REFERENCE DOCUMENT 2009

REFERENCE DOCUMENT 2009

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:

● for the fi scal year ended December 31, 2008: Annual Report, Consolidated Accounts and the corresponding Statutory Auditors’ Report included in Chapters 9, 20.1 and 20.2, respectively of the Reference Document, fi led with the AMF on April 14, 2009 under number R.09-016;

● for the fi scal year ended December 31, 2007: Annual Report, Combined Accounts and the corresponding Statutory Auditor’s Report included in Chapters 9, 20.1 and 20.2, respectively, of the Prospectus for the listing of SUEZ ENVIRONNEMENT COMPANY shares for trading on the Euronext Paris stock exchange as part of the distribution of SUEZ ENVIRONNEMENT COMPANY shares to SUEZ shareholders, which received AMF visa on June 13, 2008 under number 08-127.

The original French version of this Reference Document was fi led with the French Financial Markets Authority (Autorité des Marchés Financiers – AMF) on April 12, 2010, in accordance with the provisions of Article 212-13 of the General Regulations of the AMF under the number R.10-017. It may not be used in support of a fi nancial transaction unless supplemented by an offering memorandum approved by the AMF. It has been prepared by the issuer and is binding on the signatories.

In accordance with the provisions of Article L. 621-8-1-I of the French Monetary and Financial Code, this visa was granted after the AMF verifi ed that “the document is complete and comprehensible and that the information it contains is consistent.” It does not imply authentication by the AMF of the accounting and fi nancial items presented. CONTENTS

Page Page PERSON RESPONSIBLE 1 FOR INFORMATION 5 9 FINANCIAL REVIEW AFR 95 9.1 General information 96 1.1 Person Responsible for the Reference Document 5 9.2 Analysis of income statement 98 1.2 Declaration of the Person Responsible 9.3 Financing and net debt 105 for the Reference Document AFR 5 9.4 Provisions 112 9.5 Contractual commitments 113 2 STATUTORY AUDITORS 7 9.6 Parent Company fi nancial statements 115 9.7 2010 Outlook 115 2.1 Principal Statutory Auditors 7 2.2 Deputy Statutory Auditors 7 CASH AND SHAREHOLDERS’ 10 EQUITY 117 3 SELECTED FINANCIAL INFORMATION 9 10.1 Company shareholders’ equity 118 10.2 Source and amount of the issuer’s 4 RISK FACTORS 11 cash fl ows and description of cash fl ows 118 10.3 Borrowing terms and issuer’s 4.1 Primary Risks 12 fi nancing structure 119 4.2 Risk Management and Control within 10.4 Restrictions on the use of capital 120 the Group 23 10.5 Sources of fi nancing expected to meet the commitments relating to INFORMATION investment decisions 121 5 ABOUT THE GROUP AFR 29 5.1 History and Reorganization of the Group 29 RESEARCH AND DEVELOPMENT, 5.2 Investments 31 11 PATENTS AND LICENSES AFR 123 11.1 Research and development 123 6 OVERVIEW OF ACTIVITIES AFR 33 11.2 Trademarks, patents and licenses 125 6.1 General Information 34 6.2 Group Assets 37 12 INFORMATION ON TRENDS AFR 127 6.3 Strategy 40 6.4 Presentation of the market and competitive position 46 13 PROFIT FORECASTS OR ESTIMATES 129 6.5 Description of the Group’s Principal Businesses 54 ADMINISTRATIVE, MANAGEMENT 6.6 Dependence Factors 73 14 AND SUPERVISORY BODIES 6.7 Legal and regulatory framework 74 AND GENERAL MANAGEMENT AFR 131 6.8 Environmental policy 81 14.1 Composition and functioning of the management and supervisory bodies 132 7 ORGANIZATIONAL CHART 89 14.2 Confl icts of interest within administrative bodies and general 7.1 Simplifi ed Group organizational chart 89 management 141 7.2 Presentation of the Group’s main subsidiaries 90 COMPENSATION 7.3 Relations with subsidiaries 90 15 AND BENEFITS AFR 143 15.1 Compensation and benefi ts in kind 144 REAL ESTATE AND EQUIPMENT AFR 91 8 15.2 Sums provisioned by the Company 8.1 Group real estate and equipment 91 and its subsidiaries for the payment 8.2 Environmental constraints that may of pensions, retirement plans, affect the Group’s use of its fi xed assets 93 and other benefi ts to members of the management committee 148

The elements of the Annual Financial Report are clearly identifi ed in the sub-table of contents using the AFR pictograms AFR

2 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 Page Page FUNCTIONING OF ADMINISTRATIVE ADDITIONAL INFORMATION AFR 293 16 AND MANAGEMENT BODIES AFR 149 21 16.1 Terms of offi ce of members of the 21.1 General information on the share capital 294 administrative and management bodies 150 21.2 Memorandum of association and bylaws 298 16.2 Information on service contracts between members of the Company’s SIGNIFICANT CONTRACTS 305 administrative and management 22 bodies and the Company or any of its subsidiaries 151 INFORMATION FROM THIRD 16.3 Committees of the Board of Directors 151 PARTIES, STATEMENTS OF 16.4 Statement on corporate governance 154 EXPERTS, AND DECLARATIONS 23 OF INTEREST 307 17 EMPLOYEES AFR 155 17.1 Human resources 156 DOCUMENTS AVAILABLE 17.2 Employment information 160 24 TO THE PUBLIC 309 17.3 Stock options – bonus shares – 24.1 Consultation of documents 309 employee share purchase plan 165 24.2 Schedule of fi nancial information 310 17.4 Employee incentives and profi t sharing (France) 167 17.5 Global plan for the allotment of bonus INFORMATION ON EQUITY shares 167 25 INTERESTS 311 17.6 Retirement and similar commitments 167 COMBINED ORDINARY 18 MAJOR SHAREHOLDERS AFR 169 AND EXTRAORDINARY SHAREHOLDER’S MEETING 18.1 Breakdown of share capital 26 OF MAY 20, 2010 313 at December 31, 2009 170 18.2 Voting rights of the major shareholders 171 26.1 Agenda 314 18.3 Company control – shareholders’ 26.2 Report of the Board of Directors 315 agreement 171 26.3 Report of the Statutory Auditors 18.4 Agreement that may result on related party agreements and in a change of control 173 commitments 323 18.5 Summary of transactions made 26.4 Report of the Statutory Auditors by persons indicated in article to the Combined Ordinary and L. 621-18-2 of the monetary and Extraordinary Shareholders’ Meeting fi nancial code during the fi scal year of May 20, 2010 326 ended December 31, 2009 173 26.5 Resolutions 333

RELATED-PARTY A APPENDIX AFR 349 19 TRANSACTIONS AFR 175 Report of the Chairman of the Board of Directors prepared pursuant to Article L. 225-37 FINANCIAL INFORMATION of the French Commercial Code 349 RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION 20 AND REVENUES 179 B APPENDIX AFR 361 20.1 Consolidated fi nancial Statutory auditors’ report, prepared statements AFR 180 in accordance with Article L. 225-235 20.2 Statutory auditors’ report of the French commercial code (Code on the consolidated de Commerce), on the report prepared fi nancial statements AFR 267 by the chairman of the board of directors of SUEZ ENVIRONNEMENT COMPANY 20.3 Parent company fi nancial statements AFR 269 20.4 Statutory auditors’ report GLOSSARY 363 on the parent company annual fi nancial statements AFR 286 20.5 Dividend policy 288 NOTE ON METHODOLOGY 365 20.6 Legal and arbitration proceedings 288 20.7 Signifi cant change in the fi nancial or business situation 291 CONCORDANCE TABLE 367

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 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 French language Reference Document that received from the Autorité des marchés fi nanciers (the “AMF”) visa number R.10-017 on April 12, 2010. 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 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 contained therein. In the event of any ambiguity or discrepancy between this translation and the French Reference Document, the French version shall prevail.

