions governing shareholder participation ENVIRONNEMENT COMPANY also set up an electronic method in Shareholders’ Meetings are set forth in the Company Bylaws of notifying shareholders of meetings and 2,709 shareholders under section VI, Shareholders’ Meetings, Articles 20-23. agreed to receive the notice of the 2015 Shareholders’ Meeting The terms and conditions governing shareholder participation by e-mail. Finally, in 2012, SUEZ ENVIRONNEMENT COMPANY in Shareholders’ Meetings and their right to vote are also was one of the first companies to enable all of its shareholders, explained in chapter 21.2 of the Reference Document. including holders of bearer shares, to vote online through the VOTACCESS system. Hence, 3,785 shareholders used the For the Combined Ordinary and Extraordinary Shareholders’ VOTACCESS online voting platform made available by the Meeting of May 12, 2015, the participation rate was 69.8%. SUEZ Company, against 3,283 shareholders in 2014.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 223 Functioning of Governance and Management Bodies 16 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code
1.7 Factors likely to have an impact in the event of a takeover bid
Factors likely to have an impact in the event of a takeover bid, as listed in Article L. 225-100-3 of the French Commercial Code, are set forth in sections 18.3.2 and 21.2.6 of this Reference Document.
2. Internal control and risk management procedures implemented by the Company
2.1 Group objectives and standards for internal control and risk management
2.1.1 OBJECTIVES 2.1.2 REFERENCE FRAMEWORK The aim of the internal control procedures implemented The Group internal control program was developed according within SUEZ group is to provide reasonable assurance that the to the “COSO” model promoted by the Committee of Sponsoring applicable laws and regulations are complied with, and that Organizations of the Treadway Commission, and complies accounting and financial information is reliable. with the principles described within the reference framework Generally speaking, it helps to safeguard assets and control supplemented by the application guide published by the and optimize operations. Like any control system, it can only Financial Markets Authority (AMF) and updated by an AMF provide reasonable assurance that the risks of error or fraud working group on the Audit Committee (its final report was are completely under control or have been eliminated. published on July 22, 2010). The Group has adopted an integrated corporate risk General risk management principles are consistent with management policy that aims to provide a complete overview of professional standards (such as ISO 31000, the reference the risk portfolio through the use of methods and tools common framework of the Federation of European Risk Management to all subsidiaries and functional departments, as well as to put Associations (FERMA) and the practices it recommends). in place and follow up action plans to manage them.
2.2 Steering of operations and implementation of internal control and risk management objectives
2.2.1 STEERING OF OPERATIONS The Chairman or Chief Executive Officer must provide each Director with all the documents and information required In terms of steering of operations, the Group’s organization is to carry out their duties. based upon the following principles, which form the general control framework in force within SUEZ: XX The Chief Executive Officer holds the most extensive powers to act, under all circumstances, on behalf of the Company. The Board of Directors establishes operational guidelines for XX He exercises these powers within the limit of the corporate the Group and oversees their implementation. To that end, purpose and subject to (i) the powers granted by law to it tasks the Audit and Financial Statements Committee with Shareholders’ Meetings and the Board of Directors, and (ii) (among other things) monitoring the internal control and internal limits on executive powers (see section 1.2.3 of this risk management systems (see section 2.2.2 of this report). report). The Board deals with all issues concerning the running of the Company, deliberates and settles relevant matters and XX The Management Committee is an advisory and decision- carries out checks and inspections as it deems appropriate. making body comprising the Chief Executive Officer and
224 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Functioning of Governance and Management Bodies Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code 16
the four Chief Operating Officers in charge of the Recycling 2.2.2 RISK ASSESSMENT AND MANAGEMENT and Recovery Europe business, the Water Europe business, The main risks relating to Group operations are presented the International business and Finance; the Innovation in chapter 4 of the Reference Document. Coordination of this and Industrial Performance Director, the Sustainable integrated approach to risk management is the responsibility Development and Communications Director, the Human of the Chief Risk Officer, reporting to the General Secretary. The Resources Director and the General Secretary. The Chief Risk Officer is supported by a network of Risk Officers, Committee reviews the Group’s main decisions and strategic who are responsible for seamlessly and consistently rolling objectives and sets the operational and performance out risk assessment and management processes within the objectives of the business units at two business reviews different subsidiaries. A risk-mapping process for the whole during the year. Group has been in place for several years. Risks are identified, XX The Executive Committee includes the members of the classified by category (strategic, financial, operational), 16 Management Committee, the Heads of the business units assessed (by significance and frequency), and quantified when and the senior managers of the support functions. Its role possible. Then the method for dealing with them is reviewed, is to coordinate management actions. which provides information for action plans at different levels XX The Operations Committee is chaired by the Chief Executive of the organization. An action plan may consist of reinforcing Officer or the Deputy CEO in charge of Finance and also internal control procedures. This process includes the selection includes the General Secretary and the operational Deputy of significant individual risks and, if applicable, seamless risk CEO of the division concerned; its mission is to evaluate aggregation, which allows an annual summary of the Group’s significant divestiture or development projects for major risks to be drawn up. This summary is approved by commitment decisions and to analyze the performance of the Management Committee and presented to the Audit and specific projects in progress. Financial Statements Committee. XX The Treasury Committee, chaired by the Deputy CEO in The subsidiaries maintain responsibility for implementing the charge of Finance, is the management body for financial most appropriate risk management policy for their particular risks. activities. However, certain cross-divisional risks are directly managed or closely coordinated by the support functions XX The Group is organized according to three main sectors involved: (Water Europe, Recycling and Recovery Europe and International); these are in turn divided into 11 business XX Within the Office of the General Secretary: units to which the Group’s operating subsidiaries are linked. –– the Legal Department analyzes and manages the Group’s The business unit managers and the management teams legal risks, based on periodic reporting from the network of the operating subsidiaries are responsible, within their of in-house legal counsels within the subsidiaries; area of responsibility, for conducting business within the –– the Investments and Risks Department, jointly with framework of the strategic objectives set by the Board of the Planning and Control Department and the Legal Directors and the Management Committee. Department, takes part in the analysis of the main projects After setting the operational and performance objectives of of the Group and its subsidiaries in terms of investments, the business units (see above) their progress is monitored at acquisitions, disposals, etc.; monthly business reviews, in which a representative of the –– the Insurance Department, in conjunction with the Management Committee, the business unit managers and subsidiaries, is the contracting authority for the Group’s the functional departments involved all take part. insurance programs for industrial and environmental XX The support functions assist the Management Committee damage, business interruption, and liability (third-party, with controlling and guiding operations and act in support professional, etc.). Specifically, it monitors risks of fire of the business units according to principles and procedures and machinery breakdown, by implementing an annual applicable across the entire Group. prevention and protection program for the Group’s key sites; The support functions mainly include the Innovation and Industrial Performance Department (to which the Water and –– the General Secretary, the Ethics Officer for the Group, is Recycling and Recovery Projects and Information Systems responsible for the prevention and management of ethical departments report), the Finance Department, the Office of the risks (see below section 2.2.4 of this report). General Secretary (to which the Legal, Internal Audit and the XX Within the Finance Department: Investment and Risk Departments all report), the Sustainable –– the Treasury and Capital Markets Department analyzes, Development and Communications Department and the Human in conjunction with the subsidiaries, the Group’s main Resources Department. financial risks (interest rates, currencies, commodities, liquidity and banking counterparties) and implements measures for controlling such risks. The Department reports twice a year to the Audit and Financial Statements Committee;
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 225 Functioning of Governance and Management Bodies 16 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code
–– the Planning and Control Department performs a critical 2.2.3 MONITORING AND EVALUATION OF INTERNAL CONTROL analysis of the subsidiaries’ financial performance and The Group’s internal control monitoring is organized according forecasts through the monthly review of operating and to the following principles: financial indicators. It also prepares the Group’s short- and medium-term financial forecasts and participates in XX The mission of the Audit and Financial Statements the analysis of development projects involving the Group Committee (as provided for in the Board of Directors’ Internal and its subsidiaries; Regulations) is to assess the effectiveness of the Group’s internal control systems and examine the procedures –– the role of the Tax Department is to identify, analyze and applied to assess and manage the Group’s significant manage the Group’s tax risks; risks (pursuant to the Decree of December 8, 2008, which –– the Consolidation and Accounting Department ensures transposes the Eighth European Directive into French law). that accounting principles are followed. XX The Group's Management Committee is responsible XX The Innovation and Industrial Performance Department: for implementing the internal control systems; that –– coordinates the network of formally appointed responsibility is rolled out to the business unit managers Environmental and Industrial Risk Officers; co-signs and the management teams of the operating subsidiaries. progress contracts; monitors the placing under control The Group’s guidelines and rules of operation are distributed of significant risks identified; implements a multiannual by the operational or functional departments concerned. audit plan of management systems implemented by each They are also searchable by all Group employees under the business unit and verifies the compliance of the rules "Policies and procedures" section of the Group’s intranet of management and standards defined by the Group in site. The Chief Executive Officers and Chief Financial matters of environmental and industrial risk management; Officers of the main operating subsidiaries confirm, via representation letters twice a year (half-year and year-end), –– studies the operating risks associated with the Group’s their responsibility for implementing an efficient internal production systems and assists the subsidiaries in control system within their organization. resolving operational issues at their sites, establishes and distributes best practices and operational benchmarks XX The internal control system is implemented in a manner to the subsidiaries and prepares solutions for a certain consistent with the risks identified in the Group’s activities number of emerging risks by developing suitable research through a risk-mapping process managed by the Group’s programs; Chief Risk Officer. –– within the Innovation and Industrial Performance XX The Internal Control Department, which is attached to Department, the Information Systems Department the Finance Department, manages the Group’s internal analyzes the risks inherent in the information systems control program; its mission is to analyze and improve the to ensure the availability, integrity and confidentiality of internal control system, in collaboration with the Group’s the information they contain. main subsidiaries and support functions. Its actions are supported by a network of internal Control Officers and XX The Human Resources Department analyzes the main labor Process Owners identified within the main subsidiaries of risks and needs in terms of skills and develops action plans the Group, who are trained in the Group’s internal control to recruit local talent and develop skills. principles and methods. –– Within the Human Resources Department, the Health and In the framework of the internal Group control program, Safety Department monitors and ensures the prevention a questionnaire on the general control environment and of occupational illnesses and accidents related to the control reference documents have been defined; these Group’s businesses. The crisis management process is include key operational processes: sales management, also coordinated by the Health and Safety Department, procurement management, asset management and contract which implements early warning and crisis management management; support processes: the preparation of procedures for the Group and its subsidiaries. accounting and financial information, financial management, XX The Sustainable Development and Communications information systems management, legal management, tax Department analyzes and manages primarily image management, external communications, as well as global and reputation risks and prepares and disseminates processes: the management of commitments, the corporate suitable crisis communication plans, in connection governance and external communications. with the subsidiaries. The Best Practices Charter of the For each process, in line with the risk matrix prepared SUEZ communications network reminds employees of by the Chief Risk Officer, the standard risks and control the confidential nature of the information held by some objectives considered necessary for maintaining an efficient employees and the internal obligations relating to the internal control system have been identified. Internal control circulation of information. procedures (and control operations) implemented to meet these risks and control objectives are generally specific to the business and organization of each entity.
226 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Functioning of Governance and Management Bodies Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code 16
The Group’s internal control program is based on dedicated contrary to the Group’s ethical rules. The SUEZ Charter of communication and training tools, including an intranet Ethics (updated in March 2010 and approved by the Board system which enables: of Directors and the Ethics and Sustainable Development Committee) was circulated within the Group, together with –– the circulation of the standard control objectives; its practical guide. In addition, a number of procedures –– the description, updating and annual self-assessment relating to ethical issues are in place within the Group, of control activities by the process owners for each key especially in relation to the conclusion of contracts with process identified within the main subsidiaries. consultants in regard to institutional or commercial matters XX The mission of the Internal Audit Department, which is and the conclusion of partnership and sponsorship contracts. attached to the Audit and Financial Statements Committee The Group’s Ethics Officer is supported by a network of and to the Office of the General Secretary, is specifically Ethics Officers appointed within each of the major to ensure that the Group has an efficient internal control subsidiaries; these Ethics Officers are responsible for 16 system and manages its risks properly. To that end, when ensuring the roll-out and effectiveness of the Ethics Program preparing its annual audit plan, it specifically consults the within their subsidiary and for implementing internal and Group’s Internal Control Department, the Chief Risk Officer external investigation procedures for any issue brought to and the Statutory Auditors. The audit plan is then approved their attention which may potentially be in breach of the by the Management Committee, and presented for validation Group’s Ethics rules. Each year, the Ethics Officers and Chief to the Audit and Financial Statements Committee. Executive Officers of the main subsidiaries send a letter of compliance and a report on their activities to the Group In assessing the reliability of the internal control system General Secretary within the framework of the Ethics (level of control and adequacy), the Internal Audit Program. There is also an Ethics Compliance Committee, Department performs audits aimed at evaluating the design consisting of the General Secretary (as Group Ethics Officer), and operating effectiveness of internal control procedures the Director of Human Resources, the Director of Legal within the Group, particularly by reviewing processes and Affairs and the Director of Internal Audit, which reviews and testing key control activities in each of the main subsidiaries. validates the Group’s annual ethics report, determines a Furthermore, at the end of each audit the Department program of work at the beginning of each year and examines makes recommendations that it includes in a report the most significant ethical warnings. The Group General listing the Group’s risk and internal control framework, Secretary reports on the activities of the Ethics Program to monitors their implementation and reports regularly to the Board’s Ethics and Sustainable Development Committee the Management Committee and the Audit and Financial of the Board of Directors (1). Statements Committee. This Department comprises several teams of auditors, including a central team based at the XX The General Secretary oversees implementation of the Group head office, whose remit covers the Group’s entire procedures circulated within the Group to ensure compliance scope of consolidation. with its obligations on insider information and insiders. XX External audit: assessment and analysis of internal controls XX The Finance Department ensures the Group’s compliance within the Group are performed in close coordination with in accounting, financial and tax matters. It is responsible for the Group’s Statutory Auditors. The latter are informed, producing the financial reports required by law. among other matters, of the results of the internal audit XX The Human Resources Department ensures compliance tests. with the labor legislation and regulations in force and produces the labor reports required by law. It implements 2.2.4 COMPLIANCE WITH LAWS AND REGULATIONS the Group’s labor policies, particularly those relating to health and safety. Compliance with laws and regulations is the responsibility of the business unit managers, the management of the operating XX The Innovation and Industrial Performance Department subsidiaries and the functional departments in their respective oversees the Group’s compliance on environmental issues. areas of competence. For example, certain cross-divisional It produces the necessary environmental reports within the compliance objectives are managed by the support functions framework of non-financial communications. An annual concerned: representation letter regarding environmental compliance, signed by the subsidiaries’ Chief Executive Officers, confirms The General Secretary, acting as the Group’s Ethics Officer, XX their commitment in this regard. is responsible for ensuring compliance with the Ethics Program, which aims to prevent or detect any behaviors
(1) The Ethics Program is described in detail in section 4.2.5.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 227 Functioning of Governance and Management Bodies 16 Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code
2.2.5 INTERNAL CONTROL PROCEDURES RELATING TO THE PREPARATION, (iii) Management of accounting and financial information systems TREATMENT AND CIRCULATION OF ACCOUNTING AND FINANCIAL The Group and its subsidiaries use a single, standardized INFORMATION consolidation software application, managed by the Group, to secure and standardize the preparation process for forecasts, (i) Accounting standards and procedures monthly reports, year-end accounts and the Medium-Term Plan. The main procedures put in place for drawing up the statutory Each of the Group’s subsidiaries is responsible for and manages and consolidated financial statements are based on: its own information system used to prepare accounting and XX the Group’s accounting policies manual, which is accessible financial information, including their statutory financial via the intranet to all of its finance professionals. It is updated statements. regularly based on changes in IFRS standards; and (iv) Setting objectives and steering XX the Group closing instructions are circulated before every phase of the consolidation process by the Accounting and Within the Finance Department, the Planning and Control Consolidation Department. These instructions cover the Department steers the process for preparing financial forecasts closing assumptions (exchange rates, discount rates and and writes the budget instruction letters sent to each business tax rates, etc.), processes for specific issues (e.g. pensions, unit, relaying the macroeconomic assumptions to be applied impairment tests and off-balance sheet items), the scope and the financial and non-financial indicators to be measured of consolidation, the timetable for submitting information, the following year, through the various forecast reviews. items relating to closing that require particular attention, The Planning and Control Department steers the monthly changes in the chart of accounts and significant new Business Review process. The purpose of these meetings is: standards introduced. XX to define the financial objectives and forecasts twice a year; (ii) Preparation of accounting and financial information XX each time, to analyze the operational and financial Responsibilities for preparing accounting and financial performance of each business unit, how their business is information are assigned at every organizational level of the going and key events as well as monitor their operational Group. These include the set-up and maintenance of efficient risk management, internal control systems. Within the Finance Department: via management reports based on the Group’s consolidated monthly financial reports. XX The Accounting and Consolidation Department steers the Group financial statements production process, which The consolidated Group budget is presented to the Board of includes producing and controlling the statutory and Directors for approval. consolidated financial statements of SUEZ ENVIRONNEMENT The Group’s Chief Executive Officer sends each business unit COMPANY as well as producing forecasts and monthly a budget letter outlining its annual quantitative and qualitative consolidated financial reports. This work is carried out with objectives. input from the accounting and planning and control teams of each consolidated subsidiary. Each party involved performs (v) Financial communication checks to enable the circulation, assimilation and correct application of Group accounting standards and procedures (a) Preparation and approval of the interim and annual reports in their area of responsibility. These responsibilities are Within the Finance Department, the Accounting and Consolidation confirmed by the Chief Executive Officers and Chief Financial Department is in charge of preparing the Reference Document Officers of each subsidiary or each consolidation level via a filed with the AMF as well as the interim financial report, and, biannual representation letter. jointly with the Legal Department, heads a dedicated Steering The Accounting and Consolidation Department is responsible Committee whose role is: for relations with the AMF Accounting Department. XX to coordinate the process for submission and validation by XX The Planning and Control Department is responsible for all relevant support functions of the information contained in analyzing the consolidated financial statements, forecast the Reference Document and in the interim financial report; reports and monthly consolidated financial reports, as well XX to ensure that regulations and the AMF recommendations as for producing the medium-term plan jointly with the on financial communication are applied. Accounting and Consolidation Department.
228 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Functioning of Governance and Management Bodies Report of the Chairman of the Board of Directors prepared in accordance with Article L. 225-37 of the French Commercial Code 16
(b) Preparation and approval of press releases procedures aimed at ensuring the reliability of the regulatory The Sustainable Development and Communications information communicated to the market. Department and, within the Finance Department, the Financial Communication Department and the Legal Department are (c) Relationships with rating agencies responsible for reporting all information that could have an Within the Financial Department, the Corporate Finance and impact on the SUEZ ENVIRONNEMENT COMPANY share price. Projects Department maintains relationships with rating agencies in cooperation with the Financial Communication Since the Group was listed on the stock exchange, the Department, the Treasury and Capital Markets Department and Sustainable Development and Communications Department the Planning and Control Department. and Financial Communication Department have implemented 16 2.3 Changes in 2015 and outlook
The Group continues to develop its internal control system every XX the adaptation of internal control mechanisms as part of year. This continuous improvement process relies, in particular, the implementation of new information systems related on defining and operating an internal control plan that is specific especially to the upgrading of purchasing and accounting to each of its main subsidiaries. The progress of these plans is softwares. presented twice a year to the Audit and Financial Statements The main internal control development areas for 2016 are: Committee. XX continued streamlining of control reference documents In 2015, internal control actions mainly included: of support processes and global processes in close XX the enrichment of business process control reference collaboration with the support functions of the Group; documents by integrating the good practices identified in XX the change in the number of automatic controls as part of the areas of water, such as invoice and asset management, the implementation of new IT systems; as well as in recycling and recovery, such as trade and transformation of recyclable materials; XX continuing to increase the understanding of the internal control system by the business process owners. XX the streamlining of control reference documents of support processes and global processes, especially the preparation processes for the accounting and financial information and the IT system management process;
Gérard Mestrallet Chairman of the Board of Directors
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 229 Functioning of Governance and Management Bodies 16 Report of the Statutory Auditors on the Report of the Chairman of the Board of Directors
16.5 Report of the Statutory Auditors on the Report of the Chairman of the Board of Directors
To the Shareholders,
In our capacity as Statutory Auditors of SUEZ ENVIRONNEMENT Our role is to: COMPANY and in accordance with Article L. 225-235 of the XX report on any matters as to the information contained in the French Commercial Code (Code de commerce), we hereby report Chairman's report in respect of the internal control and risk on the report prepared by the Chairman of your Company in management procedures relating to the preparation and accordance with Article L. 225-37 of the French Commercial processing of the accounting and financial information; and Code (Code de commerce) for the year ended December 31, 2015. XX confirm that the report also includes the other information It is the Chairman's responsibility to prepare and submit for the required by Article L. 225-37 of the French Commercial Code Board of Directors' approval a report on the internal control and (Code de commerce). It should be noted that our role is not risk management procedures implemented by the Company to verify the fairness of this other information. and to provide the other information required by Article L. 225- 37 of the French Commercial Code (Code de commerce) relating We conducted our work in accordance with professional to matters such as corporate governance. standards applicable in France.
Information on the internal control and risk management procedures relating to the preparation and processing of accounting and financial information
The professional standards require that we perform the XX determining if any material weaknesses in the internal necessary procedures to assess the fairness of the information control procedures relating to the preparation and provided in the Chairman's report in respect of the internal processing of the accounting and financial information that control and risk management procedures relating to the we would have noted in the course of our work are properly preparation and processing of the accounting and financial disclosed in the Chairman's report. information. These procedures consist mainly in: On the basis of our work, we have no matters to report on XX obtaining an understanding of the internal control and risk the information relating to the Company's internal control management procedures relating to the preparation and and risk management procedures relating to the preparation processing of the accounting and financial information on and processing of the accounting and financial information which the information presented in the Chairman's report contained in the report prepared by the Chairman of the Board is based and of the existing documentation; of Directors in accordance with Article L. 225-37 of the French Commercial Code (Code de commerce). XX obtaining an understanding of the work involved in the preparation of this information and of the existing documentation;
Other information
We confirm that the report prepared by the Chairman of the Board of Directors also contains the other information required by Article L. 225-37 of the French Commercial Code (Code de commerce).
Courbevoie and Paris-La Défense, February 23, 2016 The Statutory Auditors French original signed by Mazars Ernst & Young et Autres Isabelle Massa Gonzague Senlis Jean-Pierre Letartre Stéphane Pédron
230 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Employees17
17.1 Human resources 232 17.1.1 Key human resources (HR) principles 232 17.1.2 Values and ethics 232 17.1.3 Corporate commitments 232 17.1.4 Diversity and equal opportunities 235 17.1.5 Health – safety – quality of life in the workplace 236
17.2 Social information 238 17.2.1 Breakdown of employees 238 17.2.2 Employment and working conditions 240 17.2.3 Training 243 17.2.4 Employee relations 244 17.2.5 Key indicators by geographical area 244 17.2.6 Methodological factors in the 2015 Social Report 245
17.3 Employee incentives and employee shareholding 246 17.3.1 Employee incentives and profit sharing (France) 246 17.3.2 Group Retirement Savings Plan (PERCO) 247 17.3.3 Employee shareholding 247
17.4 Pensions and other employee benefit obligations 248
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 231 Employees 17 Human resources
17.1 Human resources
17.1.1 Key human resources (HR) principles
In an uncertain economic context, SUEZ wishes to anticipate XX act as a socially responsible player, ensuring that our changes to its businesses with the intention of helping employees can continually adapt to changing employability employees evolve and use their professional projects to solve requirements; the issues facing the Group. XX build our future based on promoting internal talent and the With this in mind, three fundamental principles have been development of each employee; established to address the Group's requirements: XX maintain a constructive and transparent dialogue with our employees and their representatives.
17.1.2 Values and ethics
SUEZ has made ethics an indispensable element of its global all employees to perform their jobs in good physical and performance. Employee development and mutual respect are psychological conditions. central to the values and ethics promoted by the Group. Since 2008, the Group has formally set out its corporate The Group’s ethics policies are derived from the fundamental social responsibility commitments in its Group Sustainable principles that guide our conduct and are supported by the Development Roadmap. As one of the key priorities set in Ethics Charter: 2012 for the following four years, SUEZ aims at developing the abilities of its employees so that they can play an active role XX strict respect for laws and regulations; in transforming its businesses. The Group has renewed and XX a culture of integrity; deepened its commitments in terms of developing and training XX loyalty and honesty; employees, motivation and quality of working life, promoting equal opportunities, and safety. XX respect for others. Values, Ethics and Commitments to Corporate Social The Group strives to maintain quality human relationships: Responsibility are cornerstones of the Group’s HR policy. listening and accountability are the foundation for respect. In this context, it is the responsibility of management to enable
17.1.3 Corporate commitments
..Hiring At the end of 2015, the Group had 1,049 part-time learning contracts (excluding contracts for disadvantaged workers), 968 Although hiring remains very limited due to a still uncertain of them in France. Furthermore, in 2014, 18% of the part-time economic climate, the Group hired more permanent contracts learners in France were hired at the end of their contract term, in 2015 than in 2014 (7,112 new hires in 2015, i.e. 3.2% more compared to 22% in 2013. than in 2014, of which 365 executive staff in 2015 in France as opposed to 332 in 2014, which is an increase of 9.9%). . The increase reflects a requirement for skills renewal and a .Mobility policy renewed effort to take in young graduates. In order to achieve its ambitions worldwide, the Group has to count on employees who can adapt constantly and are mobile ..Part-time learning and apprenticeships enough to use their skills wherever they are most useful. The development of part-time learning is one of the five pillars While professional mobility is the key to meeting an activity’s of the “Equal opportunities, Social Progress and Commitment” requirements with flexibility, it is also a lever of development program (see section 17.1.4). for our employees and a true source of personal enrichment for staff.
232 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Employees Human resources 17
In order to promote mobility, the Group has developed a platform The objective of these communications tools is to educate dedicated to careers. This platform is particularly abundant and employees about internal mobility, to make it more attractive diversified, and it offers employees ways to advance in their by showing that it is real, accessible and a factor in their jobs and can be used to prepare career paths that are varied, career development; motivating and formative in educational opportunities. XX a day of "cross interviews", consisting of offers to employees Commitments have been made to facilitate and better organize to meet the Career Management staff of other entities as internal mobility and to optimize the career management of our a way of increasing their visibility, and of helping them to employees. Existing gateways between SUEZ and ENGIE were better understand what career possibilities exist within maintained to provide maximum opportunities for employees. the Group and to prepare future mobility plans upstream Internal mobility is essential and involves extraordinary effort by of the process. The primary objective of this event is to HR teams to improve the process, transparency and cooperation strengthen mobility between the entities and above all, among subsidiaries. This policy is based on: between businesses. In 2015, two days of cross-interviews were set up by XX SUEZ Mobility Committees, which meet every two weeks. the SUEZ HR Development Department, during which These meetings allow HR managers in the subsidiaries to 30 employees met with the Career Management staff of share information on employee mobility and open positions, other entities. 17 improve their mutual understanding of the various business activities and identify bridges between them; In addition, in 2014 the Group set up a Graduate Program called "Jump", which seeks to offer university students a progressive XX the establishment of a dedicated mobility platform: entry path extending over two years and broken down into "Move'Up": three stages: an end-of-studies internship, followed by an Move'Up is accessible on the internet and is exclusively for eight-month assignment and then a VIE (French International internal employees. Postgraduate Internship Program) assignment abroad. The objectives of the platform are multiple: These three assignments in three different entities provide both a learning experience about several businesses and a chance –– improve access to information: allow employees who to work abroad. Employees can use this approach to consider have no workstation or intranet access to connect to the inter-business mobility in their careers more easily. platform with a login name and unique password, The Group recruited five students for the program in 2014, –– help employees with their mobility plans by guiding them eight in 2015 and is planning to recruit 10 in 2016. The HR through each essential phase of the mobility process, step Development Department provides close coordination for the by step; respond to most frequently asked questions, participants in the program, through regular HR meetings, –– provide access to internal job openings, learning breakfasts, site visits, etc. –– communicate, by means of newsletters, testimonials and In 2015, the number of managers part of the mobility program videos, to manage each step in the mobility process, was 550 within France. –– emphasize tools, business activities guides and mobility Excluding positions reserved for young graduates, 64% of brochures, vacancies were filled through the mobility program (the –– outline the rules and general principles governing mobility; population of managers in France), slightly down compared to the 68% figure registered in 2014, due to the significant increase XX a mobility brochure and handbook for all SUEZ employees in the overall number of jobs filled either internally or from (executives and non-executives); external hires. XX an intranet page (Btwin) dedicated to mobility and career management. ..Training This page includes: Group employees are a key resource for performance. Their –– communication brochures and the handbook, development is a shared priority between their managers and –– video testimonials from employees who have participated the HR managers. SUEZ considers employee training to be an in the program, essential part of its Human Resources policy. Skills development is a responsibility shared locally between each employee –– access to internal job openings, and his or her manager. This position was accompanied by –– access to the job application space, the creation of the Learning & Diversity Unit within the Group Human Resources Department in January 2015. This Unit aims –– guides to SUEZ business activities. to leverage both Learning and Diversity Management in order to improve strategy, organization and personal development.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 233 Employees 17 Human resources
The decentralized training organization meets the need for ..Career paths local management of our businesses. Coordination of training managers by SUEZ's Learning and Diversity Department allows The entire People Review Process has been deployed in the the sharing of best practices and rationalization of resources. entities of the SUEZ group. In cooperation with the Operating It is supported by two major tools: the corporate social Management, the HR Departments of the various entities will network for coordinating the skills and Learning Community determine key roles in the structures of each of the entities and the Training Catalogue for sharing each entity’s training together. The purpose of this is to fully address the current opportunities. and future development requirements of the Group. The People Reviews are also an opportunity for all entities to carry out a The Training Departments in the business units in France are comprehensive review of talents, with the strongest potential now located in a single location, the CB21 tower in La Défense. abilities identified as Talents For Key Roles (TFKR). This proximity was initially used to combine real estate resources before moving into Phase 2, the pooling of educational These TFKR are identified through three criteria: engineering, to promote shared experience in assimilating XX Ready: current and past performance, level of experience; digital tools and new ways of learning and creating synergies Willing: prepared to change; between business lines and organizations. Through this phase, XX improved streamlining of the economic control of training will XX Able: capable of developing. occur, by means of both lower costs and improved financing Once identified, the TFKR will form a talent pool for the various processes for funding organizations. succession plans for our key roles. 2015 was an important year for the Group's transformation, In order to develop the TFKR concept, SUEZ has made a regarding both its internal organization and change of visual Development Center (DC) available to all of the Business Units identity and its commitment to the Resource Revolution. These (in France and internationally) in which employees will reflect are opportunities for redefining our methods for integrating on their future development on the basis of business cases and new employees into the Group. We decided to work in "Design personality tests. Thinking" mode with the CPI (Concept Project/Imagine) program developed by the Schoolab incubator to give a multidisciplinary In 2015, SUEZ sent some 60 employees identified as TFKR to a view of innovation to our new contents. The prototype will be "Learning with Stakeholders" leadership development program. delivered in March 2016. The People Reviews are also an opportunity for Operating SUEZ offers its skills development and training organization Management to identify Group experts. These experts, who expertise to serve its customers. The Water and Waste Learning are part of the Group's key staff, participate in a specific section of the Learning & Diversity Department performs audits development program that serves to better communicate and and provides support for the Group's customers. The five-year share their expertise. contract initiated in 2014 with Azersu, the National Water & Identifying employee potential is a local management process. Wastewater Treatment Company of Azerbaijan, includes over Whether identifying future top executives or the best experts 100 training kits, a training program for staff and internal for tomorrow, the use by managers of the tools available to trainers among its features. These objectives have served to them guarantees progress and success. This approach is structure services offers that can be duplicated with all of our supplemented by a battery of “people reviews” that allow us customers and prospects based on a collection of training kits to provide every person at every level (local and central) with designed using our methodology for transferring the expertise individualized appropriate answer. of our businesses and based on a policy of developing and Developing skills remains a determining factor in the Group’s recognizing internal Group trainers, backed by a SUEZ quality career management policy. Factors that contribute to this label. objective mainly include the clear positioning of functions In addition to time for training identified as such, it is appropriate up to the highest organizational levels, specific methods of to include informal apprenticeship situations that are integrated recognition and dedicated training programs. into the daily working environment. This includes time for seminars, professional situational exercises, coaching, . mentoring, tutorials, apprenticeships, professional lectures, etc. .Social relations Since 2012, each business unit of the Group accounts for this Social dialogue within the Group is based on an information and time and who has profited from it, then transmits data on this consultation process of the European Works Council and the to the Learning & Diversity Department of Human Resources. France Group Works Council. In this spirit, the social partners The 2015 survey identified more than 700,000 cumulative hours and Group Management meet regularly to exchange viewpoints, of such informal learning. enter into agreements and ensure their implementation.
234 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Employees Human resources 17
Beyond its geographical perimeters, SUEZ promotes the Council Secretariat allow for regular communications by this development of local social dialogue in accordance with local body regarding Group current events. cultural standards and existing regulations. Furthermore, A European Group agreement regarding professional gender the Group includes a certain number of principles from its equality was signed on March 31, 2015. In addition, negotiations European agreements in its HR policies, especially in the area are underway regarding Jobs and Skills Forecasting. Lastly, the of health and safety and mobility. It should also be noted that EWC designated a Director to represent employees in the Board stakeholders are seeking to develop innovative mechanisms for of Directors of SUEZ ENVIRONNEMENT COMPANY. social dialogue, such as the creation of a European survey on Health and Safety policy. The purpose of this survey, which is mentioned in the Group agreement on basic Health and Safety ..The France Group Committee (FGC) principles and whose signing was preceded by consultations The France Group Committee covers French companies in which with stakeholders, is to evaluate knowledge on a European level the Group holds over 50% of the share capital. It represents of the Group's agreement and its Health and Safety policy. 32,969 employees and has 28 members, whose role is to provide information on the French scope strategy. At the end ..The European Works Council (EWC) of 2014, the FGC designed a Director to represent employees in the Board of Directors of SUEZ ENVIRONNEMENT COMPANY. 17 The European Works Council covers 12 European countries In 2015, the Committee held four plenary sessions. (France, Germany, Belgium, the Netherlands, Spain, Finland, Italy, Luxembourg, Poland, the Czech Republic, the United The major social matters highlights for the SUEZ group in Kingdom and Sweden) representing 59,802 employees (1). It is France are the following: comprised of 28 members from these 12 countries. It has a role XX unanimous signature of an agreement on method for Quality of information and consultation on policies and changes in the of Life in the Workplace on September 1, 2015; Group. XX implementation of a procedure for appointing a Board This body met four times in plenary sessions during 2015 and member on the proposal of the shareholders employees to was consulted on large-scale Group projects, especially in the SUEZ ENVIRONNEMENT COMPANY Board of Directors; terms of strategy and operational and commercial performance. negotiation underway of an agreement relating to the Furthermore, interim meetings with the European Works XX management of union careers.
17.1.4 Diversity and equal opportunities
In accordance with the strong belief that equal opportunities The results of the first three years of the program were highly are a driving force for the business and have a positive effect on encouraging and reflected the mobilization and involvement performance, the Group treats diversity as a part of its strategy of the Sponsors, who are members of the Business Units and a priority in its HR policy. management committees and promoters of the diversity Launched in 2010, the Diversity program, “Equal Opportunities, policy; the Supervisors, who are relays for the implementation Social Progress and Commitment”, frames the Group’s of the diversity policy action programs; the Human Resources ambitions in this area in France and abroad. teams and the managers. The second three-year period, from 2013 to 2016, extends and strengthens the commitments in It is based on several major themes: the same areas. The Group is determined to achieve a rate of XX youth employment: part-time learning and integration; 30% women managers (in France this goal was surpassed in 2015, with a rate of 31.9% woman managers; the rate is 27.7% increasing the proportion of women among staff and in XX in other European countries and 21.6% in the other countries executive roles; of the world). Among these commitments, SUEZ also seeks XX careers for seniors; to achieve a level of disabled workers in countries where XX integration and career development for people with specific regulations so provide and to achieve a rate of 5% disabilities; with regard to the average number of employees governed by work-study contracts in France, per the definition used for the XX employee commitment and quality of life in the workplace. supplementary contribution to the apprenticeship tax.
(1) The number of Agbar employees outside of Europe was restated.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 235 Employees 17 Human resources
Part-time learning and integration: apprenticeship and training Employees with disabilities: In this area, approaches and programs for future employees, supervised by internal mentors, obligations are very different from one country to another. continue to expand in nearly all the Group’s companies. In Multiple programs and partnerships have been implemented in addition, social integration structures such as Maison pour the sheltered employment sector, especially in France, Morocco, Rebondir and the SUEZ environnement Initiatives Fund and the Netherlands and Spain involving training, internships and Sita Rebond develop programs to help disadvantaged persons hiring. in the regions where we operate to enter or re-enter the On careers for seniors, the approach taken also depends on workforce through tailored pathways. Through the adoption of the laws on retirement age in each country. Initiatives focus an innovative program, the Maison pour Rebondir in Bordeaux mainly on knowledge transmission, mentoring of young people, created 34 active career paths in 2015, helping people to healthcare and prevention programs and retirement planning. integrate into the economy through a job in one of the Group’s businesses or by creating their own micro-business (17 new Our entities now have quality of life in the workplace programs: entrepreneurs in the third "J'entreprends" class). Furthermore, managers are made aware, attentiveness units and ergonomics the Maison pour Rebondir has developed an insertion consulting and prevention programs have been set up and special attention program that has performed 18 missions, and it offers training is focused on difficult tasks (in Recycling and Recovery France) in social legislation, with 13 sessions conducted in 2015. It and on personal/work life balance. Each business unit also also contributed to supporting paths toward employment now conducts regular employee commitment surveys to through several collaborative efforts, including one with the measure the impact on employees of the organizational quality, Promofemmes association. The companies of the Group also management, policies, governance and ethical values deployed formed various partnerships to promote the integration of in the Group. young people from working-class districts, such as Mozaïk RH, It is notable that the Diversity Label, a French Government label, Passeport Avenir, NQT, l'École de la 2e Chance and Face. was awarded on July 7, 2014 through an AFNOR certification for Recruitment and career management of women: This theme the Group’s French entities, concerning 32,000 employees. This has been the subject of numerous agreements, policies and label is awarded for a period of four years, from 2014-2018, as action plans concerning recruitment for technical and line long as the Company receiving the label continues to conform management positions and, at upper hierarchical levels, to specifications of the program. concerning maternity leave, career management and training, The labeling audit carried out by AFNOR Certification evaluated the management of equal pay and access to networks. Several our policies, processes and practices as being compliant in the structures participated in mentoring programs whose purpose areas of anti-discrimination, equal opportunity and diversity. is to support women in career development efforts, both in The AFNOR audit report was used to draw up a road map for France and in Europe. Since the program started, 55 women the Group and a specific road map for each BU. An interim audit have been mentored by senior management staff who have will take place two years after the label was awarded, in 2016. been trained in mentoring. Two identical plans were launched as pilot programs in the USA (with 10 mentor-mentee pairings) and China (7 mentor-mentee pairings).
17.1.5 Health – safety – quality of life in the workplace
SUEZ's health and safety policy supports ambitious targets and approved by the Ethics and Sustainable Development for reducing occupational accidents and cutting the number Committee (ESDC). of serious accidents. The Group aims at reducing accident In 2013, the Group launched a campaign to mobilize all frequency rates by 30% over the five years between 2011 employees based on the 10 "rules that save lives". These and 2016. These results should reinforce the position of SUEZ 10 rules, which apply to both the water and waste businesses, among the industry’s best performing companies in this area. stem from the analysis of serious personal accidents that the The Group also implemented a three-year plan for avoiding Group has seen in recent years. A major communications effort fatal accidents for all persons involved in its activities. The is serving as impetus for managers, operators and experts elimination of fatal accidents is based on the "10 rules that in all countries in which the Group has operations, based save lives" action, detailed below. These targets, reviewed on specific commitments by staff and focusing on the real annually, are defined during the annual management review challenge of "saving lives". The Group is gradually involving its subcontractors in this process.
236 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Employees Human resources 17
In general, the most serious accidents occur off-site, on public They can also be used to evaluate the progress of some key roads, during waste collection activities or at water piping job actions, such as the life-saving rules. A “safety contract” is sites. As a result, the Group is conducting efforts to improve our established with the management of each subsidiary at the equipment, work organization and behavior in order to reduce beginning of the year and is given a special review at the end exposure of third parties to our activities on the road. Attention of the year to ensure that actions have been implemented to the quality of shielding remains a major concern with regard and targets achieved. The degree of success in carrying out to our sub-contractors, especially in countries where local on- the terms of this contract affects the bonuses of subsidiaries’ the-job safety requirements are not as stringent as our rules, executives. as is the case in Morocco. At water treatment sites, the Chlorine Discussions about setting up and monitoring safety contracts risk to employees and persons living in the vicinity of our plants serve to connect the guidelines given by the Group with concrete is rigorously monitored and HSE are of particular interest. results obtained by the subsidiaries. It is an opportunity to take SUEZ is simultaneously pursuing in-depth actions intended to into account the specific history and maturity of the subsidiary’s globally reduce the number of work accidents suffered and to safety management record with the help of a framework (the preserve the health of employees through programs to secure Group’s internal rules) established over the course of some equipment and new training tools. In parallel with continued 10 years’ continuous effort. This framework takes local training of Health and Safety management for managers, a regulations into account, as well as the experience acquired 17 similar training program is in place for local supervisors and by analyzing accidents and sharing best practices. is starting to be rolled out. A total of 14 Health and Safety audits were carried out by the Achieving objectives is based on establishing and monitoring Group’s Health and Safety Department in 2015, to measure the action plans. This plan is prepared by the Health and Safety quality of risk prevention measures in the field. Department, reviewed and approved by management and the The effectiveness of this policy, which has reduced the frequency ESDC, and then cascaded throughout the Group’s operating rate by a factor of 2.5 for SUEZ in 10 years, would not be subsidiaries. Performance contracts between the Health and possible without the personal commitment of management at Safety Department and the BUs emphatically promote health all levels: Group, business units, regions, etc. This commitment and safety management training, oversight of major risks is illustrated by the involvement of SUEZ Chief Executive Officer (with consideration of each BU's specific situation) and certain and the Executive Committee in launching the “10 rules that save sensitive operational methods. Regarding health, the prevention lives”, and the importance given to the subject in performance of muscular and skeletal disorders in sorting centers is a major reviews at all levels of the organization. Operational managers issue and these contracts include actions to promote employee and operators are supported by a network of approximately health (muscular and skeletal disorders, difficult tasks, etc.). 300 health and safety experts.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 237 Employees 17 Social information
17.2 Social information
17.2.1 Breakdown of employees
As of December 31, 2015, the Group had 82,536 employees, up • Water Well Solutions (USG/United States): 1,546 persons or +1.9% over year-end 2014. This change may +36 employees, be broken down as follows: • Proskip (International, Business Unit Australia): XX An increase of 446 employees (+0.6%) due to the scope +29 employees, effect, i.e.: • Other: +38 employees; Acquisitions: –– –– Newly consolidated entity: Sita Al Bashaer (International, • Sita Malaquin (R&R France): +133 employees, Business Unit Africa, Middle-East and India (AMEI)/Oman): • Global Chemicals Technology (International, Business +47 employees; Unit Europe and Latin America (Europe Latam)/United –– Newly consolidated entities: Saninord Assainissement and Kingdom); a company specializing in water treatment Valderun (Recycling & Recovery France): +115 employees; research and development: employees, +118 –– Sale of the Slovakian subsidiary belonging to Sita CZ • Tecnologia Consultores/Aqualogy México/Sistemas (Recycling & Recovery Central Europe): -151 employees. & Technologias Ambientales (Water Spain): XX An increase of 1,100 employees through organic growth, up +41 employees, +1.3%, corresponding primarily to different contract awards. • Poseidon (International, Business Unit North America/ Canada): +40 employees,
2013 2014 2015 2015 Number Number Number % France (metropolitan and overseas territories) 33,468 33,125 32,969 39.9% Europe (excluding France) 29,521 29,554 30,566 37.0% North America 3,312 3,390 3,650 4.4% South America** 293 395 459 0.6% Africa/Middle East 7,231 8,830 8,938 10.8% Asia-Pacific 5,394 5,696 5,954 7.2% TOTAL (XXX)* 79,219 80,990 82,536 100.0%
* See meaning of (XXX) in section 17.2.6: "Methodological factors" in the Social Report. ** Activity in Chile is part of Agbar, which is assigned to Spain (Europe excluding France).
In France, staff numbers changed little between 2015 and 2014, In the North America region, the number of staff was also (-0.5%). increased through the purchase of Water Well Solutions by In other European countries, the increase in staff of USG and the addition of Poseidon in Canada. +1,012 persons is due in particular to the acquisition of Global With regard to Asia and Pacific region, there were increases in Chemicals Technology (United Kingdom) and to the commercial staff numbers due to development in Asia and the acquisition momentum of Agbar in Spain. of Proskip in Australia. In the Africa/Middle East Region, 108 employees were added, France is the largest country in terms of workforce including 47 people through the integration of Sita Al Bashaer (32,969 employees or 39.9% of the total), ahead of Spain (Oman). (11,945 employees or 14.5%), Morocco (7,521 employees or 9.1%) and the United Kingdom (5,559 employees or 6.7%).
238 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Employees Social information 17
..Breakdown of workforce by professional category
2013 2014 2015 2015 Number Number Number % Executives (XXX) * 11,441 12,077 12,586 15.2% Senior technicians and supervisors (XXX) * 16,476 17,112 17,721 21.5% Manual and non-manual workers and technicians (XXX) * 51,302 51,801 52,229 63.3% TOTAL 79,219 80,990 82,536 100.0%
* See meaning of (XXX) in section 17.2.6: "Methodological factors" in the Social Report.
The proportion of executives continues to grow and represented The 32,969 employees in France can be broken down as 15.2% at the end of 2015 (14.9% at the end of 2014). follows: 5,758 executives (17.5%), 6,634 senior technicians and supervisors (20.1%), and 20,577 manual and non-manual workers and technicians (62.4%). 17 ..Percentage of women in the Group
2013 2014 2015 Proportion of women in total workforce (XXX)* 20.1% 20.1% 20.4% Proportion of women in management (XXX)* 27.8% 27.6% 28.2%
* See meaning of (XXX) in section 17.2.6: "Methodological factors" in the Social Report.
The proportion of women in the workforce has increased In France, the proportion of women in the workforce is 23%. significantly (20.4% of total workforce). Among executives, the This proportion is 31.9% among executives. These ratios were percentage of women increased by 0.6% to 28.2% of the total respectively 22.6% and 31.1% in 2014. workforce.
..Breakdown of workforce by contract type
2013 2014 2015 Permanent contracts 93.2% 93.1% 92.0% Fixed-term contracts 5.3% 5.3% 6.4% Part-time learning and social insertion contracts 1.5% 1.6% 1.6%
The proportion of employees on permanent contracts within the XX 0.4% of these were linked to social insertion contracts total workforce fell slightly (92%), and the portion of fixed-term through dedicated Recycling & Recovery France initiatives contracts was 6.4%. Despite this, compared to the previous year, (mainly Sita Rebond). At year-end 2015, this involved SUEZ recruited more under permanent contracts in 2015 than 304 employees, a significant increase of 5.9% compared in 2014 (see the paragraph on recruitment). to 2014. Part-time learning and social insertion contracts (1.6% of total In France, 93.2% of employees were on permanent contracts, 3% workforce) break down as follows: on fixed-term contracts, and 3.8% were on part-time learning or social insertion contracts. XX 1.2% linked to part-time learning contracts (apprenticeships and professionalization contracts in France, and similar types of contracts in other countries, if they exist). At end- 2015, there were 1,049 part-time learning contracts;
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 239 Employees 17 Social information
..Breakdown of workforce by age group (permanent employees only)
2013 2014 2015 Under 25 2.6% 2.3% 2.2% 25-29 8.0% 8.3% 8.3% 30-34 12.5% 12.5% 12.5% 35-39 13.9% 13.7% 13.8% 40-44 16.4% 16.1% 15.7% 45-49 16.7% 16.4% 16.2% 50-54 14.8% 15.3% 15.4% 55-59 10.8% 11.0% 11.4% 60-64 3.7% 3.8% 3.9% 65 and over 0.6% 0.6% 0.6%
The average age was 43.9. The proportion of the workforce In France, the average age was 43.6, the proportion of the under the age of 30 was 10.5%, and employees aged 55 and workforce under the age of 30 was 7.3%, and employees aged over represented 15.9% of the workforce. 55 and over represented 11.9% of the workforce.
17.2.2 Employment and working conditions
..Hiring
2013 2014 2015 Number of external hires on permanent contracts 6,203 6,890 7,112 Number of external hires on fixed-term contracts 8,287 8,535 9,718 Hiring rate* 18.2% 19.0% 20.5% Hiring rate for permanent posts** 42.8% 44.7% 42.3%
* Hiring rate: Number of hires on permanent and fixed-term contracts/average workforce. ** Hiring rate for permanent contracts: Number of people hired on permanent contracts/Number of people hired on permanent and fixed-term contracts.
The number of external hires under permanent contracts rose XX by gender: 1,533 women (21.6%) and 5,579 men (78.4%). by 3.2% (+222 persons) in 2015 compared to 2014: Among executives: 332 women (29.6%) and 789 men (70.4%); XX in Europe, the number of permanent hires increased by 6.9% XX by age group: 893 employees under the age of 25 (12.7%) (+308 new hires) compared to 2014, primarily in Spain and and 952 employees aged 50 and over (13.4%). Belgium; In France, the Group hired 4,820 new employees in 2015, XX outside Europe, the new hires under permanent contracts consisting of 1,685 on permanent contracts and 3,135 on fixed- volume fell slightly compared to 2014 (-86). term contracts. The overall hiring rate was 14.6% and the hiring The 7,112 new permanent hires in 2015 break down as follows: rate on permanent contracts was 35%. The number of new hires under permanent contracts rose 1.9%, compared to 2014. XX by professional category: 1,121 managerial staff (15.8%), 1,564 senior technicians and supervisors (22%), and 4,427 manual and non-manual workers and technicians (62.2%);
240 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Employees Social information 17
..Employee turnover
2013 2014 2015 Number of layoffs 2,681 2,738 2,207 Number of resignations 2,388 2,507 2,428 Number of retirements 920 975 1,020 Turnover* 6.4% 6.5% 5.6% Voluntary turnover** (XXX)*** 3.0% 3.1% 3.0%
* Turnover: number of layoffs and resignations/average workforce. ** Voluntary turnover: number of resignations/Average workforce. *** See meaning of (XXX) in section 17.2.6: "Methodological factors" in the Social Report.
Compared to 2014, the voluntary turnover rate remained stable, In France, overall turnover was 3.9% and voluntary turnover reaching 3.0% in 2015. In contrast, the overall turnover rate fell was 1.3%. The figures were: 871 layoffs, 430 resignations and 17 to 5.6% in 2015, compared to 6.5% in 2014, due to the significant 434 retirements. drop in the number of layoffs (-19.4%). In the Group’s database of indicators, contract terminations are counted as layoffs; these represent 31.1% of layoffs in France.
..Working hours
2013 2014 2015 Average weekly number of hours worked per employee* 33.4 33.2 33.2 Overtime rate** 4.8% 4.1% 4.1% Proportion of part-time workers among total workforce 4.8% 4.4% 4.5%
* On the basis of 52 weeks. ** Overtime rate: number of overtime hours/number of hours worked.
In France, overtime represented 2.8% of the total number of hours worked, and part-time workers represented 4.2% of its workforce.
..Absenteeism
2013 2014 2015 Average number of days of absence/person 11.8 11.5 11.4 Of which sick leave (days/person) 8.1 7.8 7.9
Based on a theoretical eight-hour working day, average suspended contracts. This rate is also dependent on the social absenteeism per employee was 11.4 days in 2015, down on systems and local situations (especially climate) in the countries previous years. This average remains stable in comparison to where the Group operates. previous years. In France, the average length of absence per employee was The Group generally believes that the absenteeism rate is not 12.1 days, of which 7.9 days involved sick leave. significant, because it comprises absences of all kinds, including
..Employees with disabilities
2013 2014 2015 Employees with disabilities as % of total workforce at end of period 1.8% 1.8% 1.8% Of which France 3.0% 3.0% 3.1% Of which Germany 5.5% 5.5% 5.4%
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 241 Employees 17 Social information
The number of disabled workers is a difficult indicator to track In France, a specific reporting system introduced in 2011 was at the Group level, insofar as the notion of disabled worker is used to measure the overall insertion rate. This rate is calculated not clearly defined in every country in which the Group has by adding direct and indirect jobs. Indirect jobs include the operations. number of invoiced contracts in the protected sector, under At the end of 2015, the Group employed 1,490 disabled workers, the terms defined in the mandatory disclosure on disability 128 of whom had been hired that year. Most (88%) of the disabled employment. This rate was 4.1% for 2014, up 0.1% compared employees counted work in France, Spain or Germany. These to the 2013 figure of 4%. three countries, in which the Group's presence is significant, have had laws on hiring disabled persons for several years.
..Wages and salaries
In thousands of euros 2013 2014 2015 Gross payroll 2,586,507 2,636,223 2,803,732 Average gross compensation per employee 32.5 32.4 34.2 Management 66.5 66.5 69.3 Non-executives 26.9 26.6 27.9 Men 32.9 32.7 34.4 Women 31.0 31.5 33.1 Average rate of employer’s contributions 36.4% 35.7% 35.0%
The amounts and changes in compensation reflect the Group’s In France, gross payroll amounted to €1,222.2 million and compensation policies, but other factors also have a significant average gross compensation per employee was €37,003, of influence on the average data: country mix, foreign exchange which €37,503 for men and €35,318 for women. rates, distribution by socio-economic category, the proportion of part-time employees, and the "Noria" effect.
..Temporary workers
2013 2014 2015 Average temporary workforce (FTEs) 5,723 6,078 6,084 As % of average contractual workforce expressed in Full-Time Equivalents (FTE) 7.4% 7.9% 7.6%
The main reasons for employing temporary workers are In France, Group entities employed a total of 3,048 temporary temporary hiring difficulties, and replacement of absent workers, representing 9.5% of the average contractual employees. Temporary workers are hired primarily in the workforce in FTE terms. Recycling & Recovery segment.
..Workplace safety
2013 2014 2015 Number of fatal accidents (employees) 4 4 2 Frequency rate of workplace accidents* (XXX)*** 12.2 11.0 10.05 Severity rate of workplace accidents ** (XXX) *** 0.54 0.54 0.53
* Frequency rate: number of accidents with sick leave x 1,000,000/number of hours worked. ** Severity rate: number of days of sick leave x 1,000/number of hours worked. *** See meaning of (XXX) in section 17.2.6: "Methodological factors" in the Social Report.
242 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Employees Social information 17
As in recent years, our key Health and Safety indicators For the first time ever, we have carried out health and safety continued to improve. Between 2014 and 2015, the Group’s management training for a foreign company, in Azerbaijan. frequency rate fell from 11.0 to 10.05 and its severity rate from The new training program offered to the BUs of the Group 0.54 to 0.53. specifically intended for local supervisors is starting well and The gains in overall frequency rates are primarily found in our has allowed employee meetings to promote the "10 rules to Recycling & Recovery businesses, with frequency rates of 16.23 save lives" program to be conducted more effectively. These at year-end 2014 and 14.06 at year-end 2015. In the Water meetings were developed by providing specific examples of activities, with frequency rates of 4.8 at year-end 2014 and accidents that occur in our employees’ professional lives and 5.33 at year-end 2015, the poorer results are primarily due to organizing discussions within each group. Local supervisors an increase in accidents in France. The road map states that discuss situations of the same type they may encounter with our objective is a frequency rate of 15 in "R&R" and of 5 in their staff, the obstacles that prevent application of the rule Water by year-end 2016, so we are in line with that objective. and the solutions available to them to adhere to the rule in all The highest frequency rates in the "R&R" sector are in Western circumstances. These solutions are described in a "commitment" Europe, despite exceptional progress in France, Belgium and made by each team member at the meeting's end. Germany. In contrast, the best results are in Australia and there Regarding occupational illnesses, the number of new cases is no marked difference in the other areas of the world where recognized within the Group amounted to 76 in 2015, of which 17 we operate "R&R" businesses. 50 were in the Recycling & Recovery business and 26 in the New health and safety coordinators have been designated in Water business. the new international BUs of the Group, which have given us the opportunity to organize some 20 health and safety management training courses in Asia, North America, France, the Middle East, China and India.
17.2.3 Training
2013 2014 2015 Number of training hours (in thousands) (XXX) * 1,376 1,360 1,420 Including number of hours of training via e-learning training (in thousands) 148 177 166 Training hours per person trained (hours/person) 25 25 25 Number of training hours per woman trained (hours/person) 24 26 26 Percentage of workforce trained (XXX)* 69.4% 66.5% 69.4% Breakdown of workforce trained by gender Women 19.7% 20.9% 20.3% Men 80.3% 79.1% 79.7% Breakdown of workforce trained by category Executives 14.6% 16.8% 16.8% Senior technicians & supervisors+ Manual and non-manual workers and technicians 85.4% 83.2% 83.2% Training spend per person trained (€/person) 488 504 478 Breakdown of training time by type of activity Job techniques 26.0% 29.0% 27.9% Quality, Environment, Safety 38.7% 36.8% 35.4% Languages 6.5% 6.4% 7.0% Other 28.8% 27.8% 29.7%
* See meaning of (XXX) in section 17.2.6: "Methodological factors" in Social Report. ** Senior Technicians & Supervisors. *** Manual and non-manual workers and technicians
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 243 Employees 17 Social information
In 2015, training efforts remained significant, and indicators The distribution of workforce trained by gender and category is were up compared to 2014: 1.4 million hours of training close to the distribution of total headcount according to these (including e-learning), 25 training hours per person trained same criteria. and 69.4% of employees trained. In France, 62.6% of employees received training in 2015, The number of training hours via e-learning represented nearly compared to 61.6% in 2014, training expenditure per person 12% of total training hours during the year (compared to 13% trained amounted to €709 (€779 in 2014) and the number of in 2014). training hours per trained employee was 23.9 hours (26 hours in 2014).
17.2.4 Employee relations
2013 2014 2015 Number of agreements with social partners 465 463 371 Proportion of employees with a representative body 90% 86% 84%
The number of agreements signed in 2015 fell in comparison applies the principles of the European agreement on health and with 2014. This is explained by the renewal of numerous multi- safety to its HR policies. year agreements in 2014. Nearly 42% of agreements signed relate to compensation and With regard to health and safety, the European agreement social benefits. covers all the European entities. Outside of Europe, the Group
17.2.5 Key indicators by geographical area
France (metropolitan and overseas Europe North South Africa/ territories) (excluding France) America America* Middle East Asia-Pacific Total Number of employees 32,969 30,566 3,650 459 8,938 5,954 82,536 Proportion of women in total workforce (%) 23.0% 20.7% 20.4% 25.7% 8.5% 22.0% 20.4% Proportion of executives in total workforce (%) 17.5% 13.2% 22.2% 23.1% 11.0% 15.2% 15.2% Proportion of Permanent Contracts (%) 93.2% 88.4% 98.1% 98.9% 95.0% 94.4% 92.0% Average weekly number of hours worked/employee 29.5 33.5 36.5 41.3 39.8 39.8 33.2 Average number of days of absence/ employee 12.1 14.3 8.3 2.8 3.1 8.5 11.4 Average number of days of sick leave/ employee 7.9 10.4 6.6 1.5 2.0 4.7 7.9 Average gross compensation/ employee (in thousands of euros) 37.0 33.3 69.1 24.9 11.1 36.8 34.2 Percentage of workforce trained 62.6% 80.6% 95.6% 96.8% 36.8% 81.4% 69.4% Hiring rate 14.6% 30.0% 20.9% 42.0% 7.8% 22.3% 20.5% Turnover rate 3.9% 6.6% 10.0% 16.6% 2.2% 12.4% 5.6%
* Activity in Chile is included in Agbar, which is assigned to Spain (Europe excluding France).
244 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Employees Social information 17
17.2.6 Methodological factors in the 2015 Social Report
SCOPE CONSOLIDATION AND INTERNAL CONTROL The employment analyses carried out in this report correspond Once collected, the data are consolidated by the subsidiaries and solely to fully consolidated (FC) entities, companies that SUEZ the Group Human Resources Department (HRD), in accordance ENVIRONNEMENT COMPANY controls in terms of share capital with clearly defined procedures and criteria. These data are and management. When a company is fully consolidated in the controlled internally during the following stages: financial statements of SUEZ ENVIRONNEMENT COMPANY, 100% XX automated controls: the Magnitude packages incorporate of its social data are included, regardless of the percentage a certain number of automated controls that allow of share capital held. Except as noted below, the reporting contributors to ensure the reliability of the information scope for 2015 showing coverage of the indicator in question entered at the most detailed level. Contributors also have as a percentage of Group workforce, was nearly 100% for all access to the comments sections, where they can explain indicators. significant changes or circumstances specific to their entity; TOOLS AND METHODS XX subsidiary-level controls: the major subsidiaries control the 17 consistency of the data provided by their entities; Social reporting is based on: XX controls at Group HR level: Group HR applies consistency XX a network of 219 individuals around the world who controls to the data of all entities. These controls consist collect and monitor their own entities’ indicators at each specifically of analyzing changes in indicators from one quarterly HR reporting campaign. This provides feedback period to another. In the event of a significant change, the through approximately 300 (full consolidation) reporting contributor in question is asked to provide a more in-depth packages every quarter, corresponding to data from analysis, which may result in a correction. over 400 companies. This network is managed through quarterly meetings (physical meetings for correspondents METHODOLOGY DEFINITIONS AND LIMITS at French entities and web conferences for international correspondents). These meetings provide an opportunity We would like to highlight the following points in relation to the for top-down communication, for clarifying the definition of data published in this report: some indicators, sharing best practices and reviewing major XX unlike social reporting, Health and Safety reports take into points of concern. A collaborative space is also available to account operational control criteria. This leads to a slight all correspondents; difference in the scope of the workforce covered by the two XX the “User Guide”, which consolidates all definitions and reporting methods of -5%; the results in the area of Health procedures comprising the Group’s common reference and Safety of entities joining the Group are not integrated system, i.e. some 50 primary indicators with various into Group reporting packages for three years; collection criteria (age, gender, etc.) producing approximately XX the breakdown of workforce by geographical area is in line 250 social indicators. This guide is available in French and with the reporting segments used in the IFRS financial English and is distributed to all contributors; statements. Accordingly, some Agbar companies located XX Magnitude, a SUEZ financial consolidation software outside Europe are assigned to Spain. This concerns application based on a dedicated social indicators package, 2,729 employees; enables the collection, processing, and reporting of data XX the French notion of “cadres” (executives) is sometimes entered by the local legal entities subsidiaries of the difficult to understand in countries other than France, where Group. Each of these entities, including in the HR phase, is the Group operates. This may lead to a slight underestimation allocated the appropriate financial consolidation method: of the number of executives; full consolidation (FC), proportional consolidation (PC), and due to the reporting deadlines, the data related to training equity method (EM). An online self-training module for XX and hours worked are not always finalized and therefore Magnitude was made available to contributors during the relate only to the most recent situation; first half of 2015. This module allowed new users to teach themselves how to navigate within the tool and acquire the social indicators requested (definitions, examples and hints). This training helped existing users to deepen their knowledge of the subject matter.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 245 Employees 17 Employee incentives and employee shareholding
XX as regards training, while retrieving the number of training the Group continues to improve the organization and the hours via e-learning is relatively easy in the entities, it is quality of its reporting on this subject. In fact, the concept of not always as easy to reconcile the number of trainees who employer recognition of occupational illness, which applies received in-person training with the number of trainees who in France, is not found in most countries worldwide. As received e-learning training. The risk lies in overestimating a result, there may be discrepancies in the way data on the total number of trainees due to double-counting of occupational illnesses are calculated owing to differences employees who have received training both in-person in local practices and regulations. and via e-learning. Therefore, only two entities (Agbar and SUEZ Water Inc.) count “e-learning” trainees in their trained EXTERNAL AUDIT workforce, because their internal tracking systems enable them to avoid the risk of double-counting; As in previous years up to 2007, the SUEZ group and its BUs engaged the specialized services of the Statutory Auditors to XX it should be noted that USG, which had 504 employees at verify four social indicators for 2008. Since 2009, the Group the end of December 2015, was unable to provide data has renewed this request by increasing the number of verified on absences and training. SUEZ Recycling & Recovery indicators to 14, 10 of which are given with reasonable assurance, Netherlands, which had 2,029 employees, could not provide indicated by the special characters "XXX". As of last year, gross the number of hours of training via the e-learning program; wages have been subject to a moderate assurance review. The XX note that the figures on occupational illness have been nature of the work and findings of the Statutory Auditors can be reported on a global basis since last year. Nevertheless, found in section 6.8.4 of this Reference Document.
17.3 Employee incentives and employee shareholding
17.3.1 Employee incentives and profit sharing (France)
Each subsidiary of the Group in France has implemented profit- XX at the same time, €23.4 million was paid out under incentive sharing agreements (pursuant to the mandatory provisions of agreements, benefiting 23,629 employees at an average of French law). Incentive agreements (optional in France) have around €1,000 per beneficiary. also been implemented within the following companies: SUEZ, In total, incentive and profit-sharing agreements represented Degrémont, some Water France companies (Lyonnaise des Eaux €40.7 million, i.e. 3.5% of the gross payroll of the companies France, Eau et Force) and about half of the French subsidiaries concerned, a decrease of 3.8% compared to the €42.3 million of Sita France. paid out in 2014. These arrangements for 2014 produced the following results in 2015: XX €17.3 million was paid out under profit-sharing agreements, benefiting 17,607 employees at an average of approximately €1,000 per beneficiary;
246 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Employees Employee incentives and employee shareholding 17
17.3.2 Group Retirement Savings Plan (PERCO)
SUEZ offers a Group Retirement Savings Plan (PERCO) through A Supervisory Board for dedicated PERCO funds is set up yearly. an agreement signed on December 10, 2013 with the social It is comprised of equal numbers of employee and management partners. This program offers employees of the Group in France representatives. the possibility of establishing long term savings to supplement At the end of 2015, 17,831 Group employees had savings in the retirement benefits at an attractive tax rate. PERCO, with assets representing €43.8 million. The SUEZ PERCO offers a range of diversified investments and a choice of plan management adapted to the investment period and employee life goals.
17.3.3 Employee shareholding 17 Since its IPO, the Company has prioritized employee XX in 2011, a share issue reserved for employees, called shareholding both as a way to involve the Group’s employees “Sharing 2011”, subscribed by 18,679 employees in over the long term in its business development plans and to 19 countries; increase the share of equity held by employees, with a target XX in 2013, the second worldwide bonus share allocation plan. of 5%. 79,000 employee beneficiaries in over 32 countries received 38 shares; . .Group savings plan XX in 2014, a second share issue reserved for employees, In 2011, SUEZ set up a Group savings plan aimed at all called “Sharing 2014”, subscribed by 16,519 employees in employees of the Group’s companies in France and around 22 countries. the world. DELIVERY OF ADDITIONAL FREE SHARES THROUGH THE LINK 2010 PLAN The plan was created to serve as a mechanism for acquiring SUEZ ENVIRONNEMENT COMPANY shares via a Company In addition to past plans and in view of the shareholder mutual fund and the allocation of free bonus shares. relationships between ENGIE and SUEZ, the employees of the It also offers the option of investing in a diverse range of savings Group participated in an ENGIE global employee shareholder vehicles. These funds, invested in SUEZ ENVIRONNEMENT plan called “LINK 2010”. COMPANY shares within the Group savings plan, are administered Two subscription plans were offered: one was a "classic" plan by Supervisory Boards 50% composed of representatives of exposed to fluctuations in the ENGIE share price, the other was employee unitholders and 50% of management representatives. a leveraged plan with guaranteed-capital. Employees received a The Supervisory Board exercises the voting rights attached to 20% discount on the share price. Under the classic option they shares held by the Company mutual fund. also benefited from an employer's contribution in the form of In France, the Group savings plan comes as a complement to free bonus shares on the following basis: for the first 10 shares the existing Company savings plans in the Group’s subsidiaries. subscribed, 1 free share per share subscribed; and for the next 40 shares, 1 free share per 4 shares subscribed, subject to a maximum of 20 free shares for 50 shares subscribed. ..Employee shareholding programs in place For legal and tax reasons, supplemental free shares were SUEZ has set up several programs to encourage employee allocated differently in France than outside France: shareholding: XX In France, in accordance with Article L. 3332-21 of the XX in 2009, the first worldwide bonus share allocation plan. French Labor Code and the authorization in Resolution 17 68,000 employee beneficiaries in over 40 countries received of the ENGIE Shareholders' Meeting of July 16, 2008, free 30 shares; shares were allocated by ENGIE in place of the employer’s contribution.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 247 Employees 17 Pensions and other employee benefit obligations
XX Outside France, employees received a free share entitlement DELIVERY OF THE ENGIE 2012 AND SUEZ 2013 BONUS SHARE PLAN with the number of free shares dependent on the number of Employees of SUEZ and its controlled or fully consolidated shares subscribed under the classic option and an employer’s companies as of September 30, 2012 were allocated 15 ENGIE contribution calculated on a basis similar to that cited above. bonus shares by the Board of Directors on October 30, 2012, The free share entitlement was allocated in accordance with and 38 SUEZ ENVIRONNEMENT COMPANY bonus shares by the the provisions of Article L. 225-197-1 et seq. of the French Board of Directors on January 17, 2013. Commercial Code and the authorization in Resolution 15 of the ENGIE Shareholders’ Meeting of May 4, 2009. The The shares were to be delivered to the beneficiaries at the end of ENGIE Board of Directors set the allocation conditions and a three- or four-year vesting period, depending upon the country approved the free share allocation plan on May 3, 2010. and subject to meeting a service condition on the vesting date. SUEZ beneficiaries located abroad who met the service SUEZ beneficiaries based in France, Spain, Italy, New Caledonia condition of the plan received free shares on August 24, 2015 and French Polynesia satisfying the plan’s service requirement based on the number of shares subscribed under the Classic who were due to receive their shares on November 2, 2015 formula. Vested shares were recorded in a registered account consequently received 38 SUEZ ENVIRONNEMENT COMPANY on behalf of the beneficiary or in a mutual fund with no lock-up and 15 ENGIE shares. The shares acquired at the end of the period required. vesting period were registered in an account in the name of the beneficiary or in a mutual fund, and were subject to a lock- DELIVERY OF THE ENGIE 2011 BONUS SHARE PLAN in period. In June 2011, the ENGIE Board of Directors approved a global . bonus share allocation plan to give all its employees a stake in .Participation of employee shareholders the Group’s success and a greater share of its capital. At December 31, 2015, the total number of shares held by the All employees of ENGIE and its subsidiaries (in France and Group's employees under the definition of the law for growth, around the world), controlled or fully consolidated as of April 30, activity and equal economic opportunities, the "Macron Law" 2011, were granted the right to free bonus shares, subject to of August 6, 2015, directly in individual registered accounts or meeting a service condition at the end of the vesting period, through Company mutual funds, totaled 4.16% of share capital. which varies between two and four years depending upon the In accordance with that same definition, at the end of December country. 2014, this figure was 3.77% of share capital. SUEZ beneficiaries satisfying the plan’s service requirement Because the 3% share equity threshold was exceeded at who were due to receive their shares on June 23, 2015 December 31, 2014, the Shareholders’ Meeting of May 12, consequently received 10 ENGIE shares. Vested shares were 2015 decided to change the Company Bylaws so as to appoint recorded in a registered account on behalf of the beneficiary a Director to represent employee shareholders, in accordance or in a mutual fund with no lock-up period required. with Article L. 225-23 of the Commercial Code. The appointment process for candidates was still underway at year-end 2015.
17.4 Pensions and other employee benefit obligations
A description of the pensions and other employee benefit obligations appears in Note 18 to the consolidated annual financial statements in chapter 20.1 of this Reference Document.
248 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Major Shareholders18
18.1 Breakdown of share capital at December 31, 2015 250
18.2 Major shareholders’ voting rights 251
18.3 Control of the Company 251 18.3.1 Absence of control of the Company 251 18.3.2 Factors likely to have an impact in the event of a takeover bid 251
18.4 Agreement that may result in a change of control 252
18.5 Summary of transactions made by persons indicated in Article L. 621‑18‑2 of the French Monetary and Financial Code during the year ended December 31, 2015 253
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 249 Major Shareholders 18 Breakdown of share capital at December 31, 2015
18.1 Breakdown of share capital at December 31, 2015
As of December 31, 2015 the Company's share capital totaled The principal events affecting the Company’s share equity in €2,170,573,872. It consisted of 542,643,468 shares with a 2015 were: nominal value of €4 each, representing 542,643,468 voting XX a capital increase on March 30, 2015 stemming from the rights. creation of 895,111 new shares as part of the delivery at At December 31, 2015 the number of shares without voting the end of the vesting period, of a part of the performance rights (shares held by the Company within the framework of shares awarded on March 27, 2013 for the beneficiaries of the share purchase program described in section 21.1.3 of this the plan in France, Belgium and Spain; Reference Document) totaled 1,959,749, hence a total number XX a capital increase on November 2, 2015 stemming from the of exercisable voting rights of 540,683,719. creation of 1,514,528 new shares as part of the delivery at The voting rights of the Company’s major shareholders are no the end of the vesting period, of a part of the bonus shares different from those of other shareholders. awarded on January 17, 2013 for the beneficiaries of the plan in France, Italy and Spain.
The following table shows the number of shares and percentages of capital and voting rights held by the Company’s major shareholders, based on information available on the date that this Reference Document was prepared.
At December 31, 2015 At December 31, 2014 At December 31, 2013 % of % of % of Number of % of shares exercisable Number of % of shares exercisable Number of % of shares exercisable Shareholders shares held held voting rights shares held held voting rights shares held held voting rights ENGIE 182,057,355 33.55% 33.67% 182,057,355 33.70% 33.86% 182,057,355 35.68% 35.77% Criteria Caixa (a) 30,669,422 5.65% 5.67% 30,647,422 5.67% 5.70% - - - Employee shareholding 22,570,010(b) 4.16% 4.17% 18,673,565 3.46% 3.47% 10,311,066 2.02% 2.03% Treasury shares 1,959,749 0.36% - 2,507,240 0.46% - 1,328,428 0.26% - Other 305,386,932 56.28% 56.48% 306,348,247 56.71% 56.97% 316,536,980 (c) 62.04% (d) 62.20% (d) Of which free float 305,386,932 56.28% 56.48% 306,348,247 56.71% 56.97% 251,834,929 49.36% 49.49% TOTAL 542,643,468 100% 100% 540,233,829 100% 100% 510,233,829 100% 100%
(a) Shares held by Criteria Caixa are subject to a lock-in period until September 2018. (b) Including the shares from the bonus share allocation plans and the performance shares held in registered accounts by employees of the Company and its subsidiaries. (c) Of which 36,746,488 held by Groupe Bruxelles Lambert, 10,078,220 by Caisse des Dépôts et Consignations, 7,251,292 by Areva NC, 6,500,390 by CNP Assurances and 4,125,661 by Sofina, according to the threshold crossing declaration No. 213C1063 dated July 24, 2013. (d) Of which 7.20% of share capital and 7.22% of voting rights held by Groupe Bruxelles Lambert, 1.98% of share capital and voting rights held by Caisse des Dépôts et Consignations, 1.42% of share capital and voting rights held by Areva NC, 1.27% of share capital and 1.28% and voting rights held by CNP Assurances et 0.81% of share capital and voting rights held by Sofina.
Pursuant to Article L. 233-13 of the French Commercial Code and to the knowledge of SUEZ ENVIRONNEMENT COMPANY, as of December 31, 2015 there were no shareholders other than those mentioned above holding 5% or more of the share capital or voting rights directly, indirectly or together.
250 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Major Shareholders Control of the Company 18
18.2 Major shareholders’ voting rights
Each Company share entitles the holder to one voting right. The Combined Shareholders’ Meeting of May 12, 2015 approved a resolution to maintain the principle of "one share, one vote" thus excluding double voting rights, in accordance with paragraph 3 of Article L. 225-123-3 of the French Commercial Code.
18.3 Control of the Company
18.3.1 Absence of control of the Company 18
No third party exercised control over the Company in 2015. Caisse des Dépôts et Consignations, Areva, CNP Assurances and It is emphasized that ENGIE has no longer exclusive control the Company. A description of the Shareholders’ Agreement is over the Company since July 23, 2013 due to the termination available in section 18.3.1 of the Company’s 2013 Reference of the Shareholders’ Agreement concerning the Company that Document. was concluded on June 5, 2008, in the context of the IPO of ENGIE remains the primary shareholder of the Company and the Company, by ENGIE, Groupe Bruxelles Lambert, Sofina, the is a strategic long-standing partner of SUEZ.
18.3.2 Factors likely to have an impact in the event of a takeover bid
The information below, dated December 31, 2015, is provided XX the operating mechanisms built into the Company’s employee in compliance with the provisions of Article L. 225-100-3 of the shareholding program are described in chapter 17.3 of this French Commercial Code: Reference Document; XX the Company’s ownership structure is described in XX to the Company’s knowledge, there are no agreements chapter 18.1 of this Reference Document; between shareholders that could result in restrictions on the transfer of shares or the exercise of voting rights in the XX there are no restrictions in the Bylaws on the exercise of voting rights or the transfer of shares or clauses of Company; Criteria Caixa has committed to hold its shares agreements notified to the Company pursuant to Article in the Company until September 2018; said commitment L. 233-11 of the French Commercial Code; would no longer apply in the event of a takeover bid on the Company; XX direct or indirect shareholdings in the Company of which it is aware by virtue of Articles L. 233-7 (threshold crossing XX the rules applicable to the nomination and replacement of declaration) and L. 233-12 of the French Commercial Code members of the Board of Directors are set out in chapter 14.1 are described in chapter 18.1 of this Reference Document; of this Reference Document; the powers of the Board of Directors for the issuance or XX there are no holders of shares with special control rights; XX redemption of shares are presented in chapter 21.1 of this Reference Document;
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 251 Major Shareholders 18 Agreement that may result in a change of control
XX the Company may enter into agreements containing clauses the Company, the issues of undated deeply subordinated which could, under certain conditions, lead to their early notes, known as "hybrids", carried out in 2014 and 2015 termination in the event of a change of control of the and the syndicated loan set up in February 2010 and Company, some of which could, according to the Company, renegotiated in 2011 and 2014, maturing in 2020 and in have an impact in a takeover bid. These include: the amount of €1.5 billion, providing the change of control is accompanied by a downgrade of the Company’s rating –– certain agreements with ENGIE described in chapter 19 of this Reference Document, and below a certain threshold; there is no agreement providing for the payment of severance –– certain financing agreements, as mentioned in Note 13 XX to the consolidated financial statements of chapter 20.1 pay to a Board director (including the Chief Executive Officer) of this document for the year ended December 31, 2015, if that person resigns or is dismissed following a takeover including bonds issued under the EMTN program set up by bid.
18.4 Agreement that may result in a change of control
None.
252 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Major Shareholders Summary of transactions made by persons indicated in Article L. 621-18-2 18 of the French Monetary and Financial Code during the year ended December 31, 2015
18.5 Summary of transactions made by persons indicated in Article L. 621-18-2 of the French Monetary and Financial Code during the year ended December 31, 2015
..Transactions in 2015 by the persons indicated in Article L. 621-18-2 of the French Monetary and Financial Code
Name of shareholder Date of transaction Nature of transaction Amount Price/share Harold Boël 11/23/2015 Sale of shares of the Company €65,966.42 €17.89
..Number of shares held by members of the Board of Directors at December 31, 2015 18 Number of shares held at December 31, 2015 Gérard Mestrallet 15,787 shares (a) Jean-Louis Chaussade 73,900 shares and 9,685.6 units of the mutual fund, "classic" and 9.4 units of the "multiple" formulae (b) Enric Xavier Amiguet i Rovira (c) 73 shares Nicolas Bazire 2,099 shares Gilles Benoist 3,000 shares Valérie Bernis 2,608 shares (a) Harold Boël 2,000 shares Agatta Constantini (c) 30 shares and 132.4 units of the mutual fund, "classic" and 121.4 units of the "multiple" formulae (b) Delphine Ernotte Cunci 2,000 shares Lorenz d’Este 2,139 shares Isidro Fainé Casas 2,000 shares Judith Hartmann 2,000 shares (a) (d) Isabelle Kocher 4,100 shares (a) Ines Kolmsee 2,000 shares Anne Lauvergeon 2,570 shares Guillaume Pepy 2,087 shares Jérôme Tolot 35,634 shares (a)
(a) Of which 2,000 shares as a loan granted by ENGIE. (b) Subscription to the Company mutual fund, as part of the Employment Shareholding "Sharing 2011" and "Sharing 2014” issue. (c) Directors representing employees not subject to the statutory obligation of owning 2,000 shares. (d) Judith Hartmann holds 2,000 shares of the Company as part of a loan granted by ENGIE on January 18, 2016.
This table was prepared on the basis of information provided to the Company by the Directors.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 253 254 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Related-party transactions19
Parties related to the Company include, among others, A breakdown of transactions with these related parties for fiscal the Company's major shareholders, its non-consolidated years 2015 and 2014, particularly ENGIE and its subsidiaries, subsidiaries, companies under joint control (proportionately appears in chapter 20.1, Note 24 of this document. The consolidated companies), associates (equity affiliates), and transactions are not significant at the level of the SUEZ group. entities on which various Company officers exercise at least The special report of the Statutory Auditors on the related-party a significant influence. agreements and commitments appearing in section 26.3 of this Reference Document describes the notified transactions.
Agreement concerning the "SUEZ" trademark
On June 5, 2008, SUEZ (now ENGIE) and SUEZ environnement This agreement lapsed on March 23, 2016, when the Company entered into a brand-name licensing agreement under which became the owner of the SUEZ brand through the company ENGIE authorizes SUEZ environnement to use the brand name SUEZ IP. “SUEZ.” Following the approval by the Boards of Directors of ENGIE and Under this agreement, ENGIE grants SUEZ environnement, for the Company in accordance with the related-party procedure, a tacitly renewable term of five years, the non-exclusive right an agreement was signed on March 2, 2016 under which ENGIE to use, at no cost, the brand name “SUEZ” in its Company name contributed to the Company all shares of the company SUEZ and in some other brand names. SUEZ environnement is also IP, which owns all intellectual property rights related to the granted the right to award licenses for the use of the brand SUEZ brand. name “SUEZ” to other Group companies, including the Company. The main terms and conditions of this transaction, which are ENGIE does however retain the right to examine communication set out in the contribution agreement, are as follows: and promotional campaigns proposed by SUEZ environnement. (i) the contribution by ENGIE to the Company of all shares it This contract has been tacitly renewed for another five-year holds in SUEZ IP, representing the entirety of the latter's term, commencing on July 22, 2013. share capital; An amendment to that agreement was entered into on (ii) valuation of the entire SUEZ IP share capital contribution at October 1, 2013 after prior approval by the Boards of Directors €30 million; of ENGIE and the Company, in accordance with the procedure (iii) consideration for this contribution by the issuance of applicable to the related-party agreements. This amendment 1,757,778 ordinary shares of the Company, in accordance was approved by the Shareholders’ Meetings of each of these with the terms of Article L. 225-147 of the French Commercial two companies. Code and the Resolution 22 of the Combined Shareholders The main changes set out in this amendment relate to (i) a Meeting of May 12, 2015, representing approximately 0.3% better securing of the brand-name, (ii) an improved reputation of its share capital and voting rights. protection measures, (iii) the possibility of acquiring the SUEZ This transaction was finalized on March 23, 2016, with the Board brand name if it was no longer used by ENGIE and (iv) the of Directors authorizing the completion of the contribution conditions for the termination of the agreement in case of and the resulting capital increase, based on the independent certain changes in the shareholding structure of the Company.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 255 Related-party transactions 19
appraisers' reports on the value of the contribution and the The Board of Directors approved the signing of this contribution fairness of the exchange ratio between this value and the agreement, believing that it offers the best solution for ensuring consideration offered therefore. the SUEZ group's quiet enjoyment of this brand worldwide, as well as the opportunity to develop it and to defend it in case of dispute.
Guarantees and counter-guarantees
The Company and ENGIE agree that all commitments involving ENGIE. For any commitments unable to be transferred on this guarantees, bonds, comfort letters, surety and any other similar date, the Company, or a subsidiary acceptable by ENGIE, must commitments granted by ENGIE in respect of commitments provide ENGIE with a counter-guarantee. made by Company subsidiaries to third parties have been transferred to the Company or any subsidiary acceptable by
Guidelines and strategies for industrial and commercial cooperation
On January 17, 2013, ENGIE and SUEZ ENVIRONNEMENT This agreement covers in particular the following areas: COMPANY signed a three-year agreement outlining the XX reciprocal preference for purchases/sales; guidelines and strategies for industrial and commercial cooperation. The agreement came into effect on July 22, 2013, XX development of synergies in industrial activities; the date of expiration of the Shareholders’ Agreement. This XX development of joint commercial offerings; agreement followed the procedure for related-party agreements in addition, the Company is the preferred partner of ENGIE and was thus subject to prior authorization by the Company’s XX for its sustainable development policy; Board of Directors on December 12, 2012. This agreement has also been subject to the approval of the Shareholders’ XX coordination in sales, marketing, innovation and R&D. Meeting on May 23, 2013. Through this agreement, ENGIE and SUEZ ENVIRONNEMENT COMPANY sought to establish guiding CONDITIONS principles to serve as a framework for their future relations on industrial and commercial matters after the expiration Industrial and commercial relations between ENGIE and SUEZ of the shareholders’ agreement. The shared intention is ENVIRONNEMENT COMPANY will be on an arm’s length basis that, notwithstanding the assertion of their independence according to the principles of fairness and reciprocity, payment in matters of strategy and decision-making, ENGIE and for services at market price and shareholder equality. SUEZ ENVIRONNEMENT COMPANY will continue to maintain close industrial and commercial relations that are mutually TERM AND TERMINATION beneficial in the pursuit of their respective corporate interests, The agreement is concluded for an initial term of three years in compliance with applicable laws and regulations, particularly with effect from July 22, 2013. those governing competition and the markets. Either party may terminate any of these agreements at any time, subject to six months’ prior notice.
Transitional agreement for external purchases
On October 1, 2013, ENGIE and SUEZ ENVIRONNEMENT Company and for the cooperation between the two companies COMPANY entered into a transitional agreement in the field of in the management of these framework agreements. This would external purchases. This agreement followed the procedure enable a portion of their purchases to continue to be pooled for related-party agreements and was thus subject to prior during the two-year transitional period, in order to benefit from authorization by the Board of Directors of each of the two the leverage in terms of synergies and volume vis-à-vis the companies. This agreement has also been subject to the external supplier market. The agreement also provided for a approval of the Shareholders’ Meetings of both Companies payment of financial compensation by the Company to ENGIE in 2014. for the management of the existing framework agreements. This agreement provided for the continuation of the framework This agreement expired on July 31, 2015. agreements entered into by ENGIE for the benefit of the
256 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues20
20.1 Consolidated financial statements 258 20.1.1 Consolidated statements of financial position 258 20.1.2 Consolidated income statements 259 20.1.3 Consolidated statements of comprehensive income 260 20.1.4 Statements of changes in consolidated shareholders’ equity 261 20.1.5 Consolidated statements of cash flows 263 20.1.6 Notes to the consolidated financial statements 264
20.2 Statutory Auditors’ Report on the consolidated financial statements 347
20.3 Parent Company financial statements 349 20.3.1 Balance sheet assets 349 20.3.2 Balance sheet liabilities 350 20.3.3 Income statement 351 20.3.4 Cash flow statement 352 20.3.5 Highlights for the year 352 20.3.6 Accounting rules and policies 353 20.3.7 Notes to the financial statements 357
20.4 Statutory Auditors’ Report on the Parent Company financial statements 374
20.5 Dividend distribution policy 376
20.6 Legal and arbitration proceedings 376 20.6.1 Competition and industry concentration 376 20.6.2 Litigation and arbitration 376 20.6.3 Tax litigations 377
20.7 Significant change in the financial or business situation 378
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 257 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
20.1 Consolidated financial statements
20.1.1 Consolidated statements of financial position
December 31, 2014 In millions of euros Note December 31, 2015 restated (a) Non-current assets Intangible assets, net 10 4,213.6 4,276.0 Goodwill 9 3,479.5 3,261.9 Property, plant and equipment net 11 8,274.9 8,009.1 Available-for-sale securities 13 180.1 163.7 Loans and receivables carried at amortized cost 13 767.4 722.7 Derivative financial instruments 13 197.0 194.1 Investments in joint ventures 12.1 584.6 527.9 Investments in associates 12.2 760.4 745.6 Other assets 302.9 299.8 Deferred tax assets 7 832.1 790.7 TOTAL NON-CURRENT ASSETS 19,592.5 18,991.5 Current assets Loans and receivables carried at amortized cost 13 130.3 119.7 Derivative financial instruments 13 6.1 7.6 Trade and other receivables 13 3,966.5 3,790.1 Inventories 274.0 262.2 Other assets 1,523.3 1,372.4 Financial assets measured at fair value through income 13 59.9 62.5 Cash and cash equivalents 13 2,079.0 2,248,8 TOTAL CURRENT ASSETS 8,039.1 7,863.3 TOTAL ASSETS 27,631.6 26,854.8 Shareholders' equity, Group share 5,419.8 5,486.2 Non-controlling interests 16 1,385.6 1,518,5 TOTAL SHAREHOLDERS' EQUITY 6,805.4 7,004.7 Non-current liabilities Provisions 17 1,458,0 1,511.4 Long-term borrowings 13 8,501.1 7,721.6 Derivative financial instruments 13 45.1 65.6 Other financial liabilities 13 3.0 4.7 Other liabilities 911.5 896.9 Deferred tax liabilities 7 636.6 576.8 TOTAL NON-CURRENT LIABILITIES 11,555.3 10,777.0 Current liabilities Provisions 17 493.8 483.3 Short-term borrowings 13 1,853.9 1,926.7 Derivative financial instruments 13 40.1 42.3 Trade and other payables 13 2,991.2 2,871.2 Other liabilities 3,891.9 3,749.6 TOTAL CURRENT LIABILITIES 9,270.9 9,073.1 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 27,631.6 26,854.8
NB: The values in the tables are generally expressed in millions of euros. Rounding may in some cases produce a non-material discrepancy in totals or variances. (a) Data at December 31, 2014 has been changed for comparability purposes to reflect the application of IFRIC 21 interpretation mentioned in Note 1.2.1.
258 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
20.1.2 Consolidated income statements
In millions of euros Note December 31, 2015 December 31, 2014 Revenues 4.1 15,134.7 14,324.1 Purchases (2,945.5) (2,833.1) Personnel costs (3,818,4) (3,656.4) Depreciation, amortization and provisions (1,091.9) (1,097.7) Other operating expenses (6,397.8) (5,953.6) Other operating income 234.0 227.9 CURRENT OPERATING INCOME 4 1,115.1 1,011.2 Mark-to-market on operating financial instruments 0.6 (0.6) Impairment on property, plant and equipment, intangible and financial assets (80.4) (105.2) Restructuring costs (71.4) (58,0) Scope effects 0.9 82.4 Other gains and losses on disposals and non-recurring items 4.1 0.2 Costs linked to changes in the brand and visual identity (27.5) - INCOME FROM OPERATING ACTIVITIES 5 941.4 930.0 Share in net income of equity-accounted companies considered as core business 266.4 243.5 of which: share in net income (loss) of joint ventures (a) 12.1 179.8 167.4 of which: share in net income (loss) of associates 12.2 86.6 76.1 Income from operating activities after share in net income of equity-accounted companies considered as core business 1,207.8 1,173.5 20 Financial expenses (510.6) (516.6) Financial income 89.1 110.9 Net financial income (loss) 6 (421.5) (405.7) Income tax expense 7 (173.0) (173.1) Share in net income of other equity-accounted companies 12.1 - 5.8 NET INCOME 613.3 600.5 Group share 407.6 417.2 Non-controlling interests 205.7 183.3 NET INCOME (GROUP SHARE) PER SHARE (in euros) 8 0.69 0.71 NET DILUTED INCOME (GROUP SHARE) PER SHARE (en euros) 8 0.68 0.69
(a) In 2015. this line item includes €127 million for the revaluation of Chongqing Water Group securities, which are now consolidated using the equity method, whereas in 2014 they were classified as securities available for sale (see Note 2). In 2014, this line item included €129.6 million related to the sale of Group's indirect interest in Companhia de Electricidade de Macau (CEM).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 259 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
20.1.3 Consolidated statements of comprehensive income
December 31, December 31, December 31, 2015 of which December 31, 2014 of which December 31, 2015 of which non controlling December 31, 2014 of which non controlling In millions of euros 2015 Group share interests 2014 Group share interests NET INCOME 613.3 407.6 205.7 600.5 417.2 183.3 Available-for-sale securities (0.6) (0.5) (0.1) (68,2) (68,4) (a) 0.2 Net investment hedges (88,8) (88,8) - (80.3) (80.3) - Cash flow hedges (excluding commodities) 38,5 33.4 5.1 (12.1) (8.4) (3.7) Commodity cash-flow hedges (0.2) (0.2) - (6.9) (6.9) - Deferred taxes on items above (1.2) 0.3 (1.5) 2.8 2.1 0.7 Share of joint ventures in reclassifiable items, net of taxes (82.5) (82.5) (c) - 96.6 96.6 - Share of associates in reclassifiable items, net of taxes (8,2) (8,2) - (12.9) (12.9) (a) - Translation adjustments 97.9 143.2 (d) (45.3) 147.5 163.7 (b) (16.2) TOTAL RECLASSIFIABLE ITEMS (45.1) (3.3) (41.8) 66.5 85.5 (19.0) Actuarial gains and losses 72.0 76.7 (4.7) (179.8) (174.9) (4.9) Deferred taxes on actuarial gains and losses (18,5) (19.7) 1.2 43.3 41.9 1.4 Share of joint ventures in non-reclassifiable items, net of taxes - - - 6.3 6.3 - Share of associates in non-reclassifiable items, net of taxes 4.0 4.0 - (0.4) (0.4) - TOTAL NON-RECLASSIFIABLE ITEMS 57.5 61.0 (3.5) (130.6) (127.1) (3.5) COMPREHENSIVE INCOME 625.7 465.3 160.4 536.4 375.6 160.8
(a) These changes were primarily explained by the reclassification of the Acea securities from available-for-sale securities to investments in associates. (b) This change was primarily explained by the appreciation of the British pound and the Australian dollar. (c) This change is due to the revaluation of Chongqing Water Group securities, which are no longer recognized in comprehensive income, but rather in income following the acquired significant influence in 2015 (see Note 2). (d) This change is primarily explained by the appreciation of the American dollar.
260 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
20.1.4 Statements of changes in consolidated shareholders’ equity
Share Undated holders' Change in deeply equity, Non Number Share Consolidated fair value Translation Treasury subordinated Group controlling In millions of euros Note of shares Capital Premiums reserves and other adjustments shares notes share interests Total Shareholders’ equity at December 31, 2013 published 510,233,829 2,040,9 4,138.3 (2,018.7) 123.5 (52.2) (13.6) 744.8 4,963.0 1,946.6 6,909.6 IFRS 10, 11, 12 and IAS 28 revised restatements 1.2.1 (11.4) (11.4) 52.3 40.9 IFRIC 21 restatements (a) 8.3 8.3 8.3 Shareholders’ equity at January 1, 2014 restated 510,233,829 2,040.9 4,138.3 (2,021.8) 123.5 (52.2) (13.6) 744.8 4,959.9 1,998.9 6,958.8 Net income 417.2 417.2 183.3 600.5 Other comprehensive income items (127.1) (134.5) 220.0 (41.6) (22.5) (64.1) Comprehensive income 290.1 (134.5) 220.0 375.6 160.8 536.4 Employee share issues 8,943,094 35.8 63.6 3.2 102.6 102.6 Capital reduction by cancellation of shares (943,094) (3.8) (6.5) (10.3) (10.3) Share-based payment 14.2 14.2 14.2 Dividends distributed in cash (329.3) (329.3) (205.2) (534.5) Partial redemption of undated deeply subordinated note issues 2010 (including redemption premium) (12.4) (300.0) (312.4) (312.4) Issue of new undated deeply 20 subordinated note 500.0 500.0 500.0 Issuance fees of new undated deeply subordinated note (6.5) (6.5) (6.5) Interests of undated deeply subordinated notes issue (32.5) (32.5) (32.5) Purchase/sale of treasury shares (1.9) (23.4) (25.3) (25.3) Capital increase 22,000,000 88.0 222.0 8.8 318.8 7.1 325.9 Equity component of OCEANE bonds 35.2 35.2 35.2 Transactions between shareholders (92.7) 3.6 (8.1) (97.2) (443.4) (540.6) Business combinations (8.5) (8.5) (8.5) Other changes 1.9 1.9 0.3 2.2 SHAREHOLDERS’ EQUITY AT DECEMBER 31, 2014 RESTATED(a) 540,233,829 2,160.9 4,417.4 (2,145.7) (7.4) 159.7 (37.0) 938.3 5,486.2 1,518.5 7,004.7
(a) Figures at January 1, 2014 and December 31, 2014 have been changed for comparability purposes to reflect the application of IFRIC 21 interpretation mentioned in Note 1.2.1.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 261 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
Share Undated holders' Change in deeply equity, Non Number of Share Consolidated fair value Translation Treasury subordinated Group controlling In millions of euros Note shares Capital Premiums reserves and other adjustments shares notes share interests Total Shareholders’ equity at December 31, 2014 restated (a) 540,233,829 2,160.9 4,417.4 (2,145.7) (7.4) 159.7 (37.0) 938.3 5,486.2 1,518.5 7,004.7 Net income 407.6 407.6 205.7 613.3 Other comprehensive income items 60.9 (164.1) 160.9 57.7 (45.3) 12.4 Comprehensive income 468.5 (164.1) 160.9 465.3 160.4 625.7 Share-based payment 7.1 7.1 7.1 Dividends distributed in cash (350.3) (350.3) (177.0) (527.3) Partial redemption of undated deeply subordinated note issues 2010 (including redemption premium) 2.3 (7.9) (450.0) (457.9) (457.9) Issue of new undated deeply subordinated note 2.3 500.0 500.0 500.0 Issuance fees of new undated deeply subordinated note (5.4) (5.4) (5.4) Interests of undated deeply subordinated notes issue (26.5) (26.5) (26.5) Purchase/sale of treasury shares (7.9) 7.6 (0.3) (0.3) Capital increase 15.1 2,409,639 9.6 (10.6) 1.0 - - - Transactions between shareholders (b) (195.6) (195.6) (132.0) (327.6) Business combinations - 16.4 16.4 Other changes (2.8) (2.8) (0.7) (3.5) SHAREHOLDERS’ EQUITY AT DECEMBER 31, 2015 542,643,468 2,170.5 4,406.8 (2,260.1) (171.5) 320.6 (29.4) 982.9 5,419.8 1,385.6 6,805.4
(a) Figures at January 1, 2014 and December 31, 2014 have been changed for comparability purposes to reflect the application of IFRIC 21 interpretation mentioned in Note 1.2.1. (b) This corresponds primarily to SUEZ's purchase of Sembcorp's 40% interest in Sembsita Pacific. See Note 2.8.
262 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
20.1.5 Consolidated statements of cash flows
In millions of euros Note December 31, 2015 December 31, 2014 Net income 613.3 600.5 - Share in net income (loss) of joint ventures 12.1 (179.8) (173.2) - Share in net income (loss) of associates 12.2 (86.6) (76.1) + Dividends received from joint ventures and associates (a) 102.4 280.1 - Net depreciation, amortization and provisions 1,120.2 1,121.7 - Scope effects, other gains and losses on disposal and non-recurring items (11.8) (84.7) - Other items with no cash impact 6.8 13.2 - Income tax expense 7 173.0 173.1 - Financial income 6 421.5 405.7 Cash flows from operations before financial income/(expense) and income tax 2,159.0 2,260.3 + Tax paid (153.8) (163.1) Change in working capital requirements (13.7) (124.1) CASH FLOWS FROM OPERATING ACTIVITIES 1,991.5 1,973.1 Investments in property, plant and equipment and intangible assets 3.4.3 (1,276.5) (1,076.6) Takeover of subsidiaries net of cash and cash equivalents acquired 3.4.3 (85.8) (73.3) Acquisitions of interests in associates and joint-ventures 3.4.3 (26.5) (105.6) Acquisitions of available-for-sale securities 3.4.3 (29.2) (15.4) Disposals of property, plant and equipment and intangible assets 54.1 47.2 Loss of controlling interests in subsidiaries net of cash and cash equivalents sold 36.6 62.1 Disposals of interests in associates and joint ventures 19.1 17.5 Disposals of available-for-sale securities 11.9 47.4 Interest received on non-current financial assets 7.6 13.0 Dividends received on non-current financial assets 10.7 29.3 Change in loans and receivables issued by the Company and others (b) (72.3) 194.1 20 CASH FLOWS FROM INVESTING ACTIVITIES (1,350.3) (860.3) Dividends paid (c) (571.2) (581.4) Repayment of borrowings (d) 13 (789.4) (1,379.5) Change in financial assets at fair value through income 11.5 27.8 Financial interest paid (351.4) (362.8) Financial interest received on cash and cash equivalents 27.5 33.9 Flows on financial derivatives qualifying net investment hedges and compensation payments on financial derivatives (103.1) (28,9) Increase in financial debt 13 1,256.4 944.2 Capital increase/ reduction (e) - 109.7 Partial redemption of Undated deeply subordinated note 15.6 (457.9) (312.4) Issue of Undated deeply Subordinated Notes net of costs 15.6 494.5 493.5 Issue of OCEANE (equity component) - 35.2 Purchase/sale of treasury shares (0.2) (35.5) Change in share of interests in controlled entities (f) 3.4.3 (327.8) (221.4) CASH FLOWS FROM FINANCING ACTIVITIES (811.1) (1,277.6) Impact of changes in exchange rates and other 0.1 22.2 TOTAL CASH FLOWS FOR THE PERIOD (169.8) (142.6) Opening cash and cash equivalents 2,248,8 2,391.4 Closing cash and cash equivalents 13 2,079.0 2,248,8 (a) In 2014, this flow included a exceptional dividend paid by Sino French Holding (SFH) following the disposal of its interest in Companhia de Electricidade de Macau (CEM). (b) The change is primarily explained by the assignment of a financial receivable (IFRIC12) relating to the commissioning of an incinerator in France in 2014. (c) Including withholding tax and interests of undated deeply subordinated notes issue. (d) In 2014, this item included the redemption of the €770 million nominal residual amount of a bond issued by SUEZ ENVIRONNEMENT COMPANY in April 2009. (e) In 2014, this flow mainly included: €102.6 million (SUEZ ENVIRONNEMENT COMPANY share issue for the worldwide employee shareholding plan called “SHARING”, net of issuance fees of €2.2 million). (f) In 2015, the change is due to the acquisition of the outstanding 40% interest in Sembsita Pacific. See Note 2.8. In 2014, the change was due mainly to the acquisition of 24.14% of Agbar, financed especially via a cash payment of €300.6 million (including acquisition costs), and by Agbar’s sale of 15% of the Aigües de Barcelona contract for €50.6 million.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 263 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
20.1.6 Notes to the consolidated financial statements
NOTE 1 Basis of presentation, principles and accounting policies 265
NOTE 2 Major transactions in 2015 280
NOTE 3 Operating segments information 281
NOTE 4 Current operating income 285
NOTE 5 Income from operating activities 286
NOTE 6 Net financial income/loss 288
NOTE 7 Income tax 289
NOTE 8 Earnings per share 293
NOTE 9 Goodwill 294
NOTE 10 Intangible assets 297
NOTE 11 Property, plant and equipment 299
NOTE 12 Investments in joint ventures and associates 300
NOTE 13 Financial instruments 305
NOTE 14 Management of risks arising from financial instruments 315
NOTE 15 Shareholders’ equity 323
NOTE 16 Non-controlling interests 325
NOTE 17 Provisions 327
NOTE 18 Post-employment benefit obligations and other long-term benefits 328
NOTE 19 Construction contracts 334
NOTE 20 Finance leases 335
NOTE 21 Operating leases 336
NOTE 22 Service concession arrangements 336
NOTE 23 Share-based payments or cash-based payments 337
NOTE 24 Related-party transactions 341
NOTE 25 Executive compensation 342
NOTE 26 Legal and arbitration proceedings 342
NOTE 27 Subsequent events 343
NOTE 28 List of the main consolidated companies at December 31, 2015 and 2014 344
NOTE 29 Fees of the Statutory Auditors and members of their networks 346
264 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
NOTE 1 Basis of presentation, principles and accounting policies
XX 1.1 Basis of presentation This text states that the recognition of taxes which do not fall within the scope of IAS 12 depends on the terms of the SUEZ ENVIRONNEMENT COMPANY SA, the Parent Company of relevant legislation. Accordingly, the liabilities for the payment the Group, is a French société anonyme subject to the provisions of certain taxes may be recognized in full in the interim financial of Book II of the French Commercial Code, as well as to all other statements, if the contractual obligation took place before the legal provisions applying to French commercial corporations. It closing date of the period in question. was incorporated in November 2000. The Group’s headquarter is in the CB21 tower – 16, place de l’Iris – 92040 Paris-La Défense The application of this interpretation has no significant impact – France. on the Group’s annual financial statements. The Group is a global player in the management of the water For the record, the impacts on the consolidated statement of cycle and the waste cycle. financial position at December 31, 2014 are the following: On February 23, 2016, the Board of Directors of SUEZ XX Shareholders’ equity, Group share for +€8.3 million; ENVIRONNEMENT COMPANY approved and authorized the XX Deferred tax liabilities for +€4.3 million; publication of the Group’s consolidated financial statements XX Other liabilities for -€12.6 million. for the fiscal year ended December 31, 2015. 1.2.2 IFRS standards and amendments applicable after XX Accounting standards 1.2 2015 that the Group has elected not to early adopt Pursuant to European Commission Regulation (EC) 809/2004 on Prospectus dated April 29, 2004, the financial information AMENDMENTS PUBLISHED BY THE IASB AND ADOPTED BY THE EUROPEAN UNION concerning the assets, liabilities, financial position, and profit and loss of SUEZ ENVIRONNEMENT COMPANY has been XX Annual improvements to IFRSs 2012-2014 Cycle; provided for the last two fiscal years ended December 31, XX Amendments to IFRS 11 – Accounting for acquisition of 2014 and 2015, and was prepared in accordance with European interests in Joint Operations; Regulation (EC) 1606/2002 of July 19, 2002 relating to the application of international accounting standards (IFRS). The XX Amendments to IAS 1 – Disclosure initiative; Group’s Consolidated Financial Statements for the year ended XX Amendments to IAS 16 and IAS 38 – Clarification of 20 December 31, 2015 were prepared in accordance with IFRS as acceptable methods of depreciation and amortisation; (1) issued by the IASB and endorsed by the European Union . The impact resulting from the application of these amendments The accounting standards applied in preparing the financial is currently being assessed. statements at December 31, 2015 are consistent with those applied in preparing the financial statements of December 31, STANDARDS AND AMENDMENTS PUBLISHED BY THE IASB AND NOT ADOPTED YET 2014, with the exception of the items mentioned below in BY THE EUROPEAN UNION paragraph 1.2.1. XX IFRS 9 – “Financial Instruments” (2); (2) 1.2.1 Standards, amendments and interpretations applied XX IFRS 15 – “Revenue from Contracts with Customers” ; for annual periods beginning on January 1, 2015 XX IFRS 16 – Leases (2); Amendments to IAS 12 – Recognition of deferred tax assets The standards applied by the Group for the first time starting XX for unrealised losses (2); January 1, 2015 are the following: Amendments to IFRS 10, IFRS 12 and IAS 28 – Investment IFRIC 21 Interpretation – Levies; XX XX entities applying the consolidation exception (2); XX Annual improvements to IFRSs 2010-2012 Cycle; XX Amendments to IFRS 10 and IAS 28 – Sale or contribution XX Annual improvements to IFRSs 2011-2013 Cycle; of assets between an investor and its associate or Joint (2) XX Amendments to IAS 19 –Defined benefit plans: Employee Venture ; contributions.
IMPACT OF THE FIRST APPLICATION OF THE NEW IFRIC 21 INTERPRETATION The IFRIC 21 interpretation is applicable as of January 1, 2015 with retroactive effect.
(1) Available on the European Commission’s website: http://ec.europa.eu/internal_market/accounting/index_en.htm. (2) These standards and amendments have not yet been endorsed by the European Union.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 265 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
The impact resulting from the application of these standards XX the measurement of the recoverable amount of goodwill, and these amendments is currently being assessed. property, plant and equipment and intangible assets (see Notes 1.5.4.1 and 1.5.7); XX IFRS 14 – “Regulatory Deferral Accounts” (1). This standard will have no impact on the Group’s accounts since XX the measurement of provisions, particularly for legal it is intended to first-time adopters of IFRS. and arbitration proceedings and for pensions and other employee benefits (see Note 1.5.15); 1.2.3 Reminder of IFRS 1 transition options XX the measurement of capital renewal and replacement liabilities (see Note 1.5.6); The Group used some of the options available under IFRS 1 for XX the measurement of financial instruments (see Note 1.5.10); its transition to IFRS in 2005. The options that continue to have an effect on the consolidated financial statements are: XX the measurement of unmetered revenues (see Note 1.5.16); XX translation adjustments: the Group elected to reclassify XX the measurement of margin at termination relating to cumulative translation adjustments within equity in the construction contracts (see Note 1.5.13); consolidated reserves at January 1, 2004; XX the measurement of capitalized tax-loss carry-forwards. XX business combinations: the Group elected not to restate business combinations that took place prior to January 1, 1.4.1.1 MEASUREMENT OF THE FAIR VALUE OF ASSETS ACQUIRED 2004 in accordance with IFRS 3. AND LIABILITIES ASSUMED IN A BUSINESS COMBINATION The fair value of the assets acquired and liabilities assumed is XX 1.3 Measurement basis for preparation based on estimates and assumptions regarding in particular the expected market outlook and future cash flows as well as the of the consolidated financial statements discount rate to apply. The values used reflect management’s The Consolidated Financial Statements have been prepared best estimates. using the historical cost convention, except for financial instruments that are accounted for according to the financial 1.4.1.2 RECOVERABLE AMOUNT OF GOODWILL, PROPERTY, PLANT instrument categories defined by IAS 39. AND EQUIPMENT AND INTANGIBLE ASSETS The recoverable amount of goodwill, intangible assets and XX 1.4 Use of judgment and estimates property, plant and equipment is based on estimates and assumptions regarding in particular the expected market The economic and financial crisis continues, while the Group outlook and future cash flows associated with the assets and maintains its risk management procedures of its financial the discount rate to apply. Any changes in these assumptions instruments. The significant market volatility caused by the may have a material impact on the measurement of the crisis is taken into account by the Group in the estimates made recoverable amount and could result in adjustments to the such as for its business plans and in the various discount rates impairment losses already booked. used in impairment testing and computing provisions. 1.4.1.3 ESTIMATES OF PROVISIONS 1.4.1 Estimates Parameters with a significant influence on the amount of The preparation of the Consolidated Financial Statements provisions include the timing of expenditure and the discount requires the use of estimates and assumptions to determine rate applied to cash flows, as well as the actual level of the value of assets and liabilities, the disclosure of contingent expenditure. These parameters are based on information and assets and liabilities at the reporting date, as well as the estimates deemed to be appropriate by the Group at the current revenues and expenses reported during the period. time. Due to uncertainties inherent in the estimation process, the To the Group’s best knowledge, there is no information Group regularly revises its estimates in light of currently suggesting that the parameters used taken as a whole are available information. Final outcomes could differ from those not appropriate. Furthermore, the Group is not aware of any estimates. developments that are likely to have a material impact on the The key estimates used by the Group in preparing the provisions booked. Consolidated Financial Statements relate mainly to: XX the measurement of the fair value of assets acquired and liabilities assumed in a business combination;
(1) These standards and amendments have not yet been endorsed by the European Union.
266 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
1.4.1.4 PENSIONS AND OTHER EMPLOYEE BENEFIT OBLIGATIONS 1.4.1.9 MEASUREMENT OF CAPITALIZED TAX LOSS CARRY-FORWARDS Pension obligations are measured on the basis of actuarial Deferred tax assets are recognized on tax loss carry-forwards calculations. The Group considers that the assumptions used when it is probable that future taxable profit will be available to measure its obligations are appropriate and documented. to the Group against which the tax loss carry-forwards can be However, any change in these assumptions may have a material utilized. The likelihood of future taxable profits is estimated impact on the resulting calculations. taking into account the existence of temporary taxable differences from the same tax entity and is passed on to 1.4.1.5 CAPITAL RENEWAL AND REPLACEMENT LIABILITIES the same deadlines towards the tax authority as well as the estimates of future taxable profits. Estimates of taxable profit This item includes concession operators’ liabilities for renewing and utilizations of tax loss carry-forwards were prepared on the and replacing equipment and for restoring sites. The liabilities basis of profit and loss forecasts as included in the medium- are determined by estimating the cost of renewing or replacing term business plan and, if necessary, on the basis of additional equipment and restoring the sites under concession (as defined forecasts. by IFRIC 12), discounted each year at rates linked to inflation. The related expense is calculated on a contract-by-contract basis with probable capital renewal and site restoration costs 1.4.2 Judgment allocated over the life of each contract. As well as relying on estimates, the Group management also makes judgments to define the appropriate accounting 1.4.1.6 FINANCIAL INSTRUMENTS treatment to apply to certain activities and transactions, To determine the fair value of financial instruments that are not when the effective IFRS standards and interpretations do not listed on an active market, the Group uses valuation techniques specifically deal with the related accounting issue. that are based on certain assumptions. Any change in these This particularly applies in relation to the recognition of assumptions could have a material impact on the resulting concession arrangements, the classification of agreements calculations. that contain a lease, and the recognition of acquisitions of non- controlling interests prior to January 1, 2010. 1.4.1.7 REVENUES In accordance with IAS 1, the Group’s current and non-current Revenues generated from customers whose consumption assets and current and non-current liabilities are shown is metered during the accounting period are estimated at separately on the consolidated statement of financial position. the reporting date based on historical data, consumption For most of the Group’s activities, the breakdown into current 20 statistics and estimated selling prices. The Group has developed and non-current items is based on when assets are expected measuring and modelling tools that allow it to estimate revenues to be realized, or liabilities extinguished. Assets expected to with a satisfactory degree of accuracy and subsequently ensure be realized or liabilities extinguished within 12 months of the that risks of error associated with estimating quantities sold reporting date are classified as current, while all other items and the resulting revenues can be considered as not material. are classified as non-current.
1.4.1.8 MARGIN AT TERMINATION RELATING TO CONSTRUCTION CONTRACTS XX 1.5 Accounting policies The determination of total expected revenue and costs at termination involves significant estimates related to technical 1.5.1 Scope and methods of consolidation solutions, duration of project and contractual issues. The consolidation methods used by the Group are the following: Management reassesses those estimates for the preparation of consolidated financial statements on a quarterly basis or XX subsidiaries (over which the Group exercises exclusive more frequently if required by significant new developments in control) are fully consolidated; the course of the projects. Any significant change in expected XX joint operations over which the Group exercises joint control revenue or expected costs implies an immediate adjustment are consolidated in proportion to the direct rights to the of the margin already recognized for the portion of the project assets and direct obligations for the liabilities of the entity. already performed, and impacts future margin for works still to be performed.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 267 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX the equity method is used for: 1.5.2.4 TRANSLATION OF THE FINANCIAL STATEMENTS OF CONSOLIDATED COMPANIES WITH A FUNCTIONAL CURRENCY OTHER THAN THE EURO –– joint ventures over which the Group exercises a joint control but has only rights to the net assets of the entity, The statement of financial position is translated into euros at –– associate companies over which the Group exercises year-end exchange rates. Income statement and statement of significant influence. In accordance with this method, cash flow items are translated using the average exchange the Group recognizes its proportionate share of the rate for the year. Any differences arising from the translation investee’s net income or loss on a separate line of the of the financial statements of consolidated companies are consolidated income statement under “Share in net recorded under “Cumulative translation adjustment” as Other income of associates”. The accounting policies applied Comprehensive Income. by these companies comply with IFRS and are consistent Goodwill and fair value adjustments arising from the acquisition with the accounting policies of the Group. of foreign entities are classified as assets and liabilities of The Group analyses what type of control exists on a case- those foreign entities. Therefore, they are denominated in the by-case basis, taking into account the situations illustrated functional currencies of the entities and translated at the year- in IFRS 10, IFRS 11 and IAS 28 revised. end exchange rate. All intercompany balances and transactions are eliminated in the consolidated financial statements. 1.5.3 Business combinations A list of the main fully consolidated companies together with Business combinations accomplished before January 1, 2010 the main investments accounted for by the equity method, is have been recognized in accordance with IFRS 3 prior to the presented in Note 28 “List of the main consolidated companies revision effective January 1, 2010. In accordance with IFRS 3 at December 31, 2015 and 2014”. revised, these business combinations have not been restated. Since January 1, 2010, the Group applies the purchase method 1.5.2 Foreign currency translation methods as defined in IFRS 3 revised, which consists of recognizing at the acquisition date the identifiable assets acquired and liabilities assumed at their fair values, including any non-controlling 1.5.2.1 PRESENTATION CURRENCY OF THE CONSOLIDATED FINANCIAL interests in the acquired company. Non-controlling interests STATEMENTS are measured either at fair value or at proportionate interest in The Group’s Consolidated Financial Statements are presented the net identifiable assets. The Group determines on a case-by- in euros (€). case basis which measurement option is to be used to recognize non controlling interests. 1.5.2.2 FUNCTIONAL CURRENCY Functional currency is the currency of the primary economic 1.5.4 Intangible assets environment in which an entity operates. In most cases, the Intangible assets are recognized at cost less any accumulated functional currency corresponds to the local currency. However, amortization and any accumulated impairment losses. certain entities may have a different functional currency from the local currency when that other currency is used for an 1.5.4.1 GOODWILL entity’s main transactions and better reflects its economic environment. A. Recognition of goodwill 1.5.2.3 FOREIGN CURRENCY TRANSACTIONS The application of IFRS 3 revised on January 1, 2010 requires the Group to identify business combinations carried out before Foreign currency transactions are recorded in the functional or after that date. currency at the exchange rate prevailing at the date of the transaction. At each reporting date: Business combinations carried out before January 1, 2010 XX monetary assets and liabilities denominated in foreign Goodwill represents the excess of the cost of a business currencies are translated at year-end exchange rates. The combination (acquisition price of shares plus any costs directly related translation gains and losses are recorded in the attributable to the business combination) and the Group’s income statement for the year to which they relate; interest in the fair value of the identifiable assets, liabilities and XX non-monetary assets and liabilities denominated in foreign contingent liabilities recognized at the acquisition date (except currencies are recognized at the historical cost applicable if the business combination is achieved in stages). at the date of the transaction.
268 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
For a business combination achieved in stages – i.e. where B. Other internally generated or acquired intangible assets the Group acquires a subsidiary through successive share Other intangible assets include mainly: purchases – the amount of goodwill is determined separately for each exchange transaction based on the fair values of the XX amounts paid or payable as consideration for rights relating acquiree’s identifiable assets, liabilities and contingent liabilities to concession arrangements or public service contracts; at the date of each exchange transaction. XX customer portfolios acquired on business combinations; surface and underground water drawing rights, which are Business combinations carried out after January 1, 2010 XX not amortized as they are granted indefinitely; Goodwill is measured as being the amount by which the total of: XX concession assets; i. the consideration transferred; XX exclusive rights to distribute drinking water in a defined ii. the amount of any non-controlling interest in the acquired geographic area in perpetuity; company; and XX softwares. iii. in a business combination achieved in stages, the fair value at acquisition-date of the previously held interests in the Intangible assets are amortized on the basis of the expected acquired company; pattern of consumption of the expected future economic benefits embodied in the asset. If this cannot be reliably calculated, the exceeds the accounting net balance of identifiable assets straight-line method is used, as a function of the useful lives acquired and liabilities assumed. presented in the table below (in years). The amount of goodwill recognized at the acquisition date cannot be adjusted after the end of the measurement period. Useful Life
Goodwill relating to associates and joint ventures are recorded In years Minimum Maximum respectively under “Investments in associates” and “Investments Concession rights 10 50 in joint ventures”. Customer portfolios 10 25 B. Measurement of goodwill Other intangible assets 1 40 Goodwill is not amortized but is tested for impairment each year, or more frequently when an indication of impairment Some intangible assets (water rights, etc.) with an indefinite is identified. Impairment tests are carried out at the level of useful life are not amortized but are subject to an annual cash-generating units (CGUs), which constitute groups of assets impairment test. 20 generating cash inflows that are largely independent of the cash inflows from other cash-generating units. 1.5.5 Property, plant and equipment The methods used to carry out these impairment tests are described in Note 1.5.7 “Impairment of property, plant and 1.5.5.1 PROPERTY, PLANT AND EQUIPMENT – INITIAL MEASUREMENT equipment and intangible assets”. AND SUBSEQUENT MEASUREMENT Impairment losses in relation to goodwill cannot be reversed Items of property, plant and equipment are recognized at their and are shown under “Impairment” in the income statement. historical cost of acquisition, production or entry to the Group, Impairment losses on goodwill relating to associates and joint less any accumulated depreciation and any accumulated ventures are respecively reported under “Share in net income impairment losses. (loss) of associates” and “Share in net income (loss) of joint The carrying amount of these items is not revalued as the ventures”. Group has elected not to apply the allowed alternative method, which consists of regularly revaluing one or more categories 1.5.4.2 OTHER INTANGIBLE ASSETS of property, plant and equipment. Investment subsidies are deducted from the gross value of the A. Development costs assets concerned under the heading they were received. Research costs are expensed as incurred. In accordance with IAS 16, the initial cost of the item of property, Development costs are capitalized when the asset recognition plant and equipment includes an initial estimate of the costs criteria set out in IAS 38 are met. Capitalized development of dismantling and removing the item and restoring the site costs are amortized over the useful life of the intangible on which it is located, when the entity has a present legal or asset recognized. In view of the Group’s activities, capitalized constructive obligation to dismantle the item or restore the site. development costs are not material. In counterpart, a provision is recorded for the same amount.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 269 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
Property, plant and equipment acquired under finance leases XX the grantor is contractually obliged to provide these services are carried in the consolidated statement of financial position to the public (this criterion must be met for the arrangement at the lower of the market value and the present value of the to qualify as a concession); related minimum lease payments. The corresponding liability XX the operator is responsible for at least some of the is recognized under financial debt. These assets are also management of the infrastructure and does not merely act depreciated using the methods and useful lives set out below. as an agent on behalf of the grantor; The Group applies IAS 23 revised, which consists in capitalizing XX the contract sets the initial prices to be levied by the operator borrowing costs that are directly attributable to the acquisition, and regulates price revisions over the concession period. construction or production of a qualifying asset as part of the cost of that asset. For a concession arrangement to fall within the scope of IFRIC 12, usage of the infrastructure must be controlled by the 1.5.5.2 DEPRECIATION concession grantor. The requirement is met when the following two conditions are satisfied: In accordance with the components approach, the Group uses the grantor controls or regulates what services the operator different depreciation terms for each significant component of XX must provide with the infrastructure and determines to a sole tangible asset when one of these significant components whom it must provide them, and at what price; and has a different useful life from that of the main tangible asset to which it relates. XX the grantor controls the infrastructure, i.e. retains the right to take back the infrastructure at the end of the concession. Depreciation is calculated on a straight-line basis over normal useful lives. Under IFRIC 12, the operator’s rights over infrastructure operated under concession arrangements should be accounted The range of useful lives is due to the diversity of the assets for based on the nature of the compensation to be received. and contractual terms in each category. The shortest periods Thus: relate to smaller equipment and furniture, while the longest useful lives concern network infrastructure. XX the “financial asset model” is applied when the operator has an unconditional right to receive cash or another financial Standard useful lives are as follows: asset, either directly from the grantor or indirectly by means of warranties given by the grantor for amounts receivable Main depreciation from the users of the public service (e.g., via a contractually In years periods guaranteed internal rate of return) and the grantor has the Constructions (a) 3 to 100 primary responsibility to pay the operator; Plant and equipment 2 to 70 XX in other cases, the “intangible asset model” is applied: the Transport equipment 3 to 14 operator is entitled to bill the users of the public service and the users have primary responsibility to pay for the (a) Including fittings. concession services. With respect to the assets accounted for as counterpart for the In cases where the users actually pay the Group, but the local site restoration provisions, they are amortized according to the authority guarantees the amounts that will be paid for the method set forth in Note 17.4. duration of the contract (e.g., via a guaranteed internal rate of return), the financial asset model should be used to account 1.5.6 Concessions arrangements for the concession infrastructure, since the local authority is, in substance, primarily responsible for payment. In practice, the SIC 29 interpretation – “Services Concession agreements – financial asset model is used to account for BOT (Build, Operate Disclosures” – relates to concession contracts that should be and Transfer) contracts entered into with local authorities for disclosed in the Notes to the financial statements, while IFRIC 12 public services such as wastewater treatment and household relates to the accounting treatment of certain concession waste incineration). arrangements. However, where the local authority pays the Group but merely These interpretations set out the common features of acts as an intermediary fee collector and does not guarantee the concession arrangements: amounts receivable (“pass through arrangement”), the intangible XX concession arrangements involve the provision of a public asset model should be used to account for the concession since service and the management of associated infrastructure, the users are, in substance, primarily responsible for payment. entrusted to the concession operator, together with specific “Primary responsibility” means that while the identity of the capital renewal and replacement obligations; payer of the services is not an essential criterion, the person ultimately responsible for payment should be identified.
270 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
Pursuant to these principles: Such indications may be based on events or changes in the market environment, or on internal sources of information. XX property, plant and equipment received at no cost from the grantor as infrastructure, access to which the operator is Intangible assets that are not amortized are tested for granted for the purposes of the service agreement, may impairment annually. not be transferred and, as these will be returned to the grantor at no cost at the end of the contract, they are not IMPAIRMENT INDICATORS recorded in the statement of financial position. In particular, This impairment test is only carried out for property, plant infrastructure entrusted during the term of the contract by and equipment and intangible assets for the defined useful the grantor to the operator for servicing and maintenance is lives when they are indications of an alteration in their value. not recognized in the statement of financial position; In general, this arises as a result of significant changes in the XX infrastructure undertaken by the operator is recognized as operational environment of the assets or from a poorer than follows: expected economic performance. –– under the intangible asset model, the fair value of The main indications of impairment used by the Group are: construction and other work on the infrastructure XX external sources of information: represents the acquisition cost of the intangible asset and should be recognized when the infrastructure is built –– significant changes in the economic, technological, provided that this work is expected to generate future political or market environment in which the entity economic benefits (e.g., the case of work carried out to operates or to which the asset is dedicated, extend the network). Where no such economic benefits are –– fall in demand; expected, the present value of commitments in respect XX internal sources of information: of construction and other work on the infrastructure is recognized from the outset, with a corresponding –– evidence of obsolescence or physical damage not adjustment to concession liabilities, budgeted for in the depreciation/amortization schedule, –– under the financial asset model, the amount receivable –– worse-than-expected performance. from the grantor is recognized at the time the infrastructure is built, at the fair value of the construction and other work IMPAIRMENT carried out, Items of property, plant and equipment or intangible assets –– when the grantor has a payment obligation for only part are tested for impairment at the level of the individual asset or of the investment, the cost is recognized in financial cash-generating unit as appropriate, determined in accordance 20 assets for the amount guaranteed by the grantor, with with IAS 36. If the recoverable amount of an asset is lower the balance included in intangible assets (“mixed model”). than its carrying amount, the carrying amount is reduced to Renewal costs consist of obligations under concession the recoverable amount by recording an impairment loss. Upon arrangements with potentially different terms and conditions recognition of an impairment loss, the depreciable amount – (obligation to restore the site, renewal plan, tracking account, and possibly the useful life – of the asset concerned is revised. etc.). Impairment losses recorded in relation to property, plant and Renewal costs are recognized as either (i) intangible or financial equipment or intangible assets may be subsequently reversed assets depending on the applicable model, when the costs are if the recoverable amount of the assets is once again higher expected to generate future economic benefits (i.e. they bring than their carrying value. The increased carrying amount of an about an improvement); or (ii) expenses, where no such benefits item of property, plant or equipment attributable to a reversal are expected to be generated (i.e. the infrastructure is restored of an impairment loss may not exceed the carrying amount that to its original condition). would have been determined (net of depreciation/amortization) had no impairment loss been recognized in prior periods. Costs incurred to restore the asset to its original condition are recognized as a renewal asset or liability when there is a timing MEASUREMENT OF RECOVERABLE AMOUNT difference between the contractual obligation calculated on a time proportion basis, and its realization. In order to review the recoverable amount of property, plant and equipment and intangible assets, the assets are, where The costs are calculated on a case-by-case basis based on the appropriate, grouped into cash-generating units (CGUs) and the obligations associated with each arrangement. carrying amount of each unit is compared with its recoverable amount. 1.5.7 Impairment of property, plant and equipment For operating entities which the Group intends to hold on a and intangible assets long-term and going concern basis, the recoverable amount of In accordance with IAS 36, impairment tests are carried out a CGU corresponds to the higher of its fair value less costs to on intangible assets and on property, plant and equipment sell and its value in use. Value in use is primarily determined whenever there is an indication that the assets may be impaired. based on the present value of future operating cash flows and
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 271 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
a terminal value. Standard valuation techniques are used based 1.5.8.2 ACCOUNTING FOR OPERATING LEASES on the following main economic data: Payments made under operating leases are recognized as an XX discount rates based on the specific characteristics of the expense in the consolidated income statement on a straight-line operating entities concerned; basis over the lease term. XX terminal values in line with the available market data specific to the operating segments concerned and growth 1.5.8.3 ACCOUNTING FOR ARRANGEMENTS THAT CONTAIN A LEASE rates associated with these terminal values, not to exceed IFRIC 4 deals with the identification of services and take-or-pay inflation. sales or purchase contracts that do not take the legal form of a Discount rates are determined on a post-tax basis and applied lease but convey rights to customers/suppliers to use an asset to post-tax cash flows. The recoverable amounts calculated on or a group of assets in return for a payment or a series of fixed the basis of these discount rates are the same as the amounts payments. Contracts meeting these criteria should be identified obtained by applying the pre-tax discount rates to cash flows as either operating leases or finance leases. In the latter case, a estimated on a pre-tax basis, as required by IAS 36. financial receivable should be recognized to reflect the financing For operating entities which the Group has decided to sell, the deemed to be granted by the Group where it is considered as related carrying amount of the assets concerned is written acting as lessor and its customers as lessees. down to the estimated market value less costs of disposal. This interpretation applies to some contracts with industrial When negotiations are ongoing, this is determined based on or public customers relating to assets financed by the Group. the best estimate of their outcome as of the reporting date. In the event of a decline in value, the impairment loss is recorded 1.5.9 Inventories in the consolidated income statement under “Impairment”. Inventories are measured at the lower of cost and net realizable value. Net realizable value corresponds to the estimated selling 1.5.8 Leases price in the ordinary course of business, less the estimated The Group holds assets for its various activities under lease costs of completion and the estimated costs necessary to make contracts. the sale. These leases are analyzed based on the situations and The cost of inventories is determined based on the first-in, first- indicators set out in IAS 17 in order to determine whether they out method or the weighted average cost formula. constitute operating leases or finance leases. A finance lease is defined as a lease which transfers substantially 1.5.10 Financial instruments all the risks and rewards incidental to the ownership of the Financial instruments are recognized and measured in related asset to the lessee. All leases which do not comply accordance with IAS 32 and IAS 39. with the definition of a finance lease are classified as operating leases. 1.5.10.1 FINANCIAL ASSETS The following main factors are considered by the Group to Financial assets comprise available-for-sale securities, loans assess whether or not a lease transfers substantially all the and receivables carried at amortized cost including trade and risks and rewards incidental to ownership: whether (i) the other receivables, and financial assets measured at fair value lease transfers ownership of the asset to the lessee by the through income including derivative financial instruments. end of the lease term; (ii) the lessee has an option to purchase Financial assets are broken down into current and non-current the asset and if so, the conditions applicable to exercising assets in the statement of financial position. that option; (iii) the lease term covers the major part of the estimated economic life of the asset; and (iv) the asset is of a A. Available-for-sale securities highly specialized nature. A comparison is also made between the present value of the minimum lease payments and the fair Available-for-sale securities include the Group’s investments value of the asset concerned. in non-consolidated companies and equity or debt instruments that do not satisfy the criteria for classification in another category (see below). These items are measured by using a 1.5.8.1 ACCOUNTING FOR FINANCE LEASES weighted average cost formula. On initial recognition, assets held under finance leases are recorded as property, plant and equipment and the related liability is recognized under borrowings. At inception of the lease, finance leases are recorded at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments.