4 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 1 PERSON RESPONSIBLE 1 FOR INFORMATION

Z 1.1 PERSON RESPONSIBLE FOR THE REFERENCE DOCUMENT

Mr. Jean-Louis Chaussade, Chief Executive Offi cer of SUEZ ENVIRONNEMENT COMPANY

1.2 DECLARATION OF THE PERSON RESPONSIBLE Z 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 fi nancial statements have been drawn up in accordance with applicable accounting standards and give a true and fair view of the assets, fi nancial 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 fi nancial 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 fi nancial position and the fi nancial statements presented in this Reference Document, and have read the entire document.

The consolidated fi nancial statements for fi scal year ended December 31, 2009 presented in this document, are the subject of a report by the Statutory Auditors in section 20.2, which contains two observations that do not put into question their opinion.

These observations apply, on the one hand, to the presentation of the fi nancial statements according to the “pooling of interest” method, and on the other hand, to the impact of new standards, amendments and interpretations whose adoption is mandatory in 2009.”

Jean-Louis Chaussade

Chief Executive Offi cer

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 5 1 PERSON RESPONSIBLE FOR INFORMATION

6 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 2 STATUTORY AUDITORS

2

Z 2.1 PRINCIPAL STATUTORY AUDITORS

● Ernst & Young et Autres ● Mazars

41, rue Ybry 61 rue Henri Regnault – Tour Exaltis

92576 Neuilly sur Seine Cedex - FRANCE 92400 Courbevoie - FRANCE

Appointed by decision of the Combined Ordinary and Appointed by decision of the Combined Ordinary and Extraordinary Shareholders’ Meeting of December 21, 2007 for Extraordinary Shareholders’ Meeting of July 15, 2008, for a the remaining duration of the term of offi ce of its predecessor, period of 6 years, and will expire at the close of the Ordinary and expiring at the close of the Ordinary Shareholders’ Meeting Shareholders’ Meeting called to approve the fi nancial called to approve the fi nancial statements for the fi scal year statements for the fi scal year ending December 31, 2013. ending December 31, 2011. Represented by Thierry Blanchetier and Philippe Castagnac (2). Represented by Charles-Emmanuel Chosson and Pascal Macioce (1).

Z 2.2 DEPUTY STATUTORY AUDITORS

● Auditex ● CBA

Faubourg de l’Arche 61 rue Henri Regnault

92037 Paris La Défense Cedex - FRANCE 92400 Courbevoie - FRANCE

Appointed by decision of the Combined Ordinary and Appointed by decision of the Combined Ordinary and Extraordinary Shareholders’ Meeting of December 21, 2007 for Extraordinary Shareholders’ Meeting of July 15, 2008, for a the remaining duration of the term of offi ce of its predecessor, period of 6 years, and will expire at the close of the Ordinary and expiring at the close of the Ordinary Shareholders’ Meeting Shareholders’ Meeting called to approve the fi nancial called to approve the fi nancial statements for the fi scal year statements for the fi scal year ending December 31, 2013. ending December 31, 2011.

(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.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 7 2 STATUTORY AUDITORS

8 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 3 SELECTED FINANCIAL INFORMATION

3

The tables below present excerpts from the consolidated income The selected fi nancial information below should be read in statements, statements of fi nancial position and cash fl ow conjunction with the consolidated fi nancial statements in statements of the Group for the fi scal years ended December 31, Section 20 of this Reference Document and with the fi nancial 2009, December 31, 2008 and December 31, 2007. review of the Group in Section 9 of this Reference Document.

KEY DATA FROM THE CONSOLIDATED INCOME STATEMENT

(in millions of euros) 2009 2008 2007

Revenues 12,296.4 12,363.7 12,034.1 EBITDA (1) 2,059.9 2,101.9 2,061.4 Current Operating Income 926.0 1,059.1 1,061.4 Net income Group share 403.0 533.2 491.7

(1) The Group uses “Earnings Before Interest, Taxes, Depreciation and Amortization” (or EBITDA) to measure its operating performance and its ability to generate cash fl ows from operations. EBITDA is not defi ned 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 STATEMENT OF FINANCIAL POSITION

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2007

Non-current assets 13,683.2 13,132.5 12,733.0 Current assets 8,864.4 6,578.5 6,004.7 TOTAL ASSETS 22,547.6 19,711.0 18,737.7 Shareholders’ equity, Group share 3,675.9 3,532.4 3,643.9 Minority interests 742.2 637.6 613.0 Other liabilities 18,129.5 15,541.0 14,480.8 TOTAL LIABILITIES 22,547.6 19,711.0 18,737.7

KEY DATA FROM THE CONSOLIDATED CASH FLOW STATEMENT

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2007

Cash fl ows from (used in) operating activities 1,605.7 1,532.2 1,461.9 Cash fl ows from (used in) investing activities (1,024.3) (2,418.5) (1,535.0) Cash fl ows from (used in) fi nancing activities 457.7 1,154.5 (438.7) TOTAL CASH FLOWS FOR THE PERIOD 1,043.2 202.3 (528.6)

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 9 3 SELECTED FINANCIAL INFORMATION

10 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 4 RISK FACTORS

Page

4.1 PRIMARY RISKS 12 4.1.1 Risks related to the Group’s business sector 12 4 4.1.2 Risks related to the Group’s business activities 14 4.1.3 Market Risks 18 CONTENTS 4.1.4 Insurance Risks 21 4.1.5 Legal Risks 22 4.1.6 Tax-Related Risks 22 4.1.7 Risks Relating to the Company’s Shares 22

4.2 RISK MANAGEMENT AND CONTROL WITHIN THE GROUP 23 4.2.1 General Framework of the Group’s Risk Management and Control 23 4.2.2 Management of Industrial and Environmental Risks 24 4.2.3 Management of Legal Risks 25 4.2.4 Management of Market Risks 25 4.2.5 Ethics Program 27 4.2.6 Management and Financing of Insurable Risks 28

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 11 4 RISK FACTORS Primary Risks

Z 4.1 PRIMARY RISKS

Because of the broad range of its businesses, locations and products, the Group represents a portfolio of risks and opportunities of a fi nancial, industrial and commercial nature. Its position as a key-player in the environmental sector and its ambitions for development also expose the Group to strategic risks which are particularly contingent on regulatory, climatic and industry developments in the segments in which it is involved.

The Group operates in a rapidly changing environment, triggering numerous risks, including some beyond its control. The Group presents hereafter the signifi cant risks to which it believes it is exposed. The occurrence of any one of these risks could have a signifi cant negative effect on the Group’s business, fi nancial position, or earnings, or its image, outlook or the Company’s share price.

4.1.1 RISKS RELATED TO THE GROUP’S to generate additional revenues, which brings with it substantial BUSINESS SECTOR costs that could have a negative impact on the fi nancial position and earnings of the Group.