272 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
On initial recognition, they are measured at fair value which 1.5.10.2 FINANCIAL LIABILITIES generally corresponds to the acquisition cost plus transaction Financial liabilities include borrowings, trade and other costs. payables, derivative financial instruments, and other financial At each reporting date, available-for-sale securities are liabilities. measured at fair value. For listed companies, fair value is Financial liabilities are broken down into current and non- determined based on the quoted market price at the closing current liabilities in the statement of financial position. Current date. Unlisted securities are measured using valuation models financial liabilities primarily comprise: based primarily on the most recent market transactions, discounted dividends or cash flow and net asset value. XX financial liabilities with a settlement or maturity date within 12 months of the reporting date; Changes in fair value are recognized directly in “Other Comprehensive Income”, except when the decline in the value XX financial liabilities for which the Group does not have an of the investment below its historical acquisition cost is judged unconditional right to defer settlement for at least 12 months significant or prolonged enough to require an impairment if after the reporting date; needed. In this case, loss is recognized in income under XX financial liabilities held primarily for trading purposes; “Impairment”. Only impairment losses recognized on debt instruments (debt securities/bonds) may be reversed through XX derivative financial instruments qualifying as fair value income (refer to Note 13.1.1.2). hedges where the underlying is classified as a current item; XX all derivative financial instruments not qualifying as hedges. B. Loans and receivables carried at amortized cost This item primarily includes loans and advances to associates A. Measurement of borrowings and other financial liabilities or non-consolidated companies, and guarantee deposits as well Borrowings and other financial liabilities are measured at as trade and other receivables. amortized cost using the effective interest rate method. On initial recognition, these loans and receivables are recorded On initial recognition, any issue premiums/discounts, at fair value plus transaction costs. At each reporting date, they redemption premiums/discounts and issuing costs are are measured at amortized cost using the effective interest added to/deducted from the nominal value of the borrowings rate method. concerned. These items are taken into account when calculating On initial recognition, trade and other receivables are recorded the effective interest rate and are therefore recorded in the at fair value, which generally corresponds to their nominal consolidated income statement over the life of the borrowings value. Impairment losses are recorded based on the estimated using the amortized cost method. 20 risk of non-recovery. The amounts owed by customers under As regards structured debt instruments that do not have an construction contracts are included in this item. equity component, the Group may be required to separate an “embedded” derivative instrument from its host contract. C. Financial assets measured at fair value through income The conditions under which these instruments must be These financial assets meet the qualification or designation separated are detailed below. When an embedded derivative criteria set out in IAS 39. is separated from its host contract, the initial carrying amount of the structured instrument is broken down into an embedded This item mainly includes trading securities and short-term derivative component, corresponding to the fair value of the investments which do not meet the criteria for classification as embedded derivative, and a financial liability component, cash or cash equivalents (see Note 1.5.11). The financial assets corresponding to the difference between the amount of the are measured at fair value at the reporting date and changes in issue and the fair value of the embedded derivative. The fair value are recorded in the consolidated income statement. separation of components upon initial recognition does not give rise to any gains or losses. Subsequently, the debt is recorded at amortized cost using the effective interest method, while the derivative is measured at fair value, with changes in fair value taken to income.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 273 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
B. Call options on non-controlling interests granted before January 1, 2010 these are contracts to buy or sell non-financial assets whose Other financial liabilities primarily include put options on price may be adjusted in accordance with fluctuations of an non-controlling interests granted by the Group. As no specific index, a pricing provision, foreign currency prices, or the price guidance is provided by IFRS and in view of the AMF (French of an asset other than the asset underlying the contract. Financial Market Authority) recommendations for year-end Embedded derivatives are separately recognized in the 2009, the Group has adopted the following accounting treatment following cases: for these commitments: XX if the host contract is not a financial instrument already XX when the put option is initially granted, the present value recognized at fair value with any fair value adjustment of the exercise price is recognized as a financial liability, shown in income; with a corresponding reduction in non-controlling interests. XX if when separated from the host contract, the component When the value of the put option is greater than the carrying still meets the definition of a derivative product (existence amount of the non-controlling interests, the difference is of an underlying instrument, absence of initial and future recognized as goodwill; settlement); XX at each reporting date, the amount of the financial liability XX if the characteristics of the identified derivative are is revised and any changes in the amount are recorded with not closely related to those of the host contract. The a corresponding adjustment to goodwill; determination of “closely related” is carried out on the date XX payments of dividends to non-controlling interests result in that the contract is signed. an increase in goodwill; When an embedded derivative is separated from its host XX in the income statement, non-controlling interests are contract, it is recognized at fair value in the statement of allocated their share in income. In the statement of financial financial position and variations in fair value are recognized position, the share in income allocated to non-controlling in income (if the embedded derivative is not documented in a interests reduces the carrying amount of goodwill. No hedge relationship). finance costs are recognized in respect of changes in the fair value of liabilities recognized against goodwill. Derivative hedging instruments: recognition and presentation Derivative instruments qualifying as hedging instruments are 1.5.10.3 DERIVATIVES AND HEDGE ACCOUNTING recognized in the statement of financial position and measured The Group uses financial instruments to manage and reduce its at fair value. However, their accounting treatment varies exposure to market risks arising from fluctuations in interest according to whether they are classified as: rates, foreign currency exchange rates and commodity prices. XX a fair value hedge of an asset or liability; Use of derivative instruments is governed by a Group policy for XX a cash flow hedge; managing interest rate, currency and commodity risks. XX a hedge of a net investment in a foreign operation. Definition and scope of derivative financial instruments Derivative financial instruments are contracts whose value Fair value hedges changes in response to the change in one or more observable A fair value hedge is defined as a hedge of the exposure to variables that do not require any material initial net investment changes in fair value of a recognized asset or liability, such and that are settled at a future date. as a fixed-rate loan or borrowing, or of assets, liabilities or an unrecognized firm commitment denominated in a foreign Derivative instruments therefore include swaps, options and currency. futures, as well as forward commitments to purchase or sell listed and unlisted securities. The gain or loss from re-measuring the hedging instrument at fair value is recognized in income. The gain or loss on the hedged Embedded derivatives item attributable to the hedged risk adjusts the carrying amount of the hedged item and is also recognized in income even if the An embedded derivative is a component of an agreement known hedged item is in a category in respect of which changes in fair as a host contract, which meets the definition of a derivative value are recognized through “Other Comprehensive Income”, instrument and whose economic characteristics are not closely or if it is normally recognized at amortized cost in the absence related to those of its host contract. of hedging. These two adjustments are presented net in the At Group level, the main contracts likely to contain embedded income statement, with the net effect corresponding to the derivatives are those containing clauses or options that can ineffective portion of the hedge. affect the price, volume or maturity of the contract. In particular,
274 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
Cash flow hedges Hedge effectiveness is demonstrated both prospectively and A cash flow hedge is a hedge of the exposure to variability in retrospectively using various methods, based mainly on a cash flows that could affect the Group’s consolidated income. comparison between changes in the fair value or cash flows The hedged cash flows may be attributable to a particular risk between the hedging instrument and the hedged item. Methods associated with a recognized financial or non-financial asset based on an analysis of statistical correlations between or a highly probable forecast transaction. historical price data are also used by the Group. The portion of the gain or loss on the hedging instrument that Derivative instruments not qualifying for hedge accounting: recognition is determined to be an effective hedge is recognized in Other and presentation Comprehensive Income, net of tax, while the ineffective portion is recognized in income. The gains or losses accumulated in These items mainly concern derivative financial instruments shareholders’ equity are reclassified to the income statement, used in economic hedges that have not been – or are no longer – under the same caption as the loss or gain on the hedged item documented as hedging relationships for accounting purposes. – i.e. current operating income for operating cash flows and When a derivative financial instrument does not qualify or no financial income/expense for other cash flows – in the same longer qualifies for hedge accounting, changes in fair value periods in which the hedged cash flows affect income. are recognized directly in income, under “Mark-to-Market on If the hedging relationship is discontinued, in particular because commodity contracts other than trading instruments”, in current the hedge is no longer considered effective, the cumulative operating income for derivative instruments with non-financial gain or loss on the hedging instrument remains separately assets as the underlying, and in financial income or expenses recognized in shareholders’ equity until the forecast transaction for currency, interest rate and equity derivatives. occurs. However, if a forecast transaction is no longer highly Derivative expiring in less than 12 months are recognized in the probable, the cumulative gain or loss on the hedging instrument consolidated statement of financial position in current assets is recognized in income. and liabilities, while derivatives expiring after this period are classified as non-current items. Hedge of a net investment in a foreign operation In the same way as for a cash flow hedge, the portion of the Measurement of fair value gain or loss on the hedging instrument that is determined The fair value of listed instruments on an active market is to be an effective hedge of the currency risk is recognized determined based on the market price. In this case, these directly in Other Comprehensive Income, net of tax, while the instruments are presented at Level 1 of the fair value ineffective portion is recognized in income. The gains or losses measurement. 20 accumulated in Other Comprehensive Income are transferred The fair value of non-listed financial instruments for which there to the consolidated income statement when the investment is is observable market data is determined by using valuation sold or liquidated. techniques such as the valuation models applied for options, or by using the discounted cash flows method. The counterparty Identification and documentation of hedging relationships risk is taken into account when valuing derivative contracts. The hedging instruments and hedged items are designated The models used to value these instruments include at the inception of the hedging relationship. The hedging assumptions based on market data in accordance with IFRS 13: relationship is formally documented in each case, specifying the hedging strategy, the hedged risk and the method used to XX the fair value of interest rate swaps is calculated based on assess hedge effectiveness. Only derivative contracts entered discounted future cash flows; into with external counterparts are considered eligible for hedge XX the fair value of forward exchange contracts and currency accounting. swaps is calculated based on current prices for contracts Hedge effectiveness is assessed and documented at the with similar maturity profiles by discounting the differential inception of the hedging relationship and on an ongoing basis of future cash flows (the difference between the forward throughout the periods for which the hedge was designated. price of the contract and the recalculated forward price Hedges are considered to be effective when changes in fair based on new market conditions applied to the nominal value or cash flows between the hedging instrument and the amount); hedged item are offset within a range of 80%-125%. XX the fair value of currency or interest rate options is determined using valuation techniques for options;
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 275 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX commodity derivatives are valued as a function of market billings are then determined. If this amount is positive, it is quotes based on discounted future cash flows (firm recognized as an asset under “Amount due from customers contracts: commodity swaps or commodity forwards), and under construction contracts” within “Trade and other option valuation models (optional contracts) for which it may receivables”. If the amount is negative, it is recognized as a be necessary to observe market price volatility. For contracts liability under “Amount due to customers under construction with maturity exceeding the depth of transactions for which contracts” within “Trade and other payables”. prices are observable, or that are particularly complex, valuations may be based on internal assumptions; 1.5.14 Share-based payments XX for complex contracts entered into with independent financial institutions, the Group uses valuations carried out Under IFRS 2, the Group is required to recognize an expense by counterparties, on an exceptional basis. (personnel costs) corresponding to benefits granted to employees in the form of share-based payments, in These instruments are presented in Level 2 of the fair value consideration for services provided. These services are valued measurement hierarchy, unless their valuation depends at the fair value of the instruments awarded. significantly on non-observable parameters. In this case, This payment may take the form of instruments paid in shares they are presented at Level 3 of the fair value measurement hierarchy. These largely involve derivative financial instruments or in cash. with maturities exceeding the observable horizon for the forward prices of the underlying asset, or for which certain EQUITY-SETTLED INSTRUMENTS parameters, such as underlying volatility, are not observable. 1.5.14.1 STOCK OPTION PLANS 1.5.11 Cash and cash equivalents Options granted to Group employees are measured at the grant date using a binomial pricing model for options with no These items include cash equivalents as well as short-term performance conditions, or a Monte Carlo pricing model for investments that are considered to be readily convertible into those with external performance conditions. These models take a known amount of cash and where the risk of a change in into account the characteristics of the plan concerned (exercise their value is deemed to be negligible based on the criteria set price, exercise period, performance conditions if any), market out in IAS 7. data at the time of grant (risk-free rate, share price, volatility, Bank overdrafts are not included in the calculation of cash expected dividends), and a behavioral assumption in relation and cash equivalents and are recorded under “Short-term to beneficiaries. The value determined is recorded in personnel borrowings”. costs over the vesting period and offset against equity.
1.5.12 Treasury shares 1.5.14.2 ALLOTMENT OF BONUS SHARES Treasury shares are recognized at cost and deducted from The fair value of bonus share plans is estimated based on equity. Gains and losses on disposal of treasury shares are the share price on the allotment date, taking into account directly recorded in equity and do not therefore impact income the absence of dividend payments over the vesting period, for the period. the turnover rate for the relevant staff in each plan and the likelihood of the Group’s performance. The estimation of the fair value of the plans also takes into account the non-transferability 1.5.13 Construction contracts period associated with these instruments. The cost is expensed The engineering operations fall within the scope of IAS 11 – over the vesting period of the rights and offset against equity. “Construction Contracts”. For performance shares that are allotted on a discretionary basis and include external performance conditions, a Monte In accordance with IAS 11, the Group applies the percentage of Carlo model is used. completion method as described in section 1.5.16 (“Revenues”) to determine the contract revenue and costs to be recorded in the consolidated income statement for each period. 1.5.14.3 EMPLOYEE SHARE PURCHASE PLANS When it is probable that total contract costs will exceed total Employee share purchase plans enable employees to subscribe contract revenue, the expected loss at termination is recognized to Company shares at a lower-than-market price. The fair value as an expense immediately. of the instruments awarded under employee share purchase plans is estimated on the allotment date based on the value of Partial payments received under construction contracts before this discount awarded to employees and non-transferability the corresponding work has been carried out are recorded on period applicable to the share subscribed. As it is treated as the liabilities side of the statement of financial position as a service rendered, the cost is recognized in full and offset advances received from customers. The costs incurred plus against equity. any recognized profit less any recognized losses and progress
276 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
CASH-SETTLED INSTRUMENTS Other Comprehensive Income (equity) items. Where appropriate, adjustments resulting from applying the asset ceiling to net In specific cases where local legislation prohibits employee assets relating to overfunded plans are treated in a similar way. share purchase plans, share appreciation rights (SAR) are granted instead. When these instruments are settled in cash, However, actuarial gains and losses on other long-term their fair value is recognized in expenses over the vesting benefits such as long-service awards, continue to be recognized period, with an offsetting entry recorded in employee-related immediately in income. liabilities. Changes in the fair value of the liability are taken to The net interest expense (income) in respect of pensions is income for each fiscal year. presented as a “financial result”. The long term incentive plan, which will result in a cash payment to the beneficiary, is valued at its fair value and an expense is 1.5.15.2 OTHER PROVISIONS recognized on a straight-line basis over the term of the plan. The Group records a provision where it has a present obligation (legal or constructive), the settlement of which is expected to 1.5.15 Provisions result in an outflow of resources embodying economic benefits with no corresponding consideration in return. 1.5.15.1 PROVISIONS FOR POST-EMPLOYMENT BENEFIT OBLIGATIONS A provision for restructuring costs is recorded when the general AND OTHER LONG-TERM BENEFITS criteria for setting up a provision are met, i.e., when the Group Depending on the laws and practices in force in the countries has a detailed formal plan relating to the restructuring and has where SUEZ ENVIRONNEMENT COMPANY operates, Group raised a valid expectation in those affected that it will carry companies have obligations in terms of pensions, early out the restructuring by starting to implement that plan or retirement payments, retirement bonuses and other benefit announcing its main features to those affected by it. plans. Such obligations generally apply to all of the employees Provisions with a maturity of over 12 months are discounted within the companies concerned. when the effect of discounting is material. The Group’s main long- The Group’s obligations in relation to pensions and other term provisions, excluding the provisions for post-employment employee benefits are recognized and measured in accordance benefit obligations, are provisions for site restoration costs with IAS 19 revised. Accordingly: (relating to the waste services business). The discount rate (or rates) used reflect current market measurements of the time XX the cost of defined contribution plans is expensed based on value of money and the risks specific to the liability concerned. the amount of contributions payable in the period; Expenses corresponding to the reversal of discounting XX the Group’s obligations concerning pensions and other adjustments to long term provisions are recorded under other 20 employee benefits payable under defined benefit plans are financial income and expenses. assessed on an actuarial basis. These calculations are based A provision is recognized when the Group has a present legal on assumptions relating to mortality, staff turnover and or constructive obligation to restore a site. The counterpart for estimated future salary increases, as well as the economic this provision is included in the carrying amount of the asset conditions specific to each country or subsidiary of the concerned. Adjustments to the provision due to subsequent Group. Discount rates are determined by reference to the changes in the expected outflow of resources, the site yield, at the measurement date, on high-quality corporate restoration date or the discount rate are deducted from or bonds in the related geographical area (or on government added to the cost of the corresponding asset in a symmetrical bonds in countries where no representative market for such manner. The impacts of unwinding the discount are recognized corporate bonds exists). in expenses for the fiscal year. Provisions are recorded when commitments under these plans less the unrecognized past service cost exceed the fair value 1.5.16 Revenues of plan assets. When the value of plan assets (capped where appropriate) is greater than the related commitments, the Group revenues (as defined by IAS 18) are mainly generated surplus is recorded as an asset under “Other current assets” from the following: or “Other non-current assets”. XX Water services; As regards post-employment benefit obligations, the Group XX Waste services; recognizes actuarial gains and losses resulting from changes in actuarial assumptions and experience adjustments directly to XX Engineering and construction contracts and other services.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 277 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
Revenues on sales of goods are recognized on delivery (i.e., when (in accordance with ANC Recommendation 2013-03 in the the significant risks and rewards of ownership are transferred financial statements of companies applying IFRS). Current to the buyer), or as a function of the progress of the contract, in operating income is a sub-total which helps management to the case of provisions of services and construction contracts, better understand the Group’s performance because it excludes when the price is fixed or determinable and receivables are elements which are inherently difficult to predict due to their likely to be recoverable. unusual, irregular or non-recurring nature. For the Group, Revenues are measured at the fair value of the consideration these elements relate to the marked-to-market (MtM) value of received or receivable. Where deferred payment has a trading instruments, asset impairments, restructuring costs, material impact on the measurement of the fair value of this scope effects, other gains and losses on disposals, and non- consideration, this is taken into account by discounting future recurring items. They are defined as follows: receipts. XX MtM of trading instruments: This corresponds to changes in the fair value (marked-to-market) of financial instruments 1.5.16.1 WATER SERVICES relating to commodities and gas which do not qualify as either trading or hedging instruments. These contracts are Revenues generated by water distribution are recognized based used in economic hedges of operating transactions; on volumes delivered to customers, either specifically metered and invoiced or estimated based on the output of the supply XX impairment of assets: this includes impairment losses on networks. goodwill, intangible and tangible assets, investments in associates and available-for-sale securities; The price for wastewater services and wastewater treatment is either included in the water distribution invoice, or is sent in XX restructuring costs: These relate to costs of a restructuring a separate invoice to the local municipality or industrial client. program planned and controlled by management that materially changes either the scope of a business undertaken Commission fees received from the grantors of concessions by an entity, or the manner in which that business is are recorded as revenues. conducted, based on the criteria set out in IAS 37; scope effects. 1.5.16.2 WASTE SERVICES XX This line includes: Revenues arising from waste collection are generally based on the tonnage collected and the service provided by the operator. –– direct costs related to acquisitions of controlling interests, Revenues from other forms of treatment (principally sorting and –– in the event of a business combination achieved in stages, incineration) are recognized based on volumes processed by impacts of the remeasurement of the previously held the operator and the incidental revenues generated by recycling interest at acquisition-date fair value, and reuse, such as the sale of paper, cardboard, glass, metals –– subsequent changes in the fair value of contingent and plastics for sorting centers, and the sale of electricity and consideration, heat for incinerators. –– gains or losses from disposals of interests which result in a change in consolidation method, as well as any impact 1.5.16.3 ENGINEERING, CONSTRUCTION CONTRACTS AND SERVICES of the remeasurement of retained interests, RENDERED –– other gains and losses on disposals and non-recurring Revenues from construction contracts are determined using the items: This includes mainly capital gains and losses on percentage of completion method and more generally according disposals of non-current assets and available-for-sale to the provisions of IAS 11 (see section 1.5.13). This stage of securities; completion is determined on the proportion that costs incurred to date bear to the estimated total costs of the contract. XX costs linked to changes in the brand and visual identity. Revenues also include revenues from financial concession In 2015, external service providers worked on the rebranding assets (IFRIC 12) and lease receivables (IFRIC 4). and change of visual identity. The fees for this work and the costs incurred through the rebranding and change of visual identity reached in 2015 a total of €27.5 million. 1.5.17 Current operating income (COI) As they are expenses of an unusual nature and a significant Current operating income is an indicator used by the Group to amount, they are presented on a separate line in the income present “a level of operational performance that can be used statement, between the current operating income and the as part of an approach to forecast recurring performance” income from operating activities.
278 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
1.5.18 Statement of cash flows A deferred tax liability is recognized for all taxable temporary differences associated with investments in subsidiaries, The Group consolidated statement of cash flows is prepared branches and associates, and interests in joint ventures, except based on net income, using the indirect method. if the Group is able to control the timing of the reversal of the “Interest received on non-current financial assets” is classified temporary difference and it is probable that the temporary within investing activities because it represents a return on difference will not reverse in the foreseeable future. investments. “Interest received on cash and cash equivalents” Net balances of deferred tax are calculated based on the is shown as a component of financing activities because the tax position of each company or on the total income of the interest can be used to reduce borrowing costs. companies included within the consolidated tax group and the Impairment losses on current assets are identified as definitive net position of each fiscal entity is recorded on the statement losses, and therefore any change in current assets is shown of financial position under assets or liabilities, as appropriate. net of impairment. Deferred taxes are reviewed at each reporting date to take into Cash flows related to payment of taxes are treated separately. account factors including the impact of changes in tax laws and the prospects of recovering deferred tax assets arising from 1.5.19 Income tax expense deductible temporary differences. Deferred tax assets and liabilities are not discounted. The Group computes taxes in accordance with the prevailing tax legislation in the countries where income is taxable. 1.5.20 Earnings per share In accordance with IAS 12, deferred taxes are recognized according to the liability method on temporary differences Net income per share is calculated by dividing the adjusted net between the book values of assets and liabilities in the income Group share for the fiscal year attributable to ordinary consolidated financial statements and their tax bases, using shares by the weighted average number of shares outstanding tax rates that have been enacted or substantively enacted by during the fiscal year. The adjusted net income Group share the reporting date. However, under the provisions of IAS 12, no takes into account the cost of the coupon attributable to deferred taxes are recognized for temporary differences arising holders of undated deeply subordinated notes issued by SUEZ from goodwill for which impairment losses are not deductible ENVIRONNEMENT COMPANY. The average number of shares for tax purposes, or from the initial recognition of an asset or outstanding during the fiscal year is the number of ordinary liability in a transaction which (i) is not a business combination; shares outstanding at the beginning of the year, adjusted by and (ii) at the time of the transaction, affects neither accounting the number of ordinary shares bought back or issued during income nor taxable income. In addition, deferred tax assets are the course of the year. 20 only recognized to the extent that it is probable that taxable For the calculation of diluted earnings per share, the weighted income will be available against which the deductible temporary average number of shares and earnings per share are adjusted difference can be utilized. to take into account the impact of the conversion or exercise Temporary differences arising on restatements of finance of any dilutive potential ordinary shares (OCEANE convertible leases result in the recognition of deferred taxes. bonds mainly).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 279 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
NOTE 2 Major transactions in 2015
XX 2.1 Strengthening of the Group’s positions XX 2.3 New issue and redemption of outstanding undated in the industrial water market deeply subordinated notes On March 30, 2015, SUEZ ENVIRONNEMENT COMPANY Acquisition of Poseidon successfully completed a third issue of undated deeply subordinated notes, for a total amount of €500 million, after an At the beginning of 2015, the Group acquired the company inaugural issue in September 2010 and another in June 2014. Poseidon for CAD27.4 million (approximately €20 million). The new notes will bear interest at a fixed rate of 2.5%, which Established in Canada, Poseidon is specialized in the design will be revised for the first time seven years after issuance on and manufacture of compact and innovative flotation separation the basis of the 5-year swap rate, and then every five years. equipment for industrial water treatment. The funds raised are partly used for the redemption and The company generates annual revenues of CAD12.7 million repayment of hybrid bonds issued in September 2010 (which (approximately €9 million). bore interest at a rate of 4.82%) for a nominal amount of €450 million. Acquisition of B&V Group As a result of these two transactions, the Group’s outstanding On February 2, 2015, the Group acquired B&V Group for hybrid bonds amounted to €1.0 billion as at December 31, 2015. GBP12.6 million (approximately €17 million). See Note 15.6. B&V Group is a British company specialized in water treatment chemicals, equipment and services for industry. XX 2.4 Arbitration proceedings against the Argentine The company generates annual revenues of GBP11.7 million Republic: arbitral judgment in favor of SUEZ (approximately €16 million). On April 9, 2015, the ICSID (International Centre for Settlement of Investment Disputes) delivered its ruling and ordered the XX 2.2 SUEZ is bringing together all of its activities under Argentine Republic to pay USD405 million to Aguas Argentinas a single brand to accelerate its development shareholders in damages for the harm suffered in connection with the termination of the Aguas Argentinas water and Operating in 70 countries, the SUEZ group is represented by 40 wastewater concession contract in Buenos Aires. brands (Sita, Degrémont, Lyonnaise des Eaux, Agbar, Aqualogy, In early August 2015, the Argentine Republic petitioned an ad United Water, Ondeo Industrial Solutions, Safege, etc.), following hoc ICSID committee to render this decision invalid. international development and the integration of new business lines. In 1993, the Group’s subsidiary Aguas Argentinas was awarded the contract to manage water and wastewater services in From March 12, 2015, all the commercial brands that made up Buenos Aires. In 2006, the Argentine government terminated the Group have been brought together under a single brand: the contract. SUEZ environnement, focusing on the sustainable management of resources. On December 4, 2015, the ICSID issued its decision and ordered the Argentine Republic to pay USD211 million to On July 28, 2015, the Board of Directors decided to complete this the shareholders of Aguas Provinciales de Santa Fe for the transformation by transitioning from "SUEZ environnement" to termination of the concession contract. "SUEZ", a short, strong name and full of history. Aguas Provinciales de Santa Fe, a Group's subsidiary, was The costs incurred by the rebranding and change of visual awarded the water and wastewater services contract for identity are presented on a separate line in the income several cities in the province of Santa Fe in 1995. The contract statement. See Note 5.6. had been terminated by the Argentine government in 2006. See Note 26.
280 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
XX 2.5 Acquisition of Nantaise des Eaux Services In accordance with the terms of IAS 28 “Investments in Associates and Joint Ventures”, the interest formerly held On April 28, 2015, SUEZ through its subsidiary Lyonnaise des in Chongqing Water Group was revalued at the date when Eaux, completed the acquisition of Nantaise des Eaux Services, significant influence was exercised. a company specialized in the production and distribution of drinking water and wastewater collection and treatment. The revaluation gain on this date is recorded in the consolidated income statement in the amount of €127 million. Mainly implanted in the Western part of France and in Guadeloupe, the company generated revenues in 2014 for See Note 12.1. €38 million. XX 2.7 Bond issues XX 2.6 SUEZ signed an agreement to launch a leading The 2015 financial year featured the pursuit of a financial environmental group in China policy whose aim is to optimize the cost of debt and to extend maturities of debt instruments. On December 31, 2015, SUEZ and its partner New World To accomplish this, SUEZ ENVIRONNEMENT COMPANY issued Services (NWS) finalized the cooperation agreement with several bonds amounting to a total of €750 million. Chongqing Water Assets Management Co (CWA) to jointly create Derun Environment, a leading group in water and waste See Note 13.3.3. activities in China. Under the agreement, CWA transferred to Derun Environment XX 2.8 SUEZ strengthens its position in Australia by 36.6% shares in Chongqing Water Group, a listed company at Shanghai Stock Exchange and 67.1% shares in Chongqing acquiring the Sembcorp's minority stake in Sanfeng which operates waste-to-energy projects and provides Sembsita Pacific Pte Ltd related equipments and services. SUEZ and NWS contributed On September 18, 2015 SUEZ and Sembcorp Industries signed to Derun Environment the 13.4% shares they jointly owned an agreement for the acquisition of the 40% of Sembcorp's stake in Chongqing Water Group (CWG) and a cash consideration. in Sembsita Pacific, a company that owns 100% of Sita Australia, Upon completion of the agreement, CWA owns 74.9% of Derun for the amount of AUD485 million (around €312 million). Environment while SUEZ and NWS own 25.1%. This transaction represents an opportunity for SUEZ to Thus, Derun Environment owns a 50.04% shareholding in accelerate its development through the full integration of its Chongqing Water Group, whose market capitalisation amounts water, waste and construction activities in Australia, while 20 to CNY44.8 billion (€6.3 billion) as at December 31, 2015 simultaneously developing cross-selling activities and pursuing and 67.1% of Chongqing Sanfeng. Derun Environment will operational synergies in the short term. become a development platform to tap into China’s growing environmental-related businesses. This transaction is financially accretive for SUEZ and is compliant with the selective financial investment criteria Upon completion of this transaction, the SUEZ group holds followed by the Group. significant influence in Derun Environment and CWG.
NOTE 3 Operating segments information
In accordance with the provisions of IFRS 8 – “Operating A distinction is made between the water distribution and Segments”, the segments used below to present segment water treatment services and the waste collection and waste information have been identified based on internal reporting, treatment services in Europe. in particular those segments monitored by the Management The activities conducted internationally are grouped together Committee, comprised of the Group’s key operational decision- and separated from those conducted in the Europe region. This makers. specific segmentation reflects the difference in development The Group uses four operating segments: strategy implemented internationally compared to the strategy pursued in Europe and is consistent with the Group’s internal XX Water Europe; organizational systems and management structure. XX Recycling and Recovery Europe; XX International; XX Other.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 281 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX 3.1 Operating segments XX International: the Group is expanding in these business segments, depending on the opportunities that may arise, SUEZ ENVIRONNEMENT COMPANY’s subsidiaries are divided in the areas of water, waste and engineering services, with into the following operating segments: a special focus on risk-management resulting from specific XX Water Europe: water distribution and treatment local environments by setting up partnerships, entering into services, particularly under concession contracts (water hedges, and limiting invested capital or other investments management). These services are rendered to individuals, in highly regulated environments; local authorities and industrial clients; XX the “Other” segment is mainly made up of holding XX Recycling and Recovery Europe: waste collection and companies, including SUEZ ENVIRONNEMENT COMPANY treatment services for local authorities and industrial as well as Safege, a consulting subsidiary of the Group. clients. These services include collection, sorting, recycling, The accounting principles and valuation methods used to composting, energy recovery and landfilling for both non- prepare internal reporting are the same as those used to prepare hazardous and hazardous waste; the consolidated financial statements. The EBITDA, EBIT, capital employed and investments indicators are reconciled with the consolidated financial statements.
XX 3.2 Key indicators by operating segment
Revenues
December 31, 2015 December 31, 2014
In millions of euros Non-Group Group Total Non-Group Group Total Water Europe 4,677.1 47.1 4,724.2 4,476.5 39.6 4,516.1 Recycling and Recovery Europe 6,356.8 47.4 6,404.2 6,323.5 43.7 6,367.2 International 3,997.6 22.9 4,020.5 3,422.2 25.2 3,447.4 Other 103.2 107.9 211.1 101.9 105.5 207.4 Intercompany eliminations (225.3) (225.3) (214.0) (214.0) TOTAL REVENUES 15,134.7 - 15,134.7 14,324.1 - 14,324.1
EBITDA
In millions of euros December 31, 2015 December 31, 2014 Water Europe 1,321.3 1,245.0 Recycling and Recovery Europe 766.4 743.0 International 797.2 728,1 Other (133.8) (72.5) TOTAL EBITDA 2,751.1 2,643.6
EBIT
In millions of euros December 31, 2015 December 31, 2014 Water Europe 637.5 574.0 Recycling and Recovery Europe 305.7 264.8 International 591.3 519.7 Other (153.6) (103.8) TOTAL EBIT 1,380.9 1,254.7
282 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
Depreciation and amortization
In millions of euros December 31, 2015 December 31, 2014 Water Europe (454.0) (433.1) Recycling and Recovery Europe (444.4) (448,8) International (197.8) (175.0) Other (11.5) (10.3) TOTAL DEPRECIATION AND AMORTIZATION (1,107.7) (1,067.2)
Capital employed
In millions of euros December 31, 2015 December 31, 2014 (a) Water Europe 6,598,2 6,671.3 Recycling and Recovery Europe 4,041.7 4,099.2 International 4,229.4 3,563.0 Other 138,5 (37.3) TOTAL CAPITAL EMPLOYED 15,007.8 14,296.2
(a) Refer to Note 1.2.1. "Impact of the first application of the new IFRIC 21 interpretation: Levies".
Investments in property, plant and equipment, intangible assets and financial assets
In millions of euros December 31, 2015 December 31, 2014 Water Europe (582.0) (448,3) Recycling and Recovery Europe (434.8) (375.9) 20 International (698,8) (353.9) Other (30.2) (314.2) TOTAL INVESTMENTS (1,745.8) (1,492.3)
Reconciliation with the cash flow statement is made in paragraph 3.4.3.
XX 3.3 Key indicators by geographical area The indicators below are analyzed by: XX destination of products and services sold for revenues; XX geographical location of consolidated companies for capital employed.
Revenues Capital Employed December 31, 2014 In millions of euros December 31, 2015 December 31, 2014 December 31, 2015 restated (a) France 5,119.2 5,187.0 2,411.6 2,293.4 Europe 5,351.0 5,142.7 8,123.0 8,179.4 International 4,664.5 3,994.4 4,473.2 3,823.4 TOTAL 15,134.7 14,324.1 15,007.8 14,296.2
(a) Refer to Note 1.2.1.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 283 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX 3.4 Reconciliation of indicators with consolidated financial statements
3.4.1 Reconciliation of EBIT and EBITDA with current operating income
In millions of euros December 31, 2015 December 31, 2014 Current operating income 1,115.1 1,011.2 (+) Share in net income of equity-accounted companies considered as core business 266.4 243.5 (-) Other (0.6) - EBIT 1,380.9 1,254.7 (-) Net depreciation, amortization and provisions 1,091.9 1,097.7 (-) Share-based payments (a) 6.8 13.3 (-) Disbursements under concession contracts 271.5 277.9 EBITDA 2,751.1 2,643.6
(a) The impact of Share Appreciation Rights is disclosed after hedging by warrants. Moreover, this amount doesn't include long term incentive plans in the form of cash bonuses.
3.4.2 Reconciliation of capital employed with items of the statement of financial position
In millions of euros December 31, 2015 December 31, 2014 (a) (+) Tangible and intangible assets, net 12,488,5 12,285.1 (+) Goodwill, net 3,479.5 3,261.9 (+) Available-for-sale securities (excluding marketable securities and impact of revaluation of available-for-sale securities to fair value) 182.9 163.7 (+) Loans and receivables carried at amortized cost (excluding assets related to financing) 897.8 840.0 (+) Investments in joint ventures (excluding Other comprehensive income net of taxes) 586.1 421.3 (+) Investments in associates (excluding Other comprehensive income net of taxes) 762.5 747.7 (+) Trade and other receivables 3,966.5 3,790.1 (+) Inventories 274.0 262.2 (+) Other current and non-current assets 1,826.2 1,672.2 (-) Provisions and actuarial losses/gains on pensions plans (1,658,6) (1,625.6) (-) Trade and other payables (2,991.2) (2,871.2) (-) Other current and non-current liabilities (4,803.4) (4,646.5) (-) Other financial liabilities (3.0) (4.7) CAPITAL EMPLOYED 15,007.8 14,296.2
(a) Refer to Note 1.2.1.
3.4.3 Reconciliation of investments in property, plant and equipment and intangible assets and financial investments with items in the statement of cash flows
In millions of euros December 31, 2015 December 31, 2014 Investments in property, plant and equipment and intangible assets (1,276.5) (1,076.6) Takeover of subsidiaries net of cash and cash equivalents acquired (85.8) (73.3) Acquisitions of interests in associates and joint-ventures (26.5) (105.6) Acquisitions of available-for-sale securities (29.2) (15.4) Change in share of interests in controlled entities (327.8) (221.4) TOTAL INVESTMENTS (1,745.8) (1,492.3)
284 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
NOTE 4 Current operating income
In millions of euros December 31, 2015 December 31, 2014 Revenues 15,134.7 14,324.1 Purchases (2,945.5) (2,833.1) Personnel costs (3,818,4) (3,656.4) Depreciation, amortization and provisions (1,091.9) (1,097.7) Other operating income and expenses (6,163.8) (5,725.7) CURRENT OPERATING INCOME 1,115.1 1,011.2
XX 4.1 Revenues The following table shows Group's revenues per category:
In millions of euros December 31, 2015 December 31, 2014 Sale, transport and distribution of electricity 413.2 406.5 Water, Recycling and Recovery Europe 13,256.3 12,680.9 Engineering and construction contracts and other services 1,465.2 1,236.7 TOTAL 15,134.7 14,324.1
XX 4.2 Personnel costs
In millions of euros December 31, 2015 December 31, 2014 Short-term benefits (3,768,3) (3,556.1) 20 Share-based payments or by cash payment (16.9) (16.9) Post-employment benefit obligations and other long-term benefits (33.2) (83.4) TOTAL (3,818,4) (3,656.4)
Short-term benefits correspond to salaries and expenses Share-based payments are broken down in Note 23. This recognized for the period. The amount of these short-term amount includes the impact of Long-term incentive plan. benefits is reduced by the impact of CICE (tax credit for Post-employment benefit obligations and other long-term competitiveness and employment) in France for an amount of benefits are disclosed in Note 18. This amount corresponds to €39.3 million in 2015 for the companies included in the French defined-benefit plan expenses (see Note 18.2.3) and to defined- tax consolidation group versus €39.6 million in 2014. contribution plan expenses (see Note 18.3).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 285 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX 4.3 Depreciation, amortization and provisions The amounts shown below are net of reversals:
In millions of euros December 31, 2015 December 31, 2014 Depreciation and amortization (1,107.7) (1,067.2) Depreciation of inventories, trade receivables and other assets (11.6) (34.5) Net change in provisions 27.4 4.0 TOTAL (1,091.9) (1,097.7)
The depreciation breakdown is €707.1 million for property, plant and equipment and €400.6 million for intangible assets. The breakdown by type of asset is shown in Notes 10 and 11.
XX 4.4 Other operating income and expenses Other operating income and expenses include the following amounts:
In millions of euros December 31, 2015 December 31, 2014 Other operating income 234.0 227.9 Other operating expenses (6,397.8) (5,953.6) Sub-contracting (2,079.8) (1,905.3) Taxes excluding corporate income tax (755.9) (691.0) Other expenses (3,562.1) (3,357.3) TOTAL (6,163.8) (5,725.7)
“Other expenses” mainly include the following types of costs: rental expenses, external personnel, professional fees and compensation of intermediaries.
NOTE 5 Income from operating activities
In millions of euros December 31, 2015 December 31, 2014 CURRENT OPERATING INCOME 1,115.1 1,011.2 MtM on operating financial instruments 0.6 (0.6) Impairment on property, plant and equipment, intangible and financial assets (80.4) (105.2) Restructuring costs (71.4) (58.0) Scope effects 0.9 82.4 Other gains and losses on disposals and non-recurring items 4.1 0.2 Costs linked to changes in the brand and visual identity (27.5) - INCOME FROM OPERATING ACTIVITIES 941.4 930.0
286 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
XX 5.1 MtM on operating financial instruments fluctuations. However, to the extent that these strategies hedge net exposure to the price risk of the entities in The mark-to-market on operating financial instruments question, they are not eligible for the recognition of hedging amounted to a gain of +€0.6 million at December 31, 2015, in accordance with the provisions of IAS 39 – Financial versus a loss of -€0.6 million in 2014 resulting primarily from instruments – recognition and measurement. Consequently, the following factors: all changes in the fair value of the forward contracts XX to optimize their margins, certain Group entities implement concerned must be reflected in the income statement; economic hedging strategies through forward contracts XX gains and losses are recorded in the income statement in traded on the wholesale markets, aimed at reducing the respect of the ineffective portion of future cash flow hedging sensitivity of the Group’s margins to commodity price strategies on non-financial assets (cash flow hedge).
XX 5.2 Impairments of property, plant and equipment, intangible assets and financial assets
In millions of euros December 31, 2015 December 31, 2014 Impairments Goodwill - - Property, plant and equipment and other intangible assets (56.6) (70.3) Financial assets (33.8) (42.2) TOTAL (90.4) (112.5) Write-back of impairments Property, plant and equipment and other intangible assets 6.9 3.9 Financial assets 3.1 3.4 TOTAL 10.0 7.3 TOTAL (80.4) (105.2)
5.2.1 Impairments of goodwill XX 5.3 Restructuring costs 20 No impairment on goodwill was recognized in 2015, pursuant At December 31, 2015, this item mainly includes the to the procedure described in Note 9.3. reorganization costs in the three operating segments. At December 31, 2014, this item mainly included the costs of 5.2.2 Impairments of property, plant and equipment and adaptation plans related to the business slowdown in the Recycling and Recovery Europe and International segments. intangible assets excluding goodwill In 2015, as for 2014, this item mainly recognized impairment XX 5.4 Scope effects of property, plant and equipment in the Recycling and Recovery Europe and Water Europe operating segments. At December 31, 2015, this item includes mainly insignificant individual amounts. 5.2.3 Impairments of financial assets At December 31, 2014, this item mainly included a revaluation gain for €64.5 million due to the assessment at fair value of In 2015, as for 2014, the evolution in this item is connected Acea securities already held at January 1, 2014 following the mainly with the evolution of financial receivables relating to gain of significant influence occurred in 2014. an International concession contract.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 287 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX 5.5 Other gains and losses on disposals and non-recurring items
In millions of euros December 31, 2015 December 31, 2014 Disposals of property, plant and equipment and intangible assets 2.1 5.5 Disposals of shares 2.0 (5.3) TOTAL 4.1 0.2
In 2015, as for 2014, this item shows only insignificant individual amounts.
XX 5.6 Costs linked to changes of brand Expenses of an unusual nature and a significant amount are presented on a separate line in the income statement, between and visual identity the current operating income and the income from operating In 2015, external service providers worked on the rebranding activities. and change of visual identity. The fees for this work and the costs incurred through the rebranding and change of visual identity reached a total of €27.5 million as at December 31, 2015.
NOTE 6 Net financial income/loss
December 31, 2015 December 31, 2014
In millions of euros Expenses Income Total Expenses Income Total Cost of net debt (415.3) 51.9 (363.4) (432.8) 58,0 (374.8) Other financial income and expenses (95.3) 37.2 (58,1) (83.8) 52.9 (30.9) FINANCIAL INCOME/(LOSS) (510.6) 89.1 (421.5) (516.6) 110.9 (405.7)
XX 6.1 Cost of net debt This item primarily includes interest expenses related to gross borrowings (calculated using the effective interest rate – EIR), gains and losses arising from foreign currency and interest rate hedging transactions on gross borrowings, as well as interest income on cash investments and changes in the fair value of financial assets measured at fair value through income.
December 31, 2015 December 31, 2014
In millions of euros Expenses Income Total Expenses Income Total Interest expense on gross borrowings (354.4) - (354.4) (351.5) - (351.5) Exchange gain/(loss) on borrowings and hedges (31.4) - (31.4) (49.6) - (49.6) Unrealized income/(expense) from economic hedges on borrowings - 0.4 0.4 (0.1) - (0.1) Income/(expense) on cash and cash equivalents, and financial assets at fair value through income - 35.9 35.9 - 34.1 34.1 Capitalized borrowing costs - 4.5 4.5 - 12.6 12.6 Financial income (expense) relating to a financial debt or receivable restructuring (29.5) 11.1 (18,4) (31.6) 11.3 (20.3) COST OF NET DEBT (415.3) 51.9 (363.4) (432.8) 58,0 (374.8)
288 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
XX 6.2 Other financial income and expenses
December 31, 2015 December 31, 2014
In millions of euros Expenses Income Total Expenses Income Total Net interest expenses related to post employment and other long term benefits (18,6) - (18,6) (20.9) - (20.9) Unwinding of discounting adjustment to long term provisions (except post employment) (50.1) - (50.1) (45.5) - (45.5) Change in fair value of derivatives not included in net debt - 0.3 0.3 - 0.5 0.5 Income from available-for-sale securities - 9.7 9.7 - 24.5 24.5 Other (26.6) 27.2 0.6 (17.4) 27.9 10.5 OTHER FINANCIAL INCOME AND EXPENSES (95.3) 37.2 (58,1) (83.8) 52.9 (30.9)
NOTE 7 Income tax
XX 7.1 Income tax expense in the income statement
7.1.1 Breakdown of income tax expense in the income statement Income tax expense for the fiscal year amounted to €173.0 million (compared to €173.1 million in 2014) and breaks down as follows:
In millions of euros December 31, 2015 December 31, 2014 20 Current income tax (176.2) (157.9) Deferred taxes 3.2 (15.2) TOTAL INCOME TAX EXPENSE RECOGNIZED IN INCOME (173.0) (173.1)
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 289 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
7.1.2 Theoretical income tax expense and actual income tax expense The reconciliation between the Group’s theoretical income tax expense and actual income tax expense is shown in the following table:
In millions of euros December 31, 2015 December 31, 2014 Net income 613.3 600.5 XX Share in net income of associates and joint ventures 266.4 249.3 XX Income tax expense (173.0) (173.1) Income before income tax and share in net income of associates and joint ventures (A) 519.9 524.3 Of which French companies (27.7) (2.2) Of which companies outside France 547.6 526.5 Statutory income tax rate of SUEZ ENVIRONNEMENT COMPANY (B) (a) 38,0% 38,0% THEORETICAL INCOME TAX EXPENSE (C) = (A) X (B) (197.6) (199.2) Difference between the normal tax rate applicable to SUEZ ENVIRONNEMENT COMPANY and the normal tax rate applicable in jurisdictions in France and outside France (b) 55.8 63.4 Permanent differences (c) (43.4) (24.7) Income taxed at a reduced rate or tax-exempt (d) (3.8) 5.8 Additional tax expense (e) (46.2) (68,4) Effect of unrecognized deferred tax assets on tax loss carryforwards and on other tax-deductible temporary differences (f) (56.9) (32.4) Recognition or utilization of tax assets on previously unrecognized tax loss carryforwards and other tax-deductible temporary differences (g) 32.4 17.5 Impact of changes in tax rates (h) 0.3 (16.7) Tax savings and credits (i) 68,9 40.3 Other (j) 17.3 41.3 Actual income tax expense (173.0) (173.1) EFFECTIVE TAX RATE (ACTUAL INCOME TAX EXPENSE DIVIDED BY INCOME BEFORE INCOME TAX AND SHARE IN NET INCOME OF ASSOCIATES AND JOINT VENTURES) 33.3% 33.0%
(a) The overall corporate tax rate in France is 38.00% for companies with revenues over €250 million. Under current law, this rate will remain in place until 2015. (b) It mainly reflects the impact of the rate difference in 2015 between Chile (22.5%) and France. The corporate tax rate in Chile in 2014 was 21%. (c) It includes the impact of the limitation on the deductibility of financial expenses to 75% in France in 2015 and 2014, and the impact of the non-deductibility of expenses related to share-based payments. Moreover, this item also includes the impact of the non-taxation of the revaluation gain on Acea securities. (d) In 2014, this included the impact of taxation at the reduced rate of gains on the disposal of investments. (e) Additional taxes in 2015 and 2014 are mainly attributable to the application in France of the 3% contribution on dividends paid out, to withholding taxes on dividends received. Moreover, in 2014, this items included the effect of residual tax on transfers of shareholdings within the Group. (f) In 2015, this item includes an impact of -€30 million from the capping of deferred tax assets withint the French tax consolidation group (see 7.3.2). (g) In 2015, the recognition of deferred tax within the Australian tax consolidation group amounts to €2.8 million (compared with €4.4 million in 2014). Furthermore, in 2015, this amount also includes reversals of deferred tax in assets, which having expired and gone unused, were then written off. (h) In 2014, this mainly includes the impact of the revaluation of deferred tax liabilities at Agbar following the gradual increase in the tax rate of its subsidiary Aguas Andinas in Chile (from 20% in 2013 to 21 % in 2014, and to 27% in 2018), partially offset by the reduced tax rate in Spain. (i) It mainly includes the impact of the tax credit for Competitiveness and Employment (CICE) and tax credit for Corporate Sponsorship in France. Moreover, in 2015, this item includes tax credits perceived in Spain. (j) It mainly includes the impact of the tax savings generated by the tax consolidation group in France. In 2014, this included the favorable impact of tax adjustments from prior years at Agbar.
Stabilization of the effective tax rate at December 31, 2015 The relative low effective tax rate at December 31, 2015, as for compared to that of 2014 can be explained by two contrary 2014, can be explained by the Group’s presence in countries impacts that offset each other: with more favorable tax rates such as Chile and the United Kingdom. XX the impact of the cap on deferred tax assets within the French tax consolidation group in 2015; XX the use of tax credits in Spain in 2015.
290 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
7.1.3 Analysis by type of temporary difference in deferred tax income/expenses on the income statement
In millions of euros December 31, 2015 December 31, 2014 Deferred tax assets Loss carryforwards and tax credit 6.3 2.3 Pension obligations (16.9) (2.3) Concessions arrangements 0.1 4.9 Non-deductible provisions 7.0 (9.3) Differences between the carrying amount of PPE and their tax bases 24.4 38,2 Measurement of financial instruments at fair value (IAS 32/39) (25.5) (2.0) Other 62.7 3.4 TOTAL 58,1 35.2 Deferred tax liabilities Differences between the carrying amount of PPE and their tax bases (3.0) (31.1) Concessions arrangements (16.6) (15.5) Tax-driven provisions (0.4) (1.1) Measurement of assets and liabilities at fair value (IAS 32/39) (3.3) (4.3) Other (31.6) 1.6 TOTAL (54.9) (50.4) NET DEFERRED TAXES 3.2 (15.2)
In 2015, the amounts appearing under "Other" in assets are retroactive tax deduction for certain investments within primarily related to the recognition of deferred tax assets on the scope of regulated activities while their accounting tax credits received in Spain. amortization is over a longer period; 20 In 2015, as in 2014, the amounts reported in liabilities under XX and the revaluation of deferred tax liabilities due to tax rate “Differences between the carrying amount of PPE and their changes in Chile and Spain. tax bases” include the depreciation of revalued assets as part In 2015 and 2014, the amounts reported in assets under of allocating the business combination costs related to the “Differences between the carrying amount of PPE and their takeovers of Agbar and former joint companies (Lyonnaise tax bases” correspond to the flows of deferred tax assets on Des Eaux France). temporary differences arising from the tax values of depreciable In 2014, the amounts reported in liabilities under “Differences assets exceeding their carrying amount. between the carrying amount of PPE and their tax bases” included in addition: XX the recognition of a deferred tax liability at United Water through the application of the new tax law that allows a
XX 7.2 Deferred tax income and expense recognized in “other comprehensive income” Deferred tax income and expense recognized in “Other comprehensive income” break down as follows:
In millions of euros December 31, 2015 December 31, 2014 Available-for-sale securities 0.1 (0.1) Actuarial gains and losses (18,6) 43.3 Net investment hedges 1.7 1.4 Cash flow hedges (2.9) 1.5 TOTAL EXCLUDING SHARE OF ASSOCIATES AND JOINT VENTURES (19.7) 46.1 Share of associates 2.2 7.9 Share of joint ventures 33.8 (14.7) TOTAL 16.3 39.3
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 291 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
The impact in 2015 is primarily due to the tax effect of: The impact in 2014 came from the tax effect of: XX actuarial gains on pension obligations and other long- XX actuarial losses on pension obligations and other long-term term benefits in the International operating segment in the benefits in the International business for €43.3 million; amount of €18.6 million; XX the remeasurement at fair value of non-consolidated XX the reversal of the "Other comprehensive income" securities held in Chongqing Water Group in China, for revaluation of Chongqing Water Group securities in the €14.7 million. amount of €34 million, which were classified as available- for-sale securities in 2014 and are now consolidated via the equity method (see Notes 2 and 12).
XX 7.3 Deferred taxes in the statement of financial position
7.3.1 Change in deferred taxes Movements in deferred taxes recorded in the statement of financial position, after netting off the deferred tax assets and liabilities by tax entity, are broken down as follows:
In millions of euros Assets Liabilities Net Balances At December 31, 2014 (a) 790.7 (576.8) 213.9 From income statement 58,1 (54.9) 3.2 From other comprehensive income (31.5) 11.8 (19.7) Scope effects 2.8 (7.7) (4.9) Translation adjustments 22.3 (30.5) (8,2) Other impacts (2.4) 13.6 11.2 Deferred tax netting off by tax entity (7.9) 7.9 - AT DECEMBER 31, 2015 832.1 (636.6) 195.5
(a) See Note 1.2.1.
7.3.2 Analysis of the net deferred tax position recognized on the statement of financial position (before netting off deferred tax assets and liabilities by tax entity), by type of temporary difference
In millions of euros December 31, 2015 December 31, 2014(a) Deferred tax assets Loss carry-forwards and tax credit 424.5 400.1 Pension obligations 209.1 232.7 Concessions arrangements 113.9 102.1 Non-deductible provisions 189.7 188,3 Differences between the carrying amount of PPE and their tax bases 129.6 113.3 Measurement of financial instruments at fair value (IAS 32/39) (35.3) 16.9 Other 319.7 248,8 TOTAL 1,351.3 1,302.2 Deferred tax liabilities Differences between the carrying amount of PPE and their tax bases (937.0) (896.1) Concessions arrangements (54.4) (37.8) Tax-driven provisions (11.3) (10.8) Measurement of assets and liabilities at fair value (IAS 32/39) (31.8) (30.7) Other (121.3) (112.8) TOTAL (1,155.8) (1,088,2) NET DEFERRED TAXES 195.5 213.9
(a) See Note 1.2.1.
292 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
The deferred tax assets recognized on loss carry-forwards they did not meet the criteria for recognition as a deferred tax amounted to €424.5 million as of December 31, 2015 versus asset) amounted to €225.3 million for ordinary tax loss carry- €400.1 million as of December 31, 2014. forwards, versus €159.2 million as of December 31, 2014. In 2015, the Group generated net deferred tax assets within the French tax consolidation group. These assets are capped OTHER TEMPORARY DIFFERENCES NOT RECOGNIZED for an amount of €57 million, including €30 million through The amount of deferred tax assets on other unrecognized income. The total amount of net deferred tax assets within temporary differences amounted to €55.2 million as of the French tax consolidation group, including all temporary December 31, 2015, compared to €69.4 million as of differences, remained stable after capping in 2015 compared December 31, 2014. to December 31, 2014, and amounted to €301.4 million versus €308.0 million as of December 31, 2014. 7.4.2 Unrecognized deferred tax liabilities on taxable Management considers that the French tax consolidation group will be able to use up its deferred tax assets on loss carry- temporary differences relating to investments forwards over the 7-year medium-term plan (approximately in subsidiaries 60% of them as previously) or beyond. No significant deferred tax liability has been recognized on temporary differences when the Group is able to control the XX 7.4 Unrecognized deferred taxes timing of their reversal and it is probable that the temporary difference will not reverse in the foreseeable future. 7.4.1 Deductible temporary differences not recognized
TEMPORARY DIFFERENCES ON LOSSES CARRIED FORWARD As of December 31, 2015, unused tax losses carried forward and not recognized in the statement of financial position (because
NOTE 8 Earnings per share 20 December 31, 2015 December 31, 2014 Numerator (in millions of euros) Net income, Group share 407.6 417.2 XX coupon attributable to holders of undated deeply subordinated notes issued by SUEZ ENVIRONNEMENT COMPANY in September 2010 (6.4) (32.5) XX coupon attributable to holders of undated deeply subordinated notes issued by SUEZ ENVIRONNEMENT COMPANY in June 2014 (15.0) - (+) expenses related to the partial redemption of the undated deeply subordinated notes (12.6) (15.5) ADJUSTED NET INCOME, GROUP SHARE 373.6 369.2 Denominator (in millions) WEIGHTED AVERAGE NUMBER OF OUTSTANDING SHARES 539.0 518.2 Earnings per share (in euros) Net income Group share per share 0.69 0.71 Net diluted income Group share per share 0.68 0.69
The Group’s dilutive instruments included in the calculation of diluted earnings per share are as follows: XX the SUEZ ENVIRONNEMENT COMPANY bonus share plans; XX the SUEZ ENVIRONNEMENT COMPANY stock options plans; XX the OCEANE 2020 convertible bonds, i.e. 19,052,803 securities issued in 2014, which generate financial expense of €6.3 million in 2015.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 293 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
NOTE 9 Goodwill
XX 9.1 Movements in the carrying amount of goodwill
In millions of euros Gross amount Impairment Losses Carrying amount AT DECEMBER 31, 2013 3,192.1 (97.2) 3,094.9 Scope effects 49.6 - 49.6 Impairment losses - - - Translation adjustments 119.3 (1.9) 117.4 Other - - - AT DECEMBER 31, 2014 3,361.0 (99.1) 3,261.9 Scope effects 55.0 2.1 57.1 Impairment losses - - - Translation adjustments 115.9 (1.1) 114.8 Other 44.4 1.3 45.7 AT DECEMBER 31, 2015 3,576.3 (96.8) 3,479.5
In 2015, the net change in goodwill came to +€217.6 million. In 2014, the net change in goodwill came to +€167.0 million. This is mainly the result of: This was mainly the result of: XX the takeover of Poseidon for +€12.6 million and the acquisition XX the takeover of Process Group in the International business of B&V Group for +€10.5 million in the International operating for +€42.5 million; sector (refer to Note 2.1); XX translation adjustments (mainly related to fluctuations in XX translation adjustments (mainly related to fluctuations in the US dollar, the pound sterling, and Hong Kong dollar for the US dollar, the pound sterling, and Hong Kong dollar for +€117,4 million). +€111.1 million).
XX 9.2 Main goodwill cash generating units (CGUs) Goodwill CGUs break down as follows:
In millions of euros Operating segment December 31, 2015 December 31, 2014 Material CGUs Sita France Recycling and Recovery Europe 578,6 531.6 Agbar Water Europe 565.7 537.9 Sita News Recycling and Recovery Europe 506.4 505.2 United Water – regulated activity International 480.4 430.7 Sita UK Recycling and Recovery Europe 423.7 399.3 Lyonnaise des Eaux Water Europe 311.6 306.2 Sita Waste Services International 202.2 181.3 Sita Australia International 163.3 160.2 Other CGUs (individual goodwill of less than €150 million or about 5% of total amount) 247.6 209.4 TOTAL 3,479.5 3,261.9
294 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
XX 9.3 Impairment test XX a discount rate appropriate for the CGU depending on the business, country and currency risks of each CGU. The after- All goodwill cash-generating units (CGUs) are tested for tax discount rates applied in 2015 range from 4.7% to 6.6%. impairment. Impairment tests were carried out based on actual results at the end of June, on the last forecast of the year taking When this method is used, the measurement of the recoverable into account the upcoming events in the second half of the year, value of goodwill CGU is based on three scenarios (low, medium on the following year budget and on the medium-term plan and high), distinguished by a change in key assumptions: the (MTP) over four years for the rest of the business plan. discount rate and the long term growth rate of normalized free cash flow. The medium scenario is preferred. The recoverable value of goodwill CGUs is calculated by applying various methods, primarily the discounted cash flow Valuations thus obtained are systematically compared with (DCF) method, which is based on the following: valuations obtained using the market multiples method or the stock exchange capitalization method, when applicable. XX cash flow projections prepared over the duration of the medium-term plan approved by the Group’s Board of Based on events reasonably foreseeable at this time, the Directors. These are linked to operating conditions estimated Group believes there is no reason to find material impairment by the Management Committee, specifically the duration of on the goodwill shown in the statement of financial position, contracts carried by entities of the CGU in question, changes and that any changes affecting the key assumptions described in pricing regulations and future market outlooks; below should not result in excess book value over recoverable amounts. XX a terminal value for the period after the MTP, calculated by applying the long-term growth rate, which is between 2% and 3% depending on the activity, to normalized free cash flow (1) (used specifically in impairment tests) in the final year of the projections;
Main assumptions used for material goodwill The following table describes the method and discount rate used in examining the recoverable amount of material goodwill CGUs:
Cash-generating units Measurement method Discount rates Sita France DCF + confirmation by multiple(a) 5.3% 20 Sita News DCF + confirmation by multiple (a) 5.4% United Water – regulated activity Multiples (a) + DCF 4.7% Agbar DCF + confirmation by multiple (a) 5.8% Sita UK DCF + confirmation by multiple (a) 5.8% Lyonnaise des Eaux DCF + confirmation by multiple (a) 4.9% Sita Waste Services DCF + confirmation by multiple (a) 6.5% Sita Australia DCF + confirmation by multiple (a) 6.6%
(a) Valuation multiples of comparable entities: market value of transactions.
(1) The “normalized” free cash flow used in impairment tests is different from free cash flow in the following aspects: no financial interest, use of a normalized tax rate, taking into account all investment flows (maintenance capital expenditures and financial disposals, already committed development capital expenditures and financial acquisitions).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 295 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX 9.4 Sensitivity to interest rate and operational the recoverable amounts of goodwill CGUs, which remain higher than their book values. assumptions The table below shows the sensitivity of the measurements of A change of 50 basis points upward or downward in the discount recoverable value exceeding book value, in response to changes rate or growth rate of normalized free cash flow does not affect in discount rates and growth rates:
Growth rate of "normalized" Discount rates Free Cash Flow Impact in % on excess of recoverable value over book value -50 pb +50 pb -50 pb +50 pb Sita France 33% -24% -21% 29% Sita News 48% -36% -31% 41% United Water – regulated activity 133% -72% -31% 56% Agbar 53% -41% -35% 46% Sita UK 42% -32% -27% 36% Lyonnaise des Eaux 34% -24% -21% 30% Sita Waste Services 38% -31% -26% 32% Sita Australia 16% -13% -11% 14%
Moreover, we have ensured that, in 2015, a reasonable decrease (equal to or less than 5%) of both cash flows during the medium- term plan and of the terminal value does not call into question the goodwill values of the different significant CGUs.
XX 9.5 Segment information The carrying amount of goodwill can be analyzed by operating segment as follows:
In millions of euros December 31, 2015 December 31, 2014 Water Europe 887.3 853.9 Recycling and Recovery Europe 1,642.8 1,567.1 International 946.7 838,2 Other 2.7 2.7 TOTAL 3,479.5 3,261.9
The segment breakdown above is based on the operating segment of the acquired entity (and not on that of the acquirer).
296 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
NOTE 10 Intangible assets
XX 10.1 Movements in the carrying amount of intangible assets
Intangible rights arising In millions of euros Softwares on concession contracts Other Total A. Gross amount at December 31, 2013 509.0 5,227.3 1,122.2 6,858,5 Acquisitions 37.1 189.8 93.1 320.0 Disposals (12.0) (60.8) (a) (9.7) (82.5) Translation adjustments (0.1) 22.3 31.8 54.0 Changes in scope of consolidation 0.1 (44.4) (b) 5.2 (39.1) Other 100.4 (d) 50.0 (c) (87.2) (d) 63.2 At December 31, 2014 634.5 5,384.2 1,155.4 7,174.1 Acquisitions 47.8 210.1 85.6 343.5 Disposals (2.7) (101.9) (a) 2.2 (102.4) Translation adjustments (1.7) 18,0 26.5 42.8 Changes in scope of consolidation 0.3 25.3 7.5 33.1 Other 20.3 (7.4) (98,5) (85.6) AT DECEMBER 31, 2015 698.5 5,528.3 1,178,7 7,405.5 B. Accumulated depreciation and impairment at December 31, 2013 (351.7) (1,802.5) (390.3) (2,544.5) Depreciation (55.1) (266.6) (59.6) (381.3) Impairment losses (5.6) (5.9) (25.7) (37.2) Disposals 9.4 59.7 (a) 9.5 78,6 20 Translation adjustments (0.1) (4.5) (9.9) (14.5) Changes in scope of consolidation - 15.0 (b) (0.1) 14.9 Other (0.3) (3.7) (10.1) (14.1) At December 31, 2014 (403.4) (2,008.5) (486.2) (2,898,1) Depreciation (58,9) (283.3) (58,4) (400.6) Impairment losses - (3.3) (7.4) (10.7) Disposals 2.2 95.0 (a) (2.4) 94.8 Translation adjustments 1.2 (3.2) (8,5) (10.5) Changes in scope of consolidation (0.1) 0.8 0.2 0.9 Other (7.5) 13.0 26.8 32.3 AT DECEMBER 31, 2015 (466.5) (2,189.5) (535.9) (3,191.9) C. Carrying Amount At December 31, 2014 157.3 3,424.8 731.9 4,314.0 At December 31, 2014 231.1 3,375.7 669.2 4,276.0 AT DECEMBER 31, 2015 232.0 3,338,8 642.8 4,213.6
(a) "Disposals" reflect the derecognition at the end of the concession contract of intangible assets that are in the scope of IFRIC 12. (b) Changes in the scope of consolidation in 2014 were mainly due to the disposal of SADET by Lyonnaise des Eaux and to the achievement of the PPA that led to reassess the value of Aguas de Sabadell's intangible assets linked to concession contracts . (c) The line "Other" of intangible rights arising on concession contracts in 2014 corresponded mainly to the revaluation of Lydec concession rights following the contract renegociation. (d) These were primarily reclassifications of intangible assets in progress related to various ongoing software development projects within the Group.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 297 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
10.1.1 Intangible rights arising on concession contracts XX 10.2 Information on research and development The Group manages a large number of concession contracts as expenses defined by SIC 29 (see Note 22) in the drinking water distribution, Research and Development activities relate to various studies wastewater treatment, and waste management businesses. regarding technological innovation, improvements in plant Infrastructure rights granted to the Group as concession efficiency, safety, environmental protection and service quality. operator, falling within the scope of application of IFRIC 12, and corresponding to the intangible model, are recognized Research and Development activities that do not meet the under this category. These include the rights to charge users assessment criteria defined in IAS 38 were posted to expenses recognized under the intangible asset model in IFRIC 12. in the amount of €74 million, unchanged from 2014. Expenses related to in-house projects in the development phase 10.1.2 Non-depreciable intangible assets that meet the criteria for recognition as an intangible asset are not material. Non-depreciable intangible assets, mainly composed of water rights, amounted to €95 million as of December 31, 2015, versus €120 million as of December 31, 2014, and were included in the column “Other”. No significant impairment was posted in this asset category in 2015.
298 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
NOTE 11 Property, plant and equipment
XX 11.1 Movements in the carrying amount of property, plant and equipment
Capitalized dismanting Total property, Plant and Transport and restoration Construction in plant and In millions of euros Lands Constructions equipment equipment costs progress Other equipment A. Gross amount AT DECEMBER 31, 2013 1,805.7 3,230.8 6,707.9 1,443.1 539.1 610.0 420.3 14,756.9 Acquisitions 29.8 60.6 209.5 47.1 - 426.9 21.7 795.6 Disposals (22.0) (46.2) (182.2) (81.5) - - (12.1) (344.0) Translation adjustments 37.6 9.7 232.2 5.7 7.3 12.3 19.5 324.3 Changes in scope of consolidation (14.3) (3.4) 10.7 3.7 - 0.5 0.7 (2.1) Other 7.3 43.9 279.7 51.3 (12.7) (395.1) 2.7 (22.9) AT DECEMBER 31, 2014 1,844.1 3,295.4 7,257.8 1,469.4 533.7 654.6 452.8 15,507.8 Acquisitions 14.5 78.3 173.7 58.9 - 532.0 58.9 916.3 Disposals (16.2) (65.0) (190.3) (113.2) - - (63.8) (448.5) Translation adjustments 22.6 3.1 212.8 14.5 6.9 9.6 17.7 287.2 Changes in scope of consolidation 3.8 (4.1) (9.3) 17.5 7.3 5.0 3.6 23.8 Other 75.5 45.7 272.5 62.8 4.5 (517.3) 2.7 (53.6) AT DECEMBER 31, 2015 1,944.3 3,353.4 7,717.2 1,509.9 552.4 683.9 471.9 16,233.0 B. Accumulated depreciation and impairment 20 AT DECEMBER 31, 2013 (887.0) (1,264.0) (3,028.2) (1,010.1) (535.7) (3.1) (278.8) (7,006.9) Depreciation (56.1) (132.1) (327.1) (116.0) (0.2) - (54.4) (685.9) Impairment losses (14.3) (1.1) (6.4) (0.7) - (10.1) (0.6) (33.2) Disposals 17.8 34.9 165.7 76.9 - 0.1 11.1 306.5 Translation adjustments (30.9) (8.4) (67.4) (3.3) (7.3) (0.9) (11.2) (129.4) Changes in scope of consolidation 11.6 0.7 (1.3) (0.9) - - (0.5) 9.6 Other 22.5 - (9.0) (3.1) 12.7 - 17.5 40.6 AT DECEMBER 31, 2014 (936.4) (1,370.0) (3,273.7) (1,057.2) (530.5) (14.0) (316.9) (7,498.7) Depreciation (58.2) (129.3) (338.8) (119.0) (0.2) - (61.6) (707.1) Impairment losses (4.3) (9.9) (29.3) (1.6) - (0.6) (0.2) (45.9) Disposals 11.5 53.7 181.2 100.7 - - 53.6 400.7 Translation adjustments (22.9) (6.2) (58.6) (10.7) (6.9) (1.2) (10.4) (116.9) Changes in scope of consolidation (2.6) 6.1 13.2 (11.6) (7.3) (0.6) (1.8) (4.6) Other (18.0) 25.6 (7.9) (1.1) (4.5) - 20.3 14.4 AT DECEMBER 31, 2015 (1,030.9) (1,430.0) (3,513.9) (1,100.5) (549.4) (16.4) (317.0) (7,958.1) C. Carrying Amount At December 31, 2013 918.7 1,966.8 3,679.7 433.0 3.4 606.9 141.5 7,750.0 At December 31, 2014 907.7 1,925.4 3,984.1 412.2 3.2 640.6 135.9 8,009.1 AT DECEMBER 31, 2015 913.4 1,923.4 4,203.3 409.4 3.0 667.5 154.9 8,274.9
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 299 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
In 2015, the main changes were as follows: XX 11.2 Pledged and mortgaged assets XX Disposals include the scrap of fully amortized assets and Assets pledged and mortgaged as collateral for borrowings sale of assets that are individually not significant; amounted to €9.4 million at December 31, 2015 against XX the main translation adjustments on the carrying amount €124.7 million at December 31, 2014. This significant decrease of property, plant and equipment concern the Chilean peso is primarily due to the cancelling of guarantees concerning the (-€86 million), the US dollar (+€225 million) and the pound financing of the Zorbau incinerator by SE Deutschland following sterling (+€25 million). repayment of this loan. In 2014, the main changes were as follows: XX the lines “Other” included in particular the recognition of XX 11.3 Contractual commitments for the acquisition new assets relating to finance leases in accordance with of property, plant and equipment IAS 17 and have no impact on cash flow; In the course of ordinary operations, some Group companies XX the main translation adjustments on the carrying amount of also entered into commitments to invest in technical facilities, property, plant and equipment concerned the Chilean peso with a corresponding commitment by related third parties to (-€71 million), the US dollar (+€229 million) and the pound deliver these facilities. sterling (+€28 million). The Group’s contractual commitments for property, plant and equipment amounted to €546.5 million at December 31, 2015, against €302.8 million at December 31, 2014. This change is mainly due to the increase in investment commitments for property, plant and equipment in Agbar totaling €142 million, for the Mapocho facility in Chile, and totaling €94.4 million for Sita UK for the Surrey Eco Park project, where construction began in 2015.
NOTE 12 Investments in joint ventures and associates
XX 12.1 Investments in joint ventures
Carrying amount of investments Share in net income/ (loss) in joint ventures of joint ventures
In millions of euros December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014 SFH group 259.8 251.3 27.0 152.2 Suyu group 257.0 216.6 142.6 10.8 Other 67.8 60.0 10.2 10.2 TOTAL 584.6 527.9 179.8 173.2
In millions of euros December 31, 2015 December 31, 2014 Net income 179.8 173.2 Other comprehensive income (OCI) (82.5) 102.9 COMPREHENSIVE INCOME 97.3 276.1
The Group’s largest joint ventures are Sino-French Holdings of consolidation and were revalued in other comprehensive (SFH), based in Hong Kong, in which the Group has a 50% stake income. and Suyu, based in China, in which the Group has a 50% stake. At December 31, 2015, Suyu acquired a significant influence At December 31, 2014, the SFH group’s net income primarily in Derun Environment, which now owns 50.04% of Chongqing includes the capital gain on the disposal of CEM – Companhia Water Group. At this time, the Chongqing Water Group securities de Electricidade de Macau. At December 31, 2014, Suyu owned were revalued by the income statement (see Note 2). Chongqing Water securities in China, which were not in the scope
300 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
The summarized financial information at 100% of the SFH Group are presented below.
Summarized Statement of financial position at 100%
In millions of euros December 31, 2015 (a) December 31, 2014 (a) Non-current assets 621.3 586.4 Current assets 81.9 129.7 of which Cash and cash equivalents 53.1 99.0 TOTAL ASSETS 703.2 716.1 Shareholders' equity, Group share 519.6 502.7 Non-controlling interests 4.3 3.8 Total shareholders' equity 523.9 506.5 Non-current liabilities 159.5 143.4 Current liabilities 19.8 66.2 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 703.2 716.1
(a) Includes chinese joint ventures held at 50% and equity accounted.
Summarized Income Statement at 100%
In millions of euros December 31, 2015 (a) December 31, 2014 (a) Revenues 72.5 60.1 Current operating income (6.2) (1.5) Net income – Group share (b) 54.0 304.5 Net income – non-controlling interests 1.1 1.0 20 Net income 55.1 305.5 Other comprehensive income (OCI) 35.5 82.8 COMPREHENSIVE INCOME 90.5 388,3
(a) Chinese joint ventures are presented under equity method. (b) Of which the net disposal gain on Companhia de Electricidade de Macau (CEM) for an amount of €129.6 million in 2014.
Dividends at 100%
In millions of euros Dividends related to 2014 Dividends related to 2013 Dividends paid by SFH Group 460.4 18,8
Furthermore, SFH paid an interim dividend of €388.8 million in 2014 due to the gain on the disposal of shares held in Companhia de Electricidade de Macau (CEM).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 301 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
The summarized financial information at 100% of the Suyu Group are presented below.
Summarized Statement of financial position at 100%
In millions of euros December 31, 2015 December 31, 2014 Non-current assets (a) 806.0 504.2 Current assets 3.8 2.1 of which Cash and cash equivalents 3.8 2.1 TOTAL ASSETS 809.8 506.3 Shareholders' equity, Group share 513.9 433.3 Non-controlling interests 0,0 0,0 Total shareholders' equity 513.9 433.3 Non-current liabilities 222.5 73.0 Current liabilities 73.4 0.0 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 809.8 506.3
(a) Includes Derun held at 25.1% by Suyu and equity accounted for the year ended December 31st, 2015.
Summarized Income Statement at 100%
In millions of euros December 31, 2015 December 31, 2014 Revenues - - Current operating income - - Net income (a) 285.2 21.6 Other comprehensive income (OCI) (b) (204.6) 128,4 COMPREHENSIVE INCOME 80.6 150.0
(a) At December 31, 2015, Suyu's income includes the revaluation of Chongqing Water Group's securities (see Note 2). (b) At December 31, 2015, this amount may be explained by the reclassification of revaluations of Chongqing Water Group securities at fair market value in the income statement in 2015, which were formerly recognized in other comprehensive income in 2014. Please refer to Note 2.
Dividends at 100%
In millions of euros Dividends related to 2014 Dividends related to 2013 Dividends paid by Suyu Group - 21.5
302 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
XX 12.2 Investments in associates
Carrying amount of investments Share in net income/ (loss) in associates of associates
In millions of euros December 31, 2015 December 31, 2014 December 31, 2015 December 31, 2014 In Agbar group 314.6 295.4 34.3 24.7 In Acea group 236.4 225.9 22.2 14.1 In the company Aquasure Holding (a) 100.6 105.1 16.5 21.4 In the company Arte SA de CV (a) 9.0 9.5 1.4 1.5 In the company Aquasystema Maribor (a) 5.8 6.0 0.7 1.3 In the company Degremont WTS Beijing (a) 2.5 2.3 - - In the company Brnenske Vodarny A Kanalizace 34.2 32.8 1.2 1.7 In Sita UK group 7.4 11.6 6.4 3.5 In Sita Belgium group 17.9 25.0 3.0 3.3 In United Water group 4.2 8,2 - (0.2) In Sita France group 7.4 3.7 (1.0) (3.6) Other 20.4 20.1 1.9 8,4 TOTAL 760.4 745.6 86.6 76.1
(a) These companies were presented in a single line named "Degrémont group" in 2014.
In millions of euros December 31, 2015 December 31, 2014 Net income 86.6 76.1 Other comprehensive income (OCI) (8,0) (13.3) COMPREHENSIVE INCOME 78,6 62.8 20
The Group’s largest individual associate is the Acea Group, The book value of Acea in the statement of financial position based in Rome, in which the Group has a 12.5% stake. as of December 31, 2015 is €236.4 million. Its market value is €377.5 million.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 303 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
The summarized financial information at 100% of the Acea Group are presented below.
Summarized Statement of financial position at 100%
In millions of euros September 30, 2015 (a) December 31, 2014 Non-current assets 4,404.3 4,271.1 Current assets 2,140.0 2,640.5 of which Cash and cash equivalents 595.8 1,018,0 TOTAL ASSETS 6,544.3 6,911.6 Shareholders' equity, Group share 1,481.2 1,430.6 Non-controlling interests 72.6 71.8 Total shareholders' equity 1,553.8 1,502.4 Non-current liabilities 3,267.5 3,598,7 Current liabilities 1,723.0 1,810.5 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 6,544.3 6,911.6
(a) The consolidated financial statements of Acea group at December 31, 2015 are not available at the date of publication of the Group's 2015 consolidated financial statements. In compliance with IAS 28 " Investments in Associates and Joint Ventures", the summarized statement of financial position at September 30, 2015 corresponds to the latest available information.
Summarized Income Statement at 100% – of the first nine months
In millions of euros September 30, 2015 (a) September 30, 2014 Revenues 2,167.7 2,280.7 Gross operating profit 530.9 504.9 Operating profit /(loss) 284.8 274.5 Net income – Group share 136.6 112.8 Net income – non-controlling interests 5.1 4.9 Net income 141.7 117.7 Other comprehensive income (OCI) 10.3 (14.0) COMPREHENSIVE INCOME 152.0 103.7
(a) The consolidated financial statements of Acea group at December 31, 2015 are not available at the date of publication of the Group's 2015 consolidated financial statements. In compliance with IAS 28 " Investments in Associates and Joint Ventures", the summarized income statement at September 30, 2015 corresponds to the latest available information.
Dividends (at 100%)
In millions of euros Dividends related to 2014 Dividends related to 2013 Dividends paid by Acea 95.8 89.4
304 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
NOTE 13 Financial instruments
XX 13.1 Financial assets The following table shows the various financial asset categories and their breakdown as “non-current” and “current”:
December 31, 2015 December 31, 2014
In millions of euros Non-current Current Total Non-current Current Total Available-for-sale securities 180.1 - 180.1 163.7 - 163.7 Loans and receivables carried at amortized cost 767.4 4,096.8 4,864.2 722.7 3,909.8 4,632.5 Loans and receivables carried at amortized cost (excluding trade and other receivables) 767.4 130.3 897.7 722.7 119.7 842.4 Trade and other receivables - 3,966.5 3,966.5 - 3,790.1 3,790.1 Financial assets measured at fair value 197.0 66.0 263.0 194.1 70.1 264.2 Derivative financial instruments 197.0 6.1 203.1 194.1 7.6 201.7 Financial assets measured at fair value through income - 59.9 59.9 - 62.5 62.5 Cash and cash equivalents - 2,079.0 2,079.0 - 2,248,8 2,248,8 TOTAL 1,144.5 6,241.8 7,386.3 1,080.5 6,228,7 7,309.2
13.1.1 Available-for-sale securities
In millions of euros AT DECEMBER 31, 2014 163.7 Acquisitions 29.2 20 Net book value of disposals (2.7) Changes in fair value posted to equity as other comprehensive income (0.6) Changes in fair value posted to income statement (12.6) Changes in scope, exchange rates and other 3.1 AT DECEMBER 31, 2015 180.1
The value of available-for-sale securities held by the Group amounts to €180.1 million as of December 31, 2015, which is divided between €23.4 million for listed securities and €156.7 million for unlisted securities (versus €15.1 million and €148.6 million respectively in 2014).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 305 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
13.1.1.1 GAINS AND LOSSES POSTED TO EQUITY AND INCOME FROM AVAILABLE-FOR-SALE SECURITIES Gains and losses posted to equity and income from available-for-sale securities are as follows:
Post acquisition remeasurement Impact of Profit (loss) In millions of euros Dividends Change in fair value exchange rates Impairment on disposals Shareholders' equity (a) (0.6) - Net income 9.7 - (12.6) 2.0 TOTAL AT DECEMBER 31, 2015 9.7 (0.6) - (12.6) 2.0 Shareholders' equity (a) (4.7) - Net income 24.5 - (18,2) (2.2) TOTAL AT DECEMBER 31, 2014 24.5 (4.7) - (18,2) (2.2)
(a) Excluding tax impact.
13.1.1.2 ANALYSIS OF AVAILABLE-FOR-SALE SECURITIES Among the factors taken into consideration for listed securities, AS PART OF IMPAIRMENT TESTS the Group believes that a decline in the share price of more than 50% below historical cost or a decline in the share price The Group examines the value of the various available-for- below historical cost for more than 12 months consecutively sale securities on a case-by-case basis and taking the market are indicators of impairment. context into consideration, to determine whether it is necessary to recognize impairments.
13.1.2 Loans and receivables carried at amortized cost
December 31, 2015 December 31, 2014
In millions of euros Non-current Current Total Non-current Current Total Loans and receivables carried at amortized cost (excluding trade and other receivables) 767.4 130.3 897.7 722.7 119.7 842.4 Loans granted to affiliated companies (a) 218,3 43.2 261.5 195.6 44.1 239.7 Other receivables at amortized cost 85.7 54.4 140.1 104.2 25.5 129.7 Concession receivables 462.3 32.6 494.9 422.9 50.1 473.0 Finance lease receivables 1.1 0.1 1.2 - - - Trade and other receivables - 3,966.5 3,966.5 - 3,790.1 3,790.1 TOTAL 767.4 4,096.8 4,864.2 722.7 3,909.8 4,632.5
(a) This item primarily includes loans granted to associates accounted for under the equity method and to non-consolidated companies, and amounted to €220.0 million as of December 31, 2015,versus €228.1 million as of December 31, 2014.
Depreciation and impairment on loans and receivables carried at amortized cost are shown below:
December 31, 2015 December 31, 2014 Depreciation Depreciation In millions of euros Gross and impairment Net Gross and impairment Net Loans and receivables carried at amortized cost (excluding trade and other receivables) 986.4 (88,7) 897.7 922.8 (80.4) 842.4 Trade and other receivables 4,256.8 (290.3) 3,966.5 4,076.5 (286.4) 3,790.1 TOTAL 5,243.2 (379.0) 4,864.2 4,999.3 (366.8) 4,632.5
Information on the maturity of receivables that are past due but not impaired and on the monitoring of counterparty risk on loans and receivables at amortized cost (including trade and other receivables) is presented in Note 14.2 “Counterparty risk”.
306 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
Net income and expenses on loans and receivables carried at amortized cost and recognized in the income statement break down as follows (including trade receivables):
Remeasurement post-acquisition
In millions of euros Interests Translation adjustment Impairment At December 31, 2014 50.7 0.6 (51.5) AT DECEMBER 31, 2015 68,8 0.1 (27.2)
TRADE AND OTHER RECEIVABLES On initial recognition, trade receivables are recorded at fair value, which generally corresponds to their nominal value. Impairment losses are recorded based on the estimated risk of non-recovery. The net carrying amount posted to the statement of financial position represents a good measurement of fair value.
13.1.3 Financial assets measured at fair value This item comprises derivative financial instruments as well as financial assets measured at fair value through income or loss excluding derivatives, and can be analyzed as follows:
December 31, 2015 December 31, 2014
In millions of euros Non-current Current Total Non-current Current Total DERIVATIVE FINANCIAL INSTRUMENTS 197.0 6.1 203.1 194.1 7.6 201.7 Debt-related derivatives (see Note 13.3.1) 164.6 4.6 169.2 180.6 6.5 187.1 Derivative hedging commodities (see Note 14.1.1.2) - 0.4 0.4 - 0.5 0.5 Derivative hedging other items (a) 32.4 1.1 33.5 13.5 0.6 14.1 FINANCIAL ASSETS AT FAIR VALUE THROUGH INCOME EXCLUDING DERIVATIVES - 59.9 59.9 - 62.5 62.5 20 Financial assets measured at fair value through income (see Note 13.3.1) - 59.9 59.9 - 62.5 62.5 TOTAL 197.0 66.0 263.0 194.1 70.1 264.2
(a) Includes derivative financial instruments: XX for net investment hedging for €9.5 million at December 31, 2015, compared with €5.3 million at December 31, 2014; XX for the interest rate futures portion of debt-related derivatives not designated as hedges for €7.1 million at December 31, 2015, compared with €6.9 million at December 31, 2014; XX for forward interest pre-rate hedges maturing in 9 years with deferred start dates in 2017 and 2018, designated as cash flow hedge, for €7.6 million at December 31, 2015.
Commodities derivatives, debt-related derivatives, and 13.1.4 Cash and cash equivalents derivatives hedging other items are set up as part of the Group’s risk management policy and are analyzed in Note 14. The Group’s financial risk management policy is described in Note 14. Financial assets measured at fair value through income (excluding derivatives) are mainly UCITS and negociable “Cash and cash equivalents” amounted to €2,079.0 million medium-term notes (MTNs); which are included in the as of December 31, 2015 versus €2,248.8 million as of calculation of the Group’s net debt (see Note 13.3). December 31, 2014. Income recognized on all financial assets measured at fair value This item mainly includes term deposits of less than three through income as of December 31, 2015 was €6.6 million. months in the amount of €543.7 million, versus €528.7 million as of December 31, 2014, and cash in the amount of €1,465.9 million versus €1,632.6 million as of December 31, 2014. In addition, restricted cash amounted to €32.2 million as of December 31, 2015. Income recognized in respect of “Cash and cash equivalents” as of December 31, 2015 amounted to €29.3 million versus €33.9 million as of December 31, 2014.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 307 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
13.1.5 Pledged and mortgaged assets
In millions of euros December 31, 2015 December 31, 2014 Pledge and mortgaged assets 108,7 120.8
XX 13.2 Financial liabilities The following table shows the various financial liability categories as of December 31, 2015, as well as their breakdown Financial liabilities are accounted for: as “non-current” and “current”: XX in “liabilities at amortized cost” for borrowings and debt, trade and other payables, and other financial liabilities; XX or in “liabilities measured at fair value” for derivative financial instruments.
December 31, 2015 December 31, 2014
In millions of euros Non-current Current Total Non-current Current Total Borrowings 8,501.1 1,853.9 10,355.0 7,721.6 1,926.7 9,648,3 Derivative financial instruments 45.1 40.1 85.2 65.6 42.3 107.9 Trade and other payables - 2,991.2 2,991.2 - 2,871.2 2,871.2 Other financial liabilities 3.0 - 3.0 4.7 - 4.7 TOTAL 8,549.2 4,885.2 13,434.4 7,791.9 4,840.2 12,632.1
13.2.1 Borrowings and debt
December 31, 2015 December 31, 2014
In millions of euros Non-current Current Total Non-current Current Total Bonds issues 7,350.2 84.8 7,435.0 6,423.3 39.1 6,462.4 Commercial paper - 786.5 786.5 - 854.0 854.0 Draw downs on credit facilities 112.4 14.8 127.2 190.9 81.2 272.1 Borrowings under finance leases 282.4 51.4 333.8 321.5 49.3 370.8 Other bank borrowings 585.8 141.8 727.6 607.2 111.0 718,2 Other borrowings 89.6 92.5 182.1 78,6 40.4 119.0 Borrowings (gross amounts) 8,420.4 1,171.8 9,592.2 7,621.5 1,175.0 8,796.5 Overdrafts and current cash accounts - 570.1 570.1 - 647.1 647.1 Outstanding financial debt 8,420.4 1,741.9 10,162.3 7,621.5 1,822.1 9,443.6 Impact of measurement at amortized cost (49.9) 112.0 62.1 (49.4) 104.6 55.2 Impact of fair value hedge 130.6 - 130.6 149.5 - 149.5 BORROWINGS AND DEBT 8,501.1 1,853.9 10,355.0 7,721.6 1,926.7 9,648,3
The fair value of borrowings and debt as of December 31, 2015 was €11,548.2 million for a net book value of €10,355.0 million (for details see Note 13.4.2). Gains and losses on borrowings and debt recognized in the income statement mainly comprise interests and are detailed in Note 6 “Net financial income/loss”. Borrowings are analyzed in Note 13.3 “Net debt”.
308 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
13.2.2 Derivative financial instruments (including commodities) Derivative instruments recorded as liabilities are measured at fair value and may be analyzed as follows:
In millions of euros December 31, 2015 December 31, 2014 Non-current Current Total Non-current Current Total Debt-related derivatives 6.9 29.4 36.3 8,3 29.9 38,2 Derivatives hedging commodities - 7.8 7.8 - 7.7 7.7 Derivatives hedging other items (a) 38,2 2.9 41.1 57.3 4.7 62.0 TOTAL 45.1 40.1 85.2 65.6 42.3 107.9
(a) Mainly includes derivative financial instruments:: XX for net investment hedge for €11.0 million at December 31, 2015, compared with €22.6 million at December 31, 2014; XX for the interest rate futures portion of debt-related derivatives qualifying as cash flow hedge for €18.0 million at December 31, 2015, compared with €32.5 million at December 31, 2014.
These instruments are set up according to the Group’s risk management policy and are analyzed in Note 14.
13.2.3 Trade and other payables
In millions of euros December 31, 2015 December 31, 2014 Trade payables 2,712.7 2,525.1 Payables on fixed assets 278,5 346.1 Total 2,991.2 2,871.2
The carrying amount recorded to the statement of financial position represents a good measurement of fair value.
13.2.4 Other financial liabilities 20 Other financial liabilities correspond entirely to payables on share acquisition.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 309 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX 13.3 Net debt
13.3.1 Analysis by type of debt
December 31, 2015 December 31, 2014
In millions of euros Non-current Current Total Non-current Current Total Outstanding borrowings 8,420.4 1,741.9 10,162.3 7,621.5 1,822.1 9,443.6 Impact of measurement at amortized cost (a) (49.9) 112.0 62.1 (49.4) 104.6 55.2 Impact of fair value hedge (b) 130.6 - 130.6 149.5 - 149.5 Borrowings and debts 8,501.1 1,853.9 10,355.0 7,721.6 1,926.7 9,648,3 Debt-related derivatives under liabilities (c) 6.9 29.4 36.3 8,3 29.9 38,2 Gross debt 8,508,0 1,883.3 10,391.3 7,729.9 1,956.6 9,686.5 Assets related to financing (d) - - - (2.5) - (2.5) Assets related to financing - - - (2.5) - (2.5) Financial assets measured at fair value through income excluding financial derivative instruments - (59.9) (59.9) - (62.5) (62.5) Cash and cash equivalents - (2,079.0) (2,079.0) - (2,248,8) (2,248,8) Debt-related derivatives under assets (c) (164.6) (4.6) (169.2) (180.6) (6.5) (187.1) Net cash (164.6) (2,143.5) (2,308,1) (180.6) (2,317.8) (2,498,4) Net debt 8,343.4 (260.2) 8,083.2 7,546.8 (361.2) 7,185.6 Outstanding borrowings 8,420.4 1,741.9 10,162.3 7,621.5 1,822.1 9,443.6 Assets related to financing (d) - - - (2.5) - (2.5) Financial assets measured at fair value through income excluding financial derivative instruments - (59.9) (59.9) - (62.5) (62.5) Cash and cash equivalents - (2,079.0) (2,079.0) - (2,248,8) (2,248,8) NET DEBT EXCLUDING AMORTIZED COST AND IMPACT OF DERIVATIVE FINANCIAL INSTRUMENTS 8,420.4 (397.0) 8,023.4 7,619.0 (489.2) 7,129.8
(a) Includes accrued interest on gross debt as well as premiums and fees for setting up borrowings to be amortized. (b) This item corresponds to the remeasurement of the interest rate component of debt in a designated fair value hedging relationship. (c) It corresponds to the fair value of debt-related derivatives, regardless of whether or not they are designated as hedges. (d) The financial assets related to financing are henceforth shown as a reduction of the amount of debt. These generally refer to pledged deposits for financing subsidiaries.
The increase in the non current portion of outstanding As was the case for the 2010 and 2014 issues, this new issue is borrowings at December 31, 2015 is mainly due to bond issues not recognized in financial debt, as it satisfies the conditions for presented in Note 13.3.3. recognition in shareholders’ equity provided for by IAS 32 (see The sensitivity of the debt (including interest rate and currency Note 2.3 “New issue and redemption of outstanding undated derivatives) to interest rate risk and currency risk is presented deeply subordinated notes” of the present chapter). in Note 14. 13.3.3 Bond and Commercial paper issues 13.3.2 Issue of Undated Deeply Subordinated Notes In 2015, the Group continued a financial policy favoring On March 30, 2015, SUEZ ENVIRONNEMENT COMPANY has optimization of the cost of debt and the extension of maturities. issued Undated Deeply Subordinated Notes amounting to As a result, on January 14, 2015, the Company’s Board of €500 million with a coupon of 2.5%. Simultaneously, SUEZ Directors authorized renewal of the €6 billion Euro Medium- ENVIRONNEMENT COMPANY has totally redeemed Undated Term Note program and the use of a €1.5 billion issuance Deeply Subordinated Notes from the tranche issued in 2010, for which the residual par value was €450 million.
310 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
package. SUEZ ENVIRONNEMENT COMPANY issued several –– a deposit known as “mezzanine”, underwritten by the bonds under this policy: Group, XX on June 26, 2015, SUEZ ENVIRONNEMENT COMPANY issued –– shares known as “subordinated”, underwritten by an a €200 million bond with a variable coupon (Euribor 3M + investor taking part in the program and with contracted 0.2%) maturing in 2017; involvement with the Group; XX on June 30, 2015, SUEZ ENVIRONNEMENT COMPANY issued (c) These shares are presented here in order of payment priority a private placement of €50 million with a coupon of 2.25% related to each other; the senior shares are therefore the maturing in 2030; first to be reimbursed and the subordinated shares are the last; XX on September 10, 2015, SUEZ ENVIRONNEMENT COMPANY issued a €500 million bond with a coupon of 1.75% maturing (d) The Group subsidiaries involved remain in charge of in 2025; recovering the receivables transferred against remuneration. XX in addition, on December 2, 2015, SUEZ ENVIRONNEMENT The sales of receivables are made by Group subsidiaries at COMPANY restructured a private placement issued in 2009 their nominal value, minus a discount that covers the cost in the amount of €250 million with a coupon of 5.20% of financing the receivables, the risk of late payment and maturing in 2017. This placement will now mature in 2027 the credit risk. and will have a coupon of 5.20% until 2017, then of 1.904% The main commitments of the Group towards the until maturity. securitization fund are the following:
COMMERCIAL PAPER ISSUES (e) Set-up of a security deposit for the compartment, earning interest, and designed to cover, if the FCT reserves and the SUEZ ENVIRONNEMENT COMPANY has a commercial paper “subordinated” shares ever came to run out, any defaults program. This program was renewed on June 15, 2015 and and late payments on transferred receivables exceeding increased to €1,750.0 million. At December 31, 2015, the the amount estimated during the transfer and invoiced outstanding notes totaled €786.5 million. through the discount applied to the transfer price, to a set Commercial paper is recognized as current financial debt. maximum limit (Cash Collateral 1 or CC1); this deposit is However, the Group’s policy is to back all commercial paper by effective from the launch of the program and corresponds available credit lines. Thus, the refinancing of commercial paper to the “mezzanine” deposit presented above; is guaranteed even in case of closure of the money market. (f) Set-up of a security deposit for the compartment, earning At December 31, 2015, outstanding commercial paper was interest, and designed to preserve the correct execution of all 20 entirely covered by confirmed available for more than one year financial obligations of Group entities party to the program, to credit lines. a set maximum limit (Cash Collateral 2 or CC2); this deposit is only effective if certain events or triggers occur linked to the downgrading of SUEZ ENVIRONNEMENT COMPANY or to 13.3.4 Securitization of receivables the non-respect by the Group of its contractual obligations. At December 31, 2015, this security deposit had not yet been CONTEXT formed; In 2012, SUEZ implemented a program for the sales of trade (g) Existence of a mechanism known as “excess fee” through receivables to a special purpose vehicle (SPV) called Fonds which, in certain cases, the FCT can give back part of Commun de Titrisation (or FCT). the excess cash accumulated in the compartment when recovering receivables (transferred at discount prices). This This so-called “deconsolidation” program concerns assignors mechanism corresponds to a part of the remuneration of from Sita France, Sita Spécialités, Sita Nederland, Sita UK and Group subsidiaries for collecting receivables (see below); Sita Deutschland. (h) An option, for all Group subsidiaries, to jointly request The aim of the receivable assignment or receivable securitization buyback at fair value of the receivables held by the program is to carry out so-called “deconsolidation” assignments compartment in a single and unique transaction, in case within the meaning of IAS 39. of program amortization, planned (with a 5-year term), The main characteristics of the program are as follows: or accelerated, and after agreement with the holders of (a) A compartment dedicated to the Group’s receivables was “subordinated” shares. To date, accelerated amortization created within a FCT; of the program is not expected before its maturity date; (b) The FCT used in the program is financing the compartment by issuing three types of instruments: –– shares known as “senior”, issued on the markets through a dedicated channel,
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 311 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
(i) Issue of a guarantee for the risk of modification of tax rules; ACCOUNTING TREATMENT (j) Preservation by each Group subsidiary of the follow-up The compartment of the FCT is not controlled by the Group and and collection of receivables that it has transferred to the is therefore not consolidated. compartment; to this effect, a follow-up and collection According to IAS 39 and based on the terms of the program and agreement was signed by each of the subsidiaries acting the quantitative analyses implemented, the Group transferred as collector and by the compartment, this service being almost all the risks and rewards inherent to the ownership remunerated by FCT. of the receivables sold. The receivables transferred within the The Group remains exposed to the risks linked to the receivables scope of the program are therefore fully derecognized from the transferred within the limit of the security deposits. It also Group’s consolidated statement of financial position. receives part of the benefits from the FCT via the collection of The loss arising from the sale of these receivables, through the an excess fee in its role as servicer. applied discount, is recorded in the income statement under However, the discount applied to the sales and the sizing of financial expenses (see Note 6). the “subordinated” shares allow almost all possible losses The security deposit paid and representing the “mezzanine” of the compartment to be absorbed. The probability that shares underwritten by the Group is recorded under the item the “mezzanine” deposit is impacted is very low. Finally, the “Loans and receivables carried at amortized cost” on the Group’s holders of the “subordinated” shares benefit from almost all consolidated statement of financial position. Its remuneration the advantages through excess fees more favorable than those is recorded in the income statement under financial income attributable to the Group, and the granting of the liquidation (see Note 6). profit. The remuneration of services provided by the Group for follow- up and recovery of receivables transferred is shown in the income statement under financial income (see Note 6).
The figures as of December 31, 2015 are presented below:
In millions of euros Total of receivables sold over the period 2,523.3 Gain/(loss) arising from sale over the period (29.5) (b) Remuneration for CC1 1.0 (c) Remuneration of services for follow-up and recovery of receivables transferred over the period 11.7 (d) Outstanding receivables transferred as of December 31, 2015 409.8 (a) Book value of CC1 as of December 31, 2015 42.1 (e) Fair value of CC1 42.1 Book value of CC2 * Residual maturity of CC1 17 months Impact of sales of derecognized receivables in the sense of IAS 39 on net debt 351.0 (a) + (b) + (c) + (d) - (e)
* No security deposit known as “CC2” had been made as of December 31, 2015; payment of this deposit is subject to the conditions described above.
13.3.5 Change in net debt XX the purchase of Sembcorp's 40% interest in Sembsita Pacific amounting to €311.7 million (AUD 485 million); Net debt increased by €897.6 million during the year 2015, mainly for the following reasons: XX the exchange rate variations resulted in an increase of €203.5 million in net debt; XX the payment of cash dividends to shareholders of SUEZ ENVIRONNEMENT COMPANY amounting to €360.8 million XX the losses realized on the derivative financial instruments (including the 3% tax on dividends distributed, for qualified as net investment hedge generated a €103.1 million €10.5 million); increase of the net financial debt; XX the payment of cash dividends to minority shareholders of XX excess cash generated by the Group’s activities generated subsidiaries amounting to €183.9 million (witholding taxes a decrease in net debt of €471.1 million. included);
312 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
13.3.6 Debt/equity ratio
December 31, 2014 In millions of euros December 31, 2015 restated Net debt 8,083.2 7,185.6 Total equity 6,805.4 7,004.7 Debt/equity ratio 118.8% 102.6%
XX 13.4 Fair value of financial instruments by level
13.4.1 Financial assets
AVAILABLE-FOR-SALE SECURITIES Listed securities are recognized in the consolidated statement of Unlisted securities valued at €156.7 million at December 31, financial position at fair value for €23.4 million at December 31, 2015 are measured using valuation models based primarily 2015. They have a Level 1 fair value based on stock market on the most recent transactions, discounted dividends or cash prices at that date. flows and net asset value (fair value Level 3).
As of December 31, 2015, the change in Level 3 available-for-sale securities breaks down as follows:
In millions fo euros AT DECEMBER 31, 2014 148,6 Acquisitions 20.1 Disposals (book value of assets disposed) (2.7) Gains and losses posted to equity (0.2) Gains and losses posted to income (12.6) 20 Changes in scope, exchange rates and other 3.6 AT DECEMBER 31, 2015 156.7
The main line of unlisted securities is Aguas de Valencia, the DERIVATIVE FINANCIAL INSTRUMENTS value of which is determined based on a multi-criteria analysis The portfolio of derivative financial instruments used by the (DCF, multiples). A decline of 10% in the total value of Aguas de Group within the context of its risk management consists Valencia shares would result in a -€4.3 million decline in equity. primarily of interest rate and exchange rate swaps, interest The net value of other unlisted securities is not of a significant rate options and forward currency sales and purchases. uniform amount that would have to be presented separately. It is recognized at its fair value at December 31, 2015 for €203.1 million. The fair value of virtually all of these contracts LOANS AND RECEIVABLES CARRIED AT AMORTIZED COST (EXCLUDING TRADE is determined using internal valuation models based on AND OTHER RECEIVABLES) observable data. These instruments are considered Level 2. Loans and receivables carried at amortized cost (excluding trade and other receivables), amounting to €897.7 million at FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH INCOME December 31, 2015, may contain elements that contribute to Financial assets measured at fair value through income a fair value hedging relationship. At December 31, 2015, no amounting to €59.9 million at December 31, 2015, determined hedge was put in place. based on observable data, are considered Level 2.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 313 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
13.4.2 Financial liabilities The fair value of financial liabilities and financial instruments posted to liabilities are distributed as follows among the various levels of fair value (fair value levels are defined in Note 1.5.10.3):
December 31, 2015 December 31, 2014
In millions of euros Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Borrowings 11,548,2 5,941.2 5,607.0 11,462.5 5,478,3 5,984.2 Derivative financial instruments 85.2 85.2 107.9 107.9 Debt-related derivatives 36.3 36.3 38,2 38,2 Derivatives hedging commodities 7.8 7.8 7.7 7.7 Derivatives hedging other items 41.1 41.1 62.0 62.0 TOTAL 11,633.4 5,941.2 5,692.2 - 11,570.4 5,478,3 6,092.1 -
BONDS AND BORROWINGS DERIVATIVE FINANCIAL INSTRUMENTS Only listed bonds issued by SUEZ ENVIRONNEMENT COMPANY See Note 13.4.1 for details on fair value level. are presented in this table at Level 1. Other bonds are shown in this table at Level 2. All of these loans are measured in light of the interest rate risk (interest rate component); their fair value is determined on the basis of observable data.
XX 13.5 Offsetting of derivative assets and liabilities At December 31, 2015, as at December 31, 2014, the Group in the event of failure of one of the contracting parties. These does not offset financial assets and liabilities in its statement master netting agreements do not meet the criteria of IAS 32 of financial position. Moreover, SUEZ has subscribed for OTC to allow the offsetting of derivative assets and liabilities in the derivatives with first class banks under agreements that statement of financial position. However, they do fall within the provide for the compensation of amounts due and receivable scope of disclosures under IFRS 7 on offsetting:
December 31, 2015 December 31, 2014 Financial derivatives Financial derivatives Financial derivatives Financial derivatives instruments on net debt instruments on instruments on net debt instruments on and others commodities and others commodities
In millions of euros Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities Gross amount (a) 202.7 (77.4) 0.4 (7.8) 201.2 (100.2) 0.5 (7.7) AMOUNT AFTER OFFSETTING 180.2 (54.9) 0.4 (7.8) 180.8 (79.8) 0.5 (7.7)
(a) Gross amounts of recorded assets and liabilities.
314 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
NOTE 14 Management of risks arising from financial instruments
The Group mainly uses derivative instruments to manage its available on over-the-counter markets, whether they are firm exposure to market risks. The management of financial risks is commitments or options, but always settled in cash. The Group’s explained in chapter 4 “Risk factors” of the Reference Document. aim is to protect itself against adverse changes in market prices, which may specifically affect its supply costs. XX 14.1 Market risks 14.1.1.2 FAIR VALUE OF DERIVATIVE INSTRUMENTS LINKED TO COMMODITIES The fair value of derivative instruments linked to commodities 14.1.1 Commodity market risks at December 31, 2015 and 2014 is presented in the table below:
14.1.1.1 HEDGING OPERATIONS The Group sets up cash flow hedge on fuel and electricity as defined by IAS 39 by using the derivative instruments
December 31, 2015 December 31, 2014 Assets Liabilities Assets Liabilities
In millions of euros Current Non-current Current Non-current Current Non-current Current Non-current Cash flow hedges 0.4 - 7.8 - 0.5 - 7.7 - TOTAL 0.4 - 7.8 - 0.5 - 7.7 -
The fair value of cash flow hedging instruments by type of commodity breaks down as follows:
December 31, 2015 December 31, 2014 Assets Liabilities Assets Liabilities 20
In millions of euros Current Non-current Current Non-current Current Non-current Current Non-current Electricity 0.4 - - - 0.5 - - - Swaps 0.4 - - - 0.5 - - - Oil - - 7.8 - - - 7.7 - Swaps - - 7.8 - - - 7.7 - TOTAL 0.4 - 7.8 - 0.5 - 7.7 -
14.1.2 Currency risk Exposure to currency risk is reviewed monthly and the asset hedging coverage ratio (corresponding to the ratio between the The Group is exposed to financial statement translation risk carrying amount of an asset denominated in a foreign currency due to the geographical spread of its activities: its statement outside the eurozone, and the debt assumed for that asset) of financial position and income statement are impacted by is periodically reviewed in the light of market conditions and changes in exchange rates when consolidating its foreign whenever assets are acquired or sold. Any significant change subsidiaries outside the eurozone (translation risk). Translation in the hedging ratio is subject to prior approval by the Treasury risk is mainly concentrated on equity holdings in the United Committee. States, United Kingdom, Chile and Australia. The Group’s hedging policy with regard to investments in non-eurozone In addition, the Group finances itself in euros and converts its currencies consists in contracting liabilities denominated in financing into the reporting currency of its subsidiaries through the same currency as the cash flows expected to derive from foreign exchange derivatives. the hedged assets. Taking financial instruments into account, 50% of net debt was Among the hedging instruments used, borrowings in the denominated in euro, 19% in US dollar, 5% in pound sterling, relevant currency constitute the most natural hedging tool. 14% in Chilean peso and 7% in Hong Kong dollar at the end of The Group also uses foreign currency derivatives (swaps, cross 2015, compared to 53% in euro, 18% in US dollar, 6% in pound currency swaps…), which allow for the creation of synthetic sterling, 14% in Chilean peso and 4% in Hong Kong dollar at currency debts. the end of 2014.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 315 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
14.1.2.1 ANALYSIS OF FINANCIAL INSTRUMENTS BY CURRENCY The breakdown by currency of outstanding borrowings and of financial net debt, before and after taking interest rate and currency hedges into account, is presented below:
Outstanding borrowings
December 31, 2015 December 31, 2014 Before impact After impact Before impact After impact In % of derivatives of derivatives of derivatives of derivatives Euro zone 73% 56% 73% 61% US$ zone 8% 15% 7% 13% £ zone 4% 5% 4% 5% CLP (Chilean peso) 12% 12% 11% 11% AUD (Australian dollar) 0% 6% 0% 3% Other currencies 3% 6% 5% 7% TOTAL 100% 100% 100% 100%
Net debt
December 31, 2015 December 31, 2014 Before impact After impact Before impact After impact In % of derivatives of derivatives of derivatives of derivatives Euro zone 72% 50% 70% 53% US$ zone 9% 19% 9% 18% £ zone 4% 5% 5% 6% CLP (Chilean peso) 14% 14% 14% 14% AUD (Australian dollar) 0% 7% 0% 4% Other currencies 1% 5% 2% 5% TOTAL 100% 100% 100% 100%
14.1.2.2 ANALYSIS OF CURRENCY RISK SENSITIVITY Impact on equity after taking into account foreign exchange derivatives: The sensitivity analysis was based on the financial net debt For financial liabilities (debt and derivatives) designated as position (including derivative financial instruments), and net investment hedges, a uniform +/- 10% change of foreign derivatives designated as net investment hedges at the currencies against euro would have a negative or positive reporting date. impact on equity of €143.8 million. This impact is offset by a counter-effect on the net investment in the hedged currency. As regards currency risk, the sensitivity calculation consists in evaluating the impact in the consolidated financial statements of a +/-10% change in foreign exchange rates compared to 14.1.3 Interest rate risk closing rates. The Group aims to reduce its financing costs by limiting the impact of interest rate fluctuations on its income statement. Impact on income after the impact of foreign exchange derivatives: The Group’s policy is to diversify net debt interest rate Changes in exchange rates against the euro only affect income references between fixed and floating rates. The Group’s aim through gains and losses on liabilities denominated in a currency is to achieve a balanced interest rate structure for its net debt other than the functional currency of the companies carrying in the medium term (5 to 15 years). The interest rate mix may the liabilities on their statement of financial position, and to change depending on market trends. the extent that these liabilities do not qualify as net investment hedges. A uniform +/-10% change of foreign currencies against The Group therefore uses hedging instruments (particularly euro would generate a gain or a loss of €7.3 million. swaps), to protect itself from increases in rates in the currencies in which the debt is denominated.
316 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
The Group’s exposure to interest rate risk is managed centrally The Group’s main exposure to interest rate risk arises from and regularly reviewed (generally on a monthly basis) during loans and borrowings denominated in euro, US dollar, pound meetings of the Treasury Committee. Any significant change in sterling, Chilean peso and Hong-Kong dollar, which represented the interest rate mix is subject to prior approval by Management. 95% of net debt as of December 31, 2015. The cost of debt is sensitive to changes in interest rates on all In 2014 and 2015, to protect the refinancing of a portion of floating-rate debt. The cost of debt is also affected by changes in its debt, the Group set up forward interest pre-rate hedges market value of derivative instruments not classified as hedges maturing in 9 years with deferred start dates in 2017 and 2018. under IAS 39.
14.1.3.1 FINANCIAL INSTRUMENTS BY RATE TYPE The breakdown by type of rate of outstanding borrowings and net debt, before and after impact of hedging instruments, is shown in the following tables:
Outstanding borrowings
In % December 31, 2015 December 31, 2014 Before impact After impact of Before impact After impact of derivatives derivatives of derivatives of derivatives Floating rate 24% 33% 26% 33% Fixed rate 67% 58% 65% 58% Fixed rate indexed to inflation 9% 9% 9% 9% TOTAL 100% 100% 100% 100%
Net debt
December 31, 2015 December 31, 2014 Before impact After impact Before impact After impact 20 In % of derivatives of derivatives of derivatives of derivatives Floating rate 2% 13% 0% 10% Fixed rate 87% 76% 88% 78% Fixed rate indexed to inflation 11% 11% 12% 12% TOTAL 100% 100% 100% 100%
The inflation-linked debt corresponds exclusively to securities Impact on income after taking into account interest rate derivatives issued by Aguas Andinas in Chile. It involves fixed-rate bonds (See Note 1.5.10.3) denominated in Unidad de Fomento (a Chilean monetary adjusted for inflation). A +/-1% change in short-term interest rates (for all currencies) on the nominal amount of floating-rate net debt, inflation-linked debt included, and the floating-rate component of derivatives 14.1.3.2 ANALYSIS OF INTEREST RATE RISK SENSITIVITY would have a negative or positive impact of €20.0 million on The sensitivity analysis was based on the net debt position as net interest expense. at the reporting date (including financial instruments with an A 1% increase in interest rates (for all currencies) would interest rate component). generate a gain of €9.2 million in the income statement due For interest rate risk, the sensitivity is calculated based on to the change in fair value of non-qualified derivatives. A 1% the impact of a rate change of +/-1% compared with year-end decrease in interest rates would a contrario generate a loss interest rates. of €9.8 million.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 317 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
Impact on equity after taking into account interest rate derivatives On the other hand, a decrease of 1% would generate a loss of An increase of 1% in all interest rates (uniform for all currencies) €52.1 million. would generate a gain of €45.8 million in equity, linked to the The asymmetrical impacts are attributable to the low short- change in fair value for derivatives documented as cash flow term interest rates (less than 1%) applicable to certain financial hedges and accounted for in the statement of financial position. assets and liabilities.
14.1.4 Currency and interest rate risk hedges The fair values and notional amounts of the financial derivative instruments used to hedge currency and interest rate risks are as follows:
Foreign currency derivatives
December 31, 2015 December 31, 2014
In millions of euros Total market value Total nominal value Total market value Total nominal value Fair-value hedges (1.3) 336.3 - 213.0 Cash-flow hedges 0.5 410.4 (2.2) 77.4 Net investment hedges (0.7) 1,379.8 (17.3) 1,237.8 Derivative instruments not qualifying for hedge accounting (22.6) 1,865.6 (23.3) 1,227.5 TOTAL (24.1) 3,992.1 (42.8) 2,755.7
Interest rate derivatives
December 31, 2015 December 31, 2014
In millions of euros Total market value Total nominal value Total market value Total nominal value Fair-value hedges 159.6 1,150.0 176.6 1,050.0 Cash-flow hedges (10.6) 181.2 (33.1) 537.4 Derivative instruments not qualifying for hedge accounting 0.4 100.0 0.3 127.0 TOTAL 149.4 1,431.2 143.8 1,714.4
The market values shown in the table above are positive for an because they do not meet the effectiveness criteria defined in asset and negative for a liability. IAS 39, cannot be qualified as hedges for accounting purposes. The Group defines foreign currency derivatives hedging by firm Foreign currency derivatives not designated as hedges provide foreign currency commitments, and instruments transforming financial cover for foreign currency commitments. Furthermore, fixed-rate debt into floating-rate debt, as fair-value hedges. the effect of foreign currency derivatives is almost entirely Cash-flow hedges correspond mainly to hedges of future offset by translation adjustments on the hedged items. operating cash flows in foreign currency and the hedging of floating-rate debt. Fair-value hedges As of December 31, 2015, the net impact of fair value hedges Net investment hedging instruments are mainly foreign recognized in the income statement, including compensation exchange swaps. payments and redemption premium was -€0.6 million. Interest rate derivatives not designated as hedges consist of structured instruments, which because of their type and
318 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
Cash flow hedges The breakdown by maturity of the market value of the foreign currency and interest rate derivatives designated as cash flow hedges is as follows:
At December 31, 2015 Beyond In millions of euros Total 2016 2017 2018 2019 2020 5 years Fair value of derivatives by maturity date (10.1) - (2.7) (4.3) (0.4) (1.3) (1.4)
At December 31, 2014 Beyond In millions of euros Total 2015 2016 2017 2018 2019 5 years Fair value of derivatives by maturity date (35.3) (12.0) (7.9) (6.0) (4.4) (3.3) (1.7)
The unrealized gains and losses directly recognized in XX 14.2 Counterparty risk shareholders’ equity, Group share in 2015 amounted to €23.2 million (including impacts on associates). Through its operational and financial activities, the Group is exposed to the risk of default on the part of its counterparties The ineffective portion of cash-flow hedges recognized in (customers, suppliers, associates, intermediaries, banks) in income is nil. the event that they find it impossible to meet their contractual obligations. This risk arises from a combination of payment risk Net investment hedges (non-payment of goods or services rendered), delivery risk (non- No ineffective portion of derivatives must be recognized in delivery of goods or services already paid), and replacement income for net investment hedges. risk on defaulting contracts (called mark-to-market exposure and corresponding to the risk that replacement terms will be different from the initially agreed terms).
14.2.1 Operating activities
TRADE AND OTHER RECEIVABLES 20 The gross maturity of past-due trade and other receivables is broken down below:
Non-impaired Trade and other receivables Impaired and not past- In millions of euros Past-due non impaired assets at closing date assets (a) due assets 0-6 months 6-12 months Over one year Total Total Total Total At December 31, 2015 183.5 21.5 54.9 259.9 406.9 3,590.0 4,256.8 At December 31, 2014 157.4 10.9 46.4 214.7 318,6 3,543.2 4,076.5
(a) This figure corresponds to the nominal value of trade and other receivables that are partially or fully depreciated.
The ageing of receivables that are past due but not impaired OTHER ASSETS may vary significantly depending on the type of customer with In “Other assets”, the proportion of depreciated assets is not which the Group companies do business (private companies, material in relation to the total amount of the item. Moreover, the individuals or public authorities). The Group decides whether Group does not consider that it is exposed to any counterparty to recognize impairment on a case-by-case basis according risk on those assets. to the characteristics of the various types of customers. The Group does not consider that it is exposed to any material credit concentration risk in respect of receivables, taking into account the diversified nature of its portfolio.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 319 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
14.2.2 Financial activities 14.2.2.1 COUNTERPARTY RISK ARISING FROM LOANS AND RECEIVABLES CARRIED AT AMORTIZED COST (EXCLUDING TRADE AND OTHER The Group’s maximum exposure to counterparty risk in its RECEIVABLES) financial activities may be measured in terms of the carrying amount of financial assets excluding available-for-sale The gross maturity of past-due loans and receivables carried securities and the fair value of derivatives on the assets side at amortized cost (excluding trade and other receivables) is of the statement of financial position (i.e. €7,206.2 million at analyzed below: December 31, 2015, and €7,145.5 million at December 31, 2014).
Non-impaired Impaired and not past- Loans and receivables carried at amortized Past-due non impaired assets at closing date assets (a) due assets cost (excluding trade and other receivables) In millions of euros 0-6 months 6-12 months Over one year Total Total Total Total At December 31, 2015 - 1.5 - 1.5 97.7 887.0 986.2 At December 31, 2014 - - 0.3 0.3 106.3 815.8 922.4
(a) This figure corresponds to the nominal value of loans and receivables carried at amortized cost (excluding trade and other receivables) that are partially or fully depreciated.
Loans and receivables carried at amortized cost (excluding The Group invests the majority of its cash surplus in, and trade and other receivables) do not include items relating negotiates its financial hedging instruments with, leading to impairment (€88.7 million as of December 31, 2015 and counterparties. As part of its counterparty risk management €80.4 million as of December 31, 2014) or amortized cost policy, the Group has set up management and control procedures (€0.2 million as of December 31, 2015 and €0.4 million as of that focus on the counterparty’s accreditation according to its December 31, 2014). The change in these items is presented in credit ratings, its financial exposure, as well as objective market Note 13.1.2, “Loans and receivables at amortized cost”. factors (Credit Default Swaps, market capitalization), plus an assessment of risk limits. 14.2.2.2 COUNTERPARTY RISK ARISING FROM INVESTMENT ACTIVITIES At December 31, 2015, “Cash and cash equivalents” and The Group is exposed to counterparty risk on the investment derivatives assets were the most significant items subject of its cash surplus (cash and cash equivalents) and through to counterparty risk. For these items, the breakdown of its use of derivative financial instruments. Counterparty risk counterparties by credit rating is as follows: corresponds to the loss which the Group might incur in the event of counterparties failing to meet their contractual obligations. In the case of derivative instruments, that risk corresponds to positive fair value.
December 31, 2015 December 31, 2014 Counterparty risk arising Investment Non Investment Investment Non Investment from investing activities Total Grade (a) Unrated (b) Grade (b) Total Grade (a) Unrated (b) Grade (b) % of exposure 2,282.1 94% 3% 3% 2,450.5 92% 2% 6%
(a) Counterparties with a minimum Standards & Poor's rating of BBB- or Moody's rating of Baa3. (b) Most of the two latter types of exposure consisted of consolidated companies with non-controlling interests or Group companies operating in emerging countries where cash cannot be centralized and is therefore invested locally.
320 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
XX 14.3 Liquidity risk As of December 31, 2015, bank funding accounted for 8.9% of the outstanding borrowings (excluding bank overdrafts and As part of its operating and financial activities, the Group could liability current accounts as those elements do not correspond be exposed to a risk of insufficient liquidity, preventing it from to sustainable financial resources). Funding from capital meeting its contractual commitments. markets (bond issues for 77.5% and commercial paper for 8.2%) represented 85.7% of the outstanding borrowings (excluding 14.3.1 Available cash bank overdrafts and liability current accounts). The Group’s financing policy is based on the following principles: At December 31, 2015, available cash, composed of cash and cash equivalents (€2,079.0 million) and financial assets XX diversification of financing sources between the banking measured at fair value through income (€59.9 million), net of and capital markets; bank overdrafts and liability current accounts (€570.1 million), XX balanced repayment profile of borrowings. amounted to €1,568.8 million versus €1,664.2 million at December 31, 2014. As of December 31, 2015, the Group’s total net cash stood at €2,308.1 million, consisting of cash and cash equivalents of €2,079.0 million, financial assets at fair value through income 14.3.2 Undiscounted contractual payments of €59.9 million, and debt-related derivatives recorded as assets In order to best reflect the current economic circumstances of €169.2 million euros. Almost all surplus cash is invested in of operations, cash flows related to derivatives recognized as short-term bank deposits and interest-bearing accounts. liabilities or assets shown below correspond to net positions. In addition, at December 31, 2015, the Group specifically Moreover, the values shown in the table below are positive for had €2,148.3 million in confirmed credit facilities, including a liability and negative for an asset. €127.2 million already drawn; unused credit facilities therefore At December 31, 2015, undiscounted contractual payments on totaled €2,021.1 million, €125.5 million of which will be maturing outstanding borrowings by maturity and type of lenders are in 2016. as follows: 81% of total credit lines and 87% of undrawn facilities were centralized. None of these centralized lines contains a default clause linked to financial ratios or minimum credit ratings.
At December 31, 2015 Beyond In millions of euros Total 2016 2017 2018 2019 2020 5 years 20 Bonds issues 7,435.0 84.8 423.5 206.8 837.1 456.9 5,425.9 Commercial paper 786.5 786.5 - - - - - Draw downs on credit facilities 127.2 14.8 26.7 29.1 35.1 - 21,5 Borrowings under finance leases 333.8 51.4 51.8 81.4 41.0 23.0 85.2 Other bank borrowings 727.6 141.8 116.9 120.1 127.5 85.0 136.3 Other borrowings 182.1 92.5 13.5 9.4 8,4 7.7 50.6 Overdrafts and current accounts 570.1 570.1 - - - - - OUTSTANDING BORROWINGS 10,162.3 1,741.9 632.4 446.8 1,049.1 572.6 5,719.5 Financial assets relating to financing ------Financial assets measured at fair value through income (59.9) (59.9) - - - - - Cash and cash equivalents (2,079.0) (2,079.0) - - - - - NET DEBT EXCLUDING AMORTIZED COST AND IMPACT OF DERIVATIVE FINANCIAL INSTRUMENTS 8,023.4 (397.0) 632.4 446.8 1,049.1 572.6 5,719.5
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 321 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
At December 31, 2014 Beyond In millions of euros Total 2015 2016 2017 2018 2019 5 years Outstanding borrowings 9,443.6 1,822.1 344.8 675.2 469.0 1,042.7 5,089.8 Financial assets relating to financing, Financial assets measured at fair value through income and Cash and cash equivalents (2,313.8) (2,311.3) - - - - (2.5) Net debt excluding amortized cost and impact of derivative financial instruments 7,129.8 (489.2) 344.8 675.2 469.0 1,042.7 5,087.3
As of December 31, 2015, undiscounted contractual payments on outstanding borrowings broke down as follows by maturity:
At December 31, 2015 Beyond In millions of euros Total 2016 2017 2018 2019 2020 5 years Undiscounted contractual interest payments on outstanding borrowings 2,908,3 360.7 362.5 326.5 298,2 239.6 1,320.8
At December 31, 2014 Beyond In millions of euros Total 2015 2016 2017 2018 2019 5 years Undiscounted contractual interest payments on outstanding borrowings 3,225,4 341,8 350.5 336.4 300.9 282.4 1,613.4
At December 31, 2015 undiscounted contractual payments on outstanding derivatives (excluding commodity instruments) recognized in liabilities and assets broke down as follows by maturity (net amounts):
At December 31, 2015 Beyond In millions of euros Total 2016 2017 2018 2019 2020 5 years Derivatives (excluding commodities) (90.7) 17.8 (21.4) (19.2) (23.6) (9.0) (35.3)
At December 31, 2014 Beyond In millions of euros Total 2015 2016 2017 2018 2019 5 years Derivatives (excluding commodities) (95.7) 29.2 (18,8) (24.1) (23.1) (25.0) (33.9)
The maturity of the confirmed undrawn credit facilities is as follows:
Beyond In millions of euros Total 2016 2017 2018 2019 2020 5 years At December 31, 2015 2,021.1 125.5 28,5 79.9 127.5 1,650.9 8,8
Beyond In millions of euros Total 2015 2016 2017 2018 2019 5 years At December 31, 2014 2,368,9 181.9 264.2 160.4 - 1,756.0 6.4
Confirmed but unused lines of credit include a €1.5 billion multi- A 10% decrease in the value of the listed securities would have currency club deal (maturing in 2020). a negative pre-tax impact of around €2.3 million on Group As of December 31, 2015, no counterparty represented more shareholders’ equity. than 7% of confirmed unused credit facilities. The Group’s portfolio of listed and unlisted equity investments is managed in accordance with a specific investment policy. Reports on the equity portfolio are submitted to Executive XX 14.4 Equity risk Management on a regular basis. As of December 31, 2015, available-for-sale securities held by the Group amounted to €180.1 million (see Note 13.1.1).
322 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
NOTE 15 Shareholders’ equity
XX 15.1 Share capital
Value Number of shares (in millions of euros) Treasury Outstanding Additional Treasury Total shares shares Share capital paid-in capital shares At December 31, 2013 510,233,829 1,328,428 508,905,401 2,040.9 4,138.3 13.6 Purchase and disposal of treasury shares 2,121,906 (2,121,906) 23.4 Capital increase reserved for employees (Sharing 2014) 8,943,094 8,943,094 35.8 66.8 Capital decrease by cancellation of shares (Sharing) (943,094) (943,094) (3.8) (6.5) Allocation to the legal reserve (Sharing) (3.2) Capital increase as remuneration for the contribution of Agbar shares by La Caixa 22,000,000 22,000,000 88.0 230.8 Allocation to the legal reserve (La Caixa contribution) (8,8) At December 31, 2014 540,233,829 2,507,240 537,726,589 2,160.9 4,417.4 37.0 Purchase and disposal of treasury shares (547,491) 547,491 (7.6) Delivery of 2013 performance share plan 895,111 895,111 3.6 (3.6) Delivery of worldwide incentive share scheme 2013 1,514,528 1,514,528 6.1 (6.1) Allocation to the legal reserve (0.9) AT DECEMBER 31, 2015 542,643,468 1,959,749 540,683,719 2,170.6 4,406.8 29.4 20 Changes in the number of shares during 2015 to 2,409,639 is due XX 15.3 Other information on premiums to the disbursement of free shares under the January 17, 2013 worldwide incentive share plan and SUEZ ENVIRONNEMENT and consolidated reserves COMPANY performance shares for the March 27, 2013 plan. Consolidated premiums and reserves, including income for the year (€3,856 million as of December 31, 2015), incorporate the XX 15.2 Treasury shares SUEZ ENVIRONNEMENT COMPANY legal reserve. In accordance with French law, SUEZ ENVIRONNEMENT COMPANY ’s legal A tacitly renewable €40 million liquidity contract is managed by reserve represents 10% of the share capital. This reserve may Rothschild & Cie Banque. The aim of this contract is to reduce be distributed to shareholders only in the event of the liquidation the volatility of the SUEZ ENVIRONNEMENT COMPANY ’s share of the Company. price. This contract complies with the professional ethics charter drawn up by the Association Française des marchés financiers (French Financial Markets Association) and approved XX 15.4 Dividend distribution by the AMF. As it did for fiscal years 2013 and 2014, the Board will propose a There were 1,959,749 treasury shares held for the bonus dividend, in this case €0.65 per share for a total of €351.4 million share allocation plans as of December 31, 2015, compared in cash based on the number of outstanding shares as of to 2,507,240 treasury shares (of which 100,000 held under December 31, 2015, to the SUEZ ENVIRONNEMENT COMPANY the liquidity contract and 2,407,240 held for the bonus share ’s Shareholders’ Meeting convened to approve the financial allocation plans) as of December 31, 2014. statements for the fiscal year ended December 31, 2015. Subject to approval by the Shareholders’ Meeting, this dividend will be paid out during the first half of 2016. This dividend is not recognized under liabilities in the financial statements at December 31, 2015 as these financial statements are presented before net income allocation.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 323 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX 15.5 Total gains and losses recognized in equity (Group share)
In millions of euros Dec. 31, 2015 Change Dec. 31, 2014 Change Change (a) January 1, 2014 Available-for-sale securities (0.8) (0.5) (0.3) (68.4) - 68.1 Net investment hedges (152.1) (88.8) (63.3) (80.3) 4.4 12.6 Cash-flow hedges (excluding commodities) 0.9 33.4 (32.5) (8.4) (0.8) (23.3) Commodity cash-flow hedges (7.4) (0.2) (7.2) (6.9) - (0.3) Deferred tax on available-for-sale securities and hedges 12.7 0.3 12.4 2.1 - 10.3 Share of associates on reclassifiable items, net of tax 107.4 (82.5) 189.9 96.6 - 93.3 Share of joint ventures on reclassifiable items, net of tax (4.8) (8.2) 3.4 (12.9) - 16.3 Translation adjustments 193.1 143.2 49.9 163.7 (8.1) (105.7) TOTAL RECLASSIFIABLE ITEMS 149.0 (3.3) 152.3 85.5 (4.5) 71.3 Actuarial gains and losses (290.4) 76.7 (367.1) (174.9) (1.0) (191.2) Deferred tax on actuarial gains and losses 78.9 (19.7) 98.6 41.9 0.3 56.4 Share of joint ventures on non reclassifiable items, net of tax (0.5) - (0.5) 6.3 - (6.8) Share of associates on non reclassifiable items, net of tax 3.6 4.0 (0.4) (0.4) - - TOTAL NON RECLASSIFIABLE ITEMS (208.4) 61.0 (269.4) (127.1) (0.7) (141.6) TOTAL (59.4) 57.7 (117.1) (41.6) (5.2) (70.3)
(a) Changes in 2014 include the impact of Agbar other comprehensive income reclassification previously recognized in non controlling interests, following the acquisition of Hisusa shares formerly held by La Caixa.
All the items in the table above are reclassifiable to profit or XX an issue of undated deeply subordinated notes of loss in future periods, with the exception of actuarial gains €500 million with an initial fixed coupon of 3%. and losses and related deferred taxes, which are reported in On March 30, 2015, SUEZ ENVIRONNEMENT COMPANY consolidated reserves Group share. completed a third issue of undated deeply subordinated notes, for a total amount of €500 million. The new notes will bear XX 15.6 Undated deeply subordinated notes interest at a fixed rate of 2.5%, which will be revised for the first time seven years after issuance on the basis of the 5-year In September 2010, SUEZ ENVIRONNEMENT COMPANY issued swap rate, and then every five years. undated deeply subordinated notes in the amount of €750 million (before issuance costs). These notes are subordinated to any The funds raised are partly used for the redemption and senior creditor and bear an initial fixed coupon of 4.82% for repayment of hybrid bonds issued in September 2010 for a the first five years. nominal amount of €450 million. In June 2014, SUEZ ENVIRONNEMENT COMPANY simultaneously In accordance with IAS 32 and taking into account its launched: characteristics (no obligation to repay, no obligation to pay a coupon unless a dividend is paid out to shareholders), this XX a partial redemption of hybrids issued in 2010 for instrument is recognized in equity. €300 million with a redemption premium of €12.4 million,for a total of €312.4 million; As a result of these two transactions, the Group’s outstanding hybrid bonds amounted to €1.0 billion as at December 31, 2015.
324 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
XX 15.7 Equity management maintain a strong rating while ensuring the desired financial flexibility in order to seize external growth opportunities which SUEZ ENVIRONNEMENT COMPANY strives to optimize its will create value. The Group manages its financial structure and financial structure on a continuous basis by achieving an makes adjustments in light of changes in economic conditions. optimal balance between net debt and equity as shown in the consolidated statement of financial position. The main aim of The management aims, policies and procedures have remained the Group in terms of managing its financial structure is to identical for several fiscal years. maximize value for shareholders, reduce the cost of capital, and
NOTE 16 Non-controlling interests
The change in "Non-controlling interests" between 2014 and IAM includes the Chilean operating company Aguas Andinas 2015 may be explained primarily by the purchase of Sempcorp's in its consolidated financial statements with a percentage of interest in Sembsita Pacific for €120.9 million (see Note 2.8). interest of 50.1%. SUEZ fully consolidates the Agbar group in its consolidated Aguas Andinas is therefore fully consolidated within the financial statements with a percentage of interest of 100% at SUEZ group with a percentage of interest of 28.4%. December 31, 2015. IAM and Aguas Andinas are both listed entities on the Santiago The Agbar group includes the Chilean holding company IAM de Chile Stock Exchange (Chile). in its consolidated financial statements with a percentage of Summarized financial information on the Aguas Andinas (at interest of 56.6%. 100%) are presented below. They are extracted from the data published by the company.
XX Summarized Statement of financial position at 100%
In millions of euros September 30, 2015 (a) December 31, 2014 Non-current assets 1,918.2 2,016.7 20 Current assets 172.4 173.3 of which Cash and cash equivalents 31.0 35.7 TOTAL ASSETS 2,090.6 2,190.0 Shareholders' equity, Group share 800.7 832.6 Non-controlling interests 70.4 75.8 TOTAL SHAREHOLDERS' EQUITY 871.1 908.4 Non-current liabilities 1,010.9 1,040.9 Current liabilities 208.6 240.6 TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES 2,090.6 2,190.0 Closing exchange rate CLP/EUR 778.1 733.6
(a) The Aguas Andinas group's consolidated financial statements were not yet available on the date when the Group's annual consolidated financial statements were published. The summarized statement of financial position at September 30, 2015 is extracted from the most recent published data (not audited).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 325 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX Summarized Income Statement at 100%
In millions of euros September 30, 2015 (a) September 30, 2014 Revenues 486.4 417.8 Operating profit /(loss) 215.3 189.1 Net income – Group share 130.2 107.1 Net income – non-controlling interests 3.2 3.5 Net income 133.4 110.6 Other comprehensive income (OCI) - - COMPREHENSIVE INCOME 133.4 110.6 Average exchange rate CLP/EUR 712.8 760.0
(a) The Aguas Andinas group's consolidated financial statements were not yet available on the date when the Group's annual consolidated financial statements were published. The summarized income statement at September 30, 2015 is extracted from the most recent published data (not audited).
XX Dividends
In millions of euros Dividends related to 2014 Dividends related to 2013 Dividends paid by Aguas Andinas 167.5 153.5
The contribution of the Agbar group to “non-controlling interests” The contribution of €1,072.8 million at December 31, 2015 is of the Group consolidated statement of financial position primarily the result of the 71.6% non-controlling interest in reaches €1,072.8 million out of a total of €1,385.6 million at Aguas Andinas in Chile. December 31, 2015, versus €1,100.8 million out of a total of €1,518.5 million at December 31, 2014.
326 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
NOTE 17 Provisions
As of December 31, 2015:
Impact of Reversals unwinding December 31, Reversals (surplus Scope discount Translation December 31, In millions of euros 2014 Allowances (utilizations) provisions) effects adjustments (a) adjustments Other 2015 Post-employment benefit obligations and other long-term benefits 774.3 45.6 (63.8) (56.6) 1.0 18.7 23.9 (72.0) 671.1 Sector-related risks 113.6 3.7 (13.9) (2.1) - - 0.1 (16.0) 85.4 Warranties 24.9 9.1 (11.9) (0.9) - - 0.4 2.4 24.0 Tax risks, other disputes and claims 172.2 42.1 (53.1) (0.3) 1.0 - (0.9) 7.6 168.6 Site restoration 556.6 29.9 (63.5) - 6.3 27.3 9.5 5.0 571.1 Restructuring costs 25.4 29.2 (10.6) (0.1) 0.7 - (0.2) 2.6 47.0 Other contingencies (b) 327.7 101.0 (74.9) (1.6) 3.3 6.6 0.9 21.6 384.6 TOTAL PROVISIONS 1,994.7 260.6 (291.7) (61.6) 12.3 52.6 33.7 (48.8) 1,951.8
(a) The discounting impact on post-employment and other long-term benefits relates to the interest expense calculated on the net amount of pension obligations and the fair value of plan assets, in accordance with IAS 19 revised. (b) Provisions for “other contingencies” include a provision for onerous contracts for €100.0 million in 2015 versus €114.1 million in 2014, following the acquisition of WSN by Sita Australia in 2010.