The Group faces steady competition Finally, certain technological choices made by the Group to remain competitive or conquer new markets may not produce The Group’s services are subject to strong competitive pressure the expected results and may have a negative impact on the from major international operators and, in some markets, from Group’s activity, earnings or outlook. “niche” players. New industrial and fi nancial players invest in markets by adopting aggressive strategies, which are supported Some Group services are sensitive to economic cycles by investment funds. In addition, the Group also faces competition Fiscal year 2008 was characterized by the emergence of the from public sector operators in some markets (for example, the crisis, particularly the banking and fi nancial crisis, followed by semi-public companies in France or the Stadtwerke in Germany). the economic and manufacturing crisis. Because of its activities, Finally, for contracts previously awarded by public authorities, the Group is sensitive to these economic factors, whose some cities may desire to retain or assume direct management potential impact is described below. of water and waste services (notably in the form of public control, “régie”) instead of depending on private operators. In particular, the economic crisis that began in late 2008 resulted in a slowdown in the business of the Group’s major clients and This strong competitive pressure, which could increase in a therefore contributed to a decline in demand for water- and context of consolidation among private entities (which is already waste-related services. This in turn impacted the Group’s sales underway in the waste sector in Europe, more specifi cally, in volume and profi ts. The Group’s broad geographic and industry the United Kingdom, Germany, and the Benelux countries), diversifi cation offers only partial protection against this risk. may put pressure on the sales prices for the services offered by the Group and lead to major contracts not being renewed Some Group services, particularly services to industrial clients, and greater diffi culties in obtaining new contracts, which could both in the water and waste segments, are sensitive to economic have a negative impact on the activity, earnings, and outlook cycles. Since the Group is mainly present in Europe, the United of the Group. States, and Asia-Pacifi c, a portion of its activity is sensitive to changes in the economic conditions of these geographic The risk of pressure on sales prices is exacerbated in the waste regions. Any economic slowdown in a country where the Group treatment sector in some countries, where the Group may see is present lowers consumption as well as investments and the profi tability of its facilities reduced due to a reduction in the industrial production and, therefore, negatively impacts demand rate of use resulting from the development of overcapacity. for the services offered by the Group, which could in turn have Moreover, in order to offer services that are comparable or a negative impact on the Group’s activity, earnings, and outlook. better than those offered by its competitors, the Group may have to develop new technologies and services, thus enabling it

12 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 RISK FACTORS Primary Risks

The Group’s water activities are sensitive to changes Moreover, the Group’s waste activities lead to the production in consumption patterns of plastic, wood, cardboard, metals, and electricity; a signifi cant A combination of many social, regulatory and climatic factors decrease in their price could affect the profi tability of some slow the growth of water consumption. investments or the economic balance of certain contracts and have a negative impact on the Group’s activity, earnings, and A reduction in volumes consumed is being observed in the outlook. supplying of drinking water in some developed countries, due notably to water saving programs established by public The Group’s businesses are subject to increasingly authorities and industrialists and the widespread idea that stringent environmental, health, and safety regulations water is a resource that needs to be protected. For example, The Group’s businesses are subject to environmental protection, in France, the Group estimates that on average, the volume of public health, and safety rules that are increasingly restrictive water billed has declined by roughly 1% per year, over the last and differ from country to country. These rules notably apply to fi fteen years. water discharge, the quality of drinking water, waste treatment, The gain in productivity achieved by the Group and the fact that soil and water table contamination, and the quality of smoke some contracts provide for a fee portion that is independent of and gas emissions. volume consumed, have allowed the Group to respond to this 4 Despite efforts by the Group to comply with the applicable reduction in volume. Moreover, the Group is developing services regulations, there are still many risks that result from the with greater added value in both the production and distribution vagueness of some regulatory provisions or the fact that of drinking water and wastewater treatment, notably by helping regulatory bodies can amend their enforcing instructions and public authorities meet their obligation in responding to changes that major developments in the legal framework may occur. In in the regulations. addition, the competent regulatory bodies have the power to However, if these efforts are insuffi cient in the future to offset institute administrative or legal proceedings against the Group, the reduced volume, the Group may experience a negative which could lead to the suspension or revocation of permits impact on its activity, earnings and outlook. or authorizations the Group holds, or injunctions to cease or abandon certain activities or services, fi nes, or civil liabilities The Group’s water activities are sensitive to weather or criminal penalties, which could negatively and signifi cantly conditions affect the Group’s public image, activity, fi nancial position, The Group’s earnings in the water sector can be affected by earnings, and outlook. signifi cant weather changes. Moreover, amending or strengthening regulatory provisions For example, in France, exceptional rainfall caused a reduction could engender additional costs or expenses for the Group. in water consumption in 2007, while episodes of hot weather As a result of such measures, the Group might have to reduce, generated greater water consumption in 2003. Therefore, temporarily interrupt, or even discontinue engaging in one or exceptional rainfalls may have a negative impact on the Group’s several activities without having the assurance that it will be able activity and earnings. to make up for the corresponding losses. Regulatory changes may also affect prices, margins, investments and operations, The Group is vulnerable to fl uctuations in some commodity and, consequently the Group’s activity, earnings, and outlook. and energy prices The applicable regulations involve investment and operating The Group’s activities heavily consume raw materials and costs not only for the Group but also for its customers, energy, more specifi cally oil and electricity, and therefore the particularly the contracting local or regional public authorities, Group is vulnerable to their price fl uctuations. due notably to compliance obligations. Failure by the customer Although the Group’s contracts generally include indexing to meet its obligations could injure the Group as the operator mechanisms, the Group cannot guarantee that these and harm its reputation and capacity for growth. mechanisms will cover all of the additional costs generated by Finally, even if the Group complies with applicable regulations, an increase in electricity and oil prices, particularly for long-term it cannot monitor the quality of the water in all areas of its contracts. In addition, some contracts entered into by the Group network. Accordingly, for several years now, France is pursuing do not include indexing provisions. Accordingly, any major a policy of eliminating lead service pipes, with a deadline of increase in the price of electricity or oil could have a negative 2013. The Group is offering to replace its customers’ pipes to impact on the Group’s earnings and outlook. achieve these objectives. This work involves renegotiating the affected contracts. However, the Group cannot exclude the possibility that the goal to eliminate lead by 2013 will not be reached because of the presence of lead in pipes for which individuals are responsible and over which the Group has no control. Any contamination of the water distributed, regardless of the source of the contamination, could have a negative impact on the Group’s public image.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 13 4 RISK FACTORS Primary Risks

Despite the monitoring systems implemented, it is impossible to Over the medium term, efforts are focused on increasing the predict all regulatory changes. However, the Group, by engaging proportion of low-carbon energy sources (for example, fuel in its businesses in several countries, each with its own substitutes produced from waste), promoting the capture of regulatory system, diversifi es this risk. Furthermore, certain biogas at landfi lls, taking into consideration energy produced regulatory changes actually offer new market opportunities for from this biogas, and energy produced by sludge and biowaste the Group’s businesses. anaerobic digestion and energy from waste (incineration) as a source of renewable energy. Certain Group activities require administrative authorizations, which can be diffi cult to obtain, be challenged, not be renewed, or which may encounter conditions that make them signifi cantly harder to obtain 4.1.2 RISKS RELATED TO THE GROUP’S Performing the Group’s activities assumes that it holds various BUSINESS ACTIVITIES permits and authorizations, which often require a long, costly, and seemingly arbitrary procedure to obtain or renew. Operating under long-term contracts could penalize Moreover, the Group may face opposition from local citizens for the Group’s activities operating certain facilities (specifi cally the operation of landfi lls, The Group carries out most of its business activities under long- incinerators, or wastewater treatment plants) citing nuisances, term contracts with terms of 30 years or more. The conditions degradations of the landscape, or, more generally, damage for performing these long-term contracts may be different from to the environment, making it more diffi cult for the Group to those that existed or that were anticipated at the time the obtain construction or operating permits and authorizations or contract was entered into and may change the balance of the resulting in non-renewal or even challenges. contract, particularly the fi nancial balance. Finally, the conditions attached to authorizations and permits The Group makes every effort to obtain contractual mechanisms that the Group has obtained could be made substantially more that allow it to adjust the balance of the contract in response stringent by the competent authorities. to changes in certain signifi cant economic, social, technical, The Group’s failure to obtain or a delay in obtaining a permit or regulatory conditions. However, not all long-term contracts or authorization, non-renewal of or a challenge to a permit entered into by the Group have such mechanisms. Moreover, or authorization, or signifi cantly more stringent conditions when the contracts entered into by the Group contain such associated with the authorizations and permits obtained by adjustment mechanisms, the Group cannot guarantee that its the Group could have a negative impact on its activity, fi nancial co-contracting partner will agree to implement them or that position, earnings, outlook, and development. they will be effective in re-establishing the fi nancial balance of the contract. Measures taken on the national, European and global level against climate change could represent both a risk The absence or potential ineffectiveness of the adjustment and an opportunity for the Group mechanisms provided for by the Group in its contracts or the Following the Kyoto Protocol and subsequent agreements, the refusal of a co-contracting partner to implement them could battle against climate change has spread and has translated have a negative impact on the Group’s fi nancial situation, into burgeoning regulations under environmental and tax law earnings, and outlook. in France, in Europe and internationally. This trend could have The Group is exposed to a risk that public authorities a very signifi cant impact on the economic models based on will unilaterally terminate or amend their contracts the emerging risk of waste activities being included in carbon The contracts entered into by the Group with public authorities accounting in some countries. make up a signifi cant share of its revenues. However, in most

On the other hand, incorporating CO2 restrictions together with of the countries in which the Group has a presence, including provisions to support renewable energies and other regulatory France, public authorities have the right, under certain and tax provisions complicates the economic model in the circumstances, to unilaterally amend or even terminate the waste business and places greater pressure than in the past contract subject to compensation by the co-contracting partner. on guiding treatment methods toward energy recovery for the production of renewable energies.