As of December 31, 2015, the variation of total provisions mainly The analysis by type of provisions and the principles used to derives from: calculate them are explained below. XX the decrease in provisions for post-employment and other long-term benefits of -€145.8 million excluding exchange XX 17.1 Post-employment benefits 20 rate impacts and unwinding discount adjustments. This variation takes into account actuarial gains about and other long‑term benefits -€72.0 million, posted in the column “Other” of the above See Note 18. table; XX the decrease in provisions for sector-related risks of XX 17.2 Sector-related risks -€28.3 million excluding exchange rate impact; This item primarily includes provisions for risks relating to the translation adjustments of +€33.7 million, which XX court proceedings involving the Argentinean contracts and to are primarily generated by the American and British warranties given in connection with divestments that are likely subsidiaries; to be called upon. XX the +€52.6 million impact of unwinding discount adjustments mainly related to provisions for site restoration and to provisions for post-employment benefit obligations and XX 17.3 Tax risks, other disputes and claims other long-term benefits. This item includes provisions for ongoing disputes involving The allowances, reversals and the impact of unwinding discount employees or social security agencies (social security adjustments presented above and linked to discounting impacts contribution relief, etc.), disputes arising in the ordinary course are presented as follows in the income statement for 2015: of business (customer claims, accounts payable disputes), tax adjustments and tax disputes. In millions of euros (Reversals) / net allowances Income from operating activities (85.8) Other financial income and expenses 52.6 Income tax expense (6.9) TOTAL (40.1)
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 327 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX 17.4 Site restoration The calculation of the provision for long-term monitoring depends on the costs linked to the production of leachate and The June 1998 European Directive on waste management biogas effluents on the one hand, and on the amount of biogas introduced a number of obligations regarding the closure recycled on the other. Biogas recycling represents a source of and long-term monitoring of landfills. These obligations lay revenue and is deducted from long-term monitoring expenses. down the rules and conditions incumbent upon the operator The main expense items arising from long-term monitoring (or owner of the site where the operator fails to comply with obligations relate to: its obligations) in terms of the design and scale of storage and collection and treatment of liquid (leachates) and gas (biogas) XX construction of infrastructure (biogas recycling facility, effluents. It also requires provisions for these facilities to be installation of leachate treatment facility) and the demolition inspected over a 30-year period after closure. of installations used while the site was in operation; These two types of provisions (rehabilitation and long-term XX upkeep and maintenance of the protective capping and of monitoring) are calculated on a case-by-case basis depending the infrastructure (surface water collection); on the site concerned. In accordance with the accrual basis of XX control and monitoring of surface water, underground water accounting, the provisions are recorded over the period that the and leachates; site is in operation, pro rata to the depletion of landfill capacity XX replacement and repair of observation wells (piezometer (void-space) (matching of income and expenses). Costs to be wells); incurred at the time of a site’s closure or during the long-term monitoring period (30 years after a site is shut down within XX leachate treatment costs; the European Union) are discounted to present value. An XX biogas collection and processing costs (taking into account asset is recorded as a counterparty against the provision. It is any revenues from biogas recycling). depreciated in line with the depletion of the landfill capacity or The provision for long-term monitoring obligations that should the need for capping, during the period. be recorded in the statement of financial position at year-end The rehabilitation provision calculations (at the time the facility depends on the fill rate of the facility at the end of the period, is shut down) depend on whether the capping used is: semi- the estimated aggregate costs per year and per unit (based on permeable, semi-permeable with drainage, or impermeable. standard or specific costs), the estimated closure date of the That choice has a considerable impact on future levels of site and the discount rate applied to each site (depending on leachate effluents and therefore on future costs of treating such its residual life). effluents. Calculating the provision requires an evaluation of the cost of rehabilitating the area to be covered. The provision recorded in the statement of financial position at year-end XX 17.5 Other contingencies must cover the costs of rehabilitating the untreated surface “Other contingencies” mainly includes provisions for area (difference between the fill rate and the percentage of the miscellaneous employee-related and environment-related site’s area that has already been rehabilitated). The amount of litigations and for various business risks. the provision is reviewed each year based on work completed or still to be carried out.
NOTE 18 Post-employment benefit obligations and other long-term benefits
XX 18.1 Description of the main pension plans or a category of its employees, retirement benefits based on a contractually agreed amount. Thus, the so-called “1991” and related benefits and “1998” defined-benefit plans at SUEZ ENVIRONNEMENT Most Group companies grant their employees post-employment COMPANY, SUEZ environnement SAS, Lyonnaise des Eaux France benefits (pension plans, retirement bonuses, medical coverage, and Eau et Force apply to those companies’ senior executives. benefits in kind, etc.) as well as other long-term benefits, such At December 31, 2015, the Projected Benefit Obligation (PBO) as jubilee and other long-service awards. for this senior executives’ plan was €81.8 million, versus €67.2 million at December 31, 2014. The average duration of the actuarial liability for the senior executives’ plans is 15 years. 18.1.1 Main pension plans It should be noted that these plans are partially funded (28% of In France, employees have defined-contribution retirement gross debt at December 31, 2015). plans, such as the basic social security benefits, and All employees also receive a retirement termination benefit in supplementary pension schemes. Some employees also have the form of a lump-sum payment on the date of the employee’s optional retirement plans, some of which are defined-benefit effective departure. Such indemnities correspond to defined- plans through which the employer agrees to pay its employees, benefit plans.
328 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
Outside France, the main retirement plans and related benefits by an insurance company (France). These funds are fed by involve the companies in the US and the UK. contributions made by the Company and, in certain cases, by In the United States, there are two defined benefit plans: the employees. the United Water Resources Inc. Retirement Plan, closed to new employees since January 2010, and the United Water 18.1.2 Multi-employer pension plans Environmental Services Pension Plan for employees of the unregulated business sector. The latter was closed to Employees of some Group companies are affiliated to multi- non-unionized employees in December 2010. In addition, employer pension plans. This is especially the case in the key executives have a specific retirement plan (SERP). At Netherlands, where most of the Group’s entities are in business December 31, 2015, the PBO for the United Water defined- activities that make it mandatory to join an industry-wide benefit pension plans was €394.1 million, versus €361.4 million scheme. These plans spread risk so that financing is assured at December 31, 2014. The average duration of the actuarial through payroll-based contributions, calculated uniformly liability for the United Water plans is 15 years. It should be noted across all affiliated companies. In the Netherlands, multi- that these plans are funded up to 68% at December 31, 2015. employer plans are defined benefit plans. However, the Group recognizes them as defined contribution plans in accordance In addition, United Water commits to support a portion of with IAS 19. healthcare costs of retirees. The corresponding actuarial liability amounted to €84.6 million against €140.7 million at Total contributions of €1.4 million are expected in 2016. December 31, 2014. The change over 2015 is mainly explained by the fact that United Water has chosen to outsource 18.1.3 Other post-employment benefit obligations management of its medical plan for retirees via a shared and long-term benefits platform (OneExchange) which is responsible for overall management of medical records of the beneficiary population. In addition to the supplementary pension schemes mentioned In this context, United Water will no longer reimburse directly above, most Group companies grant their employees long- to the beneficiaries, medical expenses as given in the plan service awards – benefits corresponding to bonuses paid to prior to its amendment but shall pay to the selected platform, employees while they are active, once they have met certain a fixed annual premium covering all services offered. This length of service conditions. Moreover, several Group companies plan amendment has the effect of reducing the commitment agree to cover a portion of expenses incurred by their employees of €56.6 million. and/or retirees on the occurrence of specific events (illness, etc.), and in addition to amounts paid under defined contribution Finally, all US subsidiaries offer a 401(k)-type defined- plans. contribution plan to their employees. 20 These obligations correspond to defined benefit plans. They In the United Kingdom, Sita UK has several defined-benefit are presented in the tables below, in “Other post-employment retirement plans, most of which are closed to new hires, except benefits” and “Other long-term benefits”. for the Sita Final Salary Pension Scheme. Sita UK, as part of its expansion, has acquired various entities throughout the United Kingdom. These entities were most often public companies XX 18.2 Defined benefit plans prior to their acquisition, so their staff was affiliated with the Local Government Pension Schemes (LGPS), which Sita UK must maintain. At December 31, 2015, the PBO for the Sita 18.2.1 Amounts presented in the statement of financial UK retirement plans was €131.0 million, versus €129.2 million position and the statement of comprehensive at December 31, 2014. The average duration of the actuarial income liability for the Sita UK plans is 19 years. It should be noted that these plans are funded up to 98% at December 31, 2015. In accordance with IAS 19, the information presented in the statement of financial position for post-employment and other Employees hired after the closing date of these plans are long-term benefits corresponds to the difference between the covered by a defined-contribution plan, the Sita Stakeholder present benefit obligation (gross liability) and the fair value of pension plan. the plan assets. If this difference is positive, a provision is posted As mentioned above, defined-benefit plans may be fully or (net liability). If the difference is negative, a net asset is posted partially funded by contributions to a pension fund (as it is the provided it satisfies the conditions for recognizing a net asset. case in the US and the UK) or to a dedicated fund managed
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 329 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
Changes in provisions and assets for pensions and related obligations recognized in the statement of financial position can be broken down as follows:
In millions of euros Asset Liability Total BALANCE AT DECEMBER 31, 2013 4.1 (576.5) (572.4) Translation gains and losses 0.2 (21.8) (21.6) Actuarial gains and losses (a) 1.2 (181.0) (179.8) Changes in scope of consolidation and other (0.6) 0.8 0.2 Expense of the period (b) (1.2) (49.5) (50.7) Contributions 2.3 53.7 56.0 BALANCE AT DECEMBER 31, 2014 6.0 (774.3) (768.3) Translation gains and losses 0.4 (23.9) (23.5) Actuarial gains and losses (a) (0.9) 72.9 72.0 Changes in scope of consolidation and other (0.4) (2.4) (2.8) Expense of the period (b) (0.1) 8.3 8.2 Contributions 0.4 48.3 48.7 BALANCE AT DECEMBER 31, 2015 5.4 (671.1) (665.7)
(a) Actuarial gains and losses on employee benefits. (b) Including actuarial gains and losses on long-term benefits (particularly long-service awards).
Plan assets and reimbursement rights are presented in the Accumulated actuarial gains and losses recognized in equity statement of financial position under “Other assets”, current amounted -€293.3 million at December 31, 2015, against and non-current. -€369.2 million at December 31, 2014. They are shown below, The income for the year amounted to €8.2 million in 2014, excluding translation gains and losses which are presented against an expense of €50.7 million in 2014. In 2015, the main separately in the statement of comprehensive income. components are explained in section 18.2.3.
In millions of euros Dec. 31, 2015 Dec. 31, 2014 OPENING BALANCE (369.2) (196.1) Actuarial gains and (losses) generated during the year (a) 72.0 (179.8) Equity-accounted companies and other 3.9 6.7 CLOSING BALANCE (293.3) (369.2)
(a) On employee benefits.
The closing balance of actuarial gains and losses presented above includes actuarial gains and losses recognized in equity-accounted affiliates.
330 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
18.2.2 Change in the amount of obligations and plan assets The table below shows the amount of present benefit obligations and plan assets of the Group SUEZ, the changes to these over the periods concerned, as well as a reconciliation with the amounts recognized in the statement of financial position.
In millions of euros December 31, 2015 December 31, 2014 Pension Pension benefit Other post- Other benefit Other post- Other obligations employment long term obligations employment long term (a) benefits (b) benefits (c) Total (a) benefits (b) benefits (c) Total Change in projected benefit obligation Projected benefit obligation at the beginning of the period (1,050.0) (291.3) (21.2) (1,362.5) (826.8) (224.9) (21.1) (1,072.8) Service Cost (33.9) (8.2) (1.8) (43.9) (28.6) (7.1) (1.6) (37.3) Interest cost (30.4) (9.4) (0.3) (40.1) (33.1) (9.9) (0.6) (43.6) Contributions paid (1.5) - - (1.5) (1.5) - - (1.5) Amendments 0.8 56.6 - 57.4 3.5 - 0.3 3.8 Acquisitions/Disposals of subsidiaries (2.3) - - (2.3) 0.1 0.1 - 0.2 Curtailments/settlements 14.2 3.6 0.7 18.5 17.8 - - 17.8 Special terminations ------Financial actuarial gains and losses 80.2 15.4 1.0 96.6 (134.4) (47.1) (1.8) (183.3) Demographic actuarial gains and losses (30.1) 8.8 (0.4) (21.7) (30.0) 7.1 2.6 (20.3) Benefits paid 39.5 8.0 1.1 48.6 31.9 7.6 1.0 40.5 Other (50.9) (15.6) (0.1) (66.6) (48.9) (17.1) - (66.0) Projected benefit obligation at the end of period A (1,064.4) (232.1) (21.0) (1,317.5) (1,050.0) (291.3) (21.2) (1,362.5) 20 Change in fair value of plan assets Fair value of plan assets at the beginning of the period 524.1 70.1 - 594.2 447.2 53.2 - 500.4 Expected return on plan assets 18.6 3.3 21.9 19.8 3.0 - 22.8 Contributions received 45.2 6.9 52.1 48.1 10.2 0.9 59.2 Acquisitions/Disposals of subsidiaries ------Curtailments/settlements (6.4) - (6.4) (15.0) - - (15.0) Actuarial gains and losses 2.5 (4.9) (2.4) 21.5 3.1 - 24.6 Benefits paid (42.7) (8.0) (50.7) (33.7) (7.6) (0.9) (42.2) Other 35.2 7.9 43.1 36.2 8.2 - 44.4 Fair value of plan assets at the end of period B 576.5 75.3 - 651.8 524.1 70.1 - 594.2 Funded status A+B (487.9) (156.8) (21.0) (665.7) (525.9) (221.2) (21.2) (768.3) Unrecognized past service cost - - Net benefit obligation (487.9) (156.8) (21.0) (665.7) (525.9) (221.2) (21.2) (768.3) TOTAL LIABILITIES (493.3) (156.8) (21.0) (671.1) (531.9) (221.2) (21.2) (774.3) TOTAL ASSETS 5.4 5.4 6.0 6.0
(a) Pensions and retirement bonuses. (b) Medical coverage, gratuities and other post-employment benefits. (c) Long-service awards and other long-term benefits.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 331 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
In 2015, the decrease of the net liability is mainly attributable to In 2014, the increase in the net liability found its main explanation higher discount rates over the period, resulting in an actuarial in the significant decline of the discount rate, since there is an gain in equity of around €72 million, and by the recognition of actuarial loss on financial assumptions of around €159 million. an income primarily due to the healthcare plan amendment in The adoption of new mortality table in the US by United Water the United States whose consequence is a decrease in liability impacted the net provision of approximately €26 million (see for about €56.6 million. These items are partially offset by a actuarial losses on demographic assumptions). foreign exchange effect that increases the commitment for about €24 million.
18.2.3 Components of cost for the period The net cost recognized in respect of pensions and other defined benefit obligations in 2015 and 2014 breaks down as follows:
In millions of euros Dec. 31, 2015 Dec. 31, 2014 Current service cost (43.9) (37.3) Net interest expense on the net defined benefit liability (18.7) (20.9) Actuarial gains or losses 0.6 0.8 Past service cost 57.4 3.9 Gains or losses on pension plan curtailments, terminations and settlements 12.8 2.8 Special terminations - - TOTAL 8.2 (50.7) Of which recognized in current operating income 26.9 (29.8) Of which recognized in financial income/(loss) (18.7) (20.9)
18.2.4 Funding policy and strategy When plan assets are invested through pension funds, investment decisions and the allocation of plan assets are When defined benefit plans are funded, the related plan assets the responsibility of the fund manager concerned. For French are invested through pension funds and/or with insurance companies, where plan assets are invested through an insurance companies, depending on the investment practices specific to company, the fund manager manages the investment portfolio the country concerned. The investment strategies underlying in units of account or euros, and guarantees a rate of return these defined benefit plans are aimed at striking the right on the related assets. Such diversified funds are characterized balance between an optimum return on investment and an by active management benchmarked to composite indices, acceptable level of risk. adapted to the long-term horizon of the liabilities and taking These strategies have a twofold objective: into account the government’s eurozone obligations and the shares of the largest companies in and outside the eurozone. In to maintain sufficient income streams and liquidity to cover XX the case of euro funds, the insurer’s sole obligation is to ensure pensions and other benefit payments; and a fixed minimum return on plan assets. XX in a controlled-risk environment, to achieve a long-term return on investment matching the discount rate or, as applicable, at least equal to the future returns required.
332 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
The funding of these obligations breaks down as follows:
Limit on defined benefit Cost of assets and Present benefit Fair value of plan unrecognized supplementary Total net In millions of euros obligation assets past service provision obligation Underfunded plans (938.8) 522.9 - - (415.9) Overfunded plans (65.3) 71.3 - - 6.0 Unfunded plans (358.4) - - - (358.4) Total December 31, 2014 (1,362.5) 594.2 - - (768.3) Underfunded plans (909.7) 600.5 - - (309.2) Overfunded plans (45.9) 51.3 - - 5.4 Unfunded plans (361.9) - - - (361.9) TOTAL DECEMBER 31, 2015 (1,317.5) 651.8 - - (665.7)
The allocation of plan assets by main asset category breaks down as follows:
2015 2014 Securities 43% 39% Bonds 30% 43% Real Estate 2% 2% Other (including money market securities) 25% 16% TOTAL 100% 100%
The allocation of plan assets by geographical area of investment is as follows: 20 Europe North America Latin America Asia Oceania Others Securities 19% 59% 76% 47% 21% Bonds 41% 21% 24% 49% 43% Real Estate 9% 0% 0% 0% 0% Other (including money market securities) 31% 20% 0% 4% 36% TOTAL 100% 100% 100% 100% 100%
18.2.5 Actuarial assumptions Actuarial assumptions are determined individually per country and company, in association with independent actuaries. The weighted rates are presented below:
Other post-employment Pensions benefits Long-term benefits Total benefit obligation 2015 2014 2015 2014 2015 2014 2015 2014 Discount rate 3.3% 3.3% 3.8% 3.9% 2.3% 2.1% 3.4% 3.4% Estimated future increase in salaries 2.9% 3.3% 2.3% 2.6% 2.7% 2.9% 2.8% 3.1% Inflation Rate 2.1% 2.2% 2.2% 2.1% 2.1% 2.0% 2.1% 2.1% Average remaining working lives of participating employees 17 years 14 years 18 years 16 years 19 years 19 years 17 years 14 years
Discount and salary increase rates are shown including inflation.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 333 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
18.2.5.1 DISCOUNT RATE AND INFLATION According to estimates made by the Group, a change of plus or minus 1% of the discount rate would result in a change in The discount rate used is determined by reference to the yield, actuarial liabilities of approximately 13%. at the measurement date, of AA corporate bonds with a maturity corresponding to the anticipated term of the obligation. Inflation rates were determined for each currency zone. A change in the inflation rate of roughly 1% would result in a As for December 31, 2014, the 2015 rates were determined for change in the actuarial liability of 7%. each currency area (euro, US dollar and pound sterling) from data on AA bond yields (according to Bloomberg and iBoxx) extrapolated to long-term maturities based on the performance of government bonds.
18.2.6 Geographical breakdown of obligations In 2015, the geographical breakdown of the main obligations and the related actuarial assumptions (including inflation) were as follows:
Euro Zone United Kingdom United States Rest of the World Other benefit Other benefit Other benefit Other benefit In millions of euros Pensions obligations Pensions obligations Pensions obligations Pensions obligations Funded status (a) (318.7) (112.1) (2.5) 0.0 (127.6) (9.4) (39.1) (56.3) Discount rate 2.2% 2.6% 3.9% 0.0% 4.6% 4.6% 2.6% 4.4% Estimated future increase in salaries 2.3% 1.3% 4.1% 0.0% 3.3% 3.3% 3.3% 2.5% Inflation Rate 2.0% 2.0% 3.1% 0.0% 2.2% 2.2% 1.3% 2.5% Average remaining working lives of participating employees 19 20 19 0 15 18 17 13
(a) Funded status corresponds to the difference between the present benefit obligation and the fair value of the plan assets.
Concerning “Rest of the world” category, the funded status XX 18.3 Defined contribution plans relating to pension mainly concerns Sweden, while the funded status relating to the other benefit obligations stems largely In 2015, the Group SUEZ recorded a €60.1 million expense in from Morocco. respect of contributions to Group defined contribution plans. These contributions are recorded under “Personnel costs” in the income statement. 18.2.7 Payments due in 2016 The Group expects to contribute to defined benefit plans in 2016 and to pay benefits for a total approximate amount of €86 million.
NOTE 19 Construction contracts
The “Amounts due from customers under construction contracts” and “Amounts due to customers under construction contracts” items are presented in the statement of financial position under “Other assets” and “Other liabilities” respectively.
In millions of euros Dec. 31, 2015 Dec. 31, 2014 Amounts due from customers under construction contracts 141.4 95.6 Amounts due to customers under construction contracts 155.8 163.6 NET POSITION (14.4) (68.0)
According to the presentation method adopted by the Group, provisions for loss at termination of construction contracts have been transferred to the bottom of the statement of financial position under “Amounts due to customers under construction contracts”.
334 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
Contracts in progress at the closing date:
In millions of euros Dec. 31, 2015 Dec. 31, 2014 Cumulated cost incurred and margins recognized 3,063.0 3,362.7 Advances received 57.0 50.0 Retentions 23.7 32.2
For the design and construction contracts, the Group guarantees, contingent liabilities, for which the Group believes that the by contract, its customers on the delivery of plants ready for probability of cash out is low. operation. The Group is required to give guarantees which are
NOTE 20 Finance leases
The net amount of Property, plant and equipment assets owned The main finance leases entered into by the Group concern the under finance leases are broken down into various asset incineration plants of Novergie in France and Torre Agbar as a categories, depending on their type. result of Agbar taking over in 2010, the rights and obligations of the finance lease previously linking Azurelau to La Caixa, the owner and financial leaseholder of the building.
The reconciliation between the undiscounted value and the present value of minimum lease payments is as follows:
Future minimum lease payments Future minimum lease payments In millions of euros at Dec. 31, 2015 at Dec. 31, 2014 Undiscounted value Present value Undiscounted value Present value During year 1 54.5 53.9 51.1 50.6 During years 2 to 5 inclusive 207.1 200.7 236.6 226.7 20 Beyond year 5 97.0 79.7 115.9 94.3 TOTAL FUTURE MINIMUM LEASE PAYMENTS (a) 358.6 334.3 403.6 371.6
(a) Including amortized cost.
The following table provides a reconciliation of maturities of liabilities under finance leases as reported in the statement of financial position (see Note 13.2.1) with undiscounted future minimum lease payments by maturity:
During years 2 to 5 In millions of euros Total During year 1 inclusive Beyond year 5 Liabilities under financial lease(a) 334.3 53.9 200.7 79.7 Impact of discounting future repayments of principal and interest 24.3 0.6 6.4 17.3 UNDISCOUNTED FUTURE MINIMUM LEASE PAYMENTS 358.6 54.5 207.1 97.0
(a) Including amortized cost.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 335 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
NOTE 21 Operating leases
Operating lease income and expenses recognized for fiscal years 2015 and 2014 break down as follows:
In millions of euros December 31, 2015 December 31, 2014 Minimum lease payments (370.7) (372.0) Contingent lease payments (7.3) (9.3) Sub-letting income 0.3 - Sub-letting expense (4.0) (3.0) Other operating lease expenses (21.1) (12.8) TOTAL (402.8) (397.1)
Future minimum lease payments due under non-cancelable operating leases can be analyzed as follows:
In millions of euros December 31, 2015 December 31, 2014 During year 1 211.8 231.7 During years 2 to 5 inclusive 504.3 410.4 Beyond year 5 401.5 356.8 TOTAL 1,117.6 998.9
NOTE 22 Service concession arrangements
SIC 29 – “Service Concession Arrangements-Disclosures” was granted a right and becomes bound by an obligation to offer published in May 2001 and deals with the information regarding public services. concession contracts which should be disclosed in the Notes to The Group manages a large number of concession contracts the Financial Statements. as defined by SIC 29 in drinking water distribution, wastewater IFRIC 12 – “Service Concession Arrangements”, published treatment, and waste management. in November 2006 deals with the recognition of concession These concession contracts include terms and conditions on contracts which meet certain criteria according to which it is rights and obligations with regard to the infrastructure and estimated that the concession-grantor controls the facilities to the obligations relating to public service, in particular the (see Note 1.5.6). obligation to allow users to access the public service, an As specified in SIC 29, a service concession agreement generally obligation, which, in certain contracts, may be subject to a involves a transfer by the concession-grantor to the concession- timeframe. The terms of the concessions vary between 12 and holder for the entire duration of the concession: 50 years, depending mainly on the level of investments to be (a) Of the right to offer services enabling the public to access made by the concession operator. major economic and social services; and In exchange for these obligations, the Group is entitled to bill (b) Of the right, in certain cases, to use tangible and intangible either the local authority granting the concession (mainly assets and/or specified financial assets; incineration activities and BOT water treatment contracts) or the users for the services provided. That right gives rise either in exchange for the commitment made by the concession- to an intangible asset, or to a receivable, or a tangible asset, holder: depending on the accounting model applicable (see Note 1.5.6). (c) To offer services in accordance with certain terms and The tangible asset model is used when the concession-grantor conditions during the length of the concession; and does not control the infrastructure, like for example, water (d) If the need arises, to return the rights received at the distribution concession contracts in the United States which beginning of the concession and/or acquired during the do not provide for the return to the concession grantor at the concession. end of the contract of the infrastructure, which remains the property of the SUEZ group. The common characteristic of all the service concession agreements is the fact that the concession holder is both
336 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
A general obligation also exists to return the concession Services are generally billed at a fixed price which is index- infrastructure in good working condition at the end of the linked for the duration of the contract. However, contracts contract. Where appropriate (see Note 1.5.6), this obligation contain clauses providing for periodic price adjustments results in the recognition of a capital renewal and replacement (usually at the end of a five-year period) if there is a change in liability. The replacement liability amounted to €222 million at the economic conditions which were initially expected when December 31, 2015 versus €263 million at December 31, 2014 the contracts were signed. and is classified as “Other current liabilities”.
NOTE 23 Share-based payments or cash-based payments
Expenses recognized in respect of share-based payments or cash-based payments are as follows:
(Expense) for the period
In millions of euros Note 2015 2014 Stock-option plans 23.1 - (0.1) Performance share plans (a) 23.2 0.4 - Worldwide financial incentive scheme 23.3 (7.1) (10.4) Employees share issues (b) 23.4 (0.1) (2.7) Long-term incentive plan 23.5 (10.1) (3.7) TOTAL (16.9) (16.9)
(a) Expenses presented for performance share plans take into account the partial achievement of performance conditions of SUEZ ENVIRONNEMENT COMPANY plans (refer to 23.2.2). (b) Impact of Share Appreciation Rights is presented after hedging by warrants (subject to IAS 39). Before hedging by warrants, the 2015 expense related to capital increases reserved for employees amounts to -€3.0 million and 2014 expense amounts to -€4.6 million. 20 XX 23.1 Stock option plans
23.1.1 Arrangements and grants Since 2010, no more stock options are granted. Arrangements relating to plans still in force in 2015 are described in previous GDF SUEZ (became ENGIE) and SUEZ ENVIRONNEMENT COMPANY Reference Documents.
23.1.2 Description of current plans
SUEZ ENVIRONNEMENT COMPANY STOCK OPTION PLANS
Date of the Outstanding Outstanding authorizing Starting point Adjusted number of number of Shareholders' for exercise Exercise shares at Cancelled shares at Expiration Residual Plan Meeting of the options price 12/31/2014 Exercised (b) Granted or Expired 12/31/2015 date life 12/17/2009 (a) 05/26/2009 12/17/2013 15.49 1,534,008 292,489 - 27,209 1,214,310 12/16/2017 2.0 12/16/2010 (a) 05/26/2009 12/16/2014 14.20 826,444 145,291 4,400 676,753 12/15/2018 3.0 TOTAL 2,360,452 437,780 - 31,609 1,891,063
(a) Exercisable plans. (b) Under specific circumstances such as retirement or death, the anticipated exercice of options is authorized.
The average share price for SUEZ ENVIRONNEMENT COMPANY in 2015 was €16.93.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 337 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
ENGIE STOCK OPTION PLANS
Date of the Outstanding Outstanding authorizing Starting point Adjusted number of number of Shareholders' for exercise Exercise shares at Cancelled shares at Expiration Residual Plan Meeting of the options price 12/31/2014 Exercised (b) Granted or Expired 12/31/2015 date life 01/17/2007 04/27/2004 01/16/2011 36.62 1,579,604 1,579,604 - 1/16/2015 - 11/14/2007 05/04/2007 11/13/2011 41.78 1,248,941 1,248,941 - 11/13/2015 - 11/12/2008 (a) 07/16/2008 11/12/2012 32.74 1,009,410 1,400 1,008,010 11/11/2016 0.9 11/10/2009 (a) 05/04/2009 11/10/2013 29.44 379,506 700 378,806 11/9/2017 1.9 TOTAL 4,217,461 - - 2,830,645 1,386,816
(a) Exercisable plans. (b) Under specific circumstances such as retirement or death, the anticipated exercice of options is authorized.
The average share price for ENGIE in 2015 was €17.32.
23.1.3 Impact on the income statement
SUEZ ENVIRONNEMENT COMPANY PLANS In 2015, no expense has been recorded in relation to the SUEZ ENVIRONNEMENT COMPANY stock option plans.
(Expense) for the period Weighted average In millions of euros fair value 2015 2014 SUEZ ENVIRONNEMENT COMPANY plan 12/17/2009 3.3 € - - SUEZ ENVIRONNEMENT COMPANY plan 12/16/2010 2.9 € - (0.1) TOTAL - (0.1)
ENGIE PLANS not fully met, the number of shares granted to employees is reduced in accordance with the plan rules. Any such change in In 2015, as for 2014, no expense has been recorded in relation the number of shares leads to a reduction in the total expense to the ENGIE stock option plans. of the plan, in accordance with IFRS 2. Performance conditions are reviewed at each year-end. XX 23.2 Performance share plans In 2015, a profit of €1.8 million was recognized on the 2012 and 2013 SUEZ ENVIRONNEMENT COMPANY performance share 23.2.1 Arrangements and grants plan to reflect the achievement level of performance conditions and consequently to cancel the expenses recognized in previous No performance share plan was granted since 2013. years. Arrangements relating to plans still in force in 2015 are In 2014, a profit of €5.2 million was recognized on the 2010 described in previous GDF SUEZ (became ENGIE) and SUEZ and 2012 SUEZ ENVIRONNEMENT COMPANY performance ENVIRONNEMENT COMPANY Reference Documents. share plan to reflect the partial achievement of performance conditions and consequently to cancel the expenses recognized 23.2.2 Review of internal performance conditions in previous years. In addition to the service condition, some plans are subject to internal performance conditions. If the performance targets are
338 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
23.2.3 Impact on the income statement
SUEZ ENVIRONNEMENT COMPANY PLANS During the period, a net income of €0.4 million was recognized for the SUEZ ENVIRONNEMENT COMPANY performance share plans.
Outstanding (Expense) for the period Number of number of shares Weighted average In millions of euros shares granted at 12/31/2015 fair value 2015 2014 December 2010 (a) 829,080 - 11.6 € - 2.8 March 2012 (a) 828,710 248,453 8.8 € 1.5 0.7 March 2013 1,315,100 369,580 6.5 € (1.1) (3.5) TOTAL 0.4 -
(a) Taking into account in 2015 of a profit of €1.8 million for partial achievement of the performance conditions.
ENGIE PLANS described in previous GDF SUEZ (became ENGIE) and SUEZ ENVIRONNEMENT COMPANY Reference Documents. During the period, the impact of the performance share plans is not significant on the Group's accounts. 23.3.2 Impact on the income statement XX 23.3 Worldwide incentive scheme SUEZ ENVIRONNEMENT COMPANY PLANS 23.3.1 Arrangements and grant During the period, an expense of -€4.8 million was recognized for the SUEZ ENVIRONNEMENT COMPANY worldwide incentive No worldwide incentive scheme has been granted since scheme. 2013. Arrangements relating to plans still in force in 2015 are
Outstanding (Expense) for the period 20 Number of number of shares Weighted average In millions of euros shares granted at 12/31/2015 fair value 2015 2014 January 2013 3,018,720 1,504,192 6.2 € (4.8) (5.4) TOTAL (4.8) (5.4)
ENGIE PLANS During the period, an expense of -€2.3 million was recognized for the ENGIE worldwide incentive schemes.
(Expense) for the period Number of Weighted average In millions of euros shares granted fair value 2015 2014 June 2011 (a) 749,655 19.9 € 1.0 (1.4) October 2012 1,140,525 11.7 € (3.3) (3.6) TOTAL (2.3) (5.0)
(a) To reflect the definitive deliveries on the worldwide financial incentive scheme launched by ENGIE in June, 2011, a profit of €1,7 million was recorded in 2015.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 339 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
XX 23.4 Employee share issues The expense recorded during the period on current plans is as follows:
(Expense) for the period
In millions of euros 2015 2014 SUEZ ENVIRONNEMENT Sharing 2014 plan Share issue and matching shares in France July 2014 - (3.2) SUEZ ENVIRONNEMENT Sharing 2014 plan Share Incentive Plan July 2014 - (0.1) SUEZ ENVIRONNEMENT Sharing 2014 plan Matching shares – International July 2014 (0.2) (0.1) SUEZ ENVIRONNEMENT Sharing 2014 plan Share Appreciation Rights July 2014 0.6 1.0 SUEZ ENVIRONNEMENT Sharing 2011 plan Matching shares – International December 2011 (0.2) (0.1) SUEZ ENVIRONNEMENT Sharing 2011 plan Share Appreciation Rights December 2011 (0.3) - ENGIE Link 2010 plan Matching shares – International August 2010 - (0.1) ENGIE Link 2010 plan Share Appreciation Rights August 2010 - (0.1) TOTAL (a) (0.1) (2.7)
(a) Impact of Share Appreciation Rights is presented after hedging by warrants (subject to IAS 39). Before hedging by warrants, the expense of the year 2015 related to capital increases reserved for employees amounts to -€3.0 million versus -€4,6 million in the year 2014.
There was no employee share issue in 2015. The only impacts on XX a non-market performance condition based on the Group’s 2015 income linked to employee share issues came from SARs cumulative recurring net Income (defined as net income, and the amortization of international matching contributions for Group share, excluding exceptional items) from January 1, the Link 2010, Sharing 2011 and Sharing 2014 plans. 2015 to December 31, 2017 included; In 2015, the accounting impact of employee share issues was XX a non-market performance condition based on the Group’s not material. cumulative EBITDA from January 1, 2015 to December 31, The arrangements relating to Sharing 2014, Sharing 2011 and 2017 included. Link 2010 plans are described in more detail in previous GDF Furthermore, the amount of the payment to these 607 SUEZ (became ENGIE) and SUEZ ENVIRONNEMENT COMPANY beneficiaries, can be increased or decreased by 10% according Reference Documents. to the level of the man/woman parity rate in the Group management on December 31, 2017. XX 23.5 Long-term incentive plan For the other beneficiaries, all granted bonuses are subject to both non-market performance condition, the Group’s EBITDA The Board of Directors, in its meeting of January 14, 2015, has and recurring net income between January 1, 2015 and decided to implement a long-term incentive plan in the form December 31, 2017 included. of a cash bonus, whose total budget amounts to €15.2 million, which concerns 1,780 beneficiaries. Market performance condition is measured using Monte Carlo simulations. The vesting period runs from January 14, 2015 to March 30, 2018 included. The fair value of this plan, determined as of December 31, 2015, results in a total expense of -€11.4 million, recognized on a This cash bonus plan is conditional upon the following straight line basis over the duration of the plan. performance conditions: During the exercise 2015, both long-term incentive plans 2014 For 607 beneficiaries, two out of three of the following conditions and 2015 generated an expense of -€10,1 million (taking into are planned according to their profile: account the social contributions). XX a market performance condition, concerning the trend of the Total Shareholder Return of SUEZ ENVIRONNEMENT COMPANY over the period between January 1, 2015 and December 31, 2017 included, compared with the trend in the Total Shareholder Return of the Eurostoxx Utilities indices over the same period;
340 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
NOTE 24 Related-party transactions
The purpose of this note is to present material transactions consolidated companies) are listed under Note 28 “List of the between the Group and its related parties as defined by IAS 24. main consolidated companies at December 31, 2015 and 2014”. Compensation for key executives is disclosed under Note 25 Only material transactions are described below. “Executive compensation”. The main subsidiaries (fully
XX 24.1 Transactions with ENGIE and related entities
In millions of euros Dec. 31, 2015 Dec. 31, 2014 Transactions with ENGIE Purchases/sales of goods and services (0.3) 5.7 Non financial payables 3.0 0.3 Non financial receivables 0.7 0.4 Receivables carried at amortized cost (a) 19.5 21.1 Transactions with companies linked to ENGIE Purchases/sales of goods and services 2.2 0.6 Non financial receivables 27.9 29.7 Non financial payables 2.1 3.2 Borrowings excluding financial instruments 1.1 0.9 Commodity derivatives (Liabilities) 4.7 2.5 Guarantees and commitments given - 0.5
(a) Refer to Note 2.2.1 of the chapter 20 of the 2009 SUEZ ENVIRONNEMENT COMPANY Reference Document – Synthetic Argentinean contract. 20 XX 24.2 Transactions with joint operations, joint ventures joint operation is proportionately consolidated at 35%. The non- Group share of €192 million was recognized under assets in the and associates Group’s consolidated statement of financial position.
24.2.1 Joint operations 24.2.2 Joint ventures and associates The Group has a €296 million current account in the joint There was no significant transaction or commitment involving venture that was responsible for the construction of the joint ventures or associates in 2015. seawater desalination plant near Melbourne (Australia). This
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 341 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
NOTE 25 Executive compensation
The Group’s key executives were the nine members of the Management Committee at December 31, 2015. Their compensation breaks down as follows:
In millions of euros Dec. 31, 2015 Dec. 31, 2014 Short-term benefits 7.3 6.9 Post-employment benefit(a) 0.8 1.1 Share-based payments (b) 0.2 (0.2) Long Term Incentive Plan 0.9 0.2 TOTAL 9.2 8.0
(a) Post-employment benefits relate to the SUEZ group plans only. (b) Data at December 31, 2014 include a cancel of expenses recognized in previous years to reflect the partial achievement of performance conditions.
NOTE 26 Legal and arbitration proceedings
XX 26.1 Litigation and arbitration Settlement of Investment Disputes (ICSID), in accordance with the bilateral Franco-Argentinean investment protection treaties. In the normal course of its business, the Group is involved in a certain number of litigation and arbitration with third parties These ICSID arbitration proceedings aim at obtaining indemnities or with the tax administrations of certain countries. Provisions to compensate for the loss of value of the investments made are recorded for such litigation and arbitration when (i) a legal, since the start of the concession due to the measures adopted contractual or constructive obligation exists at the closing date by the Argentinean government following the adoption of the with respect to a third party; (ii) it is probable that an outflow abovementioned Emergency Act. The ICSID acknowledged of resources without economic benefits will be necessary to its jurisdiction to rule on the two cases in 2006. At the same settle the obligation; and (iii) the amount of the said outflow of time as the ICSID proceedings, the concession-holders Aguas resources can be estimated in a sufficiently reliable manner. Argentinas and Aguas Provinciales de Santa Fe were forced Provisions recorded in respect of the above amounted to to file proceedings to cancel their concession agreement with €168.6 million as of December 31, 2015 (excluding litigation local governments. in Argentina). However, since the financial situation of the concession-holding There is no other governmental, judicial, or arbitration companies had deteriorated since the Emergency Act, Aguas proceedings of which the Group is aware of, that is suspended Provinciales de Santa Fe announced that it was filing for judicial or with which it is threatened, likely to have or that has already liquidation at its Shareholders’ Meeting on January 13, 2006. had, in the past 12 months, a material impact on the Group’s At the same time, Aguas Argentinas applied to file a Concurso financial position or profitability. Preventivo (similar to a French bankruptcy procedure). As part of these bankruptcy proceedings, a settlement proposal Litigation in Argentina involving the novation of admissible Aguas Argentinas liabilities was approved by creditors and ratified by the bankruptcy court In Argentina, tariffs applicable to public-service contracts on April 11, 2008. The liabilities are in the process of being were frozen by the Public Emergency and Exchange Regime settled. The proposal provides for an initial payment of 20% Reform Law (Emergency Act) in January 2002, preventing the (about USD40 million) upon ratification and a second payment application of contractual price indexation that would apply in of 20% in the event of compensation by the Argentinean the event of a depreciation of the Argentine peso against the government. As controlling shareholders, ENGIE and Agbar US dollar. decided to financially support Aguas Argentinas in making this In 2003, SUEZ – now ENGIE – and its co-shareholders in first payment, upon ratification, and paid USD6.1 million and the water concessions for Buenos Aires and Santa Fe filed USD3.8 million respectively. arbitration proceedings against the Argentinean government, In two decisions dated July 30, 2010, the ICSID recognized the in its capacity as grantor, to enforce the concession agreements’ Argentine government’s liability in canceling the Buenos Aires contractual clauses with the International Center for the and Santa Fe water and wastewater treatment concession
342 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
contracts. In addition, in June 2011 the ICSID appointed an –– Fiscal year 1996: Proceedings ended with a ruling in expert to provide a definitive assessment of the compensation favor of Agbar, which already received a repayment of € payable for the commercial harm. 4.1 million, in addition to €1 million in interest. The reports on the Buenos Aires and Santa Fe concessions –– Fiscal year 1997: Proceedings ended with a ruling in favor were presented by the expert to the ICSID respectively in of Agbar. September 2013 and in April 2014. Regarding the Buenos Aires –– Fiscal year 1998: Proceedings ended with a ruling in favor concession, ICSID rendered its decision on April 9, 2015 ordering of Agbar. the Argentine Republic to pay Aguas Argentinas shareholders USD405 million in damages (including USD346 million to SUEZ XX With regard to the reassessments notified for 1999-2001: and its subsidiaries). In early August 2015, the Republic of In May 2008, the Administrative Court cancelled the Argentina petitioned an ad hoc ICSID committee to render this penalties relating to the 1999-2001 fiscal years, but decision invalid. upheld almost all of the reassessments. Agbar appealed The ICSID ruled against the Republic of Argentina on this ruling in July 2008. In July 2011, Agbar was awarded December 4, 2015, ordering it to pay USD211 million regarding a partially favorable decision by the Court of Appeals and the termination of the Santa Fe concession contract. The Agbar subsequently filed an appeal with the Supreme Court Republic of Argentina may initiate proceedings to invalidate concerning the disputes related to the reassessments the ruling. upheld. The Spanish government also appealed the ruling in favor of Agbar. The Group considers that the provisions recorded in the financial statements relating to this litigation are appropriate. On October 25, 2012, Agbar was given the ruling of the Supreme Court, validating what had been decided by the Court of Appeals. XX 26.2 Tax litigation Agbar received notification of the decision of the Supreme Court in March 2013 and paid the sum of €20 million Sociedad General de Aguas de Barcelona corresponding to the principal. The interest of €9 million was challenged before the Central Administrative Tribunal. Agbar was subject to a number of tax audits, mainly relating to corporate tax. XX With regard to the reassessments notified for 2002-2004: With respect to corporate tax, Agbar received a reassessment In June 2009, Agbar filed suit with the Administrative Court to notice from the Spanish tax authorities for the 1995-1998 fiscal challenge the reassessments for 2002-2004. In June 2012, years that outlined a reassessment of tax payable in the amount the Court reached a decision partially in Agbar’s favor. 20 of €28 million in addition to penalties of €12 million. Agbar filed an appeal before the Court of Appeals regarding Agbar also received a reassessment notice relating to the 1999- the other elements for which the Administrative Court has 2001 fiscal years that outlined a reassessment of tax payable in not held in favor of Agbar. the amount of €41 million in addition to penalties of €25 million. In July 2015, Agbar was awarded a partially favorable In May 2009, Agbar was also notified of a reassessment in the decision in the Court of Appeals and submitted an appeal amount of €60.5 million for the 2002-2004 fiscal years, without on points of law to the Supreme Court with regard to the additional penalties. reassessments that were upheld. In court, the company challenged these notices, which were, for each period in question, justified with similar arguments by the tax authorities. Agbar considers the tax authorities’ arguments groundless. XX Agbar obtained a court ruling in its favor with regard to the 1995-1998 fiscal years and the situation may be summarized as follows: –– Fiscal year 1995: Proceedings ended with a ruling in favor of Agbar.
NOTE 27 Subsequent events
There is no significant subsequent event.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 343 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
NOTE 28 List of the main consolidated companies at December 31, 2015 and 2014
This note aims to present the list of entities covering 80% of the following indicators: Revenues, EBITDA, Net Debt and capital employed.
Consolidation % interest % control methods (a) Dec. Dec. Dec. Dec. Dec. Dec. Names Headquarters address 2015 2014 2015 2014 2015 2014 SUEZ ENVIRONNEMENT COMPANY Tour CB21, 16 Place de l'Iris, 92040 Paris La Défense Cedex – France 100.0 100.0 100.0 100.0 FC FC WATER EUROPE LYONNAISE DES EAUX France Tour CB21, 16 Place de l'Iris, 92040 Paris La Défense Cedex – France 100.0 100.0 100.0 100.0 FC FC EAU ET FORCE 300, rue Paul Vaillant Couturier BP 712 92007 Nanterre – France 100.0 100.0 100.0 100.0 FC FC EAUX DU NORD 217, boulevard de la Liberté BP 329 59020 Lille – France 100.0 99.4 100.0 99.4 FC FC SOCIÉTÉ DES EAUX DE VERSAILLES ET DE SAINT-CLOUD 5-7, rue Pierre Lescot (SEVESC) 78000 Versailles – France 100.0 100.0 100.0 100.0 FC FC SERAMM 35, boulevard du Capitaine Gèze, 13014 Marseille – France 100.0 100.0 100.0 100.0 FC FC AGBAR Edificio D38 – Passeig Zona Franca 08038 Barcelona – Spain 100.0 99.5 100.0 99.5 FC FC AGUAS ANDINAS Avenida Presidente Balmaceda 1398, Piso 4, Santiago – Chile 28.4 28.2 50.1 50.1 FC FC UTILITY SERVICES CO, Inc 1230 Peachtree Street NE, Suite 1100, Promenade II Building, Atlanta, GA 30309 – United States of America 100.0 100.0 100.0 100.0 FC FC RECYCLING AND RECOVERY EUROPE SITA HOLDINGS UK LTD Grenfell road, Maidenhead, Berkshire SL6 1ES – United Kingdom 100.0 100.0 100.0 100.0 FC FC SE DEUTSCHLAND GmbH Industriestrasse 161 D-50999 Köln – Germany 100.0 100.0 100.0 100.0 FC FC SITA NEDERLAND BV Meester E.N. van Kleffensstraat 10, 6842 CV Arnhem – Netherlands 100.0 100.0 100.0 100.0 FC FC SITA FRANCE Tour CB21, 16 Place de l'Iris, 92040 Paris La Défense Cedex – France 99.9 99.9 99.9 99.9 FC FC SITA BELGIUM Avenue Charles-Quint 584 7 1082 Berchem, Sainte-Agathe – Belgium 100.0 100.0 100.0 100.0 FC FC SOCALUX Lamesch SA ZI Wolser Nord BP 75 – L3201 Bettembourg, Luxembourg 100.0 100.0 100.0 100.0 FC FC SITA CZ Spanelska 10/1073, 12000 Praha 2, Vinohrady – Czech Republic 100.0 100.0 100.0 100.0 FC FC SITA POLSKA Zawodzie 5, 02-981 Warszawa – Poland 100.0 100.0 100.0 100.0 FC FC SITA SVERIGE AB. Kungsgardsleden, 26271 Angelholm – Sweden 100.0 100.0 100.0 100.0 FC FC SITA SUOMI OY Sahaajankatu 49 – 00880 Helsinki – Finland 100.0 100.0 100.0 100.0 FC FC
(a) FC: Full consolidation. EM: Equity method of consolidation.
344 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Consolidated financial statements 20
Consolidation % interest % control methods (a) Dec. Dec. Dec. Dec. Dec. Dec. Names Headquarters address 2015 2014 2015 2014 2015 2014 INTERNATIONAL SITA WASTE SERVICES Room 702, 7/F, Lee Garden Two, 28 Yun Ping Road, Causeway Bay – Hong Kong 100.0 100.0 100.0 100.0 FC FC SITA AUSTRALIA Level 3, 3 Rider Boulevard 2138 Rhodes, NSW – Australia 100.0 60.0 100.0 60.0 FC FC AQUASURE HOLDING Ltd 492 St Kilda Road – level 7 Melbourne, VIC 3004 – Australia 20.8 20.8 20.8 20.8 EM EM SEAH Level 7, 5 Rider Blvd Rhodes Sydney, New South Wales, 2138 – Australia 100.0 100.0 100.0 100.0 FC FC SUEZ Water Inc. 461 From Road Suite 400, Paramus 07652 New Jersey – United States of America 100.0 100.0 100.0 100.0 FC FC MACAO WATER Consolidated Consolidated 718 avenida do Conselheiro, Macao – China 42.5 42.5 via SFH via SFH EM EM DEGRÉMONT SAS Tour CB21, 16 Place de l'Iris, 92040 Paris La Défense Cedex – France 100.0 100.0 100.0 100.0 FC FC DEGRÉMONT France Tour CB21, 16 Place de l'Iris, 92040 Paris La Défense Cedex – France 100.0 100.0 100.0 100.0 FC FC LYDEC 48, Boulevard Mohamed Diouri, Casablanca – Morocco 51.0 51.0 51.0 51.0 FC FC SINO FRENCH HOLDING (SFH) New World Tower 29/f 16-18 Queensroad Central – Hong Kong 50.0 50.0 50.0 50.0 EM EM PT PAM LYONNAISE JAYA Dipo Tower 16th Floor Jl. Jend. Gatot Subroto Kav 51-52, Jakarta Pusat 10260 – Indonesia 51.0 51.0 51.0 51.0 FC FC 20 OTHER SUEZ Environnement SAS Tour CB21, 16 Place de l'Iris, 92040 Paris La Défense Cedex – France 100.0 100.0 100.0 100.0 FC FC SAFEGE SAS 15, rue du Port, Nanterre – France 100.0 100.0 100.0 100.0 FC FC
(a) FC: Full consolidation. EM: Equity method of consolidation.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 345 Financial information relating to the Company's assets, financial situation and revenues 20 Consolidated financial statements
NOTE 29 Fees of the Statutory Auditors and members of their networks
The accounting firms EY and Mazars act as Statutory Auditors for the SUEZ group. Information on fees paid to the Statutory Auditors and members of their networks is provided in accordance with Decree 2008-1487.
EY Mazars Amount % Amount %
In thousands of euros 2015 2014 2015 2014 2015 2014 2015 2014 Audit Statutory Audits, attest engagements, review of individual and consolidated accounts XX SUEZ ENVIRONNEMENT COMPANY SA 705 703 9% 9% 581 580 10% 11% XX Fully consolidated subsidiaries and joint operations 5,181 5,250 69% 64% 4,890 4,342 83% 81% Other audit procedures and incidental assigments in relation to Auditor's engagement to the Statutory Auditor's mission XX SUEZ ENVIRONNEMENT COMPANY SA 293 375 4% 5% 110 272 2% 5% XX Fully consolidated subsidiaries and joint operations 1,044 1,290 14% 16% 309 153 5% 3% Sub-total 7,223 7,618 96% 94% 5,890 5,347 100% 100% Other Services Tax 324 496 4% 6% - 6 - 0% Other ------Sub-total 324 496 4% 6% - 6 - 0% TOTAL 7,547 8,114 100% 100% 5,890 5,353 100% 100%
346 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Statutory Auditors’ Report on the consolidated financial statements 20
20.2 Statutory Auditors’ Report on the consolidated financial statements
To the Shareholders, XX the justification of our assessments; In compliance with the assignment entrusted to us by your XX the specific verification required by law. annual general meetings, we hereby report to you, for the year These consolidated financial statements have been approved ended December 31, 2015, on: by the Board of Directors. Our role is to express an opinion on XX the audit of the accompanying consolidated financial these consolidated financial statements based on our audit. statements of SUEZ ENVIRONNEMENT COMPANY;
I. Opinion on the consolidated financial statements
We conducted our audit in accordance with professional financial statements. We believe that the audit evidence we standards applicable in France; those standards require that have obtained is sufficient and appropriate to provide a basis we plan and perform the audit to obtain reasonable assurance for our audit opinion. about whether the consolidated financial statements are In our opinion, the consolidated financial statements give a true free of material misstatement. An audit involves performing and fair view of the assets and liabilities and of the financial procedures, using sampling techniques or other methods of position of your group as at December 31, 2015 and of the selection, to obtain audit evidence about the amounts and results of its operations for the year then ended in accordance disclosures in the consolidated financial statements. An audit with International Financial Reporting Standards as adopted also includes evaluating the appropriateness of accounting by the European Union. policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the consolidated
II. Justification of our assessments 20
In accordance with the requirements of Article L. 823-9 of the the correct adjustment of the goodwill accounted for at the French Commercial Code (Code de commerce) relating to the acquisition date. We have also verified that Note 9 to the justification of our assessments, we bring to your attention the consolidated financial statements provides appropriate following matters: information. XX As disclosed in Note 1.4.1 to the consolidated financial XX In respect of the recoverable amount of goodwill, property, statements, your group is required to make estimates and plant and equipment and intangible assets, we have assumptions in order to prepare its financial statements. examined the methods adopted to perform impairment This note also specifies that the future results of the tests, as well as the data and assumptions used. We have related operations could be different from these estimates reviewed the calculations made by your group and verified according to different assumptions or situations. These that Notes 1, 5, 9, 10 and 11 to the consolidated financial significant accounting estimates relate to the fair valuation statements provide appropriate information. of assets acquired and liabilities assumed within a business XX As regards provisions, and particularly provisions for site combination, the measurement of the recoverable amount rehabilitation, litigation, retirement and other employee of goodwill, property, plant and equipment and intangible benefits, we have assessed the bases on which these assets, provisions, capital renewal and replacement provisions have been established and verified that Notes 17, liabilities, financial instruments, revenues generated but not 18 and 26 to the consolidated financial statements provide metered (as in "meters not read"), margin at termination on appropriate information. construction contracts and the assessment of the tax loss carry-forwards recognized as deferred tax assets. XX In respect of capital renewal and replacement liabilities, we have assessed the bases on which they have been XX In respect of assets acquired and liabilities assumed within established and verified that Note 22 to the consolidated a business combination, we have examined data and financial statements provides appropriate information. assumptions allowing their fair valuation and reviewed
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 347 Financial information relating to the Company's assets, financial situation and revenues 20 Statutory Auditors’ Report on the consolidated financial statements
XX As regards financial instruments, we have examined data Notes 1 and 19 to the consolidated financial statements and assumptions used for the valuation models allowing provide appropriate information. the fair valuation of non-listed financial instruments and XX As regards the tax loss carry-forwards recognized as verified that Notes 13 and 14 to the consolidated financial deferred tax assets, our work consisted in verifying that statements provide appropriate information. the recognition criteria were satisfied and in assessing the XX In respect of sales of water metered during the accounting assumptions underlying the forecasts of taxable profits and period, your group prepares an estimate of the revenues the relating use of tax loss carry-forwards. We have also based on historical data of consumption as well as the verified that Notes 1 and 7 to the consolidated financial estimated selling price. Our work consisted in examining the statements provide appropriate information. data and assumptions used to calculate these estimates and In the course of our assessments, we verified the reasonableness verifying that Note 1 to the consolidated financial statements of these estimates. provides appropriate information. These assessments were made as part of our audit of the XX As regards margin at termination on construction contracts, consolidated financial statements taken as a whole, and our work consisted in examining the relating processes put therefore contributed to the opinion we formed which is in place by your group, assessing the data and assumptions expressed in the first part of this report. on which are based the kept estimations and verifying that
III. Specific verification
As required by law we have also verified, in accordance with We have no matters to report as to its fair presentation and its professional standards applicable in France, the information consistency with the consolidated financial statements. presented in the Group’s management report.
Courbevoie and Paris-La Défense, February 23, 2016 The Statutory Auditors French original signed by
Mazars Ernst & Young et Autres Isabelle Massa Gonzague Senlis Jean-Pierre Letartre Stéphane Pédron
348 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
20.3 Parent Company financial statements
20.3.1 Balance sheet assets
December 31, December 31, 2015 2014 Reference Amortization and In thousands of euros in Notes Gross depreciation Net Net NON-CURRENT ASSETS INTANGIBLE ASSETS 2.0 - 2.0 - Equity investments 6,157,390.3 - 6,157,390.3 6,157,390.3 Receivables related to equity investments Note 2 4,836,391.6 - 4,836,391.6 4,817,459.3 Other financial assets Note 2 31,868.7 - 31,868.7 31,536.6 FINANCIAL ASSETS Note 1 11,025,650.6 - 11,025,650.6 11,006,386.2 NON-CURRENT ASSETS I 11,025,652.6 - 11,025,652.6 11,006,386.2 CURRENT ASSETS ADVANCES AND DOWN PAYMENTS ON ORDERS Note 2 4.6 - 4.6 10.7 Trade and related receivables Note 2 1,836.2 - 1,836.2 165,1 Other receivables Note 2 146,092.5 - 146,092.5 123,539.3 SUEZ environnement SAS current account Note 2 2,838,909.2 - 2,838,909.2 1,969,920.3 Accrued income from cash instruments Note 2 32,690.9 - 32,690.9 32,179.3 RECEIVABLES 3,019,528.8 - 3,019,528.8 2,125,803.9 20 Cash and cash equivalents 666,768.9 - 666,768.9 910,356.8 Marketable securities Note 3 57,450.8 - 57,450.8 64,434.2 CASH, CASH EQUIVALENTS & SHORT-TERM SECURITIES 724,219.7 - 724,219.7 974,790.9 Deferred income Note 4 57,324.1 - 57,324.1 64,144.7 Bond redemption premiums 31,751.6 31,751.6 27,551.8 CURRENT ASSETS II 3,832,828.8 - 3,832,828.8 3,192,302.0 FOREIGN EXCHANGE GAINS/LOSSES III Note 9 49,992.6 - 49,992.6 30,335,4 TOTAL ASSETS (I+II+III) 14,908,474.0 - 14,908,474.0 14,229,023.6
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 349 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
20.3.2 Balance sheet liabilities
Reference In thousands of euros in Notes December 31, 2015 December 31, 2014 SHAREHOLDERS’ EQUITY Share capital 2,170,573.9 2,160,935,3 Additional paid-in capital 4,406,788.3 4,417,390.7 Legal reserve 217,057.4 216,093.5 Retained earnings 133,379.3 54,626.4 Net income for the period 208,402.0 429,077.3 SHAREHOLDERS’ EQUITY I Note 5 7,136,200.9 7,278,123.2 PROVISIONS FOR CONTINGENCIES AND LOSSES Provisions for contingencies 49,992.6 30,335,4 Provisions for losses 74,879.4 66,213.7 PROVISIONS FOR CONTINGENCIES AND LOSSES II Note 6 124,872.0 96,549.1 DEBT & PAYABLES Bonds 5,621,688.3 4,848,898.5 Bank borrowings 786,505,6 855,464.8 Deeply subordinated notes 1,017,329.3 963,892.3 Current accounts and borrowings from subsidiaries 111,773.0 96,411.4 FINANCIAL DEBT Note 7 and 8 7,537,296.2 6,764,667.0 Trade and related payables 10,109.4 5,939.4 Tax and employee-related debt 15,258.9 16,422.7 Accrued expenses on cash instruments 5,611.5 5,836.2 Other liabilities 248.1 2,393.9 OPERATING PAYABLES 31,227.9 30,592.2 DEBT & PAYABLES III 7,568,524.1 6,795,259.2 DEFERRED INCOME IV Note 4 30,088.9 29,624.8 FOREIGN EXCHANGE GAINS/LOSSES V Note 9 48,788.1 29,467.3 TOTAL LIABILITIES (I+II+III+IV+V) 14,908,474.0 14,229,023.6
350 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
20.3.3 Income statement
Reference In thousands of euros in Notes December 31, 2015 December 31, 2014 Other revenue Note 10 36,065,4 8,832.3 Net revenue 36,065,4 8,832.3 Operating grants 0.6 - Reversal of provisions for stock options and bonus shares Note 11 33,668.5 8,400.8 Reversals of depreciation and amortization, provisions and transferred expenses Note 11 1,356.1 13,001.1 Other income 2.2 178.9 Operating income 71,092.8 30,413.1 Other purchases and external expenses (44,684.9) (36,097.1) Taxes and similar 3,375.6 (101.0) Wages and salaries (18,691.7) (7,268.5) Payroll taxes (9,106.0) (14,053.0) Allocation to provisions for stock options and bonus shares Note 6 (42,297.3) (38,910.7) Allocation to other provisions (9,203.4) (14,323.7) Other operating expenses (681.5) (712.2) Operating expenses (121,289.2) (111,466.1) NET OPERATING INCOME I (50,196.4) (81,053.0) Financial income from equity investments 193,091.4 457,542.6 Other financial income 224,417.4 222,745,6 20 Other interest and similar income 78,202.6 89,239.9 Gain on disposal of marketable securities 359.8 437.7 Reversals of provisions and transferred expenses 30,945,8 9,243.5 Foreign exchange gains 162.4 14.8 Financial income 527,179.4 779,224.2 Interest and similar expenses (269,337.1) (294,833.8) Allocation to amortization and provisions (53,692.3) (33,738.1) Foreign exchange losses (274.4) (37.5) Financial expenses (323,303.8) (328,609.4) NET FINANCIAL INCOME II Note 12 203,875,6 450,614.8 CURRENT INCOME BEFORE TAX III=I+II 153,679.2 369,561.8 Non-recurring gains from financial transactions 7,028.4 620,158.5 Non-recurring gains 7,028.4 620,158.5 Non-recurring expenses from operations (289.2) (8.0) Non-recurring expenses from financial transactions (8,157.1) (621,871.0) Non-recurring expenses (8,446.3) (621,879.0) NON-RECURRING INCOME/EXPENSE IV Note 13 (1,417.9) (1,720.5) EMPLOYEE PROFIT SHARING VI (588.4) - CORPORATE TAX (TAX SAVING FROM CONSOLIDATION) V Note 14 56,729.0 61,236.0 NET INCOME III+IV+V+VI 208,402.0 429,077.3
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 351 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
20.3.4 Cash flow statement
In thousands of euros December 31, 2015 December 31, 2014 Net Income 208,402.0 429,077.3 Net depreciation, amortization and provisions 28,323.0 51,299.8 Gross cash flow 236,725,0 480,377.1 Change in working capital requirement (8,732.8) (11,000.2) NET CASH FLOW GENERATED FROM OPERATING ACTIVITIES 227,992.3 469,376.9 Disposals of property, plant and equipment and intangible assets (2.0) Change in related receivables 388.5 (95,4) Change in other financial assets (a) (332.1) (454.9) Disposals of property, plant and equipment and intangible assets 320,760.0 NET CASH FLOW GENERATED FROM FINANCING ACTIVITIES 54.4 320,209.7 Dividends paid (350,324.3) (329,336.0) Increase in share capital 9,638.6 32,000.0 Increase in capital premiums and reserves (9,638.6) 58,302.8 Purchase of treasury shares 6,967.9 (22,762.5) Change in current accounts (868,988.9) (691,032.5) Bonds 750,000.0 (345,450.0) Deeply subordinated notes 50,000.0 200,000.0 Change in other financial debt (67,500.0) 175,000.0 Purchase/sale of marketable securities 15,5 25,005,8 Accrued interest and premiums 9,654.6 (34,348.9) NET CASH FLOW GENERATED FROM FINANCING ACTIVITIES (470,175,2) (932,621.2) NET CHANGE IN CASH POSITIONS (242,128.6) (143,034.6) Net cash at beginning of the period 908,892.0 1,051,926.6 Net cash at end of the period 666,763.4 908,892.0
(a) Accrued interest on bank overdrafts and on-time deposits are now included in cash and cash equivalents. For purposes of comparison, figures for 2014 were reclassified in the same manner (€0.8 million in 2015 and €3 million in 2014).
The change in 2015 with regard to current accounts corresponds to SUEZ environnement SAS financing to cover the requirements of its subsidiaries.
20.3.5 Highlights for the year
..SUEZ unifies all of its activities under a single brand to Starting March 12, 2015, all the commercial brands that comprise the Group were united under one single brand: speed up its development SUEZ environnement, which is positioned to manage resources The SUEZ group operates in 70 countries and is represented sustainably. through 40 brands, including Sita, Degrémont, Lyonnaise des The Board of Directors meeting held on July 28, 2015 decided to Eaux, Agbar, Aqualogy, United Water, Ondeo Industrial Solutions finalize this transformation by converting “SUEZ environnement" and Safege, which were created through international expansion to “SUEZ”, a short, strong name with a long, rich history. and the acquisition of new business lines.
352 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
..New issue and redemption of outstanding deeply XX on September 10, 2015, SUEZ ENVIRONNEMENT COMPANY launched a €500 million bond issue with a coupon of 1.75% subordinated notes that matures in September 2025; On March 30, 2015, SUEZ ENVIRONNEMENT COMPANY launched XX on December 2, 2015, SUEZ ENVIRONNEMENT COMPANY a third issue of a total of €500 million of deeply subordinated restructured a private placement issued in 2009 in the notes, also known as hybrid bonds, following an initial issue in amount of €250 million with a coupon of 5.20% that September 2010 and a subsequent issue in June 2014. matures in June 2017. The restructured placement matures Following this new issue, SUEZ ENVIRONNEMENT COMPANY in June 2027 with a coupon of 5.20% up until 2017 and a bought back hybrid bonds of the same type issued in coupon of 1.904% through to maturity. September 2010 with a par value of €450 million. Following these two transactions, the Group’s outstanding ..Increase in share capital hybrid bonds amounted to €1.0 billion on December 31, 2015. In 2015, SUEZ ENVIRONNEMENT COMPANY completed two capital increases: ..Restructuring and new bond issues XX March 30, 2015: a capital increase with the issue of 895,111 In 2015, SUEZ ENVIRONNEMENT COMPANY carried out three shares following the delivery of a part of the performance placements of bond issues and one restructuring: share plan of March 27, 2013 for plan beneficiaries in France, Belgium and Spain; XX on June 26, 2015, SUEZ ENVIRONNEMENT COMPANY launched a €200 million bond issue with a floating coupon XX November 2, 2015: a capital increase with the issue of (Euribor 3M + 0.2%) that matures in January 2017; 1,514,528 shares following the delivery of a part of the bonus share allocation plan of January 17, 2013 for plan XX on June 30, 2015, SUEZ ENVIRONNEMENT COMPANY beneficiaries in France, Italy and Spain. launched a €50 million bond issue with a coupon of 2.25% that matures in July 2030; Following these two increases, SUEZ ENVIRONNEMENT COMPANY’s share capital consisted of 542,643,468 shares with a par value of €4 each.
20.3.6 Accounting rules and policies 20 The 2015 financial statements are drawn up in euros in ..Intangible assets accordance with the general accounting standards set out in the Plan Comptable Général (PCG) introduced by Regulation Intangible assets are assessed at their purchase or production 2014-03 of the French Accounting Standards Authority and cost. Depreciation line periods vary between one and five years. the measurement methods described below. This heading includes licenses and trademarks. Financial transactions relating to equity investments and related Moreover, costs related to research and development activities receivables, in particular impairment and impairment reversals, are recorded as charges in the year during which they were have been included under non-recurring income instead of incurred. under financial income. Pursuant to Article 120-2 of the PCG, SUEZ ENVIRONNEMENT COMPANY (SEC) considers that this ..Financial assets classification, which diverges from the PCG, better reflects the income statement situation, as it groups under non-recurring EQUITY INVESTMENTS income all income components relating to equity holdings along with capital gains and losses on disposals. Equity investments are long term in nature and provide the The fiscal year spans a 12-month period from January 1 to Company with control or significant influence over the issuer December 31, 2015. or help it to establish business relations with the issuer. New investments are recognized at acquisition cost plus directly related external incidental expenses.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 353 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
In line with Article 21 of the 2007 French Finance Law, ..Treasury shares which changes the taxation of the acquisition costs of equity investments, and based on CNC (Conseil National de la SUEZ ENVIRONNEMENT COMPANY shares are recognized on the Comptabilité) Recommendation 2007-C, SUEZ ENVIRONNEMENT date of delivery, at acquisition cost excluding transaction fees. COMPANY recognizes the tax on equity-investment acquisition Shares intended to be held on a long-term basis, for cancellation cost on a staggered basis over five years in an accelerated tax or trading purposes, are recognized under financial assets. depreciation/amortization account. Shares acquired as part of the buy-back programs or the With regard to the shares for which SUEZ ENVIRONNEMENT liquidity contract (1) are shown under short-term marketable COMPANY intends to hold over the long term, a provision for securities. Shares held as part of stock option and bonus share amortization may be recorded to bring the purchase price in line plans are part of such programs and are therefore also shown with its value, which appreciated especially with reference to under marketable securities. the intrinsic value, to the dividend yield, to expected cash flows Upon disposal, the cost price of the shares is established by and to the share price, while taking into account any exchange allocation category using the First In, First Out (FIFO) method. rate hedging. If the market value of SUEZ ENVIRONNEMENT COMPANY With regard to shares for which a decision to sell is taken shares classified as marketable securities is lower than their by SUEZ ENVIRONNEMENT COMPANY, the book value of the acquisition cost, an impairment equal to the amount of that shares concerned is decreased to market value if that value is difference is recognized in financial income (under liquidity lower. If negotiations are underway, this value is determined by contract). reference to the best estimate available. Regarding SUEZ ENVIRONNEMENT COMPANY shares assigned RECEIVABLES RELATED TO EQUITY INVESTMENTS to stock option plans: if they relate to an unexercisable plan (where the market These are loans granted to companies in which SUEZ XX price is lower than the strike price), the impairment loss ENVIRONNEMENT COMPANY has equity. posted to financial provisions under operating income is Related receivables are recognized at their face amount. measured in terms of the average price of all the plans Receivables denominated in a foreign currency are reported involved; using the exchange rate prevailing at period-end. In line with the if they relate to an exercisable plan (where the market price treatment adopted for equity investments, related receivables XX is higher than the strike price), a provision for expenses is are written down if the associated risk is higher than the value posted to provisions for stock options and bonus shares, of the shares and if the shares have already been depreciated. under operating income. OTHER FINANCIAL ASSETS As part of the stock option plans and as an alternative to holding shares assigned to these plans, SUEZ ENVIRONNEMENT These mainly include mutual funds held by SUEZ COMPANY may acquire instruments that may be settled in ENVIRONNEMENT COMPANY under a liquidity contract. A shares. These instruments consist of call options subscribed provision may be made based on the criteria used for equity when setting up the plan, or after that date up to the end of the investments as described above. vesting period. A provision is made for stock option plans if at the end of the ..Receivables reporting period, the share price exceeds the strike price. The Receivables reported within current assets are carried on the provision is made on a straight-line basis over the vesting period balance sheet at their face amount, with non-payment risk and ultimately covers the loss on disposal corresponding to the analyzed on a case-by-case basis. Bad debts are depreciated acquisition value of the shares, less the strike price paid by in an amount corresponding to the risk incurred. employees. This provision is recognized in provisions for losses. Where SUEZ ENVIRONNEMENT COMPANY is hedged by call options, the provision includes the premium paid.
(1) SUEZ ENVIRONNEMENT COMPANY has signed a liquidity contract with an investment services provider. The provider’s contractual role is to intervene in the market on a daily basis, buying and selling SUEZ ENVIRONNEMENT COMPANY shares, in order to maintain liquidity and to stimulate the market for Company shares on the Paris Stock Exchange. The amounts paid to this provider are reported under other financial assets.
354 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
..Marketable securities excluding treasury shares PROVISIONS FOR EQUITY INVESTMENT RISK Securities held for trading are recognized at acquisition price. The Company may establish provisions for contingencies if it If the closing market price is less than their book value, an believes that its commitments exceed assets held or if some amortization is recognized for the difference. In the case of of its investment assets harbor risk that may not materialize listed securities, the market value is measured at the average as an asset impairment. closing price in the settlement month. ..Financial debt ..Foreign currency transactions Income and expenses denominated in foreign currencies are BOND ISSUE PREMIUMS AND COSTS recorded at their equivalent value in euros at the transaction Bond issues that include a premium are recognized as date. liabilities on the balance sheet at their total value, including Foreign currency receivables, payables and cash and cash any redemption premium. Accordingly, redemption premiums equivalents are translated at the exchange rate prevailing at are recognized in balance sheet assets as “bond redemption period-end. Foreign exchange gains and losses are posted to premiums” and are amortized using the straight-line method income when they relate to cash and cash equivalents, or to over the term of the bond. the balance sheet under “Unrealized foreign exchange gains Issue premiums received are deducted from the issue costs. and losses” when they relate to receivables and payables. Any difference outstanding is recorded under prepaid income Unrealized losses are provisioned. over the term of the bond. In accordance with the CNC recommendation, bond issuance ..Provisions for contingencies and losses costs are amortized on a straight-line basis over the lifetime of the contracts concerned. Issuance costs mainly include broker’s Pursuant to ANC Regulation 2014-03 on liabilities, provisions commissions. are recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying future economic UNDATED DEEPLY SUBORDINATED NOTES benefits will be required to settle the obligation, and a reliable In accordance with Recommendation 28 from the Ordre des estimate can be made of the amount of the obligation. Experts Comptables issued in October 1994, deeply subordinated The amount recognized as a provision should be the best notes are classified as financial debt. The issue premium 20 estimate of the expenditure required to settle the obligation at is recognized in balance sheet assets, and the year’s tax- the end of the reporting period. deductible interest expense is recognized as a financial expense in the income statement. Issuance costs are amortized over the PROVISION FOR BONUS SHARES TO EMPLOYEES lifetime of contracts on a straight-line basis. Pursuant to ANC Regulation 2014-03, a provision is set aside . for bonus share grants on a straight-line basis over the vesting .Financial and operating instruments period and ultimately covers the loss on disposal corresponding SUEZ ENVIRONNEMENT COMPANY uses derivatives in order to to the carrying amount of the treasury shares awarded without manage and reduce its exposure to interest rate and foreign consideration to employees. This provision is recognized exchange volatility or to secure the value of certain financial in “Provisions for contingencies” and has an impact on the assets. Accordingly, unrealized capital losses at year-end Company’s operating income. on financial instruments held by SUEZ ENVIRONNEMENT COMPANY for hedging purposes and shown as off-balance- PENSIONS sheet commitments are not provisioned. The actuarial method used is that of vested rights with future Gains and losses on interest rate and, where applicable, salary levels determined using the Projected Unit Credit Method. currency swaps, are recognized on a prorata temporis basis The Company’s obligations regarding pensions, early retirement in the income statement as financial income/expense over the payments, retirement bonuses and other plans are measured lifetime of the underlying assets. on an actuarial basis using mortality and employee turnover Premiums paid for options are recognized on the same basis. assumptions, salary projections, and a discount rate based on the investment-grade corporate bond yield at the measurement date.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 355 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
..Income tax and tax consolidation As a result of the amended French Finance Law of August 16, 2012, French companies must pay a 3% contribution on cash The French tax provision to limit the deductibility of financial dividends paid to shareholders, effective as of that date. expenses (known as the rabot fiscal) imposes a 25% cap on the This contribution does not apply to dividends paid between deduction of net financial expenses beyond €3 million for fiscal consolidated companies. years starting January 1, 2014. SUEZ ENVIRONNEMENT COMPANY is the parent company of a French tax group formed in 2008 and made up of 123 companies as of 2015.
356 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
20.3.7 Notes to the financial statements
NOTE 1 Financial assets 358
NOTE 2 Maturity of receivables 358
NOTE 3 Marketable securities 359
NOTE 4 Deferred expenses, deferred income and accruals 359
NOTE 5 Shareholders’ equity 360
NOTE 6 Provisions 362
NOTE 7 Financial debt 362
NOTE 8 Maturity of debt and payables 363
NOTE 9 Unrealized foreign exchange gains and losses 365
NOTE 10 Revenues 365
NOTE 11 Reversals of depreciation and amortization, provisions and transferred expenses 365
NOTE 12 Financial income 366
NOTE 13 Non-recurring profit (loss) 366
NOTE 14 Income tax and tax consolidation 367 20
NOTE 15 Off-balance sheet commitments 368
NOTE 16 Post-employment benefits 369
NOTE 17 Personnel 369
NOTE 18 Related-party transactions 370
NOTE 19 Subsidiaries and equity investments 370
NOTE 20 Compensation of Board of Directors members and Chief Executive Officer 371
NOTE 21 Subsequent events 371
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 357 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
NOTE 1 Financial assets
In thousands of euros At Dec. 31, 2014 Increase Decrease At Dec. 31, 2015 Consolidated equity investments (a) 6,157,390.3 6,157,390.3 EQUITY INVESTMENTS 6,157,390.3 0.0 0.0 6,157,390.3 Receivables related to equity investments (b) 4,817,459.3 4,520,946.7 (4,502,014.4) 4,836,391.6 Other financial assets (c) 31,536.6 61,345,5 (61,013.4) 31,868.7 OTHER FINANCIAL ASSETS 4,848,995,9 4,582,292.2 (4,563,027.8) 4,868,260.3 FINANCIAL ASSETS 11,006,386.2 4,582,292.2 (4,563,027.8) 11,025,650.6
(a) Consolidated equity investments only include SUEZ environnement SAS shares. (b) All receivables related to equity investments concern SUEZ environnement SAS. The change over the year may be explained by a net foreign exchange impact of -€19.3 million and the change in interest accrued of €0.4 million. (c) At December 31, 2015, this amount represented only sums paid to the investment services provider under the liquidity contract.
NOTE 2 Maturity of receivables
Gross amount In thousands of euros at Dec. 31, 2015 < 1 year > 1 year Receivables related to equity investments 4,836,391.6 1,627.7 4,834,763.9 Other financial assets 31,868.7 31,868.7 RECEIVABLES ON NON-CURRENT ASSETS 4,868,260.3 33,496.4 4,834,763.9 Advances and down payments on orders 4.6 4.6 Trade and related receivables 1,836.2 1,836.2 Other receivables 146,092.5 146,092.5 SUEZ environnement SAS current account 2,838,909.2 2,838,909.2 Accrued income from cash instruments 32,690.9 32,690.9 RECEIVABLES ON CURRENT ASSETS 3,019,533.4 3,019,533.4 0.0 TOTAL RECEIVABLES 7,887,793.7 3,053,029.8 4,834,763.9
“Other receivables” mainly include Government receivables from subsidiaries awaiting a Government refund for a total of in the amount of €146.1 million. This receivable comprises €73.9 million, including CIR and CICE primarily, as well as a VAT both the 2015 tax consolidation gain, which benefits SUEZ tax credit of €9.8 million. ENVIRONNEMENT COMPANY as the parent company of the tax group in the amount of €62 million, and various tax credits
358 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
NOTE 3 Marketable securities
This item includes:
In thousands of euros Dec. 31, 2015 Dec. 31, 2014 Treasury shares held for stock options and bonus share plans 29,412.2 35,528.4 Treasury shares held for market purpose (liquidity contract) 0.0 1,462.1 Medium-term notes 28,038.6 28,054.1 GROSS AMOUNT 57,450.8 65,044.6 Provisions for impairment of treasury shares held for market purposes (liquidity contract) 0.0 (610.4) IMPAIRMENT PROVISIONS 0.0 (610.4) NET CARRYING AMOUNT 57,450.8 64,434.2
In March 2015, 120,000 SUEZ ENVIRONNEMENT COMPANY shares were acquired for €1.9 million to cover the stock option plans. No additional acquisitions have been made since then.
NOTE 4 Deferred expenses, deferred income and accruals
Accruals break down as follows:
In thousands of euros At Dec. 31, 2014 Increase Decrease At Dec. 31, 2015 Issuance costs 38,314.6 4,406.5 (6,912.9) 35,808.2 20 Credit facility set-up fees 6,087.1 0.0 (1,574.5) 4,512.6 Prepaid expenses 19,743.0 0.0 (2,739.7) 17,003.3 DEFERRED EXPENSES 64,144.7 4,406.5 (11,227.1) 57,324.1
The increase in bond issuance costs of €4.4 million is related of €750 million over 2015 (see section 20.3.5: Highlights for to the new issue of deeply subordinated notes of €500 million the year): in March 2015, the restructuring of the €250 million bond issue in December 2015 and the issue of bonds in the amount
In thousands of euros At Dec. 31, 2014 Increase Decrease At Dec. 31, 2015 Deferred income 29,624.8 4,500.0 (4,035.9) 30,088.9 DEFERRED INCOME 29,624.8 4,500.0 (4,035.9) 30,088.9
Bond issues that include a premium are recognized as are recognized in balance sheet assets as “bond redemption liabilities on the balance sheet at their total value, including premiums” and are amortized using the straight-line method any redemption premium. Accordingly, redemption premiums over the term of the bond.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 359 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
Issue premiums received are deducted from the issue costs. the contracts concerned. Issuance costs mainly include broker’s Any difference outstanding is recorded under prepaid income commissions. over the term of the bond. Accrued expenses and accrued income associated with In accordance with the CNC recommendation, bond issuance receivables and payables can be analyzed as follows: costs are amortized on a straight-line basis over the lifetime of
In thousands of euros At Dec. 31, 2015 At Dec. 31, 2014 Interest on bonds issued 106,065,8 102,933.1 Interest on deeply subordinated notes 17,329.2 13,892.3 Accrued interest 123,395,0 116,825.4 Trade debt invoices not received 9,899.5 5,788.5 Tax and employee-related debt 9,205,7 4,540.2 Cash instruments 5,611.5 5,836.2 Other liabilities 248.1 587.9 Other accrued expenses 24,964.8 16,752.7 ACCRUED EXPENSES 148,359.8 133,578.1
In thousands of euros At Dec. 31, 2015 At Dec. 31, 2014 Interest on amounts receivables related to equity investments 1,627.6 2,014.4 Invoices to be issued 1,180.0 0.0 Cash instruments 32,690.9 32,179.3 ACCRUED INCOME 35,498.5 34,193.7
NOTE 5 Shareholders’ equity
Shareholders’ equity is fully paid up. Each share confers one vote.
At Dec. 31, 2014 Increase/Reduction Purchase/Sale At Dec. 31, 2015 Outstanding shares 537,726,589 2,409.639 547,491 540,683.719 Treasury shares 2,507,240 (547,491) 1,959.749 TOTAL SHARES ISSUED 540,233.829 2,409.639 0 542,643.468
Changes in the number of shares in 2015 are the result of two These two capital increases stemming from the issuance of new capital increases: shares were carried out through by deduction from “Additional paid-in capital”. XX March 30, 2015: a capital increase involving 895,111 shares following the delivery of a part of the performance share At December 31, 2015, SUEZ ENVIRONMENT COMPANY held plan of March 27, 2013; 1,959,749 shares acquired as part of the bonus share plan for a value of €29 million and representing a market value at XX November 2, 2015: a capital increase with the issue of 1,514,528 shares following the delivery of a part of the bonus December 31, 2015 of €34 million. share allocation plan of January 17, 2013.
360 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
Changes in shareholders’ equity were as follows:
Additional Other Retained Net income In thousands of euros Share capital paid-in capital Legal reserve reserves earnings for the period Total Balance at Dec. 31, 2014 2,160,935.3 4,417,390.7 216,093.5 - 54,626.4 429,077.3 7,278,123.2 2014 net income allocation 429,077.3 (429,077.3) - Dividend distributed for fiscal year 2014 - (350,324.3) (350,324.3) Net income for fiscal year 2015 208,402.0 208,402.0 Capital increase: Delivery of 2013 Performance Shares 3,580.5 (3,580.5) - Capital increase: Delivery of 2013 Bonus Shares 6,058.1 (6,058.1) - Allocation to legal reserves (963.8) 963.8 - BALANCE AT DEC. 31, 2015 BEFORE INCOME ALLOCATION 2,170,573.9 4,406,788.3 217,057.4 - 133,379.3 208,402.0 7,136,200.9
Share allocations under the various SUEZ ENVIRONNEMENT COMPANY share plans changed as follows over the fiscal year:
XX 1 – Stock option plans No SUEZ ENVIRONNEMENT COMPANY stock options were allocated in 2015.
Number of options December 17, 2009 plan December 16, 2010 plan Total Unexercised rights at January 1, 2015 1,534,008 826,444 2,360,452 Exercised (292,489) (145,291) (437,780) Canceled/Expired (27,209) (4,400) (31,609) UNEXERCISED RIGHTS AT DECEMBER 31, 2015 1,214,310 676,753 1,891,063 20
XX 2 – Bonus share and performance share plans
Allotment of bonus shares Worldwide Employer Employer financial incentive contribution to contribution to scheme Performance shares Sharing (a) Sharing (a)
Number of shares January 2013 March 2012 March 2013 December 2011 July 2014 Total Allocated shares not delivered as of January 1, 2015 3,018,720 658,088 1,267,110 100,819 97,998 5,142,735 Allocated - Delivered (1,514,528) (409,018) (895,111) (2,818,657) Canceled or Expired (617) (2,419) (130) (3,166) ALLOCATED SHARES NOT DELIVERED AT DECEMBER 31, 2015 1,504,192 248,453 369,580 100,689 97,998 2,320,912
(a) Employer’s contribution paid to foreign employees (outside France and the United Kingdom).
As of December 31, 2015, the number of treasury shares allocated to cover its bonus share obligations was 1,959,749.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 361 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
Taking into account all the current stock option, bonus share In addition to the continuous service condition, some plans are and performance share plans, the number of beneficiaries subject to internal performance conditions. If the performance and turnover assumptions, SUEZ ENVIRONNEMENT COMPANY targets have not been met fully, the number of shares granted estimates its share delivery obligation at the end of the various to employees is reduced in accordance with the plan rules. vesting periods to be 4,211,975 shares.
NOTE 6 Provisions
In thousands of euros At Dec. 31, 2014 Allocation Reversals (Utilization) At Dec. 31, 2015 Provisions for contingencies 30,335.4 49,992.6 (30,335.4) 49,992.6 Provisions for foreign exchange losses 30,335.4 49,992.6 (30,335.4) 49,992.6 Provisions for losses 66,213.7 43,013.3 (34,347.6) 74,879.4 Pension provisions and similar 5,059.0 716.0 (679.1) 5,095.9 Provisions for bonus share plans and stock option plans 61,154.7 42,297.3 (33,668.5) 69,783.5 TOTAL 96,549.1 93,005.9 (64,683.0) 124,872.0 Posted to income statement: Net operating income 43,013.3 (34,347.6) Financial income 49,992.6 (30,335.4) TOTAL 93,005.9 (64,683.0)
Provisions for foreign exchange losses cover the unrealized loss by the deliveries of a part of the two plans carried out in 2015 on the GBP250 million bonds subscribed in 2011 (see Note 9 (see Note 5 "Shareholders' Equity"). “Unrealized foreign exchange gains and losses”). Details of the change in the provision for pensions and related The net reversal of the provision under the bonus share benefits are shown in Note 16 “Post-employment benefits”. allocation and stock options plans can be explained primarily
NOTE 7 Financial debt
In thousands of euros Position at Dec. 31, 2015 Position at Dec. 31, 2014 Bonds (nominal amount) 5,515,622.6 4,745,965.5 Bank borrowings and debt (nominal amount) 786,500.0 854,000.0 Deeply subordinated notes (nominal amount) 1,000,000.0 950,000.0 Current accounts and borrowings from subsidiaries 111,773.0 96,411.4 BORROWINGS 7,413,895.6 6,646,376.8 Accrued interests 123,395.0 116,825.4 Bank overdrafts 5.6 1,464.8 OTHER FINANCIAL DEBT 123,400.6 118,290.1 TOTAL FINANCIAL DEBT 7,537,296.2 6,764,667.0
362 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
The change in financial debt is due to: XX repayment of the balance of the deeply subordinated notes issued on September 17, 2010 for an amount of €450 million; XX the implementation of three bond issues: for €200 million over 19 months, for €50 million over 15 years, for €500 million XX a decrease in outstanding commercial paper of €67.5 million. over 10 years and an issue of a deeply subordinated note in the amount of €500 million;
NOTE 8 Maturity of debt and payables
Maturity Gross amount From 2017 In thousands of euros at Dec. 31, 2015 In 2016 to end 2020 In 2021 and beyond Bonds (nominal amount) 5,515,622.6 1,700,000.0 3,815,622.6 Bank borrowings and debt (nominal amount) 786,500.0 786,500.0 Deeply subordinated notes (nominal amount) 1,000,000.0 1,000,000.0 Current accounts and borrowings from subsidiaries 111,773.0 111,773.0 Other financial debt (a) 123,400.6 123,400.6 FINANCIAL DEBT 7,537,296.2 1,021,673.6 1,700,000.0 4,815,622.6 TRADE AND RELATED PAYABLES 10,109.4 10,109.4 0.0 0.0 TAX AND EMPLOYEE-RELATED DEBT 15,258.9 15,258.9 0.0 0.0 Accrued expenses on cash instruments 5,611.5 5,611.5 Other 248.1 248.1 OTHER LIABILITIES 5,859.6 5,859.6 0.0 0.0 TOTAL 7,568,524.1 1,052,901.5 1,700,000.0 4,815,622.6 20 (a) Represents the share of accrued interest and bank credit balances (see Note 7).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 363 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
XX Breakdown of bond borrowings (nominal)
Amount at Dec. 31, 2015 Issue date Maturity date Rate Public placements In thousands of euros 800,000.0 April 8, 2009 April 8, 2019 6.250% In thousands of euros 500,000.0 July 22, 2009 July 22, 2024 5.500% In thousands of euros 750,000.0 June 24, 2010 June 24, 2022 4.125% In thousands of euros 750,000.0 May 17, 2011 May 17, 2021 4.078% In thousands of euros (a) 340,622.6 December 2, 2011 December 2, 2030 5.375% In thousands of euros 500,000.0 October 8, 2013 October 9, 2023 2.750% In thousands of euros (b) 350,000.0 February 27, 2014 February 27, 2020 0.000% Private placements In thousands of euros (c) 250,000.0 June 8, 2009 June 8, 2027 5.200% In thousands of euros 150,000.0 October 12, 2009 October 12, 2017 4.500% In thousands of euros 100,000.0 November 22, 2011 November 22, 2018 3.080% In thousands of euros 100,000.0 March 25, 2013 March 25, 2033 3.300% In thousands of euros 100,000.0 April 5, 2013 April 6, 2020 1.747% In thousands of euros 75,000.0 May 21, 2014 May 21, 2029 2.000% In thousands of euros 200,000.0 June 26, 2015 January 26, 2017 Var. rate In thousands of euros 50,000.0 June 30, 2015 July 1, 2030 2.250% In thousands of euros 500,000.0 September 10, 2015 September 10, 2025 1.750% TOTAL 5,515,622.6
(a) In the amount of GBP250 million. (b) "OCEANE" bond. (c) Coupon of 5.20% up until 2017, then of 1.904% until 2027.
XX Breakdown of the undated deeply subordinated notes (nominal)
Amount In thousands of euros at Dec. 31, 2015 Issue date Maturity date Rate Undated deeply subordinated notes 500,000.0 June 23, 2014 undated 3.000% Undated deeply subordinated notes 500,000.0 March 30, 2015 undated 2.500% TOTAL 1,000,000.0
364 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
NOTE 9 Unrealized foreign exchange gains and losses
The following unrealized foreign exchange gains and losses were recognized as a result of the revaluation of receivables and debt denominated in foreign currencies at the exchange rate prevailing on December 31, 2015:
In thousands of euros Unrealized loss Unrealized gain Unrealized foreign exchange gains and losses on: Receivables related to equity investments 48,786.4 Trade and related receivables 1.7 Bonds 49,992.6 TOTAL 49,992.6 48,788.1
The total currency impact as of December 31, 2015, measured in 2011. This unrealized loss was fully provisioned; in accordance with the accounting principles detailed in XX an unrealized gain of €48,786,400 corresponding to the section 20.3.6, “Accounting principles and policies”, includes: impact of changes in the pound sterling on the receivable XX an unrealized loss of €49,992,600 related to fluctuation in contracted with SUEZ environnement SAS amounting to the pound sterling on the GBP250 million bonds subscribed GBP245.7 million.
NOTE 10 Revenues
Revenues of €36.1 million correspond mainly to services invoiced to its subsidiary SUEZ environnement SAS.
20 NOTE 11 Reversals of depreciation and amortization, provisions and transferred expenses
In thousands of euros At Dec. 31, 2015 At Dec. 31, 2014 Transferred expenses 677.1 7,640.1 Bond issuance costs 601.7 3,033.0 Credit facility set-up fees 75.4 409.2 Costs related to capitalization transactions 4,197.9 Reversal of provisions for stock options and bonus shares 33,668.5 8,400.8 Other 679.1 5,361.0 Financial 30,945,8 0.0 TOTAL 65,970.5 21,401.9
Expenses relating to bond issues and credit line set-up fees are The reversal of the financial provision in the amount of recognized as assets in the balance sheet and amortized over €30.9 million may be explained by the reversal of a provision the lifetime of these instruments. They correspond to fees paid for exchange rate loss that was booked in 2014 in the amount of to intermediaries for setting up these instruments. €30.3 million, and by the reversal of a provision for impairment The reversal of the €33.7 million provision under the bonus of treasury shares held for market purposes in the amount of share allocation and stock option plans can be explained €0.6 million that was allocated in 2014. primarily by the deliveries of a part of the two plans carried out in 2015 (see Note 5 "Shareholders' Equity").
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 365 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
NOTE 12 Financial income
In thousands of euros At Dec. 31, 2015 At Dec. 31, 2014 Dividends received 193,091.4 457,542.6 Interest on amounts receivables related to equity investments 224,417.4 222,745.6 Interest on current accounts 11,865.5 9,865.9 Interest on cash instruments 30,747.8 32,602.0 Other interest and similar income (233,388.0) (247,624.0) Foreign exchange gain/(loss) (112.0) (22.7) Net financial provisions (22,746.5) (24,494.6) Net gain/loss on disposal of marketable securities TOTAL 203,875,6 450,614.8
The €193.1 million in dividends received in 2015 corresponds Allocations and reversals of provisions of a financial nature in to dividends paid by SUEZ environnement SAS and consists the amount of €22.7 million correspond to: of €54.6 million for the remaining dividend for 2014 and XX a provision for exchange rate losses in the amount of €138.5 million for the interim dividend for 2015. €49.9 million on a loan in GBP; Interest on receivables related to equity investments and XX amortization of premiums related to bond issues in the on current accounts corresponds to the interest paid by amount of €3.7 million; SUEZ environnement SAS. XX the reversal of a provision for exchange rate losses booked The foreign exchange gain/loss relates to currency gains and in 2014 in the amount of €30.3 million on a loan in GBP; losses when unwinding currency transactions. XX the reversal of a provision for impairment of treasury shares Other interest and similar income relate mainly to interest in the amount of €0.6 million. expense on bonds.
NOTE 13 Non-recurring profit (loss)
Net non-recurring profit (loss) can be analyzed as follows:
In thousands of euros At Dec. 31, 2015 At Dec. 31, 2014 Sale of treasury shares (1,128.7) (1,712.5) Other (289.2) (8.0) TOTAL (1,417.9) (1,720.5)
Non-recurring profit (loss) reflects the proceeds from the sale of 547,491 treasury shares held under the terms of the bonus share plan and €1.1 million under the liquidity contract.
366 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
NOTE 14 Income tax and tax consolidation
In thousands of euros Dec. 31, 2015 Dec. 31, 2014 Gain/(loss) from tax consolidation in the period 61,954.0 63,798.2 Prior fiscal year gain/(loss) adjustment 5,749.2 7,388.9 Additional tax on dividends (10,509.7) (9,880.1) Income tax and additional taxes (464.5) (71.0) CORPORATE TAX INCOME/EXPENSE FOR THE YEAR 56,729.0 61,236.0 Tax income 56 729,0 61 236,0
XX Deferred tax position The future tax liability position results from the timing differences between the tax and accounting treatment of the income and expenses of SUEZ ENVIRONNEMENT COMPANY alone:
In thousands of euros Dec. 31, 2015 Dec. 31, 2014 TAX LOSS CARRIED FORWARD (BASE) (1) 197,507.0 202,318.0 Issuance costs for deeply subordinated notes 5,422.0 2,675.0 INCREASE IN FUTURE TAX DEBT (BASE) (2) 5,422.0 2,675.0 Provisions for non-deductible contingencies and losses 5,096.0 5,059.0 Other non-deductible provisions 634.0 11.0 Provisions not deductible in the fiscal year they are recognized 5,730.0 5,070.0 Difference between book value and tax value of marketable securities 97.0 707.0 Other 97.0 707.0 20 DECREASE IN FUTURE TAX DEBT (BASE) (3) 5,827.0 5,777.0 TOTAL: (1)-(2)+(3) 197,912.0 205,420.0
The total timing differences amount to €197.9 million, representing a net theoretical tax receivable of €68.1 million based on assumptions of the rates applicable at the probable reversal date of future tax debts and receivables.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 367 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
NOTE 15 Off-balance sheet commitments
XX Financial commitments given SUEZ ENVIRONNEMENT COMPANY pursues a debt management policy to reduce financing cost by using various types of financial instruments (interest rate swaps and options), depending upon market conditions.
Notional at Dec. 31, 2015 Fair value of derivatives at Notional at In thousands of euros < 1 year 1-5 years 6-10 years > 10 years Total Dec. 31, 2015 Dec. 31, 2014 Interest rate swaps XX fixed-rate payer/floating-rate receiver 0.0 50,000.0 0.0 500,000.0 550,000.0 489.1 300,000.0 XX floating-rate payer/fixed-rate receiver 0.0 500,000.0 700,000.0 0.0 1,200,000.0 165,117.3 1,100,000.0 TOTAL 0.0 550,000.0 700,000.0 500,000.0 1,750,000.0 165,606.3 1,400,000.0
The fair value of €165 million represents the market value of derivative products outstanding on December 31, 2015.
XX Other financial commitments given
Maturity
In thousands of euros At Dec. 31, 2015 At end 2016 From 2017 to 2020 2021 and beyond Financing commitments Securities, endorsements and guarantees 87,443.0 0.0 76,230.0 11,213.0 TOTAL 87,443.0 0.0 76,230.0 11,213.0
XX Financial commitments received
Maturity
In thousands of euros At Dec. 31, 2015 At end 2016 From 2017 to 2020 2021 and beyond Credit facilities confirmed and unused 1,750,000.0 100,000.0 1,650,000.0 TOTAL 1,750,000.0 100,000.0 1,650,000.0 0.0
XX Operational commitments given
Maturity
In thousands of euros At Dec. 31, 2015 At end 2016 From 2017 to 2020 2021 and beyond Operational commitments Securities, endorsements and guarantees 5,694.0 816.0 0.0 4,878.0 TOTAL 5,694.0 816.0 0.0 4,878.0
SUEZ ENVIRONNEMENT COMPANY gave guarantees to the government of Hong Kong for the operation of a number of landfills.
368 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
NOTE 16 Post-employment benefits
SUEZ ENVIRONNEMENT COMPANY grants its personnel post-employment benefits (pensions, retirement benefits, medical coverage and benefits) and other long-term benefits (awards).
XX Overview of benefit obligations
In thousands of euros At Dec. 31, 2014 Current service cost At Dec. 31, 2015 Pensions (a) 5,059.0 36.9 5,095.9 TOTAL 5,059.0 36.9 5,095.9
(a) Pensions and retirement bonuses
XX Calculation of pensions and other employee The main assumptions used to calculate pensions and other employee benefit obligations are as follows: benefit obligations XX long-term inflation rate: 2.0%; Pensions and other employee benefit obligations are the Mortality table: generational. difference between the present value of future benefits and XX any unrecognized past service cost. At December 31, 2015, the present value of future benefits calculated stands at €5.1 million. The present value of the future benefits of SUEZ ENVIRONMENT COMPANY is determined on an actuarial basis (projected unit method).
NOTE 17 Personnel 20
At December 31, 2015, personnel broke down as follows:
At Dec. 31, 2015 At Dec. 31, 2014 Operational staff 5 3 Supervisory staff 18 16 Executives 131 103 TOTAL 154 122
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 369 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
NOTE 18 Related-party transactions
In thousands of euros Related companies Equity investments 6,157,390.3 Receivables related to equity investments 4,836,391.6 Trade and related receivables 504.5 Current accounts 111,773.0 Current account overdrafts 2,838,909.2 Trade and related payables 1,004.7 Interest on amounts receivables related to equity investments 224,417.4 Interest on current account overdrafts 11,865.5
The above data concerns mainly the transactions with SUEZ environnement SAS.
NOTE 19 Subsidiaries and equity investments
Reserves % capital Book value of securities held and held at at Dec. 31, 2015 Net profit/ Last FY In thousands of euros Share Retained December 31, Last FY loss in reporting Corporate name capital earnings 2015 Gross Provision revenues last FY date Currency A - DETAILED DISCLOSURE OF EQUITY INVESTMENTS FOR WHICH GROSS VALUE EXCEEDS 1% OF THE SHARE CAPITAL OF SUEZ ENVIRONNEMENT COMPANY 1. Subsidiaries SUEZ environnement SAS 3,323,457 192,283 100% 6,157,390 0 362,415 296,228 Dec. 2015 EUR Tour CB21 16, place de l'Iris 92040 Paris La Défense, France SIREN No: 410 118 608 2. Equity investments None B - DISCLOSURES CONCERNING OTHER SUBSIDIARIES AND EQUITY INVESTMENTS 1. Subsidiaries not included in paragraph A None 2. Equity investments not included in paragraph A None
370 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
NOTE 20 Compensation of Board of Directors members and Chief Executive Officer
The compensation paid to the Chief Executive Officer in 2015 and Extraordinary Shareholders’ Meeting of May 12, 2015 was €1,559,100. at €700,000. Members of the Board of Directors receive Directors’ fees. The In 2015, €687,500 in Directors’ fees were paid to Board maximum annual amount was set by the Combined Ordinary members.
NOTE 21 Subsequent events
No significant events occurred after the closing of accounts on December 31, 2015.
20
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 371 Financial information relating to the Company's assets, financial situation and revenues 20 Parent Company financial statements
Five-year financial summary
2015 2014 2013 2012 2011 SHARE CAPITAL AT FISCAL YEAR END Share capital (in euros) 2,170,573,872 2,160,935,316 2,040,935,316 2,040,935,316 2,040,935,316 Number of shares issued 542,643,468 540,233,829 510,233,829 510,233,829 510,233,829 FISCAL YEAR TRANSACTIONS AND RESULTS (in thousands of euros) Revenue excluding VAT 36,065.4 8,832.3 5,726.8 5,416.0 4,356.9 Income before tax, employee profit-sharing, amortization and depreciation, and provisions 192,161.0 431,808.5 345,518.5 90,967.0 217,231.8 Employee profit-sharing (588.4) Income tax expense 56,729.0 61,236.0 53,712.9 92,834.6 109,482.1 Net income 208,402.0 429,077.3 382,605.9 165,090.7 312,176.8 Dividends paid (a) 350,324.3 329,336.0 330,295.5 330,848.1 318,304.4 EARNINGS PER SHARE (in euros) Income after tax, employee profit-sharing and before amortization and depreciation and provisions 0.46 0.91 0.78 0.36 0.64 Net income 0.38 0.79 0.75 0.32 0.61 Dividend paid per share 0.65 0.65 0.65 0.65 0.65 PERSONNEL Average headcount during the period 142 32 2 2 2
Payroll cost (in thousands of euros) 18,691.7 7,268.5 1,688.6 1,394.3 1,680.9 Employee benefit related payments (social security and pension plan contributions etc.) (in thousands of euros) 9,106.0 14,053.0 579.5 417.1 555.1
(a) Excluding treasury shares.
372 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Parent Company financial statements 20
Realizable and available assets and liabilities falling due within one year
In thousands of euros Dec. 31, 2015 Dec. 31, 2014 REALIZABLE ASSETS Non-current assets 33,496.4 33,551.0 Receivables related to equity investments 1,627.7 2,014,4 Other financial assets 31,868.7 31,536.6 Current assets 3,019,533.4 2,125,814.7 Trade and related receivables 1,836.2 165.1 Advances and down payments on orders in progress 4,6 10.7 Other receivables, including cash instruments 3,017,692.6 2,125,638.9 Cash and cash equivalents 724,219.7 974,790.9 TOTAL REALIZABLE ASSETS 3,777,249.5 3,134,156.6 CURRENT LIABILITIES Financial debt 1,021,673.6 1,068,701.5 Bank borrowings and debts 786,500.0 854,000.0 Other borrowings and short-term debts (a) 235,173.6 214,701.5 Operating payables 31,227.9 30,592.2 Trade and related payables 10,109.4 5,939.4 Tax and employee-related debt 15,258.9 16,422.7 Other payables, including cash instruments 5,859.6 8,230.1 TOTAL CURRENT LIABILITIES 1,052,901,5 1,099,293.7 REALIZABLE ASSETS – CURRENT LIABILITIES 2,724,348.1 2,034,862.9 20
(a) Including bank overdrafts 5.6 2.7
Maturity of trade payables
Due
In thousands of euros Total Not due < 3 months > 3 months 2015 209.9 209.6 0.3 0.0 2014 150.9 150.0 0.9 0.0
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 373 Financial information relating to the Company's assets, financial situation and revenues 20 Statutory Auditors’ Report on the Parent Company financial statements
20.4 Statutory Auditors’ Report on the Parent Company financial statements
To the Shareholders, XX the justification of our assessments; In compliance with the assignment entrusted to us by your XX the specific verifications and information required by law. annual general meetings, we hereby report to you, for the year These financial statements have been approved by the Board ended December 31, 2015, on: of Directors. Our role is to express an opinion on these financial XX the audit of the accompanying financial statements of SUEZ statements based on our audit. ENVIRONNEMENT COMPANY;
I. Opinion on the financial statements
We conducted our audit in accordance with professional overall presentation of the financial statements. We believe standards applicable in France; those standards require that that the audit evidence we have obtained is sufficient and we plan and perform the audit to obtain reasonable assurance appropriate to provide a basis for our audit opinion. about whether the financial statements are free of material In our opinion, the financial statements give a true and fair misstatement. An audit involves performing procedures, view of the assets and liabilities and of the financial position of using sampling techniques or other method of selection, to the Company as at December 31, 2015 and of the results of its obtain audit evidence about the amounts and disclosures in operations for the year then ended in accordance with French the financial statements. An audit also includes evaluating accounting principles. the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the
II. Justification of our assessments
In accordance with the requirements of Article L. 823-9 of the Our work included evaluating the data and hypotheses French Commercial Code (Code de commerce) relating to the supporting the estimates made, verifying the calculations and justification of our assessments, we bring to your attention the examining the approbation procedures of these estimates by following matters: management. We assessed, on this basis, the reasonableness As stated in the Note “Accounting principles and policies of the estimates made. – Financial assets – Equity Investments” to the financial These assessments were made as part of our audit of the statements, the carrying amount of investments which your financial statements taken as a whole, and therefore contributed Company intends to hold on a long-term basis is reduced to the to the opinion we formed which is expressed in the first part value in use of the investments, if this amount is lower. of this report.
374 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Statutory Auditors’ Report on the Parent Company financial statements 20
III. Specific verifications and information
We have also performed, in accordance with professional benefits received by the Directors and any other commitment standards applicable in France, the specific verifications made in their favour, we have verified its consistency with the required by French law. financial statements, or with the underlying information used We have no matters to report as to the fair presentation and to prepare these financial statements and, where applicable, the consistency with the financial statements of the information with the information obtained by your Company from companies given in the management report of the Board of Directors and controlling your Company or controlled by it. Based on this work, in the documents addressed to the shareholders with respect we attest the accuracy and fair presentation of this information. to the financial position and the financial statements. In accordance with French law, we have verified that the Concerning the information given in accordance with the required information concerning the identity of the shareholders requirements of Article L. 225-102-1 of the French Commercial or holders of the voting rights has been properly disclosed in Code (Code de commerce) relating to remunerations and the management report.
Courbevoie and Paris-La Défense, February 23, 2016 The Statutory Auditors French original signed by
Mazars Ernst & Young et Autres Isabelle Massa Gonzague Senlis Jean-Pierre Letartre Stéphane Pédron
20
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 375 Financial information relating to the Company's assets, financial situation and revenues 20 Dividend distribution policy
20.5 Dividend distribution policy
A dividend of €0.65 per share, for a total of €352.7 million, will statements for the fiscal year ended December 31, 2015(1) . be proposed to the SUEZ ENVIRONNEMENT COMPANY Subject to approval by the Shareholders’ Meeting, this dividend Shareholders’ Meeting convened to approve the financial will be paid during the first half of 2016.
20.6 Legal and arbitration proceedings
20.6.1 Competition and industry concentration
No judgment was pronounced against the Group by a court or In addition, the Group is aware of no proceedings pending before an authority in relation to competition during fiscal year 2015. such court or authority.
20.6.2 Litigation and arbitration
In the normal course of its business, the Group is involved in a the event of a depreciation of the Argentine peso against the certain number of litigation and arbitration with third parties US dollar. or with the tax administrations of certain countries. Provisions In 2003, SUEZ – now ENGIE – and its co-shareholders in are recorded for such litigation and arbitration when (i) a legal, the water concessions for Buenos Aires and Santa Fe filed contractual or constructive obligation exists at the closing date arbitration proceedings against the Argentinean government, with respect to a third party; (ii) it is probable that an outflow in its capacity as grantor, to enforce the concession agreements’ of resources without economic benefits will be necessary to contractual clauses with the International Center for the settle the obligation; and (iii) the amount of the said outflow of Settlement of Investment Disputes (ICSID), in accordance with resources can be estimated in a sufficiently reliable manner. the bilateral Franco-Argentinean investment protection treaties. Provisions recorded in respect of the above amounted to €168.6 million as of December 31, 2015 (excluding litigation These ICSID arbitration proceedings aim at obtaining indemnities in Argentina). to compensate for the loss of value of the investments made since the start of the concession due to the measures adopted There is no other governmental, judicial, or arbitration by the Argentinean government following the adoption of the proceedings of which the Group is aware of, that is suspended abovementioned Emergency Act. The ICSID acknowledged or with which it is threatened, likely to have or that has already its jurisdiction to rule on the two cases in 2006. At the same had, in the past 12 months, a material impact on the Group’s time as the ICSID proceedings, the concession-holders Aguas financial position or profitability. Argentinas and Aguas Provinciales de Santa Fe were forced to file proceedings to cancel their concession agreement with ..Litigation in Argentina local governments. In Argentina, tariffs applicable to public-service contracts However, since the financial situation of the concession-holding were frozen by the Public Emergency and Exchange Regime companies had deteriorated since the Emergency Act, Aguas Reform Law (Emergency Act) in January 2002, preventing the Provinciales de Santa Fe announced that it was filing for judicial application of contractual price indexation that would apply in liquidation at its Shareholders’ Meeting on January 13, 2006.
(1) Based on the total number of shares at December 31, 2015.
376 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Financial information relating to the Company's assets, financial situation and revenues Legal and arbitration proceedings 20
At the same time, Aguas Argentinas applied to file a Concurso The reports on the Buenos Aires and Santa Fe concessions Preventivo (similar to a French bankruptcy procedure). As were presented by the expert to the ICSID respectively in part of these bankruptcy proceedings, a settlement proposal September 2013 and in April 2014. Regarding the Buenos Aires involving the novation of admissible Aguas Argentinas liabilities concession, ICSID rendered its decision on April 9, 2015 ordering was approved by creditors and ratified by the bankruptcy court the Argentine Republic to pay Aguas Argentinas shareholders on April 11, 2008. The liabilities are in the process of being USD405 million in damages (including USD346 million to SUEZ settled. The proposal provides for an initial payment of 20% and its subsidiaries). In early August 2015, the Republic of (about USD40 million) upon ratification and a second payment Argentina petitioned an ad hoc ICSID committee to render this of 20% in the event of compensation by the Argentinean decision invalid. government. As controlling shareholders, ENGIE and Agbar The ICSID ruled against the Republic of Argentina on decided to financially support Aguas Argentinas in making this December 4, 2015, ordering it to pay USD211 million regarding first payment, upon ratification, and paid USD6.1 million and the termination of the Santa Fe concession contract. The USD3.8 million respectively. Republic of Argentina may initiate proceedings to invalidate In two decisions dated July 30, 2010, the ICSID recognized the the ruling. Argentine government’s liability in canceling the Buenos Aires The Group considers that the provisions recorded in the financial and Santa Fe water and wastewater treatment concession statements relating to this litigation are appropriate. contracts. In addition, in June 2011 the ICSID appointed an expert to provide a definitive assessment of the compensation payable for the commercial harm.
20.6.3 Tax litigations
..Sociedad General de Aguas de Barcelona XX fiscal year 1997: proceedings ended with a ruling in favor of Agbar; Agbar was subject to a number of tax audits, mainly relating to corporate tax. XX fiscal year 1998: proceedings ended with a ruling in favor of Agbar. With respect to corporate tax, Agbar received a reassessment notice from the Spanish tax authorities for the 1995-1998 fiscal WITH REGARD TO THE REASSESSMENTS NOTIFIED FOR 1999-2001 20 years that outlined a reassessment of tax payable in the amount of €28 million in addition to penalties of €12 million. In May 2008, the Administrative Court cancelled the penalties relating to the 1999-2001 fiscal years, but upheld almost all of Agbar also received a reassessment notice relating to the 1999- the reassessments. Agbar appealed this ruling in July 2008. In 2001 fiscal years that outlined a reassessment of tax payable in July 2011, Agbar was awarded a partially favorable decision by the amount of €41 million in addition to penalties of €25 million. the Court of Appeals and Agbar subsequently filed an appeal In May 2009, Agbar was also notified of a reassessment in the with the Supreme Court concerning the disputes related to the amount of €60.5 million for the 2002-2004 fiscal years, without reassessments upheld. The Spanish government also appealed additional penalties. the ruling in favor of Agbar. In court, the company challenged these notices, which were, for On October 25, 2012, Agbar was given the ruling of the Supreme each period in question, justified with similar arguments by the Court, validating what had been decided by the Court of Appeals. tax authorities. Agbar considers the tax authorities’ arguments groundless. Agbar received notification of the decision of the Supreme Court in March 2013 and paid the sum of €20 million corresponding to WITH REGARD TO THE REASSESSMENTS NOTIFIED FOR 1995-1998 the principal. The interest of €9 million was challenged before the Central Administrative Tribunal. Agbar obtained a court ruling in its favor with regard to the 1995-1998 fiscal years and the situation may be summarized WITH REGARD TO THE REASSESSMENTS NOTIFIED FOR 2002-2004 as follows: In June 2009, Agbar filed suit with the Administrative Court to XX fiscal year 1995: proceedings ended with a ruling in favor challenge the reassessments for 2002-2004. In June 2012, the of Agbar; Court reached a decision partially in Agbar’s favor. XX fiscal year 1996: proceedings ended with a ruling in favor of Agbar, which already received a repayment of €4.1 million, in addition to €1 million in interest;
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 377 Financial information relating to the Company's assets, financial situation and revenues 20 Significant change in the financial or business situation
Agbar filed an appeal before the Court of Appeals regarding In July 2015, Agbar was awarded a partially favorable decision the other elements for which the Administrative Court has not in the Court of Appeals and submitted an appeal on points of held in favor of Agbar. law to the Supreme Court with regard to the reassessments that were upheld.
20.7 Significant change in the financial or business situation
Please see section 10.5.2 “Expected sources of financing”, and chapter 20.1, Note 27 “Subsequent events”, of this Reference Document.
378 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Complementary information21
21.1 General information on share capital 380 21.1.1 Amount of share capital as of December 31, 2015 380 21.1.2 Non-equity instruments 380 21.1.3 Shares held by the Company or on its behalf 380 21.1.4 Other equity instruments 383 21.1.5 Authorizations and delegations of authority granted by the Shareholders’ Meeting 383 21.1.6 Options or agreements concerning the Company’s share capital 384 21.1.7 History of the share capital 385
21.2 Memorandum of association and Bylaws 386 21.2.1 Purpose of the Company 386 21.2.2 Provisions relating to governance and management bodies 386 21.2.3 Rights, privileges and restrictions attached to shares 389 21.2.4 Terms and conditions for amending shareholders’ rights 389 21.2.5 Shareholders’ Meetings 390 21.2.6 Provisions to delay, postpone or prevent a change of control of the Company 390 21.2.7 Statutory thresholds 390 21.2.8 Specific provisions governing changes to the share capital 391
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 379 Complementary information 21 General information on share capital
21.1 General information on share capital
21.1.1 Amount of share capital as of December 31, 2015
As of December 31, 2015 the Company’s share capital totaled The Company shares are fully subscribed and paid up, and all €2,170,573,872. It consisted of 542,643,468 shares with a belong to the same class. nominal value of €4 each. As of December 31, 2014 the Company’s share capital was €2,160,935,316, divided into 540,233,829 shares with a nominal value of €4 each.
21.1.2 Non-equity instruments
None.
21.1.3 Shares held by the Company or on its behalf
This section contains information to be included in the description of the French Commercial Code, in the context of a capital of the share buyback program pursuant to Article 241‑2 of the reduction approved or authorized by the Shareholders’ AMF General Regulations and the information required under Meeting; the provisions of Article L. 225‑211 of the French Commercial XX allotment or granting, with or without a discount, of shares Code. to employees or former employees and/or to corporate officers or former corporate officers of the Company and/ AUTHORIZATION FOR THE COMPANY TO PURCHASE ITS OWN SHARES or companies affiliated with it, or which will be affiliated with (SHAREHOLDERS’ MEETING OF MAY 12, 2015) it under the conditions and in accordance with applicable Resolution 13 of the Combined Ordinary and Extraordinary regulations, particularly following the exercise of existing Shareholders’ Meeting of May 12, 2015 (i) terminated the stock options or allotment of existing bonus shares as part unused portion of the authorization granted to the Board of of company or inter-company savings plans, under the Directors by Resolution 16 of the Combined Ordinary and terms provided by law (in particular Articles L. 3332‑18 Extraordinary Shareholders’ Meeting held on May 22, 2014, et seq. of the French Labor Code) or as part of shareholder and (ii) authorized the Company to trade in its own shares, and plans governed by the laws of other countries; delegated full powers to the Board of Directors to implement XX keep and subsequently deliver shares (to exchange or this authorization, including the power to sub-delegate, under make payments, etc.) as part of external growth operations, the following conditions: provided that the maximum amount of shares purchased with a view to keeping them and subsequently delivering Conditions: them for payment or exchange as part of a merger, spin-off XX maximum authorized purchase price per share: €25; or contribution plan does not exceed 5% of the share capital; XX maximum shareholding 10% of the share capital; XX hedging of marketable securities that give right to allotment of Company shares by remitting them after the exercise securities: shares traded on the Euronext Paris Stock XX of rights attached to marketable securities (through Exchange; redemption, conversion, exchange, presentation of warrant or any other means); Objectives: XX ensure liquidity and boost the secondary market for the XX in general, pursue any other goal which is or would become Company’s shares through an investment firm acting authorized by law or regulations, or engage in any market independently, in the framework of a liquidity contract practice that is or would become accepted by financial concluded in accordance with the Ethics Charter accepted markets regulators, provided Company shareholders are by the AMF; notified thereof. XX subsequent cancellation, either in whole or in part, of shares purchased in accordance with Article L. 225‑209
380 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Complementary information General information on share capital 21
On May 12, 2015, the Board of Directors sub-delegated to As of December 31, 2015, the Company held 1,959,749 shares, the Chief Executive Officer the power to implement this including none under the liquidity contract and 1,959,749 to authorization granted by the Shareholders’ Meeting of the hedge the stock purchase option and bonus share plans, same date, in accordance with the objectives authorized by amounting to 0.36% of the Company’s share capital, with Resolution 13 of that Meeting. a market value of €33.8 million and a purchase price of €29.4 million. TRANSACTIONS DURING FISCAL YEAR 2015 AND THE BALANCE OF TREASURY SHARES AS OF DECEMBER 31, 2015 TRANSACTIONS BETWEEN JANUARY 1 AND FEBRUARY 19, 2016 Between January 1, 2016 and February 19, 2016, the As part of the liquidity contract: Company acquired 1,225,500 of its own shares in the amount The Company entered into a liquidity contract with Rothschild of €20,310,731, i.e. at an average price per share of €16.57, & Cie Banque on August 9, 2010. Under this liquidity contract, under the liquidity contract alone. During the same period, the in 2015 the Company acquired 7,714,342 shares for a total Company sold 1,225,500 of its own shares under the liquidity value of €131,682,209 at an average share price of €17.07 and contract alone, for a total value of €20,373,333 at an average sold 7,814,342 shares for a total value of €133,444,348 at an price per share of €16.62, and delivered 2,163 treasury shares average share price of €17.08. As of December 31, 2015, the as part of the stock purchase option and bonus share allocation liquidity contract thus covers the following resources: 0 share plans. On February 19, 2016, the Company held 0.36% of its and €31,866,254. share capital, i.e. 1,957,586 shares, including no share held under the liquidity contract and 1,957,586 shares held to hedge Outside the liquidity contract: the stock purchase option and bonus share plans. XX the Company acquired 120,000 treasury shares, for an average share price of €16.13, which were allocated DESCRIPTION OF THE SHARE BUYBACK PROGRAM FOR SUBMISSION exclusively for hedging of the bonus share and stock TO THE COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDERS’ MEETING purchase option plans. OF APRIL 28, 2016 XX the Company also delivered 567,491 free shares to Group Pursuant to Articles 241-1 to 241-5 of the AMF General employees as part of the performance share plan of Regulations, the purpose of this section is to outline the March 27, 2013 and the bonus share plan of January 17, objectives and conditions of the Company's share buyback 2013. program, to be submitted to the Combined Ordinary and Extraordinary Shareholders’ Meeting of April 28, 2016. Balance as of December 31, 2015: . Number of shares: .21.1.3.1 Breakdown by objective of the shares held purchased 7,834,342 (a) as of February 19, 2016 sold 7,814,342 (b) On February 19, 2016, the Company held 0.36% of its share 21 transferred 567,491 (c) capital, i.e. 1,957,586 shares, including 1,957,586 shares allocated to hedge the stock purchase option and bonus share cancelled 0 plans and none held under the liquidity contract. Average price (in euros): purchase 17.06 ..21.1.3.2 Main characteristics of the program sale 17.08 The potential main characteristics of this program are described Number of shares held in treasury as of below: December 31, 2015: 1,959,749 XX securities: shares traded on the Euronext Paris Stock Percentage of capital held 0.36% Exchange; Value of treasury shares as of X maximum capital buyback percentage authorized by the (d) X December 31, 2015 (in euros) 29,412,201.07 Shareholders’ Meeting: 10%; (a) 7,714,342 shares were purchased under the liquidity contract and 120,000 shares maximum number of shares that can be purchased were purchased outside of the liquidity contract during 2015. XX (b) All shares purchased and sold in 2014 were related to the liquidity contract set based on the share capital as of December 31, 2015: up by the Company. 54,264,346 shares; (c) All treasury shares used were transferred as part of performance share and bonus share plans. XX maximum authorized purchase price per share: €25. (d) Share value assessed at purchase price.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 381 Complementary information 21 General information on share capital
..21.1.3.3 Objectives of the share buyback program authorities and the periods when the Board of Directors or the person acting under delegation by the Board of Directors The objectives pursued by the Company within the framework will be taking action; of this share buyback program are set forth below: XX keep and subsequently deliver shares (in exchange or XX ensure liquidity and boost the Company’s shares on the payment, etc.) as part of external growth operations, secondary market through an investment firm acting provided that the maximum number of shares purchased independently, in the framework of a liquidity contract in view of keeping them and subsequently delivering them concluded in accordance with the Ethics Charter accepted for payment or exchange as part of a merger, spin-off or by the AMF; contribution plan does not exceed 5% of the share capital; XX subsequently cancel all or some of the shares thus XX hedging of marketable securities that give right to allotment purchased in accordance with Article L. 225‑209 of the of Company shares by remitting them after the exercise French Commercial Code within the framework of a capital of rights attached to these marketable securities (through reduction to be adopted or authorized by the Shareholders’ redemption, conversion, exchange, presentation of warrant Meeting; or any other means); XX allocate or grant, with or without a discount, shares to XX in general, pursue any other goal which is or would become employees or former employees and/or to corporate authorized by law or regulations, or engage in any market officers or former corporate officers of the Company and/or practice that is or would become accepted by financial companies affiliated with it, or which will be affiliated with it markets regulators, provided Company shareholders are under the conditions and in accordance with the procedures notified thereof. set out in applicable regulations, particularly following the exercise of existing stock options or bonus share grants . or as part of company or inter-company savings plans, .21.1.3.4 Terms and conditions under the terms provided by law (in particular Articles L. 3332‑18 et seq. of the French Labor Code) or as part of (a) Maximum portion of capital that may be acquired and held and maximum shareholder plans governed by the laws of other countries; amount payable by the Company XX allotment or sale of shares to current or former employees, The maximum portion of capital acquired and held by the and/or to current or former corporate officers of the Company may not exceed 10% of the Company’s share capital, Company and/or affiliated companies in France and/or for a maximum total of €1,356,608,650 based on the share abroad that are or will be related to it under the terms capital as of December 31, 2015, consisting of 542,643,468 of Article L. 225‑180 of the French Commercial Code, in shares. particular in the context of stock option plans, allotment of existing bonus shares, employee shareholding plans, (b) Duration of the share buyback program compensation systems of the Company, especially as part of the relevant provisions of the French Commercial Code and/ Pursuant to the resolution to be proposed to the Shareholders’ or of the French Labor Code or of French or foreign legal and Meeting of April 28, 2016, the share buyback program may be regulatory provisions, and the completion of any hedging implemented for 18 months from the date of the Shareholders’ transactions related to these transactions and commitments Meeting, i.e. until October 28, 2017. linked to the Company, under the terms defined by market
382 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Complementary information General information on share capital 21
21.1.4 Other equity instruments
On February 27, 2014 the Company issued 19,052,803 zero- The OCEANE bonds will be redeemed on February 27, 2020 coupon bonds convertible into and/or exchangeable for new either at par value by a cash payment, or via the issue of new and/or existing shares (known as “OCEANE” bonds in France) and/or existing shares and, if applicable, a cash payment, at the maturing on February 27, 2020, with a nominal amount of Company’s discretion. The OCEANE bonds will entitle holders to €350 million. The nominal value of an OCEANE bond was set at the allotment of new and/or existing SUEZ ENVIRONNEMENT €18.37, representing an issue premium of 30% compared to the COMPANY shares at the rate of one share per OCEANE bond, reference price of the SUEZ ENVIRONNEMENT COMPANY share. subject to any subsequent adjustments.
21.1.5 Authorizations and delegations of authority granted by the Shareholders’ Meeting
The authorizations and delegations of authority in effect were approved by the Company’s Shareholders’ Meetings of May 22, 2014 and May 12, 2015.
..Authorizations and delegations of authority granted by the Combined Ordinary and Extraordinary Shareholders’ Meetings of May 22, 2014 and May 12, 2015
Period of Authorizations/Delegations of authority validity Authorized ceiling Amount used Balance 1 Authorization granted to the Company to trade 18 months up to a maximum 0.36% at 9.64% of the in its own shares (2015 Shareholders’ Meeting, from holding of 10% of December 31, 2015 share capital Resolution 13) 5/12/2015 the share capital 2 Cancellation of treasury shares (2015 26 months 10% of the share Not used Shareholders’ Meeting, Resolution 17) from capital per 24-month 5/12/2015 period 3 Capital increase with shareholders’ preferential 26 months €432 million (a) Not used subscription rights by issuing equity securities from and/or any securities conferring an immediate or 5/12/2015 future entitlement to the Company’s share capital (2015 Shareholders’ Meeting, Resolution 18) 21 4 Capital increase without shareholders’ preferential 26 months €216 million (a) (b) Not used subscription rights by a public issue of equity from securities and/or any securities conferring an 5/12/2015 immediate or future entitlement to the Company’s share capital (2015 Shareholders’ Meeting, Resolution 19) 5 Issue, through an offer as set out in Article 26 months €216 million (a) (b) Not used L. 411‑2-II of the French Monetary and Financial from Code (a "private placement"), of shares and 5/12/2015 marketable securities conferring entitlement to the Company’s share capital, without preferential subscription rights (2015 Shareholders’ Meeting, Resolution 20) 6 Increase, by up to 15% of the initial issue, the 26 months Up to 15% of the Not used number of shares to be issued in the event of a from initial issue (a) (c) capital increase, with or without shareholders’ 5/12/2015 preferential subscription rights (2015 Shareholders’ Meeting, Resolution 21)
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 383 Complementary information 21 General information on share capital
Period of Authorizations/Delegations of authority validity Authorized ceiling Amount used Balance 7 Capital increase in consideration of contributions 26 months €216 million (up to Not used (c) in kind consisting of equity securities or securities from 10% of the share conferring entitlement to the share capital (2015 5/12/2015 capital) (a) (b) Shareholders’ Meeting, Resolution 22) 8 Capital increase in payment of security 26 months €216 million (a) (b) Not used contributions as part of a public exchange offer from initiated by the Company (2015 Shareholders’ 5/12/2015 Meeting, Resolution 23) 9 Issue of hybrid debt securities (2014 Shareholders’ 26 months €3 billion Not used Meeting, Resolution 26) from 5/22/2014 10 Capital increase by the issue of shares or 26 months €40 million (a) Not used securities conferring entitlement to the share from capital reserved for members of a company 5/12/2015 savings plan without shareholders’ preferential subscription rights for those employees (2015 Shareholders’ Meeting, Resolution 24) 11 Capital increase, without shareholders’ 18 months €12 million (a) Not used preferential subscription rights, in favor of from the class(es) of named beneficiaries, as part of the 5/12/2015 implementation of the SUEZ group international shareholding and savings plans (2015 Shareholders’ Meeting, Resolution 25)
(a) Resolution 26 sets a limit to the total nominal amount of capital increases that may be carried out immediately or in the future by virtue of Resolutions 18 to 25 of the 2015 Shareholders’ Meeting of €432 million for share issues and €3 billion for issues of debt securities or similar securities that confer entitlement to the Company’s share capital, as well as issues of hybrid securities representing debt. (b) Overall ceiling with a nominal value of €216 million to apply to the capital increases under Resolutions 19, 20, 22 and 23 of the 2015 Shareholders’ Meeting. (c) Subject to the ceiling of the authorization under which the issue is decided.
21.1.6 Options or agreements concerning the Company’s share capital
None.
384 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Complementary information General information on share capital 21
21.1.7 History of the share capital
Share capital Cumulative Share capital before transaction Premium Shares issued/ Par value number of after transaction Date Type of transaction (in euros) (in euros) cancelled (in euros) shares (in euros) 2007 Split by four of nominal value 40,000 N/A 7,500 4 10,000 40,000 Capital increase (a) 40,000 N/A 46,250 4 56,250 225,000 2008 Capital increase (b) 225,000 4,198,819,093 489,642,810 4 489,699,060 1,958,796,240 June 27, 2011 Scrip dividend (c) 1,958,796,240 171,648,841 19,008,731 4 508,707,791 2,034,831,164 December 8, 2011 Capital decrease (d) 2,034,831,164 65,357,420 8,370,000 4 500,337,791 2,001,351,164 December 8, 2011 Capital increase reserved for employees (e) 2,001,351,164 49,679,238 9,896,038 4 510,233,829 2,040,935,316 July 21, 2014 Capital increase reserved for employees (f) 2,040,935,316 69,681,282.34 8,943,094 4 519,176,923 2,076,707,692 July 29, 2014 Capital decrease (g) 2,076,707,692 6,495,441.96 943,094 4 518,233,829 2,072,935,316 September 17, Capital increase by 2014 contribution in kind (h) 2,072,935,316 232,760,000 22,000,000 4 540,233,829 2,160,935,316 March 30, 2015 Capital increase (i) 2,160,935,316 N/A 895,111 4 541,128,940 2,164,515,760 November 2, 2015 Capital increase (j) 2,164,515,760 N/A 1,514,528 4 542,643,468 2,170,573,872 March 23, 2016 Capital increase by contribution in kind (k) 2,170,573,872 22,968,888 1,757,778 4 544,401,246 2,177,604,984
(a) Subscription form signed on December 28, 2007; capital increase on January 4, 2008. (b) Remuneration of the SUEZ environnement shares that SUEZ contributed to SUEZ ENVIRONNEMENT COMPANY. (c) Capital increase due to the subscription of 19,008,731 shares as part of the option for a scrip dividend. (d) Capital decrease due to the cancellation of 8,370,000 treasury shares. (e) Capital increase due to the subscription of 9,896,038 new shares as part of the SUEZ environnement group "Sharing 2011" employee share issue. (f) Capital increase due to the subscription of 8,943,094 new shares as part of the SUEZ environnement group "Sharing 2014" employee share issue. (g) Capital decrease due to the cancellation of 943,094 treasury shares. (h) Issue of 22 million new shares carried out as part of the Criteria Caixa contribution to the Company of its 24.14% indirect interest in Agbar, representing a capital increase of €320,760,000, of which €88,000,000 in par value and €232,760,000 in share premium account. See Note 2 of chapter 20.1 for a detailed description of this transaction. (i) Capital increase due to the issue of new shares delivered after the vesting period to beneficiaries of the performance share plan of March 27, 2013 in France, Belgium and Spain. (j) Capital increase due to the issue of new shares delivered after the vesting period to beneficiaries of the bonus share plan of January 17, 2013 in France, Italy and Spain. 21 (k) Issue of 1,757,778 new shares carried out as part of ENGIE contribution to the Company of all the shares comprising of the capital of the company SUEZ IP, representing a capital increase of €30 million, of which €7,031,112 in par value and €22,968,888 in share premium account. See chapter 19 for a detailed description of this transaction.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 385 Complementary information 21 Memorandum of association and Bylaws
21.2 Memorandum of association and Bylaws
This section summarizes the main provisions of the Company’s Bylaws and Internal Regulations.