14 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 RISK FACTORS Primary Risks

In the event of such unilateral amendments or terminations of The Group manages these risks in connection with its contracts by co-contracting public authorities, the Group cannot partnerships and contract negotiations on a case-by-case basis. guarantee that it will be able to obtain partial or full compensation, In order to limit the risks related to operations in emerging particularly in emerging countries, which could have a negative countries, the Group determines its choices by applying a impact on its activity, fi nancial position, and earnings. selective strategy based on a detailed analysis of the country risks and, to the extent possible, taking out political risk Nonetheless, the diversity of the Group’s businesses and of insurance and putting international arbitration clauses in place. their geographical location implies a considerable diversity of situations. Some partnerships established by the Group could be broken The Group may encounter diffi culties in implementing its external growth strategy In several countries, the Group carries out its activities through partnerships with local authorities or private local entities. The Group’s development strategy involves conducting Moreover, to develop its activities, the Group may be required development or external growth operations through the to enter into new partnerships. acquisition of assets or companies and interests or alliances in the waste and water businesses and geographic areas in Partnerships are one of the means by which the Group shares 4 which the Group wishes to expand. The Group may be unable, the economic and fi nancial risk inherent in certain major given the competitive environment, to successfully complete projects by limiting its capital employed and allowing it to development or external growth operations that it is planning better adapt to the specifi c context of local markets. Moreover, based on its investment criteria, which could have a signifi cant they may be required by the local laws and regulations. The negative impact on the implementation of this strategy. partial loss of operating control is often the downside of this reduced exposure in capital employed. However, this situation Moreover, external growth operations may involve a number is managed contractually on a case-by-case basis. of risks related to integrating the acquired businesses or the personnel, diffi culty in generating the synergies and/or savings Changes in a project, the local political and economic context, expected, and the appearance of unexpected liabilities or costs. the economic position of a partner, or the occurrence of a The occurrence of one or more of these risks could have a disagreement between the partners may lead to breaking negative impact on the activity, fi nancial position, earnings, or partnerships, particularly if partners exercise puts or calls on outlook of the Group. shares, if one of the partners demands dissolution of the joint venture, or through the exercise of a pre-emptive right. These The Group operates in a number of emerging countries situations can also lead the Group to choosing to strengthen with additional risks its fi nancial commitments in certain projects or, in the event Although the Group’s business activities are concentrated of confl ict with its partner(s), to seeking solutions in court or mainly in Europe, the United States, and the Asia-Pacifi c region, before the competent arbitration bodies. These situations could the Group also conducts business in other markets, notably have a signifi cant negative impact on the Group’s business, in certain emerging countries. The Group’s activities in these fi nancial position, earnings and outlook. countries involve a certain number of risks that are higher than in developed countries, such as volatility in the GDP, relative The Group achieves part of its organic growth by executing economic and governmental instability, sometimes major major projects that could encounter diffi culties amendments to, or imperfect application of regulations, the The Group’s organic growth is in part based on various major nationalization and expropriation of private property, payment projects involving the construction of industrial assets, including collection diffi culties, social problems, substantial fl uctuations water production infrastructures, ocean water desalination, in interest and exchange rates, claims by local authorities that treatment of wastewater and treatment of waste. call into question the initial tax framework or the application The profi tability of these assets, whose life is several decades, of contractual provisions, currency control measures, and other is particularly contingent on controlling costs and construction unfavorable interventions or restrictions imposed by public timeframes, operating performance, and the long-term trend of authorities. the competitive environment. This could impair the profi tability Although the Group’s activities in emerging markets are not of certain assets or imply a loss of revenues and a depreciation concentrated in one country or a specifi c geographic region, of assets. events or unfavorable circumstances that take place in any of these countries could have a negative impact on the Group’s business and could also result in the Group having to book provisions and/or impairments in its accounts, which could have a signifi cant negative impact on its fi nancial position, earnings, and outlook.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 15 4 RISK FACTORS Primary Risks

The Group incurs risks because of its design In waste management, gas emissions to be considered are and construction activities greenhouse gases, gases that promote acidifi cation of the air, In the water and waste sectors, the Group is involved in noxious gases, and dust. In the area of water, the potential air certain projects at the design and facility construction phases, pollutants are mainly chlorine or gaseous by-products resulting notably in the water sector through its specialized subsidiaries from accidental emissions of water treatment products. Degrémont, OIS and Safege. Wastewater treatment and waste treatment activities can also cause odor problems or the production of limited but dangerous Even though the projects are always subject to detailed studies quantities of toxic gas. and the Group’s expertise is well known, it is possible that construction deadlines will not be met and, consequently, that In the absence of adequate management, the Group’s activities the Group will incur penalties, construction costs will be higher could have an impact on the water present in the natural than originally planned, or facility performance level will not environment in the form of leachates from poorly monitored comply with specifi cations, which could have a negative impact facilities, discharge of heavy metals into the environment, on its fi nancial position, earnings, and outlook. or aqueous discharge from fl ue gas treatment systems at incineration plants. These various types of emissions could The Group is exposed to a risk of dependence with respect pollute water tables or streams. to some of its suppliers Wastewater treatment plants discharge decontaminated water For the construction and management of water treatment into the natural environment. For various reasons these may plants or waste treatment units, the Group’s companies may temporarily fail to meet discharge standards in terms of organic depend on a limited number of suppliers for the supply of water, load, nitrogen, and phosphorus. waste, electricity, and equipment. Issues of soil pollution would arise in the event of accidental Any interruption or delay in the supply or failure to respect a spills of stored dangerous products or liquids, leaks in processes technical performance guarantee on a major piece of equipment involving hazardous liquids, and the storage and spread of could affect the profi tability of a project and have a negative sludge. impact on the Group’ s activity, earnings, and outlook. Various mechanisms are used to monitor all the above risks. The The business areas in which the Group operates involve Group carries out its industrial activities under regulations that a major risk of civil and environmental liability give rise to safety rules for the use of infrastructures. The care RISKS RELATED TO FACILITIES MANAGEMENT taken in the design, execution and operation of its works cannot The facilities that the Group owns or manages on behalf of third prevent all industrial accidents that might impair the Group’s parties carry environmental risks. The air, water, and soil may activities or generate fi nancial losses or material liability. pose risks to the health of consumers, residents, employees, or The laws and contracts that govern the Group’s operations even subcontractors. clarify the division of responsibilities with respect to risk These health and environmental risks, which are governed management and fi nancial liability; however, failure to respect by strict national and international regulations, are regularly standards may lead to contractual fi nancial penalties or fi nes. monitored by public authorities. These changing regulations with The unavailability of a major drinking water production or regard to both environmental responsibility and environmental distribution facility could result in a stoppage of the delivery of liabilities, carry a risk of an increase in the vulnerability of the water in a fairly large area, resulting in losses of revenues and Company in relation to its activities. This vulnerability is to be the risk of paying the pertinent compensation as well as harm assessed for old facilities (such as closed landfi lls) and for sites to the Group’s public image and/or breach of a public service in operation. It may also involve damage caused to habitats or obligation. species. Although the Group has premium civil liability and environmental As part of its activities, the Group must handle, or even generate, risk insurance, it may still be held liable above the guaranteed dangerous products or by-products. This is the case, for caps or for items not covered in the event of claims involving example, for certain chemical products for water treatment. In the Group. waste treatment, some Group facilities treat specifi c industrial or healthcare waste that may be toxic.

16 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 RISK FACTORS Primary Risks

Moreover, the amounts provisioned or covered may be Labor confl icts could have a negative impact insuffi cient if the Group incurs environmental liability, given the on the Group’s business and public image uncertainties inherent in forecasting expenses and liabilities The Group must consider the possibility of labor disturbances, related to health, safety, and the environment. such as strikes, walkouts, claim actions, or other labor problems that could disrupt its business and have a negative impact on its Therefore, the Group’s liability for environmental and industrial fi nancial position and earnings. risks could have a signifi cant negative impact on its public image, activity, fi nancial position, earnings, and outlook. Moreover, in the waste segment, the occurrence of labor disruptions could have a negative impact on the Group’s public SPECIFIC RISKS RELATED TO OPERATING HIGH-RISK SITES image. (“SEVESO” SITES) Within the boundaries of the European Union, the Group The occurrence of occupational illnesses, particularly those operates three “high-threshold” Seveso classifi ed sites in related to exposure to asbestos, legionnaire’s disease, Germany and Spain: the Herne plant in Germany and the or muscular-skeletal problems cannot be ruled out Constanti and Barbera sites in Spain. The Group also operates The Group is very aware of the risks of changes in employees’ eight “low-threshold” Seveso sites in France, Belgium, the and subcontractors’ health and takes measures to protect their Netherlands, and Germany. 4 health and safety. It takes great care to remain in compliance Any incident at these sites could cause serious harm to with legal and regulatory health and safety provisions at its employees working at the site, neighboring populations, and various sites. However, it may be confronted with occupational the environment, and expose the Group to signifi cant liabilities. illnesses that could lead to legal action against the Group The Group’s insurance coverage could be insuffi cient. Any such and, potentially, to the payment of damages, which could be incident could, therefore, have a negative impact on the public signifi cant. image, activity, fi nancial position, earnings, and outlook of the Some energy recovery site operators could accidentally be Group. exposed to the risk of microorganisms such as legionella. Group The Group implements an accident prevention policy through instructions have been issued to contain this risk and sites are a series of initiatives and actions including the training audited or inspected on a regular basis. of employees, communication and by holding managers Personnel working at water production and distribution responsible, thus enabling it to maintain its permanent target facilities and in hazardous industrial waste treatment sites may of zero accident. be exposed to chemical risks. Chemical risk is one of the risks managed under the health and safety system. The Group could lack appropriate competencies at the right time and place to implement its strategy In addition, the risk of a pandemic, such as avian fl u, has been The Group employs specialists and executives with a broad anticipated by implementing continuity plans and measures to range of expertise applied to its various businesses. In order protect and prevent infection of employees that continue to to prevent the loss of key competencies the Group must work during pandemics. anticipate scarcity of labor in certain businesses. In addition, the Group’s international growth and the trends of its businesses Certain Group plants could be the target of criminal require new know-how and a great deal of mobility among its or terrorist acts staff, particularly its executives. In order to meet this need the Despite security measures taken by the Group in the operation Group has implemented a human resources policy focused of its water and waste facilities, the possibility remains that they on employment tailored to various locations and on fostering could be affected by malicious acts and acts of terrorism. employability through the development of training. Such acts could have serious consequences for public health.

In addition, some of the Group’s employees work or travel in countries where the risks of terrorism or kidnapping may be high.

The occurrence of such acts could have a signifi cant negative impact on the public image, activity, fi nancial position, earnings, and outlook of the Group.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 17 4 RISK FACTORS Primary Risks

4.1.3 MARKET RISKS

4.1.3.1 INTEREST RATE RISKS The Group’s exposure to interest rate risks derives mainly from its fl oating rate net fi nancial debt. As of December 31, 2009, the Group’s net debt (excluding fi nancial derivatives and amortized cost) totaled €6,126.7 million, 7% at fl oating rates and 93% at fi xed rates before hedging, and 22% at fl oating rates and 78% at fi xed rates after hedging.

The following table shows the Group’s net debt by type of rate (after hedging) at December 31, 2009:

Net debt at Net debt at Less than 1 (in millions of euros) Total fi xed rates fl oating rates year 1 to 5 years Beyond

Amount 6,126.7 4,793.1 1,333.6 (296.6) 3,112.0 3,311.3

The following table shows the Group’s net debt position exposed to fl oating interest rates as of December 31, 2009:

(in millions of euros) Total

Gross debt 5,186.4 Cash equivalent assets (1 ) 3,852.8 Net position before management 1,333.6 Impact of interest rate derivatives 890.7 Net position after management 2,224.3 Impact of a 1% increase in short-term interest rates on income after management (6.9)

(1) Corresponds to the “Financial assets valued at fair value through income“ and “Cash and cash equivalents“ items on the Group’s consolidated statement of fi nancial position.

A market risk sensitivity analysis is presented in Note 14.1.4.4 to denominated in their local currencies (with the exception of the consolidated fi nancial statements, Section 20.1. some Degrémont activities).

An increase in interest rates could also force the Group to However, because of the geographic diversifi cation of its fi nance or refi nance acquisitions or investments at a higher cost. activities, the Group is exposed to translation risk, i.e., its statement of fi nancial position and income statement are The interest rate risk management policy is described in sensitive to fl uctuations in foreign exchange rates when the Section 4.2.4.1. fi nancial statements of its foreign subsidiaries outside the euro zone are consolidated. As a result, fl uctuation in the value of 4.1.3.2 EXCHANGE RATE RISK the euro against these various currencies may affect the value Due to the nature of its activities, the Group has little exposure of these items in its fi nancial statements, even if their intrinsic to foreign exchange risk on transactions, i.e., the fl ows related value has not changed in their original currency. to the activity of SUEZ ENVIRONNEMENT and its subsidiaries are

The following table shows the distribution of the Group’s net debt by currency as of December 31, 2009 (excluding fi nancial derivatives and amortized cost):

Pounds (in millions of euros) Euros (1) US dollars sterling Other (2) Total

Net debt before the effects of forex derivatives 4,262.1 957.1 198.7 708.8 6,126.7 Net debt after the effects of forex derivatives 3,456.6 1,125.5 420.8 1,123.8 6,126.7 Impact on income of a 10% net appreciation of the euro, on net position after management 1.5 0.8 (1.6) 0.5 1.2

(1) The euro impact comes from the net euro position of Group entities whose currency is not the euro. (2) Mainly the Australian dollar, Hong Kong dollar and Chilean peso.

18 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 RISK FACTORS Primary Risks

The following table shows the distribution of the Group’s capital employed by currency as of December 31, 2009:

Pounds (in millions of euros) Euros US dollars sterling Other (1) Total

Capital employed 6,760 1,686 795 1,291 10,532

(1) Mainly the Australian dollar, Czech koruny, yuan, and Swedish kronor.

With respect to the US dollar, the following table presents the impact of changes in the dollar exchange rates in 2009 versus 2008 on revenues, EBITDA, net debt and the amount of equity as of December 31, 2009:

(in millions of euros) Change

Revenues 30.3 4 EBITDA 6 Net debt (37) Total equity (27)

The calculations of revenues and EBITDA were performed based on the variation in the average 2009/2008 US$/€ exchange rate (-5.5%); for net debt and equity it was based on the closing US$/€ exchange rate as of December 31, 2009 and 2008 (-3.5%).