21.2.1 Purpose of the Company
The Company's purpose is set out in Article 3 of the Company 3. The study, setup and completion of all projects, services, Bylaws. and public or private works on behalf of any local public The purposes of the Company are as follows, in all countries authorities, private entities or private individuals; the and by all means: preparation and awarding of all contracts of any type whatsoever relating to those projects and works; 1. The provision, in any form whatsoever, of all services connected to the environment, and in particular: 4. The acquisition of equity interests by obtaining shares, interests, bonds and other corporate securities, existing –– all services for the production, transportation and or to be created in the future, via subscription, purchase, distribution of water, for all domestic, industrial, contribution, exchange or any other means, and the capacity agricultural or other needs and uses, on behalf of local to divest such interests; public authorities or private individuals, 5. The acquisition, purchase, divestment and operation of any –– all wastewater treatment services, including the disposal patent, trademark, model, patent license or process; of sewage of domestic, industrial, or other origin, 6. The granting of any guarantee, first-call guarantee and other –– all services that may directly or indirectly concern the surety to any Group company or entity, in the course of their collection, sorting, treatment, recycling, incineration, and business, as well as the financing or refinancing of their recovery of all types of waste, by-products and residues, activities; and generally any activity or venture related to waste management, 7. The subscription of any borrowing or, more generally, recourse to any type of financing, specifically via the issue –– the creation, acquisition, operation or divestment of all or, as the case may be, the subscription of debt securities transport and road haulage services, or financial instruments, in order to finance or refinance the –– the creation, purchase, sale, leasing, rental, management, Company’s business activity; installation and operation of any facility relating to waste 8. In general, all industrial, financial and commercial management, and transactions and transactions involving movable assets or –– generally, all services on behalf of local public authorities, real estate that may be connected directly or indirectly to private entities and private individuals connected with the one of the purposes specified above or any other similar above; or connected purpose or a purpose that might benefit and develop the Company’s business. 2. On an ancillary basis, the production, distribution, transportation, utilization, management and development of energy in all its forms;
21.2.2 Provisions relating to governance and management bodies
..21.2.2.1 Board of Directors Committee), to update and clarify certain provisions relating to the functioning of the Board and limitations on the Chief Executive Officer’s powers, and to establish a Director’s Charter, (a) Internal Regulations of the Board of Directors to serve as a reminder of the conditions under which Directors The Board of Directors of the Company has adopted a set of are to perform their duties, their contribution to the work of the Internal Regulations to define the Board’s operating procedures. Board and committees, the rights and resources granted to After three and a half years of operation of the Board and its Directors, and the rules on confidentiality, independence, ethics, four committees, these Internal Regulations, originally adopted and integrity inherent in their roles. The Internal Regulations by the Board on July 23, 2008, were amended in 2012 in the were again amended in 2013, primarily to reflect the end of the interests of good governance, notably to extend the remit of the Shareholders’ Agreement pertaining to the Company (notably committees (particularly the Audit and Financial Statements adjusting the limits on the Chief Executive Officer’s powers
386 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Complementary information Memorandum of association and Bylaws 21
to this new context), and the adoption of the AFEP‑MEDEF this age limit to 70 years as the Chairman is reaching this age Code, amended in June 2013. The Internal Regulations were before the close of the Shareholders’ Meeting approving the further amended July 28, 2015, mainly to reflect the split of the financial statements for the preceding fiscal year. Appointments and Compensation Committee into two separate The Board is chaired by the Chairman, or in his absence, a committees: (i) an Appointments and Governance Committee Director chosen by the Board of Directors at the start of the and (ii) a Compensation Committee, whose new responsibilities meeting. are described in chapter 16.4 of this Reference Document. The Chairman of the Board organizes and manages the Board’s work and reports on it to the Shareholders’ Meeting. (b) Composition of the Board of Directors (Article 10 of the Bylaws) The Chairman ensures that the Company’s governing bodies The Company is administered by a Board of Directors consisting function correctly and, in particular, that the Directors are fit of no less than 3 and no more than 18 members, notwithstanding to carry out their duties. the statutory exemption in the event of a merger. Two Directors representing employees may be appointed (d) Functioning of the Board of Directors (Articles 1 and 2 of the Board under the terms provided in Article L. 225-27-1 of the French of Directors’ Internal Regulations) Commercial Code. The Shareholders' Meeting also appoints a The functioning of the Board of Directors is described in Articles 1 Director representing employee shareholders, pursuant to the and 2 of the Internal Regulations, which are reproduced below. provisions of Article L. 225-23 of the French Commercial Code. These Directors are not taken into account for determining the Article 1 of the Internal Regulations – Meetings minimum and maximum number of Directors provided above. 1. The Board of Directors meets as often as the interests of the Directors are appointed, re-elected, and dismissed in compliance Company and the legal and regulatory provisions require, with applicable legal and regulatory provisions. and at least once a quarter. Notices of meetings may be Directors are appointed for a four-year term. Nevertheless, a circulated by the Board Secretary or the General Secretary, Director who is appointed to replace another whose term has and are sent via letter, fax or e-mail, or conveyed verbally. not expired shall only remain on the Board for the remainder 2. Meetings may be conducted in any manner, including by of his/her predecessor’s term. videoconference or teleconference, subject to the restrictions Each Director must hold at least 2,000 shares, except under and conditions laid down in the applicable regulations. conditions as stipulated by the law or regulations. Directors who participate in a Board meeting in the manner cited above are deemed to be present for the purposes of The number of Directors who have reached the age of 70 may calculating the quorum and voting majority, subject to the not, at any time, exceed a third of the total number of Directors restrictions envisaged in the applicable regulations. in office. If the number of Directors is not exactly divisible by three, then the resulting figure is rounded up. 3. Any Director, under his/her own responsibility, may delegate by proxy to another Director the ability to vote on his/her Except in the case of termination of the employment contract behalf. The proxy must be in writing and carry the signature, (of an Executive Director), or resignation, dismissal or 21 which may be electronic, of the Director assigning the proxy. death, a Director’s term ceases at the close of the Ordinary The proxy must state the date of the meeting to which it Shareholders’ Meeting that approved the financial statements applies. A Director may assign a proxy only to another for the preceding fiscal year, held during the year that Director’s Director. Each Director may only represent one colleague appointment expires. at the same meeting. The Director receiving the proxy may participate in the Board meeting physically or, where (c) Chairman of the Board of Directors (Article 11 of the Bylaws) applicable, by videoconference or teleconference. The Board of Directors appoints a Chairman from among 4. The content of the minutes of each meeting are sufficient its members. The Chairman may propose that the Board of proof, vis-à-vis third parties, of the number of Directors Directors shall appoint one or more members to the position in office, their presence physically or by videoconference of Vice-Chairman. or teleconference, or their representation by proxy. If Regardless of the term of office, the Chairman’s term shall the Chairman of the Board of Directors finds that the expire, at the latest, as of the close of the Shareholders’ Meeting videoconferencing or teleconferencing technology is not that approved the financial statements for the preceding fiscal functioning properly, the Board may validly deliberate and/ year, held during the year in which the Chairman reaches the or continue solely with the members physically present, age of 68. The Shareholders' Meeting of April 28, 2016 will be provided that quorum conditions are satisfied. asked to amend this provision of the Bylaws in order to raise
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 387 Complementary information 21 Memorandum of association and Bylaws
5. Meetings are held at the head office at Tour CB21, 16, place powers expressly attributed to the Shareholders’ Meetings and de l’Iris, 92040 Paris-La Défense Cedex, France, or at any within the limits of the Company’s purpose, the Board deals other place indicated in the notice of meeting. with all issues concerning the management of the Company and decides on relevant matters through its debates. Article 2 of the Internal Regulations – Registers and Minutes The Board of Directors monitors and supervises activities as it 1. An attendance register is kept at the Company’s head deems appropriate. The Company Chairman or Chief Executive office and signed by the members of the Board of Directors Officer must forward to each Director the documents and attending the meeting, in their own name or on behalf of information they require to carry out their duties. other members of the Board they represent. In accordance with the provisions of applicable laws and regulations, any (g) Compensation of Directors (Article 16 of the Bylaws) proxies granted by letter or, if need be, by fax or e-mail, are attached to the attendance register. The attendance The Shareholders’ Meeting may award a fixed annual amount register for Board meetings must state which Directors, if in attendance fees for the Board of Directors, which amount any, participated by videoconference or teleconference, and shall remain the same until further notice. which conferencing method they used. Members of the Board of Directors may also be awarded other 2. The Chairman submits the minutes of the previous meeting(s) compensation from time to time, in the circumstances and to the Board for approval. The minutes must report the under the conditions set forth by law. occurrence of any technical incident that disrupted the normal operation of the meeting. ..21.2.2.2 General Management In an emergency or if necessary, the exact wording of the minutes on a particular issue may, at the Chairman’s request, (a) Chief Executive Officer (Article 17 of the Bylaws) be decided at the meeting, so that the Company can use it in a communication to third parties. The Chairman of the Board of Directors, or another person appointed by the Board of Directors from among its members Every Director is entitled to request and receive a copy of the with the title of Chief Executive Officer, takes responsibility for minutes of any Board meeting. the General Management of the Company. In accordance with Extracts from the minutes used for court proceedings must be these bylaws, the decision of the Board of Directors as to which certified as true copies by the Chairman of the Board, the Chief of the above two persons should take responsibility for the Executive Officer, the General Secretary, or the Board Secretary. General Management of the Company is made by majority vote of the Directors present or represented, after consultation with (e) Meeting of the Board of Directors and proceedings (Article 12 the Chairman of the Board and the Chief Executive Officer. of the Bylaws) Shareholders and third parties are informed of this decision in The Chairman calls the Directors to meetings of the Board of accordance with the regulations in force. Directors, which are held at the head office or at any other The Chief Executive Officer holds the most extensive powers location indicated by the author of the notice of meeting. If to act, under all circumstances, on behalf of the Company. The the Board has not met for at least two months, then at least Chief Executive Officer exercises these powers within the limit one third of the Board members may ask the Chairman to call of the Company’s purpose and without prejudice to the powers a meeting on a specific agenda. The Chief Executive Officer expressly granted by law to the Shareholders’ Meetings and may also request that the Chairman call a Board meeting on the Board of Directors. a specific agenda. Regardless of the period of the appointment, the term of office Notices of meetings may be issued by any means, including of the Chief Executive Officer expires no later than the close of verbally. the Ordinary Shareholders’ Meeting that approved the financial A legal quorum and majority is required for the Board to make statements for the preceding fiscal year, held during the year in decisions. In the event of a tied vote, the meeting Chairman has which the Chief Executive Officer reaches the age of 68. the deciding vote. In the event that the Chief Executive Officer ceases to be a The Board appoints a person to act as secretary, who need not Director during his term of office, he shall remain as Chief be a member of the Board. Executive Officer until the expiry of the term of his appointment by the Board of Directors. At the Chairman’s request, senior executives may attend Board meetings in an advisory capacity. When the Company’s General Management is in the hands of the Chairman of the Board of Directors, the provisions of law and the bylaws relating to the Chief Executive Officer apply to (f) Powers of the Board of Directors (Article 14 of the Bylaws) the Chairman of the Board of Directors. The Board of Directors determines the key Company strategies and supervises their implementation. Without prejudice to the
388 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Complementary information Memorandum of association and Bylaws 21
(b) Exercise of authority by the Chief Executive Officer (Article 4 Regardless of the period of the appointment, the Executive Vice of the Board of Directors’ Internal Regulations) President’s term of office shall expire no later than the close of the Ordinary Shareholders’ Meeting that approved the financial The limits of powers of the Chief Executive Officer are described statements for the preceding fiscal year, held during the year in Article 4 of the Internal Regulations and stated in chapter 16.4 in which the Executive Vice President reaches the age of 65. of this Reference Document. However the Board of Directors, at the proposal of the Chief Executive Officer, may extend the period of this appointment on (c) Executive Vice Presidents (Article 18 of the Bylaws) one or more occasions for a total term not to exceed three years. At the recommendation of the Chief Executive Officer, the Board With the approval of the Chief Executive Officer, the Board of of Directors may appoint one or more persons to assist the Chief Directors shall determine the scope and duration of the powers Executive Officer, with the title of Executive Vice President. The granted to Executive Vice Presidents, who nonetheless have the maximum number of Executive Vice Presidents is five. same authority as the Chief Executive Officer in their dealings If an Executive Vice President is also a Director, the term of with third parties. his appointment may not exceed his term of office as Director. The Executive Vice Presidents have the authority to delegate their powers and to appoint as many authorized agents as they wish, with the authority to sub-delegate.
21.2.3 Rights, privileges and restrictions attached to shares
..Rights attached to shares (Article 8 of the Bylaws) actual benefits and the right to receive the same net sum, after taking into account the non-amortized par value of the shares Each share, regardless of its class, confers the right to a and rights to those shares, where applicable. share in the ownership of Company assets and the liquidating dividend, in proportion to the share capital it represents, taking Without prejudice to the laws governing the right to vote at into account whether capital is amortized or paid up, as the Shareholders’ Meetings and shareholders’ right to information, case may be. shares are indivisible for the Company. Therefore, co-owners shall be represented at the Shareholders’ Meeting by one of All shares comprising current or future share capital, regardless them, or by a single proxy, to be appointed by the courts in the of their class, shall always be taxed on an equal footing. event of a dispute. Consequently, any taxes and duties that may be owed for any reason as a result of total or partial repayment of the par value When, in order to exercise a right, a shareholder must hold of those shares, either during the life of the Company or at the several securities of a particular type or class, the holder shall time of liquidation, shall be spread among all shares making be personally responsible for gathering the required number 21 up the share capital at the time of these repayments, so that or buying or selling the necessary number of shares. all current or future shares entitle their owners to the same
21.2.4 Terms and conditions for amending shareholders’ rights
None.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 389 Complementary information 21 Memorandum of association and Bylaws
21.2.5 Shareholders’ Meetings
(a) Participation in Shareholders’ Meetings (Articles 20, 21 and 22 (b) Voting rights (Article 23 of the Bylaws) of the Bylaws) The voting rights attached to shares are equal to the proportion All shareholders may attend Shareholders’ Meetings in person of the share capital they represent, and each share confers or through a proxy, regardless of the number of shares held. the right to one vote (except where voting rights are restricted Attendance is subject to proof of identity and registration of under current regulations or the Company Bylaws). In line with the shares in their name or in the name of a proxy, by 00:00 the provisions of Article L. 225-123, paragraph 3 of the French (midnight) Paris time on the second business day prior to the Commercial Code, the Shareholders' Meeting of May 12, 2015 meeting, either in the register of shares held by the Company voted to retain the principle that one share confers the right or in the register of bearer shares held by an authorized to one vote. intermediary. In Ordinary and Extraordinary Shareholders’ Meetings, the Meetings are held at the Company’s headquarters, at any other usufructuary holds the voting rights attached to usufruct shares. location within the same département (French administrative All shareholders may have a postal vote in accordance with the jurisdiction) or in a neighboring département. conditions and in the manner set by current legal and regulatory Shareholders’ Meetings are chaired by the Chairman of the provisions. These provisions also provide that shareholders may Board of Directors or, in the Chairman’s absence, by a Director submit their proxy and postal ballot form either in paper format specially appointed for this purpose by the Board of Directors. or, if stipulated by the Board of Directors in the notice of meeting, Failing this, the meeting shall elect its own Chairman. electronically. The function of teller shall be carried out by the two shareholders, present and willing, who hold, either themselves or by proxy, the highest number of voting rights. The committee thus formed shall appoint a secretary, who need not be a shareholder.
21.2.6 Provisions to delay, postpone or prevent a change of control of the Company
The Bylaws contain no provisions likely to delay, postpone or prevent a change of control of the Company.
21.2.7 Statutory thresholds
FORM OF SECURITIES IDENTIFICATION OF SHARES Fully paid-up shares can be held as registered or bearer shares, In accordance with current legal and regulatory provisions, at the discretion of the shareholder. the Company may require, at any time, that the clearing agent provides the name, and if a corporation, the corporate name, REGISTRATION OF SHARES nationality, and address of shareholders conferring entitlement, immediately or in the future, to a right to vote at Company Shares and all other securities issued by the Company are Shareholders’ Meetings, as well as the number of shares held posted to their owners’ accounts, in accordance with the by each and, where applicable, any restrictions to which they applicable legal and regulatory provisions. may be subject. Where shares are in certificate form, the Board of Directors may grant authority to any person, even a person outside the Company, to sign such certificates.
390 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Complementary information Memorandum of association and Bylaws 21
NOTIFICATIONS TO BE MADE TO THE COMPANY Any individual or legal entity, acting alone or in concert, who comes to hold or ceases to hold a fraction of the share capital Any individual or legal entity, either alone or in concert, that or voting rights equal to or exceeding 10% and 25%, is required comes to hold or ceases to hold a fraction of the share capital to notify the Company by registered letter with acknowledgment or voting rights equal to or exceeding 1%, and then, after this of receipt, within five business days of crossing one of these threshold, any multiple of 1% up to a threshold of 33% of the thresholds, of the objectives that the individual or legal entity share capital or voting rights, is required to notify the Company, intends to pursue over the next six months, pursuant to by registered letter with acknowledgement of receipt, within five Article 233‑7 of the French Commercial Code. business days of crossing one of these thresholds, stating the total number of shares they hold directly, indirectly or jointly. To To the fullest extent permitted by law, failure to comply with determine these thresholds, account will also be taken of shares the above provisions is sanctioned by the withdrawal of voting held indirectly and of quasi-shares as defined in the provisions rights in respect of the undeclared shares that exceed the of Articles L. 233‑7 et seq. of the French Commercial Code. fraction at any Shareholders’ Meeting held between the time the threshold is exceeded and not reported, and a period of two If one of these thresholds is crossed within five business days years from the date on which the proper notification is given before the date of a Company Shareholders’ Meeting, the above- as provided above. Nevertheless, this sanction will only apply if mentioned notification shall be made at the latest before the one or more shareholders holding at least 5% of the Company’s meeting’s committee certifies the accuracy of the attendance share capital so request. register, in a manner that ensures that the Company receives it before certifying attendance.
21.2.8 Specific provisions governing changes to the share capital
There are no specific provisions governing changes to the share capital stricter than the law.
21
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 391 392 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Significant contracts22
The most significant contracts, other than contracts entered into in the normal course of business, are described in chapters 6, 18 and 19 of this Reference Document. These include the following contracts: XX the Shareholders’ Agreement entered into by SUEZ environnement SAS, Lyonnaise Asia Water Limited and Beauty Ocean Limited/ New World Infrastructure Limited, in respect of Sino-French Holdings (see section 6.5.4.3 (a)); XX the Shareholders’ Agreement entered into by SUEZ environnement SAS, Cofely (the successor of Elyo), Fipar Holding and Al Wataniya in December 2004, in respect of Lydec (see section 6.5.4.4 (a)); XX agreements entered into by SUEZ ENVIRONNEMENT COMPANY and/or SUEZ environnement SAS and ENGIE, particularly the agreement on industrial and commercial cooperation (see chapter 19); XX the master agreement signed on July 17, 2014 between SUEZ ENVIRONNEMENT COMPANY, Agbar and Criteria Caixa relating to the contribution by Criteria Caixa of its 24.14% indirect interests in Agbar, to be compensated in part by issuing 22 million new Company shares; the Company shares held by Criteria Caixa are subject to a four-year lock-in period, i.e. until September 2018; and XX an agreement entered into in June 2015 between Chongqing Suyu Business Development Company Limited (joint-venture between SUEZ and New World Services) and Chongqing Water Assets Management Co. Ltd concerning the Derun Environment company for the purpose of creating a major player in the water and waste sector in China.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 393 394 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Information from third parties, statements of experts and declarations of interest23
None.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 395 396 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Documents available to the public24
24.1 Consultation of documents
Corporate documents relating to the Company are made available to shareholders in accordance with current legislation and may be consulted on the Company’s website at the following address: www.suez.com, as well as at the Company’s corporate headquarters, Tour CB21, 16, place de l’Iris, 92040 Paris, La Défense Cedex, France, under applicable legal and regulatory conditions. Reference Documents filed with the AMF for 2013, 2014 and 2015, the interim financial reports, and quarterly financial information may be consulted on the Company’s website at www.suez.com under “finance, Results and publications”. In addition, the regulatory information set out in Article 221-1 of the AMF General Regulations may be consulted on the Company’s website at www.suez.com/finance/regulatory-information/.
..Person in charge of information Christophe Cros Deputy CEO in charge of Finance Tour CB21, 16, place de l’Iris 92040 Paris, La Défense Cedex, France +33 (0)1 58 81 20 00
24.2 Financial reporting calendar
Christophe Cros, Deputy CEO in charge of Finance and Purchasing Sophie Lombard, Head of Financial Communications Telephone: +33 (0)1 58 81 20 00 Address: Tour CB21, 16, place de l’Iris 92040 Paris, La Défense Cedex, France Website: www.suez.com
..Schedule of financial communication Presentation of annual results: February 24, 2016 Annual Shareholders’ Meeting: April 28, 2016 2016 interim results: July 28, 2016
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 397 398 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Information on equity interests25
Information concerning companies in which the Company holds a part of the share capital which could have a significant impact on the assessment of its assets, its financial position, or its income is provided in chapters 6 and 7, and in Note 28, chapter 20.1 of this Reference Document.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 399 400 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 201626
26.1 Agenda 402
26.2 Report of the Board of Directors 403 Presentation of the resolutions to be submitted to the Ordinary Shareholders’ Meeting 403 Presentation of the resolutions to be submitted to the Extraordinary Shareholders’ Meeting 407
26.3 Statutory Auditors’ Special Report on related party agreements and commitments 412
26.4 Statutory Auditors’ reports 416 26.4.1 Statutory Auditors’ report on the decrease in capital 416 26.4.2 Statutory Auditors’ report on the free allocation of existing shares or shares to be issued 417 26.4.3 Statutory Auditors’ report on the issue of shares or other securities giving access to the capital reserved for members of company savings schemes 418 26.4.4 Statutory Auditors’ report on the issue of shares or securities giving access to the Company’s share capital reserved for a category of defined beneficiaries for the purposes of implementing international shareholding and savings schemes of the SUEZ group with cancellation of preferential subscription rights 419 26.4.5 Statutory Auditors’ report on the free allocation of existing shares or shares to be issued in the framework of a company shareholding plan 420
26.5 Text of the resolutions 421
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 401 Combined Shareholders’ Meeting of April, 28 2016 26 Agenda
26.1 Agenda
RESOLUTIONS TO BE SUBMITTED TO THE ORDINARY SHAREHOLDERS’ MEETING RESOLUTIONS TO BE SUBMITTED TO THE EXTRAORDINARY SHAREHOLDERS’ MEETING 1. Approval of the Company’s financial statements for the fiscal year ended December 31, 2015; 17. Amendment to Article 2 of the Company’s bylaws in order to modify the Company’s legal name; 2. Approval of the Company’s consolidated financial statements for the fiscal year ended December 31, 2015; 18. Amendment to Article 11 of the Company’s bylaws in order to change the age limit to exercise the functions of Chairman 3. Allocation of the net income for fiscal year ended December 31, 2015 and determination of the dividend; of the Board of Directors; Delegation of authority to be granted to the Board of 4. Renewal of the term of office of Mr. Gérard Mestrallet as 19. Director; Directors to reduce the share capital of the Company through the cancellation of treasury shares; 5. Renewal of the term of office of Mr. Jean-Louis Chaussade as Director; 20. Delegation of authority to be granted to the Board of Directors to allocate performance shares; 6. Renewal of the term of office of Ms. Delphine Ernotte Cunci as Director; 21. Delegation of authority to be granted to the Board of Directors to increase the share capital by issuing shares or 7. Renewal of the term of office of Mr. Isidro Fainé Casas as securities conferring rights to the share capital reserved Director; for members of Company savings plans, with waiver of the 8. Ratification of the cooptation of Ms. Judith Hartmann as shareholders’ preferential subscription rights in order to Director; benefit such members; 9. Ratification of the cooptation of Mr. Pierre Mongin as 22. Delegation of authority to be granted to the Board of Director; Directors to increase the Company’s share capital, with waiver of the shareholders’ preferential subscription rights, 10. Appointment of Ms. Miriem Bensalah Chaqroun as Director; in order to benefit the category or categories of designated 11. Appointment of Ms. Belén Garijo as Director; beneficiaries as part of the implementation of SUEZ group 12. Appointment of Mr. Guillaume Thivolle as Director worldwide employee shareholding and savings plans; representing employee shareholders; 23. Authorization to be granted to the Board of Directors to 13. Approval of the related-party agreements and commitments allocate bonus shares to employees and corporate officers governed by Articles L. 225‑38 et seq. of the French who subscribe to an employee shareholding plan of the Commercial Code; Group; 14. Consultation on the components of compensation due 24. Delegation of powers for formalities. or awarded for fiscal year 2015 to Mr. Gérard Mestrallet, Chairman of the Board of Directors; 15. Consultation on the components of compensation due or awarded for fiscal year 2015 to Mr. Jean-Louis Chaussade, Chief Executive Officer; 16. Authorization to be granted to the Board of Directors to trade the Company’s shares.
402 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Report of the Board of Directors 26
26.2 Report of the Board of Directors
A total of 24 resolutions have been submitted for your approval. The first 16 resolutions will be submitted to the Ordinary Shareholders’ Meeting, while Resolutions 17 to 24 will be submitted to the Extraordinary Shareholders’ Meeting.
Presentation of the resolutions to be submitted to the Ordinary Shareholders’ Meeting
(RESOLUTIONS 1 AND 2) The Board of Directors draws your attention to the fact that the Approval of the Company annual and consolidated financial final amount to be paid out will take into account the number statements for the fiscal year ended December 31, 2015 of existing shares and the number of treasury shares held by the Company at the time the dividend is paid out which have The Shareholders’ Meeting is requested to approve the no entitlement to the dividend, in accordance with Article Company’s annual financial statements for the fiscal year ended L. 225‑210 of the French Commercial Code. December 31, 2015, as well as the transactions reflected in When paid out to individuals residing in France for tax purposes, those statements. the dividend is payable after deduction at the source from its These Company’s annual financial statements show a net gross amount of social security contributions at the overall rate income of €208,401,994.50. of 15.5% and, in most cases, a 21% mandatory flat rate deduction The Shareholders’ Meeting is also requested to approve the at source as a deposit on income tax. Since this deposit is not consolidated financial statements for the fiscal year ended a payment in full, the gross dividend is subject to progressive December 31, 2015, which show a net income Group share of income tax, after application of the 40% tax allowance described €407.6 million, as well as the transactions reflected in those in Article 158‑3‑2° of the French General Tax Code. statements. The ex-dividend date will be May 10, 2016, with a payment date on May 12, 2016. (RESOLUTION 3) Allocation of the net income and dividend for the fiscal year (RESOLUTIONS 4 TO 12) ended December 31, 2015 Composition of the Board of Directors Distributable income as of December 31, 2015 amounts to In Resolutions 4 to 12, the shareholders will be asked to: €4,748,569,641.99 and breaks down as follows: XX renew for a four-year term the directorships of Mr. Gérard Mestrallet, Chairman of the Board of Directors, Mr. Jean- Net income for fiscal year 2015 €208,401,994.50 Louis Chaussade, Chief Executive Officer, Ms. Delphine Retained earnings from previous year €133,379,394.59 Ernotte Cunci and Mr. Isidro Fainé Casas, whose terms of Additional paid-in capital €4,406,788,252.90 office expire at the end of this Shareholders’ Meeting; TOTAL DISTRIBUTABLE INCOME €4,748,569,641.99 XX ratify the co-optation of Ms. Judith Hartmann as Director, as decided by the Board of Directors on July 28, 2015, to It is noted that, in accordance with Article L. 232‑10 of the replace Ms. Penelope Chalmers Small, who resigned, for French Commercial Code, no allocation to the legal reserve the remainder of the term of office of her predecessor, until has been proposed, as it currently represents 10% of the share the end of the Shareholders’ Meeting called to approve capital. the financial statements for the fiscal year ending on The Board of Directors proposes that the Shareholders’ December 31, 2017; Meeting set the dividend for the 2015 fiscal year at €0.65 per XX ratify the co-optation of Mr. Pierre Mongin as Director, as share, representing a total payout of €352,718,254.20 (based decided by the Board of Directors on February 2, 2016, to on 542,643,468 shares comprising the Company’s share capital replace Mr. Alain Chaigneau, who resigned, for the remainder as of December 31, 2015), by deduction from the following of the term of office of his predecessor, until the end of items: the Shareholders’ Meeting called to approve the financial statements for the fiscal year ending on December 31, 2017; Net income for fiscal year 2015 €208,401,994.50 Retained earnings from previous year €133,379,394.59 Additional paid-in capital €10,936,865.11 DIVIDEND FOR FISCAL YEAR 2015 €352,718,254.20
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 403 Combined Shareholders’ Meeting of April, 28 2016 26 Report of the Board of Directors
XX appoint Ms. Miriem Bensalah Chaqroun as Director for a recommendations of the AFEP-MEDEF Code), in accordance four-year term until the end of the Shareholders’ Meeting with the proportion recommended by the AFEP-MEDEF Code called to approve the financial statements for the fiscal year and by law; ending on December 31, 2019, to replace Mr. Harold Boël, XX seven Directors of foreign nationality, with six different whose term expires at the end of this Shareholders’ Meeting; nationalities represented. XX appoint for a four-year term Ms. Belén Garijo as Director until the end of the Shareholders’ Meeting called to approve (RESOLUTION 13) the financial statements for the fiscal year ending on Approval of related-party agreements December 31, 2019; The Shareholders’ Meeting is asked to approve the related-party XX appoint Mr. Guillaume Thivolle as Director representing employee shareholders for a four-year term until the end agreements previously authorized by your Board of Directors of the Shareholders’ Meeting called to approve the financial in the fiscal year 2015, as described in the Statutory Auditors’ statements for the fiscal year ending on December 31, 2019, Special Report on related-party agreements and commitments in accordance with the legal provisions in force and with governed by Articles L. 225‑38 et seq. of the French Commercial Article 10.3 of the Company’s bylaws. Code. Mr. Guillaume Thivolle’s appointment is subject to a vote Only one new related-party agreement was authorized by by the shareholders following a proposal by employee the Board of Directors on December 15, 2015 and signed on shareholders representing 4.16% of share capital as at March 2, 2016 by the Company and ENGIE. This is an agreement December 31, 2015, after their participation in a process for the contribution from ENGIE to SUEZ ENVIRONNEMENT to appoint candidates for this directorship within the Suez COMPANY of all of the share capital of SUEZ IP, which owns a Group, which meant that the shareholders could have had body of intellectual property rights linked in particular to the a choice of three candidates for the position: SUEZ brand. This contribution is part of the adoption of the single brand by SUEZ group, which occurred in 2015, and of –– one candidate elected from among the Company Mutual its deployment throughout the Group. Fund Supervisory Boards whose unitholders are French residents, The Board of Directors authorized this contribution agreement, believing that it would enable the SUEZ group to enjoy –– one candidate elected from within the Company Mutual undisturbed ownership of this brand internationally, as well Fund Supervisory Board whose unitholders are not French as develop and defend it against any claim. residents, The main terms and conditions of this transaction, which are –– one candidate elected from among employee shareholders stated in the contribution agreement, are the following: who hold shares directly in registered accounts, provided that this person has previously obtained sponsorship of (i) the contribution by ENGIE to the Company of all shares it employee shareholders who have registered their shares owns in SUEZ IP, which represents 100% of that entity’s and who represent at least 3% of the total number of share capital; shares registered in this category of shareholders. (ii) a valuation of the contribution of 100% of the share capital The candidacy of Mr. Guillaume Thivolle was, however, the of SUEZ IP at €30 million; only one to emerge from this appointment process. (iii) a compensation for this contribution through the issue of The biographies and information relating to Board members, 1,757,778 new ordinary Company shares, in accordance whose renewal, ratification of co-optation or appointment have with the provisions of Article L. 225‑147 of the French been submitted, appear below and in section 14.1.2 of the 2015 Commercial Code and Resolution 22 of the Combined Reference Document of the Company. Shareholders’ Meeting of May 12, 2015, representing about 0.3% of the share capital and voting rights of the Company. Consequently, subject to the approval by the Shareholders’ Meeting of Resolutions 4 to 12, the Board of Directors shall be This contribution transaction and the capital increase which composed, at the end of the Shareholders’ Meeting of April 28, followed from it were completed on March 23, 2016, after 2016, of 20 members, including: submission of the contribution auditors’ report on the value of the contribution and the fairness of the compensation granted. XX nine independent Directors (i.e. 52.9% of its members, not It is also proposed that shareholders note that the related- counting Directors appointed on the proposal of employees party agreements and commitments concluded and previously and employee shareholders in accordance with the approved by the Shareholders’ Meeting, which are mentioned recommendations of the AFEP-MEDEF Code); in the Statutory Auditors’ Special Report, continued during the XX nine women, or 45% of its members (or eight women, or last fiscal year. 44.4% of its members, not counting Directors appointed on the proposal of employees in accordance with the
404 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Report of the Board of Directors 26
(RESOLUTIONS 14 AND 15) of the Board, and Mr. Jean-Louis Chaussade, Chief Executive Consultation on the components of compensation due or Officer, are subject to the opinion of the shareholders. awarded for fiscal year 2015 to Mr. Gérard Mestrallet, Chairman With regard to Mr. Gérard Mestrallet (Resolution 14), no of the Board of Directors, and Mr. Jean-Louis Chaussade, Chief compensation was paid to him by the Company during fiscal Executive Officer year 2015, except the attendance fees allocated to him for that fiscal year, in the amount of €68,751 (1). In accordance with the recommendations of the AFEP-MEDEF Code as revised in November 2015 (Article 24.3), to which the With regard to Mr. Jean-Louis Chaussade, Chief Executive Officer, Company refers pursuant to Article L. 225‑37 of the French as part of Resolution 15, the Shareholders’ Meeting is asked to Commercial Code, the components of compensation due or give an opinion on the following components of compensation awarded for the fiscal year ended to each of the Company’s due or awarded to him during the fiscal year 2015: Executive Directors, namely Mr. Gérard Mestrallet, Chairman
Components of compensation due or awarded for fiscal year 2015 Amounts or value Details Fixed compensation €750,000 This is the gross fixed compensation for fiscal year 2015, unchanged since 2009. Since August 1, 2014, the date of liquidation of his pension rights, the amount of pension paid to Mr. Jean-Louis Chaussade under the mandatory pension plan (€110,749 for fiscal year 2015) has been deducted from the amount of the fixed compensation paid by the Company. Annual variable €940,292 XX At its meeting of February 23, 2016, on the recommendation of the Compensation Committee, the compensation Board of Directors adopted the annual variable compensation for Mr. Jean-Louis Chaussade for fiscal year 2015 which amounts to €940,292, or 125% of his fixed compensation (compared to €909,421 for fiscal year 2014). XX Mr. Jean-Louis Chaussade’s variable compensation may represent between 0% and 145% of his fixed compensation and has been determined on the basis of: –– quantitative criteria previously set by the Board of Directors in February 2015, based on the 2015 budget. These criteria represent 75% of the overall weight of the variable part and are related to EBITDA (5%), free cash flow (20%), recurring net income (30%) and ROCE (20%); and –– qualitative criteria, which account for 25% of the overall weight of the variable part and that are related to the “COMPASS” cost savings program, the implementation of environmental, ethics and industrial risk action plans, the health and safety results and the execution of the strategic plan. Deferred variable N/A Mr. Jean-Louis Chaussade is not entitled to deferred variable compensation. compensation Long-term variable No amount is due XX At its meeting of January 14, 2015, the Board of Directors decided to award Mr. Jean-Louis compensation for fiscal year Chaussade long-term variable compensation for fiscal year 2015, of a maximum amount of 2015. €750,000, or 100% of his annual fixed compensation, and providing, as the case may be, for a (IFRS value in cash payment in 2018. the consolidated XX The amount to be paid to Mr. Jean-Louis Chaussade in 2018 depends on the level of achievement statements: of the following two cumulative performance conditions: €277,360) –– an internal performance condition based on the Group’s aggregate Recurring Net Income from 2015 to 2017; –– a market performance condition based on the level of Total Shareholder Return (TSR) of SUEZ ENVIRONNEMENT COMPANY compared to the average TSR of the companies comprising the DJ Eurostoxx Utilities index over the period from January 1, 2015 to December 31, 2017. Furthermore, the amount that could be paid to Mr. Jean-Louis Chaussade in 2018 depending on his level of achievement of the two performance conditions stated above could be increased or reduced by 10% based on the level of parity in the management team on December 31, 2017. XX Under the long-term variable compensation plan, Mr. Jean-Louis Chaussade is also subject to an obligation to reinvest 15% of the net amount received in 2018 in the Company’s shares, until the number of shares that he holds represents 150% of his annual fixed compensation.
26 (1) The attendance fees allocated to Mr. Gérard Mestrallet were paid directly to ENGIE until 2014. They are now paid to him because of their eligibility to the income tax applicable to physical persons.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 405 Combined Shareholders’ Meeting of April, 28 2016 26 Report of the Board of Directors
Components of compensation due or awarded for fiscal year 2015 Amounts or value Details Exceptional N/A Mr. Jean-Louis Chaussade is not entitled to exceptional compensation. compensation Stock options, N/A No allocation was made during fiscal year 2015. performance shares or any other item relating to long-term compensation Attendance fees N/A Mr. Jean-Louis Chaussade does not receive attendance fees. Value of benefits €10,373 Mr. Jean-Louis Chaussade has a Company car. in kind Severance pay N/A Mr. Jean-Louis Chaussade is not entitled to severance pay in case of termination of his office. Compensation N/A Mr. Jean-Louis Chaussade is not entitled to compensation under a non-competition clause. due under a non- competition clause Insurance and Mr. Jean-Louis Chaussade is covered by the Company’s current mandatory Group healthcare plan. healthcare plans Supplementary No payment XX Mr. Jean-Louis Chaussade was covered by the Group supplementary retirement plans applicable retirement plan to SUEZ environnement employees: a mandatory Group defined-contribution plan under Article L. 441‑1 of the French Insurance Code and a supplementary variable Group defined benefit pension plan. XX Mr. Jean-Louis Chaussade decided to liquidate all of his retirement plans as of August 1, 2014, including collective defined-contribution and defined-benefit pension plans. He did, however, decide to waive any pension payments under these supplementary plans until his current functions as Chief Executive Officer come to an end. XX The annual pension resulting from Group supplementary retirement plans to be paid to Mr. Jean- Louis Chaussade (once he is no longer Chief Executive Officer) will be €276,376.08, or 16.25% of his 2015 annual compensation (including fixed and variable compensation payable by the Company).
The shareholders are reminded that all of the information relating to the compensation of the Company’s Executive Directors appears in chapter 15 of the Company’s 2015 Reference Document.
406 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Report of the Board of Directors 26
(RESOLUTION 16) The terms and conditions of this new authorization are as Authorization to be granted to the Board of Directors to trade in follows: the Company’s shares XX Maximum purchase price per share: €25 The Shareholders’ Meeting of May 12, 2015 authorized the XX Maximum number Company, under Resolution 13, to trade its own shares for a of shares purchased: 10% of the share capital period of 18 months. XX Maximum holding: 10% of the share capital As of December 31, 2015, the Company held 1,959,749 treasury XX Maximum acquisition value: €1,356,608,650 shares, i.e. 0.36% of the share capital. Details of the use of this authorization granted to the Board of Directors in 2015 are set This new delegation has the same purposes as the delegation out in section 21.1.3 of the 2015 Reference Document. that you approved last year, and would allow the Company to trade in its own shares (including through the use of derivative As the currently valid authorization expires in November financial instruments), except in the event of a public offering on 2016, you are requested to cancel the unused portion of this the Company’s shares. The objectives of this buy-back program, authorization and renew the authorization to the Board of set in accordance with regulations, are detailed in section 21.1.3 Directors to trade the Company’s own shares for a period of of the 2015 Reference Document. 18 months.
Presentation of the resolutions to be submitted to the Extraordinary Shareholders’ Meeting
(RESOLUTIONS 17 AND 18) (RESOLUTION 19) Amendments to the bylaws Reduction of the Company’s share capital by cancellation of treasury shares held by the Company Amendment to Article 2 of the Company’s bylaws (Legal name) to change The Shareholders’ Meeting of May 12, 2015, in Resolution 17, the Company’s legal name (Resolution 17) authorized the Board of Directors to reduce the Company’s In 2015, all the Group’s trademarks were federated under a share capital by canceling treasury shares. single brand, SUEZ, positioned in the sustainable management No shares were cancelled by the Company during fiscal year of resources. 2015. This change has three goals: to simplify a multi-brand The Shareholders’ Meeting is asked to terminate the architecture to improve performance and commercial efficiency, authorization granted by the Shareholders’ Meeting of May 12, to meet the new needs of customers and to reinforce the 2015, and to grant the Board of Directors a new authorization convergence between the Group’s activities so that we can for a period of 26 months in order to reduce the Company’s address the challenges of a circular economy. share capital by canceling some or all of the shares that the Consequently, the Shareholders’ Meeting will be asked to Company acquires itself as part of a share buyback program change the Company’s legal name from SUEZ ENVIRONNEMENT (including the program proposed to this Shareholders’ Meeting COMPANY to SUEZ and to amend Article 2 of the Company’s under Resolution 16), up to a limit of 10% of its share capital bylaws accordingly. per period of 24 months.
Amendment to Article 11 of the Company’s bylaws (Chairman of the Board (RESOLUTION 20) of Directors) to change the age limit to exercise the functions of Chairman Allocation of performance shares of the Board of Directors (Resolution 18) The Shareholders’ Meeting will be asked to amend Article 11 The compensation policy implemented by the Board of Directors of the bylaws in order to change the age limit to exercise the as proposed by the Compensation Committee includes a long- functions of Chairman of the Board of Directors from 68 years term element based on the allocation of performance shares to 70 years, with the understanding that the Chairman of the or variable compensation over several years in cash. This long- Board of Director’s term will end at the close of the Ordinary term compensation is entirely subject to the achievement of Shareholders’ Meeting which will approve the financial performance conditions that are assessed over several years. statements for the previous year to be held after the date on which the Chairman reaches the age limit (in order to bring the drafting of the bylaws in line with the practices of the majority of CAC 40 and NEXT 20 companies).
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 407 Combined Shareholders’ Meeting of April, 28 2016 26 Report of the Board of Directors
The objective of long-term compensation is to associate (according to IFRS 2 rule) allocated to the Chief Executive Officer certain categories of employees or corporate officers with the during the year does not represent an excessive percentage of Company’s future growth and value creation, to retain them and his total compensation. recognize their performance. About 1,800 of them have enjoyed Furthermore, the maximum nominal amount of capital such benefits in previous plans. These categories include: increases to be carried out will be counted against the overall XX executives and senior managers ("Top Executives"), including ceiling of capital increases of €432 million, as determined by the Chief Executive Officer, members of the Management Resolution 26 of the Shareholders’ Meeting of May 12, 2015. Committee and the Executive Committee, as well as high- potential managers and experts (“A Beneficiaries”); and Duration XX employees who demonstrate outstanding performance but The Shareholders’ Meeting will be asked to approve this do not fall within the above categories (“B Beneficiaries”). delegation to the Board of Directors for a period of 26 months.
The various long-term compensation plans implemented by Vesting and holding periods the Company in application of this policy are described in The allocation of the Company’s shares to their beneficiaries section 15.1.4 of the 2015 Reference Document. will be definitive at the end of a vesting period of a minimum of The Shareholders’ Meeting of May 24, 2012 authorized the three years for all of the Performance Shares allocated. Board of Directors, in Resolution 28, to allocate, on one or The Board of Directors shall, as the case may be, determine the more occasions, bonus shares (existing or to be issued by your duration of an obligatory holding period for the Performance Company) of up to 1.5% of the share capital, to the benefit of Shares. employees as well as corporate officers of the Company and of companies or entities affiliated with it under the conditions Furthermore, in accordance with the provisions of Article set out in Article L. 225‑197‑2 of the French Commercial Code. L. 225‑197‑1 of the French Commercial Code, at each allocation Such authorization had been granted for a 38-month period. of shares, the Board of Directors shall determine the number of shares the Chief Executive Officer must retain during his As this authorization ended in July 2015, its renewal is being term, with the understanding that the policy established by proposed under the terms described below. The Law for the Board of Directors on the proposal of the Compensation Economic Growth, Activity and Equal Opportunities published Committee states that the Chief Executive Officer must retain on August 6, 2015 significantly changes the terms applicable 25% of the Performance Shares that are fully vested throughout to allocations of performance shares. Although the Company that person’s term. This applies to all plans implemented by decided in 2014 to opt for long-term compensation plans in SUEZ ENVIRONNEMENT COMPANY, until the value of the CEO’s cash, and while no decision has been taken regarding future shares represents 150% of his annual fixed compensation. plans, the Board of Directors wishes to have available the necessary authorizations for choosing the most advantageous Conditions of share allocation long-term compensation plan for both beneficiaries and the Company. All Performance Shares allocated as part of Resolution 20 shall be subject to: Allocation ceilings XX a service condition in the SUEZ Group for a minimum period The total number of existing or new shares that may be allocated of three years; (hereinafter the “Performance Shares”) under this delegation XX one or more performance conditions, evaluated over may not exceed 0.5% of the share capital as confirmed on the minimum period of three years and based on an "internal" day the Board of Directors decides to allocate the shares. The performance condition determined on the basis of a financial amount to be allocated will thus be significantly lower compared indicator audited and published by the Company that is to the preceding authorization. consistent with the forecasts and/or objectives stated by the This ceiling includes Performance Shares that may be allocated Group (which may be EBIT), and an "external" performance to the Executive Directors, which may not exceed 5% of the condition, which may be linked to the average of the changes overall number allocated. in the Total Shareholders’ Return (TSR) of the Company over three years compared to changes in the TSR of the Euro The number of performance shares outstanding at December 31, Stoxx Utilities index for the same period. 2015 was 618,033, representing 0.11% of the Company’s share capital in the event that all of the performance shares were to Performance Shares allocated to Executive Directors and be acquired. to members of the Management and Executive Committees would be subject to these two cumulative internal and external Upon any allocation of Performance Shares, the Board performance conditions. of Directors shall ensure, upon recommendation by the Compensation Committee, that the value of Performance Shares
408 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Report of the Board of Directors 26
The level of achievement of the criteria stated above would be way, the long-term compensation plan implemented for 2016 set at the time of allocation of Performance Shares, consistent stipulates the following achievement levels: with the budget and the medium-term plan of the Group. In this
Minimum Triggering threshold Target Maximum Remarks Internal condition No allocation if the Allocation of 20% Allocation of 50% if Allocation of 110% Linear calculation achievement level is if the achievement the target objective is if the achievement between milestones. less than 90% of the level is greater or achieved. level is greater or target objective. equal to 90% of the equal to 110% of the target objective. target objective. External condition No allocation if Allocation of 50% if Allocation of 100% Allocation of 110% if Linear calculation change in the TSR is change in the TSR is if change in the TSR change in the TSR is between milestones. less than 90% of the greater or equal to is greater or equal greater or equal to change in the TSR of 90% of the change in to the change in the 110% of the change the index. the TSR of the index. TSR of the index. in the TSR of the index.
The Board of Directors could furthermore stipulate an additional XX allow employees to be involved in the choices made by the performance condition for all or some beneficiaries to be based shareholders in the annual General Meetings. on a non-financial indicator related to the Group’s corporate At December 31, 2015 employee shareholders held 4.16% of and environmental responsibility, such as, for example, the the Company’s share capital. percentage of women in Group management, with the level of achievement of this condition set previously by the Board Capital increase reserved for members of Company savings plans with of Directors increasing or diminishing by 10% the number of waiver of the shareholders’ preferential subscription rights for those Performance Shares acquired by each of the beneficiaries after applying internal or, as the case may be, external performance members (Resolution 21) conditions. The Shareholders’ Meeting of May 12, 2015, under Resolution 24, delegated its authority to the Board of Directors for a 26-month Information regarding the application of performance conditions period to increase the Company’s share capital with waiver of under previous long-term compensation plans are available in the shareholders’ preferential subscription rights reserved section 15.1.4 of the 2015 Reference Document. for members of the Company savings plan(s) in place within the SUEZ Group. (RESOLUTIONS 21 TO 23) This delegation of authority was not implemented by the Board Employee shareholding of Directors in fiscal year 2015. The purpose of the delegations of authority described in The shareholders are therefore asked to renew this authorization Resolutions 21 and 22 is to renew authorizations that were for a further 26-month period. The maximum nominal amount previously granted to the Board of Directors by the Shareholders’ for capital increases that may be carried out under this Meeting of May 12, 2015, many of which will expire in November delegation remains unchanged at €40 million, or about 1.84% 2016, in connection with the development of employee of the Company’s share capital as of December 31, 2015, with shareholding at Group level, by giving the Board the option the understanding that this maximum nominal amount will to carry out additional employee shareholding transactions be counted toward the overall cap of €432 million set under whenever it considers it appropriate to do so. Resolution 23 Resolution 26 of the Shareholders’ Meeting of May 12, 2015. will authorize the Board of Directors to allocate bonus shares for employees and corporate officers who subscribe to a Group The issue price of new shares or securities granting rights to shareholding plan. the Company’s share capital will be at least 80% of the average opening price of the Company share listed on Euronext Paris The Board of Directors wishes to pursue its policy of employee for the 20 trading sessions preceding the date on which the shareholding in order to: decision is made to set the opening day of the subscription XX make employees full-fledged partners of the Group; period of the share capital increase reserved for members of a Company savings plan (the “Reference Price”). XX pay special attention to value creation as one of the meeting points between the interests of shareholders and the Pursuant to this delegation, the Board of Directors will be interests of employees; authorized to allocate, without consideration, to beneficiaries, in
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 409 Combined Shareholders’ Meeting of April, 28 2016 26 Report of the Board of Directors
addition to shares or securities granting rights to share capital The issue price of new shares would be equal to the price to be subscribed in cash, shares or securities granting rights of shares issued as part of a capital increase for employees to share capital to be issued or already issued, as a substitute who are members of a Company savings plan, pursuant to for all or part of the discount on the Reference Price and/or Resolution 21 of this Shareholders’ Meeting, and may not in as a Company contribution, on the understanding that the any case be less than 80% of the average opening price of the benefit created by this allocation shall not exceed the legal or Company share over the 20 trading days preceding the date regulatory limitations pursuant to Articles L. 3332‑18 et seq. of the decision that sets the opening date of the subscription and L. 3332‑11 et seq. of the French Labor Code. period.
Capital increase with waiver of the shareholders’ preferential subscription Authorization of the Board of Directors to allocate bonus shares to rights to categories of designated beneficiaries, as part of the employees and corporate officers who subscribe to a Group shareholding implementation of the SUEZ group’s worldwide shareholding and savings plan (Resolution 23) plans (Resolution 22) In accordance with the provisions of Articles L. 225‑129 et seq. The Shareholders’ Meeting of May 12, 2015, under Resolution 25, and L. 229‑197‑1 et seq. of the French Commercial Code, delegated its authority to your Board of Directors to increase the Resolution 23 will authorize the Board of Directors to allocate share capital, with waiver of the preferential subscription rights bonus shares to employees and/or corporate officers of the for existing shareholders, on one or more occasions, in favor of Company and/or companies and entities related directly all entities whose sole purpose is to subscribe, hold and dispose or indirectly to the Group under the provisions of Article of shares or other financial instruments of the Company, to L. 225‑197‑2 of the French Commercial Code, who subscribe facilitate access to the Company’s share capital for the Group’s to a Group employee shareholding plan, which would be international employee shareholders; this authorization is for implemented as part of a capital increase reserved for them a maximum nominal amount of €12 million over an 18-month and carried out in application of Resolutions 21 and 22 above of period. this Shareholders’ Meeting or as part of a sale of existing shares reserved for subscribers to one of the Group’s savings plans. The shareholders are asked to renew this authorization, which was used by the Board of Directors and which expires in Granting this authorization would allow the Board of Directors November 2016, for a further 18-month period. The maximum to establish bonus share allocation plans for employees and nominal amount for capital increases that may be carried out corporate officers eligible for an employee shareholding plan under this delegation remains unchanged at €12 million, or who would subscribe to such a plan. Matching contribution is about 0.55% of the Company’s share capital as of December 31, often made to persons who subscribe to employee shareholding 2015, with the proviso that this maximum nominal amount will plans, and it may be necessary that such matching contribution be counted toward the overall cap of €432 million set under takes the form of bonus share allocations, especially outside Resolution 26 of Shareholders’ Meeting of May 12, 2015. of France. The Shareholders’ Meeting is also asked to approve the waiver Conditions of allocation of shareholders’ preferential subscription rights applicable to the corresponding shares issued and to reserve subscription These shares would not be subject to performance conditions rights for the following categories of beneficiaries: because their allocation is the result of an investment by employees or corporate officers in a shareholding plan. In a) employees and corporate officers of foreign SUEZ Group contrast, the Board of Directors must make the allocation of companies linked to the Company under the conditions set shares subject to a service condition in the Group except in out in Article L. 225‑180 of the French Commercial Code and extremely special cases. Article L. 3344‑1 of the French Labor Code; b) mutual funds (UCITS) or other incorporated or unincorporated Allocation ceilings employee shareholding entities invested in Company The number of bonus shares that may be allocated without shares whose unitholders or shareholders are the persons consideration may not exceed 0.05% of the Company’s share mentioned in paragraph (a) above; capital as evaluated on the day the Board decides to allocate c) any banking establishment or subsidiary of such shares. establishment acting at the Company’s request for the It is noted that the maximum nominal amount of capital purpose of setting up a shareholding or savings plan for increases to be carried out will be counted against the overall the benefit of the persons mentioned in paragraph (a) above. ceiling of capital increases of €432 million, as determined by To this end, it is proposed that the Board of Directors be Resolution 26 of the Shareholders’ Meeting of May 12, 2015. authorized to select said entities.
410 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Report of the Board of Directors 26
Duration (RESOLUTION 24) The Shareholders’ Meeting will be asked to approve this Delegation of powers for formalities delegation to the Board of Directors for a period of 26 months. The Shareholders’ Meeting is asked to authorize any holder of Vesting and holding periods an original, copy or extract of the minutes of the Shareholders’ Meeting to carry out all formal procedures related to the The allocation of Company shares to their beneficiaries will Shareholders’ Meeting of April 28, 2016. be final after a minimum one-year vesting period for all or part of the shares allocated, and for a minimum mandatory Feel free to contact the Board of Directors for any further holding period of one year, with the understanding that for information or explanations you might need. allocated shares for which the vesting period is set at two years, the mandatory minimum holding period of shares may be eliminated, so that the said shares can be freely transferred from the date of their definitive allocation.
The Board of Directors
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 411 Combined Shareholders’ Meeting of April, 28 2016 26 Statutory Auditors’ Special Report on related party agreements and commitments
26.3 Statutory Auditors’ Special Report on related party agreements and commitments
To the Shareholders, In addition, we are required, where applicable, to inform you in In our capacity as statutory auditors of your company, we hereby accordance with article R. 225‑31 of the French commercial report on certain related party agreements and commitments. code (Code de commerce), concerning the implementation, during the year, of the agreements and commitments previously We are required to inform you, on the basis of the information approved by the General Meeting of Shareholders. provided to us, of the terms, conditions and the reasons for the company’s interest in those agreements and commitments We performed the procedures, which we considered necessary indicated to us, or that we may have identified in the performance to comply with professional guidance issued by the national of our engagement. We are not required to comment as to auditing body (Compagnie Nationale des Commissaires aux whether they are beneficial or appropriate or to ascertain the Comptes) relating to this type of engagement. These procedures existence of any such agreements and commitments. It is your consisted in verifying that the information provided to us is responsibility, in accordance with Article R. 225‑31 of the French consistent with the documentation from which it has been commercial code (Code de commerce), to evaluate the benefits extracted. resulting from these agreements and commitments prior to their approval.
Agreements and commitments submitted for approval by the General Meeting of Shareholders
..Agreements and commitments authorized during the year The main terms and conditions of this transaction, defined in the transfer agreement, are: In accordance with article L. 225‑40 of the French commercial code (Code de commerce), we have been advised of certain XX the contribution by ENGIE to your company of all the shares related party agreements and commitments, which received it holds in SUEZ IP, representing 100% of the capital of the prior authorization from your board of directors. latter; XX valuing the contribution of 100% of the capital of SUEZ IP WITH ENGIE (SHAREHOLDER WITH MORE THAN 10% OF THE VOTING RIGHTS) company M€ 30; XX remuneration for this contribution by the issuance Persons concerned of 1.757.778 new ordinary shares of your company, Mr Gérard Mestrallet, chief executive officer of ENGIE and representing approximately 0.32% of the share capital and chairman of the board of directors of your company, Ms Isabelle voting rights in your company. Kocher, executive vice-president and chief operating officer of This transfer agreement was signed on March 2, 2016 and ENGIE and director of your company. completion of the transaction is expected after the decision of the board of directors of your company based on the reports Nature and purpose issued by the auditors' on the value of the contributions and the Transfer agreement between ENGIE and your company fairness of the exchange ratio. concerning whole of the SUEZ IP’s equity, the owner of several This transaction would annul the trademark licence agreement intellectual property rights and in particular of the brand SUEZ. signed by ENGIE, described in paragrpah A.1.b of this report. Conditions Reasons for the company’s interest in this agreement The board of directors of your company authorized during its meeting on December 15, 2015, the transfer agreement Your Board has motivated this agreement as follows: between ENGIE and your company. The Board of Directors authorized the conclusion of the transfer agreement, considering that it is in the interests of your company as it will ensure, in the framework of the deployment of thr brand “SUEZ” within the group, a peaceful enjoyment of the brand around the world, and the ability to develop and defend it in case of dispute.
412 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Statutory Auditors’ Special Report on related party agreements and commitments 26
Agreements and commitments already approved by the General Meeting of Shareholders
..Agreements and commitments approved in prior years XX Partnership on sustainable development policy; XX Coordination in sales, marketing, innovation and Research A) WHOSE IMPLEMENTATION CONTINUED DURING THE YEAR and Development. In accordance with article R. 225‑30 of the French commercial This agreement, which became effective on July 22, 2013 for code (Code de commerce), we have been advised that the a period of three years, was signed by GDF SUEZ and Suez implementation of the following agreements and commitments Environnement Company on January 17, 2013. which were approved by the general meeting of shareholders in prior years continued during the year. b) Nature and purpose Amendment n° 1 to the trademark licence agreement between 1. WITH ENGIE (SHAREHOLDER WITH MORE THAN 10% OF THE VOTING RIGHTS) ENGIE and your company. Conditions Personnes concernées A trademark licence agreement had been signed between Mr Gérard Mestrallet, chief executive officer of ENGIE and Suez Environnement and SUEZ (the rights of which have been chairman of the board of directors of your company, Ms Isabelle transferred to ENGIE) on June 5, 2008. This agreement provided Kocher, executive vice-president and chief operating officer of to your company for five years (renewable by tacit consent) ENGIE and director of your company. the non-exclusive and free use of the “SUEZ” trademark in its name and in the name of some other trademarks. Your company a) Nature and purpose has also the right to grant the use of the “SUEZ” trademark to Framework agreement on the “Guidelines and strategy for other companies of the group, including your company. This industrial and commercial cooperation” between GDF Suez agreement has been renewed tacitly for a new five-year term (now ENGIE) and your company. since July 22, 2013. Conditions An amendment to this trademark licence agreement has been signed between ENGIE and your company on October 1, 2013 As part of the spin-off/distribution of all the Water and Waste subsequent to the authorization given by the board of directors activities of SUEZ, ENGIE, Groupe Bruxelles Lambert, Areva, CNP of your company on September 24, 2013. Assurances, Sofina, your company and the Caisse des Dépôts et Consignations concluded a shareholders' agreement on This amendment brings the following main modifications: June 5, 2008 (the "Pact"), which will constitute a joint control XX a better security of the trademark, as defined by article L. 233‑3 of the French commercial code (Code de commerce) and giving to ENGIE the control of Suez XX the improvement of the measures for protecting its Environnement. The initial term of the pact was five years, reputation, automatically renewable for five years, unless terminated by XX the possibility to acquire the “SUEZ” trademark if it would either party six months before the expiry date. not be used by ENGIE anymore, On December 5, 2012, after considering the other shareholders XX and the conditions for terminating the agreement in some party to the pact had expressed unanimously their decision cases where the shareholding structure of your company not to renew it, ENGIE approved the principle of not renewing would be modified. the pact. On December 12, 2012, taking into account the non-renewal c) Nature and purpose of the agreement, the board of directors of your company has Transitional agreement on external purchases. authorized the signing of a framework agreement with ENGIE to extend the cooperation between them. This framework Conditions agreement sets out the guiding principles for the industrial Subsequent to the termination of the shareholders’ agreement and commercial agreements between ENGIE and your company of your company, the evolution of the relationship between after the end of the shareholders' agreement, which took place ENGIE and your company raised the need to review the external on July 22, 2013. These principles focus on five priority areas: purchases policy for both groups that have now become independent. XX Reciprocal preference for purchases/sales; A transitional agreement on external purchases has been Development of synergies in industrial activities; XX signed on October 1, 2013 between ENGIE and your company, XX Development of joint commercial offers; which had previously been authorized by the board of directors of your company on September 24, 2013. This agreement has a two-year transitional length and expired July 31, 2015. 26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 413 Combined Shareholders’ Meeting of April, 28 2016 26 Statutory Auditors’ Special Report on related party agreements and commitments
This agreement provides for the continuation of the contracts Conditions signed by ENGIE in favor of your company and of the cooperation The board of directors of your company authorized during its of both companies to rule those contracts, which allows during July 17, 2014 meeting that a framework agreement be signed a transitional period to keep on pooling a part of their purchases at that same date between your company, AGBAR and Criteria to benefit from the synergies and volume levers towards the Caixa, which provides for the following elements: external suppliers market. XX The transfer by Criteria Caixa of its 24.26% interest in HISUSA This agreement requires that your company pays a financial in counterpart to the issuance of M€ 22 new shares of your compensation for the management of the current contracts, company and a M€ 298,574 cash amount, subsequent to the amounting to M€ 1.2 for the period between July 23, 2013 and signing of a contribution agreement and the delivery of an July 31, 2014 and to M€ 1 for the period between August 1, 2014 independent auditors’ report confirming the valuation of the and July 31, 2015. contribution and the fairness of this value with the proposed remuneration (completed on September 17, 2014); 2. WITH MR. JEAN-LOUIS CHAUSSADE, CHIEF EXECUTIVE OFFICER AND DIRECTOR The acquisition by Criteria Caixa from AGBAR of a 15% stake OF YOUR COMPANY XX in Aïgues de Barcelona, E.M. De Gestiò Del Cicle Integral de l’Aigua, S.A., which is currently 85% held by AGBAR and Nature and purpose 15%-held by the Barcelona Metropolitan Area (completed Cover for the healthcare costs. in 2014); Conditions XX The acquisition by Criteria Caixa of a 14.5%-stake in Aguas During its meeting on March 15, 2012, the board of directors, de Valencia, S.A. from your subsidiary Suez Environnement subject to the renewal of Mr. Jean-Louis Chaussade as CEO S.A.S (completed in 2014); by the board of directors held after the General Meeting of XX The cooptation by the board of directors of your company Shareholders which approved the accounts as of December 31, of a director designated by Criteria Caixa, as soon as the 2011, authorized Mr. Jean-Louis Chaussade to take out coverage latter holds 5% of your company’s share capital. During its on health costs applicable to all employees of your company. October 29, 2014 meeting, your board of directors coopted This agreement will renew the agreement previously authorized Mr Isidro Fainé Casas and appointed him as a member of by the board of directors at its meeting on October 28, 2008. the Strategy Committee; The renewal of this agreement was approved by the General XX The commitment for Criteria Caixa to increase its interest Meeting of Shareholders on May 24, 2012, after which the board in the share capital of your company up to 7%; of directors decided unanimously to renew Mr Jean- Louis XX The obligation for Criteria Caixa to keep its shares for a Chaussade as chief executive officer for the duration of his period of four years from the realization of the contribution. term of director, i.e. until the close of the General Meeting of Shareholders which will approve the financial statements for Your board of directors indicated that this agreement would the year ended December 31, 2015. allow reinforcing the long-term partnership between your company and Criteria Caixa, in Spain and in France, with Criteria The amount of the fees relating to health coverage purchased Caixa becoming the second main shareholder of your group for the benefit of Mr. Jean- Louis Chaussade is € 1,373.28 in subsequent to this operation. respect of the 2015 fiscal year. 2. WITH ENGIE (SHAREHOLDER WITH MORE THAN 10% OF THE VOTING RIGHTS) B) WHICH WERE NOT IMPLEMENTED DURING THE YEAR In addition, we have been advised that the following agreements Persons concerned and commitments which were approved by the general meeting Mr Gérard Mestrallet, chief executive officer of ENGIE and of shareholders in prior years were not implemented during chairman of the board of directors of your company, Ms Isabelle the year. Kocher, executive vice-president and chief operating officer of ENGIE and director of your company. 1. WITH CRITERIA CAIXA (EX. CRITERIA CAIXAHOLDING) Nature and purpose Persons concerned Pensions obligations sharing agreement. Mr Jean-Louis Chaussade, director of Criteria Caixa and chief Conditions executive officer and director of your company. During its meeting on February 19, 2014, the board of directors Nature and purpose of your company authorized the signing of a pensions « Master Agreement » signed between AGBAR, Criteria Caixa obligations sharing agreement between ENGIE (and some of its and your company. subsidiaries) and your company (and some of its subsidiaries), which has been signed on March 5, 2014.
414 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Statutory Auditors’ Special Report on related party agreements and commitments 26
This agreement relates to defined-benefit plans linked to the C worked within the ENGIE group until July 22, 2013 will be taken and D remuneration tranches put in place in the companies of into account for the calculation of the rights by your group and the ENGIE group and of your group. The acquisition of the rights that the periods worked within your group until July 22, 2013 linked to these plans is conditioned to the employee ending its will be taken into account for the calculation of the rights by professional career in the company and the termination of the the ENGIE group, assuming that these working periods created shareholders’ agreement of your company could possibly have rights in application of the pensions plans rules. consequences on the calculation of the pensions rights. This agreement provides for the valuation of the social liability In order to avoid that part of the working periods of the of both groups and for the terms for transferring the credit employees who careered in the ENGIE group and in your group amount of € 59,266 in favor of your group, which occurred would not be taken into account in the calculation of the plans during fiscal year 2014. described above, this agreement provides that the periods
Courbevoie and Paris-La Défense, March 22,2016 The statutory auditors French original signed by
MAZARS ERNST & YOUNG et Autres Isabelle Massa Gonzague Senlis Jean-Pierre Letartre Stéphane Pédron
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 415 Combined Shareholders’ Meeting of April, 28 2016 26 Statutory Auditors’ reports
26.4 Statutory Auditors’ reports
26.4.1 Statutory Auditors’ report on the reduction in capital
To the Shareholders, In our capacity as Statutory Auditors of your Company and in compliance with article L. 225‑209 of the French commercial code (Code de commerce) in respect of the reduction in capital by the cancellation of treasuryshares, we hereby report on our assessment of the terms and conditions of the proposed reduction in capital. Your Board of Directors requests that it be authorized, with the power to sub-delegate, for a period of twenty‑six months starting on the date of the present Shareholders’ Meeting, to proceed with the cancellation (on one or more occasions) of shares the Company was authorized to repurchase, representing an amount not exceeding 10% of its total share capital by period of twenty‑four months, in compliance with the article mentioned above. We have performed the procedures which we considered necessary in accordance with professional guidance issued by the French national auditing body (Compagnie nationale des commissaires aux comptes) for this type of engagement. The procedures consisted in verifying that the terms and conditions for the proposed reduction in capital, which should not compromise equality among the shareholders, are fair. We have no matters to report on the terms and conditions of the proposed reduction in capital.
Courbevoie and Paris-La Défense, March 22, 2016 The statutory auditors French original signed by
MAZARS ERNST & YOUNG et Autres Isabelle Massa Gonzague Senlis Jean-Pierre Letartre Stéphane Pédron
416 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Statutory Auditors’ reports 26
26.4.2 Statutory Auditors’ report on the free allocation of existing shares or shares to be issued
To the Shareholders, In our capacity as Statutory Auditors of your Company and in compliance with article L. 225‑197‑1 of the French commercial code (Code de commerce), we hereby report on the proposed free allocations of existing shares or shares to be issued for the benefit of persons, or categories of persons, to be determined by the Board of Directors amongst employees of the Company or of affiliated companies or other groupings (as provided for by article L. 225‑197‑2 of the French commercial code) and amongst corporate officers of the Company or of affiliated companies or other groupings (as provided for by article L. 225‑197‑1, paragraph II of the French commercial code), an operation upon which you are called to vote. The total number of free shares liable to be allocated under the present authorization may not exceed 0.5% of the Company’s share capital as of the date of the Board of Directors’ allocation. Free shares allocated to corporate officers may not exceed 5% of the total allocation. The maximum nominal amount of the issues of shares liable to occur as a result of the present authorization will be allocated against the maximum global nominal amount of € 432,000,000 mentioned in the twenty-sixth resolution voted at the combined shareholders’ meeting of May 12, 2015. Your Board of Directors proposes, on the basis of its report, that it be authorized for a period of twenty six months from the date of the present meeting to allocate, for free, existing shares or shares to be issued. It is the responsibility of the Board of Directors to prepare a report on the operation envisaged. Our role is to report on the information relating to the operation provided in their report. We have performed those procedures which we considered necessary to comply with the professional guidance issued by the French national auditing body (Compagnie nationale des commissaires aux comptes) for this type of engagement. These procedures consisted in verifying the compliance with the law of the bases for the operation and other information provided in the Board of Directors’ report relating to the operation. We have no matters to report on the information provided in the Board of Directors’ report relating to the proposed free allocation of shares.
Courbevoie and Paris-La Défense, March 22, 2016 The statutory auditors French original signed by
MAZARS ERNST & YOUNG et Autres Isabelle Massa Gonzague Senlis Jean-Pierre Letartre Stéphane Pédron
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 417 Combined Shareholders’ Meeting of April, 28 2016 26 Statutory Auditors’ reports
26.4.3 Statutory Auditors’ report on the issue of shares or other securities giving access to the capital reserved for members of company savings schemes
To the Shareholders, In our capacity as Statutory Auditors of your Company and in compliance with articles L. 228‑92 and L. 225‑135 et seq. of the French commercial code (Code de commerce), we hereby report on the proposal to authorize your Board of Directors to decide whether to proceed with the issue of shares or other securities giving access to the capital, with cancellation of preferential subscription rights, reserved to members of one or several company savings schemes (or to any other plan whose members would be entitled to a reserved share capital increase under equivalent conditions in accordance with articles L. 3332‑18 et seq. of the French labor code (Code du travail) which could be implemented within the group comprised of your Company and the French or foreign entities included in the scope of consolidation of its financial statements, in application of article L. 3344‑1 of the French labor code (Code du travail), an operation upon which you are called to vote. The maximum nominal amount of the increases in capital that may be achieved may not exceed € 40,000,000 and will be allocated against the global maximum nominal amount of € 432,000,000 mentioned in the twenty-sixth resolution voted at the combined shareholders’ meeting of May 12, 2015. The maximum nominal amount of the debt securities that may be issued will be allocated against the maximum global nominal amount of € 3,000,000,000 mentioned in the twenty-sixth resolution voted at the combined shareholders’ meeting of May 12, 2015. This operation is submitted for your approval in accordance with articles L. 225‑129‑6 of the French commercial code (Code de commerce) and L. 3332‑18 et seq. of the French labor code (Code du travail). Your Board of Directors proposes that, on the basis of its report, it be authorized for a period of twenty‑six months from the date of the present meeting, to decide on whether to proceed with an issue and to cancel your preferential subscription rights to the shares and marketable securities to be issued. If applicable, it shall determine the final conditions of these operations. It is the responsibility of the Board of Directors to prepare a report in accordance with articles R. 225-113 et seq. of the French commercial code (Code de commerce). Our role is to report on the fairness of the financial information taken from the accounts, on the proposed cancellation of the preferential subscription rights and on other information relating to the issue provided in this report. We have performed the procedures which we considered necessary to comply with the professional guidance issued by the French national auditing body (Compagnie nationale des commissaires aux comptes) for this type of engagement. These procedures consisted in verifying the information relating to the operation provided in the Board of Directors’ report and the methods used to determine the issue price of the new sharesor securities giving access to the capital to be issued. Subject to a subsequent examination of the conditions for any issue decided, we have no matters to report as to the methods used to determine the issue price for the new shares or securities giving access to the capital to be issued provided in the Board of Directors’ report. As the final conditions of the issue have not yet been determined, we cannot report on these conditions and, consequently, on the proposed cancellation of preferential subscription rights. In accordance with article R. 225‑116 of the French commercial code (Code de commerce), we will issue a supplementary report, if applicable, when your Board of Directors has exercised this authorization for the issue of shares and equity securities giving access to other equity securities or for the issue of securities giving access to equity securities to be issued.