With respect to the pound sterling, the following table presents the impact of changes in the pound sterling exchange rates in 2009 versus 2008 on revenues, EBITDA, net debt and the amount of equity as of December 31, 2009:

(in millions of euros) Change

Revenues 122.4 EBITDA (16) Net debt 31 Total equity 44

The calculations of revenues and EBITDA were performed based on the variation in the average 2009/2008 £/€ exchange rate (-10.6%); for net debt and equity it was based on the closing £/€ exchange rate as of December 31, 2009 and 2008 (+7.3%).

An exchange risk sensitivity analysis is presented in Note 14.1.4.4 to the consolidated fi nancial statements, Section 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 debt and the amount of its cash at December 31, 2009:

(in millions of euros) Total 2010 2011 2012 2013 Beyond 2013

Total borrowings 9,042.9 2,619.6 189.4 694.8 686.6 4,852.5 Overdrafts and current accounts 936.6 936.6 0.0 0.0 0.0 0.0 Total outstanding fi nancial debts 9,979.5 3,556.2 189.4 694.8 686.6 4,852.5 Of which GDF SUEZ share 1,939.2 1,299.5 6.0 6.0 462.8 164.9 Cash equivalent assets (1) 3,852.8 3,852.8 0.0 0.0 0.0 0.0 Net debt (excluding derivative fi nancial instruments and amortized cost) 6,126.7 (296.6) 189.4 694.8 686.6 4,852.5

(1) Includes “fi nancial asset items valued at fair value through income“ and “Cash and cash equivalents.”

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 19 4 RISK FACTORS Primary Risks

Some borrowings contracted by the subsidiaries of the Group or the maintaining of these fi nancial covenants is most often by SUEZ ENVIRONNEMENT on behalf of its subsidiaries include assessed at the level of the SUEZ ENVIRONNEMENT subsidiaries. clauses requiring specifi c ratios to be maintained. The defi nition Finally, none of these fi nancial covenants are based on and the level of the ratios, i.e., the fi nancial “covenants”, are SUEZ ENVIRONNEMENT or SUEZ ENVIRONNEMENT COMPANY’s determined in agreement with the lenders and may potentially share price, or on the Groups’ rating. Details on short-term and be reviewed during the life of the borrowing. These covenants long-term ratings and their evolution over the course of fi scal are presented in Section 10.4 of this Reference Document. 4.4% year 2009 appear in Section 10.3.3 of this document. of borrowings in excess of €50 million were subject to fi nancial As of the date of this Reference Document, there is no payment covenants as of December 31, 2009. At the date of this Reference default on the Group’s consolidated debt. There was also no Document, fi nancial covenants relating to these borrowings are payment default on the consolidated debt of the Group at maintained. At December 31, 2009, the Group was maintaining December 31, 2009. the entirety of these same covenants. With the exception of the securitization agreement described in Section 10.4,

The following table shows borrowings contracted by the Group at December 31, 2009, in excess of €50 million:

Total amount of Amounts credit lines at drawn down at 12/31/2009 12/31/2009 Type Fixed/fl oating rate (in millions of euros) (in millions of euros) Term

Bond issue Fixed rate 1,000 1,000 2014 Bond issue Fixed rate 800 800 2019 Borrowing Floating rate 815 665 2010 Bond issue Fixed rate 500 500 2024 Borrowing Fixed rate 380 380 2010 Bond issue Fixed rate 300 300 2014 Borrowing Floating rate 257 257 2013 Credit line Floating rate 300 250 2010 Bond issue Fixed rate 250 250 2017 Borrowing Fixed rate 200 200 2010 Borrowing Fixed rate 200 200 2013 Borrowing Floating rate 153 153 2012 Borrowing Fixed rate 153 153 2010 Credit line Floating rate 150 150 2010 Bond issue Fixed rate 150 150 2017 Borrowing Fixed rate 113 113 2011 Borrowing Fixed rate 100 100 2015 Credit line Fixed rate 100 100 2010 Borrowing Fixed rate 95 95 2029 Borrowing Floating rate 93 93 2019 Credit line Floating rate 134 81 2010 Bond issue Fixed rate 69 69 2026 Credit line Floating rate 100 65 2010 Borrowing Floating rate 64 64 2017 Lease arrangement Fixed rate 62 62 2018 Credit line Floating rate 57 32 2010 Bond issue Fixed rate 56 56 2026 Project fi nancing Floating rate 59 59 2020 Credit line Floating rate 51 6 2010 Credit line Floating rate 60 - 2013 Credit line Floating rate 50 - 2012

20 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 RISK FACTORS Primary Risks

Total amount of Amounts credit lines at drawn down at 12/31/2009 12/31/2009 Type Fixed/fl oating rate (in millions of euros) (in millions of euros) Term Credit line Floating rate 100 - 2011 Credit line Floating rate 100 - 2012 Credit line Floating rate 100 - 2012 Credit line Floating rate 80 - 2012 Credit line Floating rate 60 - 2012 Credit line Floating rate 60 - 2014

At December 31, 2009, the Group had the following unused confi rmed credit facilities available:

Confi rmed but unused credit facility programs 4 Year of expiration (in millions of euros)

2010 285.8 2011 120.4 2012 473.7 2013 80.3 2014 60.0 Beyond 33.5 TOTAL 1,053.7

The liquidity risk management policy is described in As of December 31, 2009, the Group held interests in publicly Section 4.2.4.3. traded companies (mainly Acea) with a market and book value of €92.9 million. An overall decrease of 10% in the value of 4.1.3.4 COUNTERPARTY RISK these shares compared to their prices at December 31, 2009 would have had an impact of roughly €9.3 million on Group The Group’s exposure to counterparty risk is linked to its cash shareholders’equity. investments and its use of derivatives to control its exposure in certain markets. The equity risk management policy is described in Section 4.2.4.5.

The Group’s surplus cash is invested either in monetary funds, short-term deposits with international banks, or with the GDF SUEZ Group. 4.1.4 INSURANCE RISKS The derivative fi nancial instruments used by the Group are intended to manage its exposure to foreign exchange and The Group’s policy with respect to insurance is described in interest rate risks, as well as its risks on commodities. The Section 4.2.6 of this Reference Document. fi nancial instruments used are essentially forward purchases and sales as well as derivative products. However, it is still possible that, in certain cases, the Group may have to pay large indemnities that are not covered by the existing The counterparty risk management policy is described in insurance program or incur very signifi cant expenses that will Section 4.2.4.4. not be reimbursed or will be insuffi ciently reimbursed under its insurance policies. In particular, with respect to civil liability and 4.1.3.5 EQUITY RISK environmental risks, although the Group has premium insurance, it is possible that the Group may incur liability beyond the The Group has interests in publicly traded companies, the value amount of its coverage or for events not covered. of which changes depending on trends in global stock markets.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 21 4 RISK FACTORS Primary Risks

4.1.5 LEGAL RISKS Finally, several Group companies benefi t from tax-approval decisions issued by the competent local authorities. If necessary, these approval decisions may be challenged. A challenge may In the normal course of their activities, the Group’s companies result if for example the company or companies that are party may be involved in legal, administrative, or arbitration to an approval decision break a commitment assumed in proceedings. The most signifi cant current or potential disputes exchange for its issuance, and/or the facts based on which the are detailed in Section 20.6. In the context of some of these approval decision was issued change, and/or the position of the proceedings, fi nancial claims of a signifi cant amount are or may competent local tax authority changes. be brought against one of the Group’s entities. Although the Group’s policy in this regard is cautious, the provisions booked for this purpose by the Group could be insuffi cient, which could have signifi cant negative consequences on its fi nancial position 4.1.7 RISKS RELATING and earnings. TO THE COMPANY’S SHARES Generally, it is possible that new proceedings, either related or unrelated to current proceedings, may subsequently be brought against one of the entities of the Group. An unfavorable The Company’s share price may be volatile and subject outcome in such proceedings could have a negative impact on to market fl uctuations the activity, fi nancial position, or earnings of the Group. Financial markets are subject to signifi cant fl uctuations that at times are unrelated to the results of the companies whose shares are traded on them. Market fl uctuations and economic conditions could signifi cantly affect the Company’s share price.

4.1.6 TAX-RELATED RISKS The Company’s share price could also be affected by numerous events that affect the Group, its competitors, or general Independently of the Group’s policy to comply with the economic conditions, and the water and waste sectors in applicable laws and regulations in each of the countries in which particular. Accordingly, the Company’s share price could Group companies operate, as well as with international tax fl uctuate signifi cantly in reaction to events such as: rules, certain provisions may present a source of risks because ● variations in the fi nancial results of the Group or of its they are unclear, diffi cult to interpret, or subject to changing competitors from one period to the next; interpretation by local authorities. Moreover, in the European Union, tax rules that currently apply to entities of the Group ● announcements by competitors or announcements about are being reviewed by the European Commission and could be the water and waste sectors; reconsidered. ● announcements of changes in the Company’s shareholders; In addition, in the normal course of their business, the companies ● announcements of changes in the management team or key in the Group could face tax investigations by local authorities. personnel of the Group; In this respect, tax investigations performed by the French or foreign authorities are in progress. The tax investigations may ● changes in the future outlook for the Group and its businesses result in adjustments and sometimes result in tax disputes or in the water and waste sectors in general; in the competent jurisdictions. The Group’s main current tax ● changes in the content of fi nancial analyst reports about the disputes are described in Section 20.6.3 of this document. Group;

● changes in economic and market conditions.

22 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 RISK FACTORS Risk Management and Control within the Group

Z 4.2 RISK MANAGEMENT AND CONTROL WITHIN THE GROUP

4.2.1 GENERAL FRAMEWORK operating and fi nancial indicators. The Department prepares OF THE GROUP’S RISK MANAGEMENT the Group’s short-term and medium-term fi nancial forecasts AND CONTROL and participates in the analysis of the development projects of the Group and its subsidiaries. The Internal Control Department has rolled out a documentation, improvement Management of the risks the Group is facing involves identifying and annual assessment of internal control program within them, assessing them and putting in place the appropriate the main subsidiaries of the Group in collaboration with the action plans and hedges. Group’s staff and operational departments. The main mission The Group has adopted an integrated corporate risk management of the Tax Department is to identify and analyze the Group’s policy that aims to provide a complete overview of the risk tax risks; portfolio through the use of methods and tools common to all ● within the Investment, Projects and Risks Department, subsidiaries and functional divisions. 4 the Investment and Risks Department participates jointly The Chief Risk Offi cer (CRO) is responsible for coordinating with the Planning and Control Department and the Legal this integrated approach. He is supported by a network of Risk Department in the analysis of the projects of the Group and Offi cers who are responsible for seamlessly and consistently its subsidiaries; executing the risk assessment and management techniques ● the Internal Audit Department, in coordination with the Chief within the different subsidiaries. The network is headed by the Risk Offi cer, proposes its annual audit plan on the basis Chief Risk Offi cer. of an analysis of the operational and fi nancial risks of the A risk-mapping process for the whole Group has been in companies in the Group. This audit plan is approved by the place for several years. Risks are identifi ed, classifi ed by senior executives. The objectives of the internal audit are to category (strategic, fi nancial, operational, ad hoc), assessed assess the contribution of the audited entities in relation to (by signifi cance and frequency), and quantifi ed when possible. their commitments, validate their risk analysis and control, Then the method for handling them is reviewed, which provides and verify that the Group’s procedures, guidelines, and information for action plans at different levels of the Company. charters are implemented. At the end of every assignment, the Internal Audit Department communicates its conclusions This process, which is overseen centrally by the Chief Risk and recommendations for corrective actions; Offi cer and in the subsidiaries by the network of Risk Offi cers, makes it possible, in particular, to draw up an annual summary ● the Human Resources Department analyses the main labor of the major risks for the Group. It includes steps to select risks and gaps in terms of skills and in terms of corporate signifi cant individual risks and, if applicable, to aggregate culture. The Department develops action plans to recruit homogeneous risks. The summary is discussed and validated by local talent and to develop skills. The Health and Safety the Management Committee. Department monitors and ensures the prevention of occupational illnesses and accidents related to the Group’s The subsidiaries maintain responsibility for implementing the businesses. The Department ensures that warning and most appropriate risk management policy for their particular crisis management procedures are established within the activities. However, certain trans-Group risks are directly subsidiaries and at SUEZ ENVIRONNEMENT with the aim of managed by the SUEZ ENVIRONNEMENT Corporate departments establishing a culture of prevention at all levels, which also involved: improves the quality and continuity of operations; ● the Legal Department analyzes, monitors, and manages ● the Operations, Research and Environment Department the Group’s legal risks. This monitoring is based on studies the environmental risks and coordinates the actions periodic reporting from the subsidiaries and from needed to tighten control of those risks and compliance with SUEZ ENVIRONNEMENT and is performed by a network of environmental requirements. It studies the operational risks lawyers; related to the Group’s production systems and assists the ● within the Financial Department, the Treasury and Financial subsidiaries in solving operational problems at their sites. It Operations Department analyzes, with the subsidiaries, establishes and distributes best practices and operational the Group’s main fi nancial risks (rates, main currencies, benchmarks to the subsidiaries. It prepares solutions for and banking counterparties), develops instruments for a certain number of emerging risks by developing suitable measuring positions, and defi nes the policy for hedging risks. research programs; The Planning and Control Department performs a critical ● the Information Systems Department analyzes and manages analysis of the actual and projected fi nancial performance risks related to information systems in order to guarantee of the subsidiaries through the monthly monitoring of availability, completeness, and confi dentiality of information;

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 23 4 RISK FACTORS Risk Management and Control within the Group

● the Insurance Department, in conjunction with the subsidiaries, 4.2.2.1 WASTE TREATMENT is the contracting authority for the Group’s insurance programs In waste treatment, each site has been submitted to at least to cover industrial and environmental damages, business one environmental audit and one health and safety audit in the interruptions, and liability (civil, professional, etc.); and past four years. These audits, performed by the Group or by ● the Communication Department analyzes and manages external experts, make it possible to identify any potential non- the risks to image and reputation. It prepares and executes compliance with applicable regulations, detect specifi c risks, adequate crisis communication plans in association with and implement action plans for corrective measures. Such non- the subsidiaries. Press coverage is regularly monitored and compliance can be attributed to regular changes in regulations coordinated. which require operation upgrades. They may also be due to the acquisitions of facilities for which investments are planned or Aside from the staff departments, the Board of Directors is to the simple aging of the facilities under management. The use assisted by an Audit Committee whose assignments in terms of private operators is often justifi ed by diffi culties in managing of risks are as follows: facilities subject to increasingly stringent regulations. When ● obtain regular updates on the fi nancial position, cash position the Group assumes responsibility for managing facilities, some and on the major commitments and risks of the Group; may not necessarily comply with regulatory requirements. When an area of non-compliance is identifi ed, the Group ● examine the risk control policy and the procedures selected implements different types of responses, which may consist to evaluate and manage these risks. of improvements in the operational management of a site or ● evaluate the effi ciency of the Group’s internal control system. investments to reinforce or replace equipment at the site.

The 2009 results of the global risk management policy were Under service delegation contracts, such decisions must be presented to the Audit Committee on December 15, 2009. It approved by the customers, local authorities, or manufacturers was informed of the risk exposure linked to the fi nancial and who remain entirely responsible for certain investments. economic crisis and it was presented with the overview of the Nevertheless, the Group endeavors to alert its customers so that risks for all the Group’s activities. For more details, please refer they can anticipate future standards. For example, in Europe, to the Chairman’s report on Company governance and internal where the Group manages household waste incinerators on controls inserted into this document. behalf of local authorities, the Group has launched an important awareness raising program for local authorities in order to Implementation of internal control is carried out consistently anticipate the European environmental regulations that may with the risks identifi ed in the Group’s activities within the reduce authorized emission thresholds. This approach was framework of the mapping process for those risks. implemented in accordance with the European directive on waste incineration applicable since the end of December 2005.