Courbevoie and Paris-La Défense, March 22, 2016 The statutory auditors French original signed by
MAZARS ERNST & YOUNG et Autres Isabelle Massa Gonzague Senlis Jean-Pierre Letartre Stéphane Pédron
418 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Statutory Auditors’ reports 26
26.4.4 Statutory Auditors’ report on the issue of shares or securities giving access to the Company’s share capital reserved for a category of defined beneficiaries for the purposes of implementing international shareholding and savings schemes of the SUEZ group with cancellation of preferential subscription rights
To the Shareholders, In our capacity as Statutory Auditors of your Company and in compliance with articles L. 228.92 and L. 225‑135 et seq. of the French commercial code (Code de commerce), we hereby report on the proposal to authorize your Board of Directors to decide whether to proceed with the issue of shares or other securities giving access to the capital, with cancellation of preferential subscription rights, reserved to (a) employees and corporate officers of foreign subsidiaries of the Suez group within the scope of article L. 225‑180 of the French commercial code and article L. 3344‑1 of the French labor code (Code du travail); (b) and/or UCITS or other entities, incorporated or otherwise, engaged in employee stock ownership and invested in the Company’s shares, the members of which are amongst the persons mentioned under (a) of the present paragraph; (c) and/or any bank (or subsidiary thereof) acting at your Company’s request for the purposes of setting up a shareholding or savings scheme for the benefit of persons mentioned under (a) of the present paragraph, an operation upon which you are called to vote. The maximum nominal amount of the increases in capital that may be achieved may not exceed € 12,000,000 and will be allocated against the global maximum nominal amount of € 432,000,000 mentioned in the twenty-sixth resolution voted at the combined shareholders’ meeting of May 12, 2015. The maximum nominal amount of the debt securities that may be issued will be allocated against the maximum global nominal amount of € 3,000,000,000 mentioned in the twenty-sixth resolution voted at the combined shareholders’ meeting of May 12, 2015. Your Board of Directors proposes that, on the basis of its report, it be authorized for a period of eighteen months from the date of the present meeting to decide whether to proceed with an issue and to cancel your preferential subscription rights to the shares and securities giving access to the Company’s share capital to be issued. If applicable, it shall determine the final conditions of these operations. It is the responsibility of the Board of Directors to prepare a report in accordance with articles R. 225-113 et seq. of the French commercial code (Code de commerce). Our role is to report on the fairness of the financial information taken from the accounts, on the proposed cancellation of the preferential subscription rights and on other information relating to the issue provided in this report. We have performed the procedures which we considered necessary to comply with the professional guidance issued by the French national auditing body (Compagnie nationale des commissaires aux comptes) for this type of engagement. These procedures consisted in verifying the information relating to the operation provided in the Board of Directors’ report and the methods used to determine the issue price of the equity securities to be issued. Subject to a subsequent examination of the conditions for any issue decided, we have no matters to report as to the methods used to determine the issue price for the equity securities to be issued provided in the Board of Directors’ report. As the final conditions of the issue have not yet been determined, we cannot report on these conditions and, consequently, on the proposed cancellation of preferential subscription rights. In accordance with article R. 225‑116 of the French commercial code (Code de commerce), we will issue a supplementary report, if applicable, when your Board of Directors has exercised this authorization for the issue of shares and equity securities giving access to other equity securities or for the issue of securities giving access to equity securities to be issued.
Courbevoie and Paris-La Défense, March 22, 2016 The statutory auditors French original signed by
MAZARS ERNST & YOUNG et Autres Isabelle Massa Gonzague Senlis Jean-Pierre Letartre Stéphane Pédron
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 419 Combined Shareholders’ Meeting of April, 28 2016 26 Statutory Auditors’ reports
26.4.5 Statutory Auditors’ report on the free allocation of existing shares or shares to be issued in the framework of a company shareholding plan
To the Shareholders, In our capacity as Statutory Auditors of your Company and in compliance with article L. 225-197-1 of the French commercial code (Code de commerce), we hereby report on the proposed free allocations of existing shares or shares to be issued for the benefit of employees and/or corporate officers of the Company, or of affiliated companies or other groupings (as provided for by article L. 225‑197‑2 of the French commercial code), subscribing to a company shareholding plan implemented in particular for the purpose of a reserved share capital increase as provided for under the twenty-first and/or twenty-second resolutions of the present meeting, or of an allocation of existing shares reserved for the benefit of members of a company shareholding plan, an operation upon which you are called to vote. The total number of free shares liable to be allocated under the present authorization may not exceed 0.05% of the Company’s share capital as of the date of the Board of Directors’ allocation. The maximum nominal amount of the issues of shares liable to occur as a result of the present authorization will be allocated against the maximum global nominal amount of € 432,000,000 mentioned in the twenty-sixth resolution voted at the combined shareholders’ meeting of May 12, 2015. Your Board of Directors proposes, on the basis of its report, that it be authorized for a period of twenty six months from the date of the present meeting to allocate, for free, existing shares or shares to be issued. It is the responsibility of the Board of Directors to prepare a report on the operation envisaged. Our role is to report on the information relating to the operation provided in their report. We have performed those procedures which we considered necessary to comply with the professional guidance issued by the French national auditing body (Compagnie nationale des commissaires aux comptes) for this type of engagement. These procedures consisted in verifying the compliance with the law of the bases for the operation and other information provided in the Board of Directors’ report relating to the operation. We have no matters to report on the information provided in the Board of Directors’ report relating to the proposed free allocation of shares.
Courbevoie and Paris-La Défense, March 22, 2016 The statutory auditors French original signed by
MAZARS ERNST & YOUNG et Autres Isabelle Massa Gonzague Senlis Jean-Pierre Letartre Stéphane Pédron
420 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Text of the resolutions 26
26.5 Text of the resolutions
Resolutions to be submitted to the Ordinary Shareholders’ Meeting
RESOLUTION 1 additional paid-in capital of €4,406,788,252.90, amounts to (The purpose of this resolution is to approve the Company’s a total of €4,748,569,641.99; and financial statements for the fiscal year ended XX resolves to allocate the distributable income of December 31, 2015) €4,748,569,641.99 as follows: The Shareholders’ Meeting, acting in accordance with the Distributable income: quorum and majority requirements for Ordinary Shareholders’ Meetings, after having deliberated and reviewed the Board of Net income for fiscal year 2015 €208,401,994.50 Directors’ Management Report and the Statutory Auditors’ Retained earnings from previous year €133,379,394.59 Report on the annual financial statements for the fiscal year Additional paid-in capital €4,406,788,252.90 ended December 31, 2015, hereby approves the Company’s financial statements for that fiscal year, including the balance TOTAL DISTRIBUTABLE INCOME €4,748,569,641.99 sheet, income statement and notes as presented to it, and Proposed dividend: the transactions reflected in these financial statements and Dividend of €0.65 per share for fiscal summarized in these reports, and showing a net income of year 2015 €352,718,254.20 €208,401,994.50. by deduction from the following items: RESOLUTION 2 Net income for fiscal year 2015 €208,401,994.50 (The purpose of this resolution is to approve the consolidated Retained earnings €133,379,394.59 financial statements for the fiscal year ended Additional paid-in capital €10,936,865.11 December 31, 2015) For information, equity items after The Shareholders’ Meeting, acting in accordance with the dividend payment: quorum and majority requirements for Ordinary Shareholders’ Share capital €2,170,573,872.00 Meetings, after having deliberated and reviewed the Board of Legal reserve €217,057,387.20 Directors’ Management Report and the Statutory Auditors’ Report on the consolidated financial statements for the Other reserves €0.00 fiscal year ended December 31, 2015, hereby approves the Additional paid-in capital €4,395,851,387.79 consolidated financial statements for that fiscal year, including Retained earnings for fiscal year 2015 €0.00 the balance sheet, income statement and notes as presented to it, and the transactions reflected in these financial statements and summarized in these reports. The Shareholders’ Meeting therefore sets the dividend at €0.65 per share. RESOLUTION 3 The amount of € 352,718,254.20 is based on the number of (The purpose of this resolution is to approve the allocation SUEZ ENVIRONNEMENT COMPANY shares outstanding as at of net income for the fiscal year ended December 31, 2015 December 31, 2015, i.e. 542,643,468 shares, and the final amount and determine the dividend) paid will take into account the number of treasury shares held by the Company at the time the dividend is paid, which, in The Shareholders’ Meeting, acting in accordance with the accordance with Article L. 225‑210 of the French Commercial quorum and majority requirements for Ordinary Shareholders’ Code, do not have dividend rights. As a result, when the dividend Meetings and having deliberated and reviewed the Board of is paid, the dividend corresponding to treasury shares held by Directors’ Management Report and the Statutory Auditors’ the Company will be allocated to retained earnings. Report on the Company’s financial statements for the fiscal year ended December 31, 2015: When the dividend is paid out to individuals residing in France for tax purposes, it is done so following deductions at the source, XX notes that the net income for the fiscal year ended from its gross amount, of social security contributions at the December 31, 2015 amounts to €208,401,994.50; global rate of 15.5% and, in most cases, a 21% mandatory flat XX notes that the distributable income, consisting of net income rate deduction at source as a deposit on income tax. Since this for the fiscal year of €208,401,994.50, in addition to the deposit is not a payment in full, the gross dividend is subject previous year retained earnings of €133,379,394.59, and to progressive income tax, after application of the 40% tax
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 421 Combined Shareholders’ Meeting of April, 28 2016 26 Text of the resolutions
allowance provided in Article 158‑3-2 of the French General years expiring at the end of the Shareholders’ Meeting called Tax Code. to approve the financial statements for the fiscal year ending The ex-dividend date will be on May 10, 2016 with a payment on December 31, 2019. date on May 12, 2016. RESOLUTION 7 In accordance with Article 243 bis of the French General Tax Code, the Shareholders’ Meeting acknowledges the dividend (The purpose of this resolution is to renew the term of office amounts paid in the last three fiscal years: of Mr. Isidro Fainé Casas as Director) The Shareholders’ Meeting, acting in accordance with the Dividend paid Total dividend quorum and majority requirements for Ordinary Shareholders’ In € per share distributed Meetings, after having deliberated and reviewed the Board Fiscal year 2012 0.65 330,848,063.00 of Directors’ Report, noting that Mr. Isidro Fainé Casas’ term of office as Director expires at the end of this Shareholders’ Fiscal year 2013 0.65 330,295,529.85 Meeting, resolves to renew his mandate for a term of four (4) Fiscal year 2014 0.65 350,324,292.50 years expiring at the end of the Shareholders’ Meeting called to approve the financial statements for the fiscal year ending For individuals domiciled in France for tax purposes, these on December 31, 2019. dividends were eligible for the 40% tax allowance under Article 158‑3-2 of the French General Tax Code. RESOLUTION 8 (The purpose of this resolution is to ratify the cooptation RESOLUTION 4 of Ms. Judith Hartmann as Director) (The purpose of this resolution is to renew the term of office The Shareholders’ Meeting, acting in accordance with the of Mr. Gérard Mestrallet as Director) quorum and majority requirements for Ordinary Shareholders’ The Shareholders’ Meeting, acting in accordance with the Meetings and having deliberated and reviewed the Board of quorum and majority requirements for Ordinary Shareholders’ Directors’ Report, ratifies the cooptation of Ms. Judith Hartmann Meetings, after having deliberated and reviewed the Board of as Director, as decided by the Board of Directors’ meeting of Directors’ Report, noting that Mr. Gérard Mestrallet’s term July 28, 2015, for the remaining term of her predecessor of office as Director expires at the end of this Shareholders’ Ms. Penelope Chalmers Small, who resigned, i.e. until the close Meeting, resolves to renew his mandate for a term of four (4) of the Shareholders’ Meeting called to approve the financial years expiring at the end of the Shareholders’ Meeting called statements for the fiscal year ending on December 31, 2017. to approve the financial statements for the fiscal year ending on December 31, 2019. RESOLUTION 9 (The purpose of this resolution is to ratify the cooptation RESOLUTION 5 of Mr. Pierre Mongin as Director) (The purpose of this resolution is to renew the term of office The Shareholders’ Meeting, acting in accordance with the of Mr. Jean-Louis Chaussade as Director) quorum and majority requirements for Ordinary Shareholders’ The Shareholders’ Meeting, acting in accordance with the Meetings and having deliberated and reviewed the Board of quorum and majority requirements for Ordinary Shareholders’ Directors’ Report, ratifies the cooptation of Mr. Pierre Mongin Meetings, after having deliberated and reviewed the Board of as Director, as decided by the Board of Directors’ meeting of Directors’ Report, noting that Mr. Jean-Louis Chaussade’s term February 2, 2016, for the remaining term of his predecessor of office as Director expires at the end of this Shareholders’ Mr. Alain Chaigneau, who resigned, i.e. until the close of Meeting, resolves to renew his mandate for a term of four (4) the Shareholders’ Meeting called to approve the financial years expiring at the end of the Shareholders’ Meeting called statements for the fiscal year ending on December 31, 2017. to approve the financial statements for the fiscal year ending on December 31, 2019. RESOLUTION 10 (The purpose of this resolution is to appoint RESOLUTION 6 Ms. Miriem Bensalah Chaqroun as Director) (The purpose of this resolution is to renew the term of office The Shareholders’ Meeting, acting in accordance with the of Ms. Delphine Ernotte Cunci as Director) quorum and majority requirements for Ordinary Shareholders’ The Shareholders’ Meeting, acting in accordance with the Meetings and having deliberated and reviewed the Board of quorum and majority requirements for Ordinary Shareholders’ Directors’ Report, resolves to appoint Ms. Miriem Bensalah Meetings, after having deliberated and reviewed the Board of Chaqroun as Director for a term of four (4) years, to expire at the Directors’ Report, noting that Ms. Delphine Ernotte Cunci’s term close of the Shareholders’ Meeting called to approve the financial of office as Director expires at the end of this Shareholders’ statements for the fiscal year ending on December 31, 2019. Meeting, resolves to renew her mandate for a term of four (4)
422 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Text of the resolutions 26
RESOLUTION 11 Report, hereby issues a favorable opinion on the elements (The purpose of this resolution is to appoint Ms. Belén Garijo of compensation due or awarded for the fiscal year 2015 to as Director) Mr. Gérard Mestrallet, Chairman of the Board of Directors, as presented in section 15.1.5 of the 2015 Reference Document The Shareholders’ Meeting, acting in accordance with the of the Company. quorum and majority requirements for Ordinary Shareholders’ Meetings and having deliberated and reviewed the Board of RESOLUTION 15 Directors’ Report, resolves to appoint Ms. Belén Garijo as Director for a term of four (4) years, to expire at the close (The purpose of this resolution is to issue an opinion on the of the Shareholders’ Meeting called to approve the financial elements of compensation due or awarded for fiscal year 2015 statements for the fiscal year ending on December 31, 2019. to Mr. Jean-Louis Chaussade, Chief Executive Officer) The Shareholders’ Meeting, consulted in application of the RESOLUTION 12 recommendation of section 24.3 of the AFEP-MEDEF corporate (The purpose of this resolution is to appoint governance code as revised in November 2015 to which the Mr. Guillaume Thivolle as Director representing Company refers pursuant Article L. 225‑37 of the French employee shareholders) Commercial Code, acting in accordance with the quorum and majority requirements for Ordinary Shareholders’ Meetings, The Shareholders’ Meeting, acting in accordance with the after having deliberated and reviewed the Board of Directors’ quorum and majority requirements applicable to Ordinary Report, hereby issues a favorable opinion on the elements of Shareholders’ Meetings and having deliberated and reviewed compensation due or awarded for fiscal year 2015 to Mr. Jean- the Board of Directors’ Report, in accordance with Article 10.3 Louis Chaussade, Chief Executive Officer, as presented in of the Company’s bylaws, resolves to appoint Mr. Guillaume section 15.1.5 of the 2015 Reference Document. Thivolle as Director representing employee shareholders, for a term of four (4) years, to expire at the close of the Shareholders’ RESOLUTION 16 Meeting called to approve the financial statements for the fiscal year ending on December 31, 2019. (The purpose of this resolution is to authorize the Company to trade its own shares) RESOLUTION 13 The Shareholders’ Meeting, acting in accordance with the (The purpose of this resolution is to approve the related- quorum and majority requirements for Ordinary Shareholders’ party agreements and commitments governed by Articles Meetings, after having deliberated and reviewed the Board of L. 225‑38 et seq. of the French Commercial Code) Directors’ Report, and in compliance with the provisions of the French Commercial Code, specifically Articles L. 225‑209 et seq. The Shareholders’ Meeting, acting in accordance with the thereof, the directly applicable provisions of Commission quorum and majority requirements for Ordinary Shareholders’ Regulation (EC) No. 2273/2003 of December 22, 2003 and with Meetings, after having deliberated and reviewed the Statutory market practices permitted by the French Financial Market Auditors’ Special Report on the agreements and commitments Authority (AMF), authorizes the Board of Directors, with the governed by Articles L. 225‑38 et seq. of the French Commercial option to sub-delegate as permitted by Law, to purchase the Code: Company’s shares or cause them to be purchased in order to: XX approves the agreement authorized by the Board of Directors XX ensure the liquidity and promote the secondary market during fiscal year 2015 and referred to in that report; for the Company’ shares through an investment services XX approves the terms of said report and acknowledges that the provider acting independently under a liquidity contract in related-party agreements and commitments entered into accordance with the ethics charter recognized by the AMF; and approved by previous Shareholders’ Meetings, referred or to therein, continued during the fiscal year. XX subsequently cancel, all or a part, of the shares thus purchased under the conditions and limitations of Article RESOLUTION 14 L. 225‑209 of the French Commercial Code, as part of a (The purpose of this resolution is to issue an opinion on the capital reduction that would be resolved or authorized by elements of compensation due or awarded for fiscal year 2015 the Shareholders’ Meeting; or to Mr. Gérard Mestrallet, Chairman of the Board of Directors) XX implement the grant or transfer of shares to employees The Shareholders’ Meeting, consulted in application of the or former employees and/or corporate officers or former recommendation of section 24.3 of the AFEP-MEDEF corporate corporate officers of the Company and/or companies governance code as revised in November 2015 to which the affiliated with it, or which will be affiliated with it, in France Company refers, pursuant to Article L. 225‑37 of the French and/or outside of France, as provided by Article L. 225‑180 Commercial Code, acting in accordance with the quorum and of the French Commercial Code, particularly in the context majority requirements for Ordinary Shareholders’ Meetings, of any stock option plans, any bonus shares plans, any after having deliberated and reviewed the Board of Directors’ employee shareholding plan, or any form of compensation 26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 423 Combined Shareholders’ Meeting of April, 28 2016 26 Text of the resolutions
practiced by the Company, specifically under the relevant at €1,356,608,650, calculated on the basis of the Company’s provisions of the French Commercial Code and/or French share capital as of December 31, 2015, consisting of Labor Code, or French or foreign laws and regulations, and 542,643,468 shares. for any hedges set up for such transactions and related Shares may be purchased, sold, exchanged or transferred on commitments of the Company, under the conditions one or more occasions by any means, directly or indirectly, approved by the market authorities and at the times that on a regulated market, through a multilateral trading system, the Board of Directors or the person acting on behalf of the through a systematic internalizer or over-the-counter, including Board of Directors deems appropriate; or through the use of a third party acting on behalf of the Company XX hold and subsequently deliver shares (for exchange, under the conditions set forth in Article L. 225‑206-II of the payment or otherwise) in connection with external growth French Commercial Code, by a public offer or transactions of transactions, provided that the maximum number of shares blocks of shares (which may cover the entire program). Such acquired for holding and subsequent delivering for purposes means include the use of any financial derivatives, traded of payment or exchange in connection with a merger, spin- on a regulated market, using a multilateral trading system, off or contribution may not exceed 5% of the share capital; or through a systematic internalizer or over-the-counter, and the implementation of optional operations including the purchase XX hedge securities that confer entitlement to Company’s shares; said shares to be delivered at the time of exercise and sale of calls and put options, excluding the sale of put of the rights attached to securities conferring entitlement options under the conditions provided for by market authorities. to the allocation of Company’s shares through redemption, Such transactions may be carried out at any time in accordance conversion, exchange, presentation of a warrant or by any with current legal provisions. However, if a third party has filed other means of allocation of Company shares; or a public tender offer for the Company’s shares, the Board of Directors may not, during the offer period, implement this XX pursue, more generally, any other goal that is or becomes resolution without prior authorization of the Shareholders’ authorized by Law or regulations, or engage in any market Meeting. practice that is or becomes approved by financial market regulators, provided that the Company’s shareholders are The Shareholders’ Meeting grants the Board of Directors the formally notified thereof via a press release. power, including the power to sub-delegate as permitted by Law and the Company’s bylaws, in the event of a change in the Share purchase volumes are subject to the following limits: nominal value of the share, to increase the share capital through XX the number of shares acquired during the term of the the incorporation of reserves, bonus shares allocation, stock share buyback program must not exceed 10% of the splits or reverse splits, distribution of reserves or any other shares of the Company’s share capital, at any moment, assets, share capital amortization or any other transactions on the understanding that this percentage applies to an involving shareholders’ equity, to adjust the aforementioned adjusted share capital according to transactions impacting maximum purchase price to take into account the impact of it and performed after this Shareholders’ Meeting and, with such transactions on the share price. respect to the special case of shares acquired under the The Shareholders’ Meeting grants all powers to the Board of liquidity contract, the number of shares used to calculate the Directors, including the option to sub-delegate as permitted by 10% limit corresponds to the number of shares purchased, Law and the Company’s bylaws, to implement this authorization, less the number of shares resold during the term of the in particular to determine the timeliness of launching a share authorization; buyback program and to specify, if necessary, the terms and XX the number of shares that the Company holds at any time procedures for carrying out the share buyback program, must not exceed 10% of the shares of the Company’s share and specifically to submit any market order, conclude any capital on the relevant date, on the understanding that this agreements in view, particularly, for keeping records of percentage applies to an adjusted share capital according to purchases and sales of shares, undertake any formalities and transactions impacting it performed after this Shareholders’ make statements to any bodies, including the AMF, and, in Meeting. general, to do whatever is necessary in this matter. The Shareholders’ Meeting resolves that the maximum The Shareholders’ Meeting also grants all powers to the Board purchase price per share is fixed at €25 (or the equivalent value of Directors, including the option to sub-delegate as permitted of this amount on the date of acquisition in any other currency), by law and the Company’s bylaws and within the legal and excluding acquisition costs. regulatory limits, to make any permitted reallocations of the purchased shares in accordance with one or more objectives of Consequently, for guidance and pursuant to Article R. 225‑151 the share buyback program, or to sell them, on the stock market of the French Commercial Code, the Shareholders’ Meeting or over-the-counter, it being understood that such allocations sets the maximum number of shares that may be purchased and sales may involve shares repurchased under previous at 54,264,346 and the maximum overall amount allocated authorizations. to the above-mentioned authorized share buyback program
424 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Text of the resolutions 26
This authorization is granted for a term of eighteen (18) months The Shareholders’ Meeting notes that, in accordance with from the date of this meeting. It supersedes, as of today’s date, applicable laws and regulations, if the Board of Directors uses all previous authorizations having the same purpose, and this delegation, it must report to the next Ordinary Shareholders’ therefore any unused portion of the previous authorization Meeting on how it has used the authorizations granted under granted to the Board of Directors under Resolution 13 of the this resolution. Combined Ordinary and Extraordinary Shareholders’ Meeting of May 12, 2015.
Resolutions to be submitted to the Extraordinary Shareholders’ Meeting
RESOLUTION 17 RESOLUTION 19 (The purpose of this resolution is to amend Article 2 of the (The purpose of this resolution is to authorize the Board Company’s bylaws in order to change the Company’s legal name) of Directors to reduce the share capital through the cancellation of treasury shares held by the Company) The Shareholders’ Meeting, acting in accordance with the quorum and majority requirements for Extraordinary Shareholders’ The Shareholders’ Meeting, acting in accordance with Meetings, after having deliberated and reviewed the Board the quorum and majority requirements for Extraordinary of Directors’ Report, resolves to change the Company’s legal Shareholders’ Meetings, after having deliberated and reviewed name and to adopt "SUEZ" as its new legal name. Consequently, the Board of Directors’ Report and the Statutory Auditors’ Article 2 of the Company’s bylaws shall hereafter be read as Special Report, in accordance with Articles L. 225‑209 et seq. follows: of the French Commercial Code: "Article 2 – Legal name 1. authorizes the Board of Directors to reduce the Company’s The Company’s legal name is SUEZ" share capital, on one or more occasions, in the proportions and at the times it considers appropriate, by cancelling all or some of the shares acquired by the Company RESOLUTION 18 itself, in accordance with Resolution 16 submitted to this (The purpose of this resolution is to amend Article 11 Shareholders’ Meeting, or as part of a previous share buyback of the Company’s bylaws in order to change the age limit to program authorization granted previously or subsequently exercise the functions of Chairman of the Board of Directors) by a Shareholders’ Meeting, up to a maximum of 10% of the The Shareholders’ Meeting, acting in accordance with Company’s share capital (as may be adjusted to take into the quorum and majority requirements for Extraordinary account any transactions on the Company’s share capital Shareholders’ Meetings and having deliberated and reviewed after the date of this Shareholders’ Meeting) per 24-month the Board of Directors’ Report, resolves, in accordance with period, on the understanding that this percentage will be Article L. 225‑48 of the French Commercial Code, to raise the calculated on the date of the Board of Directors’ resolution age limit to exercise the functions of Chairman of the Board of to reduce the share capital; Directors from 68 to 70 years of age. The second paragraph of 2. grants full powers to the Board of Directors, including the Article 11 (Chairman of the Board of Directors) of the bylaws is option to sub-delegate under conditions provided by Law therefore amended as follows: and the Company’s bylaws, to: –– decide on the share capital reduction(s), Current drafting New drafting –– decide the final amount, specify the terms and conditions “Regardless of the period of time “Regardless of the period of time thereof, and record its completion, for which they were granted, for which they were granted, the the Chairman’s duties end no Chairman’s duties end no later –– allocate the difference between the book value of the later than the conclusion of the than the end of the Ordinary canceled shares and their nominal amount to all items Ordinary Shareholders’ Meeting Shareholders’ Meeting which corresponding to reserves and premiums, which resolves on the accounts approves the accounts for the for the past year and which is past year and which is held after –– amend the bylaws accordingly, held in the year during which the the date on which the Chairman –– carry out all publications and formalities, and Chairman reaches the age of 68.” reaches the age of 70.” –– in general, do whatever is necessary in this matter;
The rest of Article 11 remains unchanged.
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 425 Combined Shareholders’ Meeting of April, 28 2016 26 Text of the resolutions
3. resolves that this resolution, as of today’s date, shall 5. resolves that, in the event of the incapacity of a beneficiary supersede all previous authorizations having the same corresponding to the classification under Category 2 or 3 purpose, and therefore any unused portion of the previous as set forth in Article L. 341‑4 of the French Social Security authorization granted to the Board of Directors by the Code, the final allocation of shares shall occur immediately, Combined Shareholders’ Meeting of May 12, 2015, under and in the event of the death of the beneficiary, his/her heirs Resolution 17. may request the final allocation of shares within six months This resolution is granted for a term of twenty-six (26) months of the said death; as of the date of this Shareholders’ Meeting. 6. resolves that the existing shares that may be allocated pursuant to this resolution must be acquired by the RESOLUTION 20 Company, either pursuant to Article L. 225‑208 of the French (The purpose of this resolution is to authorize the Board Commercial Code or, if necessary, as part of a share buyback of Directors to grant performance shares) program pursuant to the provisions of Article L. 225‑209 of the French Commercial Code; The Shareholders’ Meeting, acting in accordance with 7. acknowledges that, in the event of an allocation of new the quorum and majority requirements for Extraordinary bonus shares, this authorization will imply, as and when Shareholders’ Meetings, after having deliberated and reviewed the allocation of the said shares is finalized, a share the Board of Directors’ Report and the Statutory Auditors’ capital increase by incorporating reserves, profits or share Special Report: premiums for the beneficiaries of the said shares and the 1. authorizes the Board of Directors, pursuant to the provisions corresponding waiving of preferential subscription rights of Articles L. 225‑197‑1 to L. 225‑197‑6 of the French applicable to the said shares by shareholders in favor of Commercial Code, to grant, on one or more occasions, the beneficiaries of the said shares; existing shares or shares to be issued by the Company in 8. grants the Board of Directors all powers within the favor of beneficiaries or categories of beneficiaries it will limitations set forth above to implement this delegation, with identify among employees of the Company or of companies the power to sub-delegate as permitted by law, to implement or entities affiliated with it under the conditions set forth this authorization, and specifically to: in Article L. 225‑197‑2 of the said Code and the corporate officers of the Company or of companies or entities affiliated –– determine if the bonus shares are shares to be issued or with it and that satisfy the conditions set forth in Article existing shares, L. 225‑197‑1-II of the said Code, under the conditions set –– determine the number of shares allocated to each forth below; beneficiary it will have identified, 2. resolves that such authorization specifically excludes the –– set the conditions and, if necessary, the criteria for issuance of preferred shares and securities conferring allocating shares, specifically the minimum vesting period entitlement to preferred shares; and the minimum holding period, 3. resolves that the total number of bonus shares that may be –– increase, if necessary, the share capital by incorporating allocated under this authorization must not exceed 0.5% of reserves, profits or issue premiums so as to undertake the Company’s share capital as determined on the day that the issuance of bonus shares, the allocation decision is made by the Board of Directors, –– allocate shares to the persons mentioned in paragraph 4 with the understanding that the allocation of bonus shares of Article L. 225‑185 of the French Commercial Code, to corporate officers must not exceed 5% of the overall subject to the conditions in Article L. 225‑186‑1 of the allocated amount, and that the maximum nominal amount said Code and, with regard to the shares thus allocated, of the share capital increases that may be carried out under either (i) resolve that the bonus shares granted shall not this authorization will count toward the overall nominal cap be sold by the interested parties before they resign from of capital increases of €432 million set forth in Resolution 26 their duties, or (ii) set the quantity of bonus shares granted of the Shareholders’ Meeting of May 12, 2015; that they must hold as registered shares until they resign 4. resolves that the allocation of shares of the Company to from their duties, their beneficiaries will be final after a vesting period of a –– as the case may be, provide for the option to postpone minimum of three years and must be subject to the Group’s the dates of the final allocation of shares and, for the performance criteria that will be assessed over the entire same period, the mandatory term for holding the said vesting period and subject to the beneficiaries remaining shares (such that the minimum holding period remains within the Group according to the terms and conditions unchanged), established by the Board of Directors. The mandatory holding period for beneficiaries shall be set by the Board of Directors, as appropriate;
426 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Text of the resolutions 26
–– as the case may be, adjust the number of bonus shares one or more occasions, in the proportions and at the times allocated needed to preserve the rights of beneficiaries, it considers appropriate, by issuing shares or securities based on potential operations on the Company’s share conferring right to the Company’s share capital, reserved for capital under the circumstances provided for in Article members of one or more Company savings plans (or another L. 225‑181 of the French Commercial Code. It is specified plan which would provide for the possibility to reserve for that the shares allocated pursuant to such adjustments its members a capital increase under equivalent conditions will be deemed to have been allocated on the same day under Articles L. 3332‑18 et seq. of the French Labor Code), as shares allocated initially, which would be put in place within a group consisting of the Company and other French or foreign companies within the –– determine the dates and terms of the allocations, and generally undertake all necessary provisions and enter scope of consolidation of the financial statements under into any agreements to bring the allocations considered Article L. 3344‑1 of the French Labor Code; to their proper conclusion. 2. resolves that such authorization specifically excludes the The Board of Directors may also implement any other new issuance of preferred shares and securities conferring legal provisions that may arise during the period of validity entitlement to preferred shares; of this authorization, the application of which does not 3. resolves that the total nominal amount of capital increases require an express decision of the Shareholders’ Meeting; that may be carried out pursuant to this delegation may not 9. resolves that the Company can adjust the number of bonus exceed the nominal cap of €40 million (i.e. at December 31, shares allocated, if necessary, to preserve the rights of the 2015, about 1.84% of the share capital) or the counter value beneficiaries, based on potential transactions impacting of this amount, with the proviso that this maximum nominal the Company’s share capital, particularly in the event of a amount will count toward the overall cap of €432 million set change in the nominal value of a share, a capital increase by under Resolution 26 of the Shareholders’ Meeting of May 12, incorporation of reserves, an allocation of bonus shares, a 2015; stock-split or a reverse-stock-split, a distribution of reserves 4. resolves that the maximum nominal amount of securities or any other assets, amortization of capital or any other representing debt or similar securities conferring transaction impacting share capital. It is specified that the entitlement to the Company’s share capital that may be shares allocated pursuant to such adjustments will be issued under this delegation will count toward the €3 billion deemed to have been allocated on the same day as shares overall nominal cap set forth under Resolution 26 of the allocated initially. Shareholders’ Meeting of May 12, 2015; This delegation is granted for a term of twenty-six (26) months 5. notes that this delegation automatically includes, for the from the date of this meeting. benefit of the holders of the securities issued under this resolution and conferring entitlement to the Company’s RESOLUTION 21 share capital, the waiver by shareholders of their preferential (The purpose of this resolution is to delegate the authority subscription rights applicable to the shares to which these to the Board of Directors to increase the Company’s share capital securities will confer rights immediately or in the future; by issuing shares or securities conferring right to the share 6. resolves that the issue price of new shares or securities capital, reserved for members of Company savings plans, with conferring right to the Company’s share capital will be waiver of the preferential subscription rights, in order to benefit determined under the conditions set forth in Article such members) L. 3332‑18 et seq. of the French Labor Code and will be equal to at least 80% of the average opening price of the The Shareholders’ Meeting, acting in accordance with Company’s share listed on Euronext Paris for the 20 trading the quorum and majority requirements for Extraordinary sessions preceding the date on which the decision is made Shareholders’ Meetings, after having deliberated and reviewed to set the opening day of the subscription period of the the Board of Directors’ Report and the Statutory Auditors’ share capital increase reserved for members of a corporate Special Report, in accordance (i) with the provisions of savings plan of the SUEZ group (the “Reference Price”); Articles L. 225‑129, L. 225‑129‑2 to L. 225‑129‑6, L. 225‑138, however, the Shareholders’ Meeting expressly authorizes L. 225‑138‑1, L. 228‑91 and L. 228‑92 of the French Commercial the Board of Directors, if it considers it appropriate, to reduce Code, and (ii) with those of Articles L. 3332‑18 et seq. of the or eliminate the aforementioned discount, within the legal French Labor Code: and regulatory limitations, in order to comply with locally 1. delegates its authority to the Board of Directors, including applicable legal, accounting, tax and corporate systems; the power to sub-delegate under conditions provided by Law and the Company’s bylaws, to increase the share capital on
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 427 Combined Shareholders’ Meeting of April, 28 2016 26 Text of the resolutions
7. authorizes the Board of Directors to allocate to the above- –– in the event of a free allocation of shares or securities mentioned beneficiaries, without consideration, in addition conferring entitlement to the share capital, to set the to shares or securities conferring right to the Company’s nature, characteristics and number of shares and share capital to be subscribed in cash, shares or securities securities conferring entitlement to the share capital to conferring right to share capital to be issued or already be issued, the number to be allocated to each beneficiary, issued, as a substitution for all or part of the discount based and to decide the dates, deadlines, terms and conditions on the Reference Price and/or as a Company contribution, for allocating these shares or securities conferring with the understanding that the overall benefit created entitlement to the share capital within the legal and by this allocation shall not exceed the legal or regulatory regulatory limitations in force, specifically, to choose limitations pursuant to Articles L. 3332‑18 et seq. and either to substitute all or a part of the allocation of these L. 3332‑11 et seq. of the French Labor Code; shares or securities conferring entitlement to the share 8. authorizes the Board of Directors, under the conditions of capital with the aforementioned Reference Price-based this authorization, to sell shares to members of a Company discounts, or count towards the total amount of the savings plan as provided in Article L. 3332‑24 of the French Company contribution the counter value of those shares, Labor Code, with the proviso that the shares sold at a or combine these two options, discount in favor of the members of one or more Company –– in the event that new bonus shares are issued, to allocate savings plans referred to in this resolution will be counted to the reserves, if applicable, profits or issue premiums against the cap mentioned in paragraph 3 above, at the the amounts necessary to pay out the said shares, nominal value of the shares thus sold; –– acknowledge the completion of the share capital increase 9. resolves that the Board of Directors will have all powers to up to the amount of the subscribed shares (following any implement this delegation, with the power to sub-delegate reduction in the event of oversubscription), as permitted by Law, within to the limitations and the –– deduct, if applicable, the capital increase expenses from conditions specified above, specifically to: the corresponding premiums collected and withhold –– decide, pursuant to Law, the list of companies for which the necessary sums from this amount to bring the legal members of one or more corporate savings plans may reserve to 10% of the new share capital resulting from subscribe for shares or securities conferring entitlement these capital increases, to share capital thus issued and may benefit from freely –– enter into agreements, carry out transactions directly or allocated shares or securities conferring entitlement to indirectly through an agent, including formalities arising share capital, from the capital increases and amending the bylaws –– resolve that the subscriptions may be made directly accordingly and, generally to enter into any agreement by the beneficiaries who are members of an employee with the specific purpose of ensuring the successful savings plan, or through a Company mutual fund or other conclusion of intended issues, to handle all measures, structures or companies acceptable under applicable decisions and formalities necessary for the issue, listing legal or regulatory provisions, and financial servicing of the shares issued by virtue of this delegation, and to permit the exercise of the rights –– determine the conditions, including seniority, that beneficiaries of capital increases must meet, attached thereto or arising from the capital increase carried out; –– set the opening and closing dates of the subscription period, 10. resolves that this delegation supersedes, as of today, all previous delegations having the same purpose, and –– determine the maximum number of shares or securities therefore any unused portion of the previous delegation giving access to capital that may be subscribed by each granted to the Board of Directors by the Combined Ordinary beneficiary, and Extraordinary Shareholders’ Meeting of May 12, 2015 –– set the amounts of issues that will be performed by in its Resolution 24; virtue of this delegation of authority, and to decide in 11. acknowledges that, in accordance with applicable laws and particular the issue price, dates, deadlines, terms and regulations, if the Board of Directors uses this delegation conditions for subscribing, paying, discharging, and it must report to the next Ordinary Shareholders’ Meeting holding the securities (even retroactively), the reduction on how it has used the authorizations granted under this rules applicable in cases of oversubscription as well as resolution. the other terms and conditions of issuance, within the legal and regulatory limitations in force, This delegation is granted for a term of twenty-six (26) months from the date of this meeting.
428 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Text of the resolutions 26
RESOLUTION 22 7. resolves to waive shareholders’ preferential subscription (The purpose of this resolution is to delegate authority rights to any shares issued pursuant to this resolution and to the Board of Directors to increase the Company’s share to reserve the right to subscribe them to the category of capital, without preferential subscription rights for existing beneficiaries that meet the following criteria: shareholders in order to benefit the category or categories of (a) employees and corporate officers of foreign SUEZ Group designated beneficiaries as part of the implementation of SUEZ companies linked to the Company under the conditions group worldwide employee shareholding and savings plans) set out in Article L. 225‑180 of the French Commercial Code and Article L. 3344‑1 of the French Labor Code, The Shareholders’ Meeting, acting in accordance with in order to allow them to subscribe for the Company’s the quorum and majority requirements for Extraordinary share capital on economically equivalent terms to those Shareholders’ Meetings, after having deliberated and reviewed offered to members of one or more corporate savings the Board of Directors’ Report and the Statutory Auditors’ plans as part of a capital increase undertaken pursuant Special Report, in accordance with the provisions of Articles to Resolution 21 of this meeting, and/or L. 225‑129, L. 225‑129‑2 to L. 225‑129‑6 and L. 225‑138 of the French Commercial Code: (b) mutual funds (UCITS) or other incorporated or unincorporated entities of employee shareholding 1. delegates its authority to the Board of Directors to increase invested in Company’s shares whose unitholders or the Company’s share capital on one or more occasions, in shareholders consist of persons mentioned in the above the proportions and at the times it considers appropriate, by subparagraph (a), and/or issuing shares or securities giving access to the Company’s share capital reserved for the class of beneficiaries defined (c) any banking establishment or subsidiary of such in paragraph 7 below; establishment acting at the Company’s request for the purpose of setting up a shareholding or savings 2. resolves that such authorization specifically excludes the plan for the benefit of persons mentioned in the above issuance of preferred shares and securities conferring subparagraph (a), provided that the authorized person’s entitlement to preferred shares; subscription in accordance with this resolution is 3. resolves that the total nominal amount of capital increases necessary or beneficial in allowing the above-mentioned that may be carried out pursuant to this delegation may not employees or corporate officers to benefit from employee exceed the nominal cap of €12 million (i.e. at December 31, shareholding or savings plans with economic benefits 2015, about 0.55% of the share capital) or the counter value equivalent or similar to the plans enjoyed by other SUEZ of this amount, with the proviso that this maximum nominal Group employees; amount will count toward the overall cap of €432 million set 8. resolves that the issue price of the shares or securities under Resolution 26 of the Shareholders’ Meeting of May 12, conferring entitlement to the Company’s share capital will be 2015; set by the Board of Directors and may be (a) under the same 4. resolves that the maximum nominal amount of securities conditions as those set out in Articles L. 3332‑18 et seq. of representing debt or similar securities conferring the French Labor Code, the subscription price being equal to entitlement to the Company’s share capital that may be at least 80% of the average opening price of the Company’s issued under this delegation will count toward the €3 billion share listed on Euronext Paris over the 20 trading days overall nominal cap set forth under Resolution 26 of the preceding the day that the decision is made to set the Shareholders’ Meeting of May 12, 2015; opening price for subscriptions under this resolution, or 5. notes that this delegation automatically includes, for the (b) equal to the price of the shares issued as part of the benefit of the holders of the securities issued under this capital increase benefiting the employee members of a resolution and conferring entitlement to the Company’s Company savings plan, pursuant to Resolution 21 of this share capital, the waiver by shareholders of their preferential Meeting, and will be at least equal to the Reference Price subscription rights applicable to the shares to which these (as this term is defined in Resolution 21 of this Meeting). securities will confer rights immediately or in the future; 6. resolves that the amount of each employee’s subscriptions may not exceed the limits that will be provided by the Board of Directors pursuant to this delegation, and, in the event of excessive employee subscriptions, these will be reduced pursuant to the rules defined by the Board of Directors;
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 429 Combined Shareholders’ Meeting of April, 28 2016 26 Text of the resolutions
However, the Shareholders’ Meeting expressly authorizes –– note the completion of the capital increases up to the the Board of Directors, if it considers it appropriate, to reduce amount of the subscribed shares or securities conferring or eliminate the aforementioned discount, particularly to entitlement to the Company’s share capital (after any take into account locally applicable legal, accounting, tax reduction in the event of oversubscription), and social provisions. For the specific requirements of an –– if necessary, allocate the fees for the share capital offer made to the beneficiaries mentioned in 7(a) above increases to the resulting premiums and withhold the who are residents in the United Kingdom, as part of a share necessary sums from this amount to bring the legal incentive plan, the Board of Directors may also resolve that reserve to one-tenth of the new share capital resulting the subscription price of new shares or securities conferring from these share capital increases, and entitlement to the Company’s share capital to be issued as part of this plan shall be equal to the lower of (i) the Euronext –– enter into agreements, conduct transactions directly Paris opening share price of the reference period used to set or indirectly through an agent, including carrying out the share price for the plan, or (ii) the closing share price of the formalities arising from the capital increases and the same reference period, the start and end dates of this amending the bylaws accordingly and, generally to enter reference period being determined under local regulations. into any agreement with the specific purpose of ensuring This price will include no discount on the reference share the successful conclusion of intended issues, to handle price; all measures, decisions and formalities necessary for the issue, and conduct listing and financial servicing of the 9. resolves that the Board of Directors may, with the power shares issued by virtue of this delegation, and to permit to sub-delegate as permitted by Law, determine the the exercise of the rights attached thereto or arising from subscription options that will be offered to employees in each the capital increase carried out; relevant country, in accordance with local legal restrictions, and may choose the countries from among those in which 12. resolves that this delegation supersedes, as of today, any the Group has subsidiaries within the Company’s financial previous delegation having the same purpose, and therefore consolidated scope pursuant to Article L. 3344‑1 of the any unused portion of the previous authorization granted to French Labor Code, as well as the subsidiaries whose the Board of Directors under Resolution 25 of the Combined employees will be eligible to participate in the transaction; Ordinary and Extraordinary Shareholders’ Meeting of May 12, 2015; 10. resolves that the amount of the share capital increase or of each share capital increase will be limited, if necessary, to 13. acknowledges that, in accordance with applicable laws and the amount of each subscription received by the Company, regulations, if the Board of Directors uses this delegation while adhering to applicable legal and regulatory provisions; it must report to the next Ordinary Shareholders’ Meeting on how it has used the authorizations granted under this 11. resolves that the Board of Directors will have all powers to resolution. implement this delegation, with the power to sub-delegate as permitted by law, within the limitations and the conditions This delegation is granted for a term of eighteen (18) months specified above, specifically to: from the date of this meeting. –– decide upon the list of beneficiaries, without shareholders’ preferential subscription rights, within the category RESOLUTION 23 defined above, as well as the number of shares or (The purpose of this resolution is to authorize the Board securities conferring entitlement to the Company’s share of Directors to allocate bonus shares as part of an employee capital to be subscribed for by the beneficiaries or by shareholding plan) each beneficiary, The Shareholders’ Meeting, acting in accordance with –– set the opening and closing dates of the subscription the quorum and majority requirements for Extraordinary period, Shareholders’ Meetings, after having deliberated and reviewed the Board of Directors’ Report and the Statutory Auditors’ –– determine the maximum number of shares or securities conferring entitlement to the share capital that may be Special Report: subscribed by each beneficiary, 1. authorizes the Board of Directors, pursuant to the provisions of Articles L. 225‑197‑1 to L. 225‑197‑6 of the French –– set the number of shares that will be issued under this delegation of authority, specifically including the Commercial Code, to undertake, on one or more occasions, issue price, dates, deadlines, terms and conditions for free allocation of existing shares or shares to be issued subscription, payment, delivery, and entitlement (including by the Company in favor of employees and/or corporate any retroactive provisions), the reduction rules applicable officers of the Company and/or of companies or entities in the event of oversubscription, as well as the other terms affiliated with it directly or indirectly under the conditions and conditions of issuance, within the legal and regulatory set forth in Article L. 225‑197‑2 of the French Commercial limits in force, Code, who subscribe to a Group shareholding plan, which
430 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Combined Shareholders’ Meeting of April, 28 2016 Text of the resolutions 26
would be implemented under a capital increase reserved 8. grants the Board of Directors all powers within the for them and carried out in application of Resolutions 21 limitations set forth above to implement this delegation, with and/or 22 of this Shareholders’ Meeting or as part of a sale the power to sub-delegate as permitted by law, to implement of existing shares reserved for subscribers to one of the this authorization, and specifically to: Group’s savings plans; –– determine if the bonus shares are shares to be issued or 2. resolves that such authorization specifically excludes the existing shares, issuance of preferred shares and securities conferring –– determine the number of shares allocated to each entitlement to preferred shares; beneficiary it will have identified, 3. resolves that the total number of bonus shares that may be –– set the conditions and, if necessary, the criteria for allocated under this authorization must not exceed 0.05% of allocating shares, specifically the minimum vesting period the Company’s share capital as determined on the day that and the minimum holding period, the allocation decision is made by the Board of Directors, and that the maximum nominal amount of the share capital –– increase, as the case may be, the share capital by increases that may be carried out under this authorization incorporating reserves, profits or issue premiums so as will count toward the overall nominal cap of €432 million to undertake the issuance of bonus shares, set forth in Resolution 26 of the Shareholders’ Meeting of –– allocate shares to the persons mentioned in paragraph 4 May 12, 2015; of Article L. 225‑185 of the French Commercial Code, 4. resolves that the allocation of shares of the Company to subject to the conditions in Article L. 225‑186‑1 of the their beneficiaries will be final after a vesting period of a said Code and, with regard to the shares thus allocated, minimum of one year and must be subject to beneficiaries either (i) resolve that the bonus shares granted shall not remaining within the Group according to the terms and be sold by the interested parties before they resign from conditions established by the Board of Directors. The their duties, or (ii) set the quantity of bonus shares granted mandatory holding period for which the beneficiaries must that they must hold as registered shares until they resign hold the allocated shares will be set at a minimum of one from their duties, year, starting from the date the shares are fully vested. –– as the case may be, provide for the option to postpone For allocated shares for which the vesting period is set at the dates of the final allocation of shares and, for the two years, the mandatory minimum holding period may be same period, the mandatory term for holding the said waived to allow the shares to be freely tradable from the shares (such that the minimum holding period remains date they are fully vested; unchanged), 5. resolves that, in the event of the incapacity of a beneficiary –– as the case may be, adjust the number of allocated bonus corresponding to the classification under Category 2 or 3 shares needed to preserve the rights of beneficiaries, as set forth in Article L. 341‑4 of the French Social Security based on potential operations on the Company’s share Code, the final allocation of shares shall occur immediately, capital under the circumstances provided for in Article and in the event of the death of the beneficiary, his/her heirs L. 225‑181 of the French Commercial Code. It is specified may request the final allocation of shares within six months that the shares allocated pursuant to such adjustments of said death; will be deemed to have been allocated on the same day 6. resolves that the existing shares that may be allocated as shares allocated initially, pursuant to this resolution must be acquired by the –– determine the dates and terms of the allocations, and Company, either pursuant to Article L. 225‑208 of the French generally undertake all necessary provisions and enter Commercial Code or, as the case may be, as part of a share into any agreements to bring the allocations considered buyback program pursuant to the provisions of Article to their proper conclusion. L. 225‑209 of the French Commercial Code; The Board of Directors may also implement any other new 7. acknowledges that, in the event of an allocation of new legal provisions that may arise during the period of validity bonus shares, this authorization will imply, as and when of this authorization, the application of which does not the allocation of the said shares is finalized, a share require an express decision of the Shareholders’ Meeting; capital increase by incorporating reserves, profits or share premiums for the beneficiaries of the said shares and the corresponding waiving of preferential subscription rights on the said shares by shareholders in favor of the beneficiaries of the said shares;
26
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 431 Combined Shareholders’ Meeting of April, 28 2016 26 Text of the resolutions
9. resolves that the Company can adjust the number of bonus This delegation is granted for a term of twenty-six (26) months shares allocated, if necessary, to preserve the rights of the from the date of this meeting. beneficiaries, based on potential transactions impacting the Company’s share capital, particularly in the event of a RESOLUTION 24 change in the nominal value of a share, a capital increase by (The purpose of this resolution is the delegation of powers for incorporation of reserves, an allocation of bonus shares, a formalities) stock-split or a reverse-stock-split, a distribution of reserves or any other assets, amortization of capital or any other The Shareholders’ Meeting, acting in accordance with transaction impacting share capital. It is specified that the the quorum and majority requirements for Extraordinary shares allocated after such adjustments will be deemed to Shareholders’ Meetings, authorizes any person holding an have been allocated on the same day as shares allocated original, copy, or extract of the minutes of this Meeting to initially. perform all necessary filings and formalities.
432 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 GlossaryG
Biological recovery Method of treating organic waste by composting it or turning it into methane. Biomechanical recovery Process in which waste is treated by mechanically isolating certain parts and treating others biologically. Includes several types of mechanical and biological processes, which may be combined in several ways depending on the desired results. Enables the separation of different fractions contained in waste into potentially reusable fractions and/or which can be treated biologically. BOT (Build-Operate- Contract under which a private company is responsible for project financing and for the design, Transfer) Contract construction and operation of the site for a fixed period, after which the property is transferred to the co-contractor. Composting A biologic process consisting of the conversion and recycling of organic materials including sewage sludge and organic waste of biologic origin into compost, a product that is stable and rendered hygienic and is rich in humic acids that are used to enhance agricultural processes. DB (Design-Build) Contract A building contract for a system for delivering the finished product. The design and construction of the project are carried out by one and the same entity known as the design-builder or design- build-contractor. DBO (Design-Build-Operate) Contract under which a private company is responsible for the design, construction and operation Contract of a site. EMAS – Environmental, Certificate based on ISO 14001 certification and an environmental declaration certified by European Management and Audit inspectors, approved by the European Commission and published. System End-of-Life Vehicle An end-of-life vehicle is a vehicle transferred by its owner to a third party for destruction. The vehicles involved are private cars, vans and three-wheeled scooters. Energy recovery Use of combustible waste as a means of producing energy, by direct incineration with or without other combustible matter, or by any other process, but with heat recovery. Energy recovery consists in using the calorific energy of waste by burning it and recovering that energy in the form of heat or electricity. The process can be carried out at an incineration plant or a cement works. Energy recovery units Another name for energy-recovering incinerators. EPC (Engineering, Turnkey contracts where contractors provide engineering, design and completion services for a Procurement and project. Construction) ISO 14001 International standard aimed at verifying a company’s procedural organization and methods of the organizational units, as well as the efficient set-up of an environmental policy and related environmental objectives. Leachate Water that percolates through the waste stored in landfills and becomes bacteriologically and chemically charged. By extension, this term is also used for water that has come into contact with waste. Membrane A kind of filter or sieve that retains particles of different sizes depending on its type and the diameter of its holes.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 433 Glossary G
Natura 2000 Zones Aiming to conserve biological diversity and promote landscapes, the European Union has embarked, since 1992, on establishing a network of ecological zones known as Natura 2000, which preserve species and natural habitats while taking the human, economic, cultural and regional activities that exist in those zones into account. O&M (Operations Type of contract where management is delegated for the operation and maintenance of facilities and Maintenance) as well as for certain renewal projects, excluding investments for initial capital expenditure. PFI – Private Finance Financing mechanism which appeared in Great Britain in 1992, whereby a private company finances Initiative the design and construction of a project usually assigned to a public authority, and then ensures its management by signing a PPP contract. PPP – Public-Private Financing mechanism by which the local authority calls upon private service providers to finance Partnership and manage installations that provide or contribute to the provision of a public service. Process water Water used by industries for the operation of technical facilities or to manufacture products. Public service contract Public service contracts are a form of management contract under which a public entity entrusts management of a public service to a company for a fixed period. The company is paid directly by customers and finances all or part of the investments in plant renewal (leasing contract) and in new plants (concession). The terms of concession contracts are generally longer (10 to 30 years) than those of leasing contracts (10 to 20 years) in view of the need for the operator to amortize the newly built installation works. RDF – Refuse-Derived Fuel Solid fuel produced through sorting household waste to extract non-combustible materials and compact combustible materials. Relevant revenues Revenues generated by “relevant” activities. In fact, certain activities within the scope of financial consolidation may not be considered relevant for environmental reporting purposes due to their core activity. The financial holding company, and commercial, broking, trading, marketing and sales activities are not considered relevant. Single stream Type of waste collection system where recyclable waste is collected from users in a single stream, which is subsequently separated in recycling centers. Skid In membrane technology, a platform comprising a frame, potentially on rails, on which an installation assembly is placed. Enables access to a system which can be moved and transported immediately, without dismantling it. Sludge Residue obtained following the treatment of effluent. Sludge consists of water and dry material. Properties of sludge vary widely depending on their origin. They depend on the nature of the effluent and the type of treatment applied. Soil amendment/ Process aimed at improving the physical properties of soil by incorporating material which, without conditioning being a fertilizer, alters and improves the nature of the soil. Sand, clay, lime or organic material, are all conditioners. Spin-Off/Distribution The listing of the Company’s shares for trading on the Euronext Paris and Euronext Brussels exchanges was part of the creation by SUEZ of a division that combines all of the Group’s water and waste operations for which the Company will be the holding company (the “Spin-off”), followed by the distribution by SUEZ to its shareholders (other than SUEZ), proportionally to their interests in the share capital of SUEZ, of 65% of the shares representing the capital of the Company following the Spin-off, immediately before the SUEZ-Gaz de France merger is completed (the Distribution“ ”, together with the Spin-off, the Spin-Off/Distribution“ ”). The completion of the Spin-Off/Distribution was accompanied by various restructuring transactions, the purpose of which was specifically to reclassify the interests held by SUEZ environnement or its subsidiaries in companies attached to the environmental division under SUEZ environnement or certain of its subsidiaries, and to organize the withdrawal of SUEZ environnement and certain of its subsidiaries from the GIE SUEZ Alliance. For each SUEZ share held by a party entitled to distribution, one allotment right to Company shares had been granted, on the understanding that four Company allotment rights gave the right to one Company share. Stadtwerke Term of German origin used for a municipal company belonging to a German town, the purpose of which is to manage certain public services, particularly energy, water and transport.
434 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Glossary G
Treatment plant sludge All residues from the biological activity of microorganisms living in treatment plants and transforming the material carried by wastewater so that it can be extracted. They consist mainly G of water, mineral salts and organic matter. WEEE – Waste electrical Electrical and electronic equipment includes all devices or components operating on electric or and electronic equipment electromagnetic current (whether powered by electrical outlets or by batteries). These include, for example, household electrical goods or white products (cooking appliances, refrigerators, heaters, vacuum cleaners, etc.); audiovisual equipment or brown products (radios, television sets, camcorders, video recorders, hi-fi equipment, etc.); andoffice and computer equipment, or gray products (computers, printers, scanners, telephones, etc.).
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 435 436 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Note on methodologyN
Operating data Most of the operating data contained in this document were calculated on the basis of a scope of consolidation that includes fully integrated companies. Population served by The population served by the Group's collection activities corresponds to the number of residents collection activities served by traditional collection, to which is added the number of residents served by selective collection (a conventional collection operation and a selective collection operation that serve the same individual can thus be added together). This involves estimates (the number of residents served by the Group’s collection activities has not been counted). Human resources The number of Group employees corresponds to the number of salaried employees in SUEZ environnement and its fully consolidated subsidiaries. Employees of companies consolidated by proportional consolidation or the equity method (for example employees of Group subsidiaries in China or Mexico) are therefore not included in the total Group workforce on that basis; the employee counts mentioned for them are thus in addition to that total. As soon as a company enters into the scope of consolidation through full consolidation, 100% of its employee data is included, regardless of the percentage of share capital held.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 437 438 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Concordance tableCT
This Reference Document includes all the elements from the management report of the Company and of the Group for the year 2015, as required in particular by Articles L. 225-100, L. 232-1-II, L. 225-100-2 and L. 233-26 of the French Commercial Code. The management report was made up by the Board of Directors of the Company on February 23, 2016.
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 439 Concordance table CT
Mentions relating to the management report Reference Document section I. ACTIVITY OF THE COMPANY AND ITS SUBSIDIARIES AND/OR CONTROLLED COMPANIES, AND OUTLOOK Status and business of the Company (Art. L. 232‑1-II, L. 233‑6, para. 2, L. 233‑26 and R. 225‑102 of the French Commercial Code) Section 6 Income from the Company’s business: financial situation and performance indicators (Art. L. 233‑6 para. 2 and R. 225‑102 para. 1 of the French Commercial Code) Sections 9, 20.1 and 20.3 Objective and exhaustive analysis of business development, the Company’s income and financial situation and, specifically, its debt position in terms of business volume and complexity Sections 6, 9, 10 (Art. L. 225‑100 para. 3 and L. 225‑100‑2 para. 1 of the French Commercial Code) and 20.1 Analysis of key non-financial performance indicators relating to the Company’s specific business and particularly information relating to environmental or employee issues (Art. L. 225‑100 para. 3 and L. 225‑100‑2 para. 1 of the French Commercial Code) Sections 6.8 and 17 Main risks and uncertainties faced by the Company (Art. L. 225‑100 para. 4 and L. 225‑100‑2 para. 2 of the French Commercial Code) Section 4 Price, credit, liquidity, cash flow risks: indication of the Company’s exposure to these risks and indications of the Company’s objectives and policy regarding the Company’s management of financial risks (Art. L. 225‑100 para. 6 and L. 225‑100‑2 para. 4 of the French Commercial Code) Sections 4.1.3 and 4.2.4 Research and development activities (Art. L. 232‑1-II and L. 233‑26 of the French Commercial Code) Section 11 Foreseeable development of the Company’s situation and future outlook (Art. L. 232‑1-II, L. 233‑26 and R. 225‑102 para. 1 of the French Commercial Code) Section 6.3.4 and 13 Important events occurring between the closing date of the fiscal year and publication of the report (Art. L. 232‑1-II Sections 20.1 and 20.7, and L. 233‑26 of the French Commercial Code) Note 27 II. PRESENTATION AND INCLUSION OF THE FINANCIAL STATEMENTS IN THE MANAGEMENT REPORT Changes made to the presentation of the annual financial statements or the valuation methods selected (Art. L. 232‑6 of the French Commercial Code) Section 20.3 Amount of non-tax deductible expenses, global amount of sumptuary expenditures and the corresponding tax and reintegration into taxable income of certain general expenses by global number or expense category (Art. 223-quater and 223-quinquies of the French General Tax Code (CGI)) Section 20.3 Income for the fiscal year and proposed allocation of that income. Sections 20.3, 20.5 and 26 Reminder of total dividends paid during the last three fiscal years (Art. 243-bis CGI) Section 26 Days trade payables outstanding (Art. L. 441‑6-1 and D. 441‑4 of the French Commercial Code) Section 20.3 III. SUBSIDIARIES AND INTERESTS Status of interests acquired in companies whose headquarters are on French soil (Art. L. 233‑6, para. 1 of the French Commercial Code) Section 20.3 IV. INFORMATION REGARDING SHARE CAPITAL Name of the companies controlled and proportion of the share capital the latter hold in the Company (treasury shares) (Art. L. 233‑13 of the French Commercial Code) Sections 18.1 and 21.1 Identity of individuals or corporate entities owning over 1/20, 1/10, 3/20, 1/5, 1/4, 1/3, 1/2, 2/3, 18/20 or 19/20 of the Sections 18.1, 18.2 and share capital or voting rights at Shareholders’ Meetings (Art. L. 233‑13 of the French Commercial Code) 18.3 Purchase and sales of its own shares (Art. L. 225‑211 of the French Commercial Code) Section 21.1.3 Factors likely to have an impact in the event of a takeover bid (Art. L. 25‑100‑3 of the French Commercial Code) Section 18.3.2 Employee profit-sharing in the share capital (Art. L. 225‑102 of the French Commercial Code) Sections 17.3 and 18.1 V. STOCK OPTIONS AND BONUS SHARE ALLOCATIONS Stock options and bonus share allocations (Art. L. 225‑108, L. 225‑180-II, L. 225‑184, L. 225‑185 para. 4, Sections 15.1, 17.3 L. 225‑197‑1-II, para. 4 and R. 225‑29 of the French Commercial Code) and 20.1 Note 23 VI. GENERAL MANAGEMENT INFORMATION – CORPORATE OFFICERS List of positions and titles held in all companies by each of the corporate officers (Art. L. 225‑102‑1 of the French Commercial Code) Section 14.1.2 Choices regarding the role of executive management (Art. R. 225‑102 of the French Commercial Code) Section 14.1.1 and 16.4
440 I SUEZ ENVIRONNEMENT COMPANY I Reference Document 2015 Concordance table CT
Status of corporate officers: appointment, renewal, notification of co-optation (Art. L. 225‑102‑1 of the French Commercial Code) Sections 16.1 and 26 Compensation and detail of commitments of all kinds made by the Company to its corporate officers (Art. L. 225‑102‑1 of the French Commercial Code) Section 15 Amount of Directors’ fees received by the Board members for the fiscal year (Art. L. 225‑102‑1 of the French Commercial Code) Section 15.1.3 Summary of transactions made by the corporate officers and their relatives during the year (Art. L. 621‑18‑2 of the French Monetary and Financial Code and Art. 223‑26 of the AMF General Regulations) Section 18.5 VII. COMPANY AND ENVIRONMENTAL INFORMATION Social information (Art. L. 225‑102‑1, R. 225‑105 and R. 225‑105‑1 of the French Commercial Code) Sections 17.2 and 6.8.2 CT Environmental information (Art. L. 225‑102‑1, R. 225‑105 and R. 225‑105‑1 of the French Commercial Code) Section 6.8.1 Societal information (Art. L. 225‑102‑1, R. 225‑105 and R. 225‑105‑1 of the French Commercial Code) Section 6.8.3 Information on plants classified as high-risk: XX policy for preventing risk of technological accidents implemented by the Company; XX ability of the Company to cover third-party liability to property and people resulting from the operation of its plants; XX means implemented by the Company to ensure the management of victim indemnification in the event of a technology accident in which the Company’s responsibility is engaged. Sections 4.1.2, 4.2.2 and (Art. L. 225‑102‑2 of the French Commercial Code) 4.2.6 VIII. MISCELLANEOUS INFORMATION Summary of resolutions submitted at the Annual Shareholders’ Meeting Section 26 Injunctions or financial sanctions for anti-competitive practices issued by the Anti-Trust Authority (Art. L. 464‑2-I of the French Commercial Code) Section 20.6.1 IX. STATUTORY AUDITORS Mandates awarded to the Statutory Auditors Section 2 X. DOCUMENTS TO BE ATTACHED AS AN APPENDIX TO THE MANAGEMENT REPORT AND/OR TO BE CIRCULATED TO SHAREHOLDERS Income statement for the last five fiscal years (Art. R. 225‑102 para. 2 of the French Commercial Code) Section 20.3 Report of the Board of Directors on the resolutions Section 26.2 Report of the Chairman of the Board of Directors (Art. L. 225‑37 para. 6 to 10 of the French Commercial Code) Section 16.4 Report of the Statutory Auditors on the Parent Company financial statements (Art. L. 225‑100 para. 8, L. 823‑9, L. 823‑10, L. 823‑11, L. 823‑12 and R. 823‑7 of the French Commercial Code) Section 20.4 Statutory Auditors’ Report on selected social, environmental and governance disclosures (Art. L. 225‑102‑1 of the French Commercial Code) Section 6.8.4 Inventory of marketable securities held in portfolios at the end of the fiscal year Section 20.3.7 Note 18 Summary table: - on the status of the delegations of authority and powers currently valid granted to the Board of Directors or Executive Committee by the Shareholders’ Meeting in terms of capital increases; - on the use made of these delegations in the past fiscal year. (Art. L. 225‑100 para. 7 of the French Commercial Code) Section 21.1.5
Reference Document 2015 I SUEZ ENVIRONNEMENT COMPANY I 441
+ 33 (0)1 53 45 19 00 Photo credits: © SUEZ / P. COPPÉ / CAPA Pictures, © SUEZ / William DANIELS, © SUEZ / Denis FÉLIX, © SUEZ / ABACAPRESS / Guillaume RAMON, all rights reserved. SUEZ ENVIRONNEMENT COMPANY Limited company with capital of €2,177,604,984 Tour CB21 – 16, place de l’Iris 92040 Paris La Défense Cedex France tel. +33 (0)1 58 81 20 00 fax +33 (0)1 58 81 25 00 433 466 570 R.C.S. NANTERRE www.suez.com
ready for the resource revolution