4.2.2 MANAGEMENT OF INDUSTRIAL 4.2.2.2 FOR THE PRODUCTION AND DISTRIBUTION AND ENVIRONMENTAL RISKS OF DRINKING WATER AND WASTEWATER TREATMENT In the water sector, each subsidiary is responsible for its own The Group’s activities may lead to industrial accidents or serious systems for managing environmental risks. A centralized control environmental and health impacts. Moreover, the Group must process similar to the process implemented for waste was put comply with increasingly stringent environmental and public in place four years ago. The audits, which are performed by the health rules. The corresponding risk factors are described in Group or by external experts, focus primarily on wastewater Section 4.1 above. treatment facilities, storage of water treatment chemicals, These risks are methodically considered within the Group, both and sludge management in the wastewater treatment plants. in the waste treatment and in the water sector. In addition, the Finally, risk prevention plans either support or precede the Group has established a specifi c policy for the most dangerous implementation of an environmental management system. sites that it owns or operates on behalf of its clients. The Group ensures the preventive management of health risks This management of industrial and environmental risks is one and systematically notifi es customers who own plants of cases of the main aspects of the Group’s environmental policy (see where the water treatment plants are not adapted to the supply Section 6.8 for a description of the Group’s environmental policy). to be treated, and proactively suggests solutions that are best suited to each context. Likewise, the Group informs local public entities who own sewage treatment networks and wastewater treatment plants of the upgrades required to meet applicable standards. When studies and compliance works are conducted by

24 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 RISK FACTORS Risk Management and Control within the Group

these owner authorities, the Group seeks to ensure their progress 4.2.2.4 EMERGENCY PLANS through regular reporting. In contrast, when the Group owns the Each of the Group’s subsidiaries has put in place emergency plants, such projects are included in its investment programs. plans that involve two intervention approaches: a mandatory With respect to the specifi c issue of lead pipes (which France on-site approach that enables a warning to be given and the has set a goal to phase out by 2013), the Group includes the immediate mobilization of the crisis management resources work required to replace lead pipes in its contracts, or, if and a dedicated crisis management organization that provides necessary, responds to bid tenders from local authorities for the effective management throughout the duration of crisis. The removal of these pipes. latter approach provides in particular for the organization of crisis management units that are capable of taking into account 4.2.2.3 THE MOST HAZARDOUS SITES internal or external impacts, whether technical, social, health- related, economic or related to reputation. The emphasis is Major industrial or environmental risks linked to the most therefore on increasing awareness and training teams for crisis hazardous sites are subject to strict and specifi c national and management, particularly through simulations, and on the international regulations and are regularly monitored by public development of a culture of exchange between local teams and authorities and Group experts. their outside contacts. These plans are audited annually. 4 Within the European Union, the Group operates three “high- threshold“ Seveso sites (as defi ned by the amended European directive 96/80/EC of December 9, 1996, which covers facilities that may present signifi cant health and safety risks 4.2.3 MANAGEMENT OF LEGAL RISKS to neighboring populations and the environment, through the danger of explosion or the release of harmful products) located As a result of its international operations, its activities, and of an in Germany and Spain, and eight “low-threshold“ Seveso sites increasingly complex and restrictive regulatory environment, the in France, Belgium, the Netherlands, and Germany. The Group’s Group pays particular attention to the management of legal risks. “high-threshold“ Seveso sites are audited every three years by the internal environmental audit team and every year for health The Group has specifi cally implemented internal legal vigilance and safety purposes. All of these sites are subject to regular rules aimed at the various operating entities and their inventories of the hazardous substances or preparations stored employees. More specifi cally, these rules cover the processes to on site. They have to comply with the regulatory procedure be followed to enter into certain contracts, as well as feedback for hazard studies and risk analysis. The design, construction, on the risks of disputes (to allow proactive management) and operation, and maintenance of facilities located on these sites developments regarding major pending disputes. are adapted and constantly improved in order to prevent any The terms and conditions for certain Group activities, particularly risk of a major accident. the fact that certain contracts are very long-term (30 to 50 The Herne site (Germany), which is operated by SITA Remediation, years) and consequently subject to periodic renegotiations, also uses pyrolysis to treat 30,000 tons of soil polluted with mercury, require ongoing involvement by the Group’s legal departments pyralene, and PAH (polycyclical aromatic hydrocarbons) every in order to assist operating departments in conducting these year. An environmental offi cer and a Seveso offi cer have been renegotiations. appointed by the Company to ensure the proper implementation Moreover, the Group frequently uses training processes to raise of the regulations. An annual three-day audit is conducted by employee awareness of the importance of managing legal risks the German government’s environment and labor departments. and of respecting the legal vigilance rules it has implemented. In addition, this site was audited in 2006 by the Group’s environmental audit team. No major non-compliance or major environmental risk was detected on the site. Finally, the site is certifi ed as “Entsorgungsfachbetrieb,“ a German environmental 4.2.4 MANAGEMENT OF MARKET RISKS certifi cation, whose annual renewal is granted by the German government only following an audit. In the context of its operating and fi nancial activities, the Group is The site in Constanti (Spain) is a hazardous waste incinerator exposed to market risks such as foreign exchange risks, interest that treats 40,000 tons a year. The site in Barbera (Spain) is a rate risks, liquidity risks, or the risk related to certain commodity transfer and collection site for hazardous waste that treats prices. To ensure greater control of these risks, the Group has 12,000 tons a year. Both sites were audited in 2007 by the implemented the management rules described below. Group’s environmental audit team. No major non-compliance Within the Group, the management of market risks is defi ned or environmental risks have been detected. Both sites hold ISO by the Treasury Committee, which is chaired by the Chief 14001 certifi cation. Administrative and Financial Offi cer.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 25 4 RISK FACTORS Risk Management and Control within the Group

The Group primarily uses fi nancial instruments to manage its However, this hedging policy is not implemented (or is only exposure to fl uctuations in interest rates, exchange rates, and partially implemented) under certain circumstances, in particular: commodity prices. ● if the hedging cost (which in fi ne corresponds to the interest rate of the reference currency) is too high; 4.2.4.1 MANAGEMENT OF INTEREST RATE RISK ● if liquidities in the currency or the available hedging durations The Group’s exposure to interest rate risk is described in are insuffi cient; Section 4.1.3.1. ● if market expectations for the relevant currency are contrary The Group’s policy is to diversify the net debt reference rates to current trends. among fi xed rates and fl oating rates. The Group’s aim is to achieve a balanced distribution between the different rates (5 The asset hedging ratio (which is the ratio between the book to 15 years), which may change according to market conditions. value of an asset denominated in a non-euro currency and the debt contracted on this asset) is reviewed periodically, The Group also uses hedging instruments (particularly swaps) according to market conditions and on each entry or exit of an to protect itself from interest-rate increases in the currencies asset. Any signifi cant change in the hedging ratio is subject to in which its debt is denominated. Financial instruments held prior approval by the Treasury Committee. by the Group in order to hedge interest rate risk are detailed in Note 14.1.4.2 to the Consolidated Financial Statements, Section 20.1. 4.2.4.3 MANAGEMENT OF LIQUIDITY RISK The liquidity risk to which the Group is exposed is described in The Group’s exposure to interest rate risk is centrally managed Section 4.1.3.3. and regularly reviewed (generally on a monthly basis) during the meetings of the Treasury Committee. Hedges decided by the In 2009, the Group’s fi nancing policy was based on the following Treasury Committee are generally executed and implemented principles: on behalf of the subsidiaries by the Group’s Treasury and ● fi nancing framework agreement with GDF SUEZ implemented Financial Operations Department. after the IPO of the Company;

4.2.4.2 MANAGEMENT OF FOREIGN EXCHANGE RISK ● diversifi cation of fi nancing sources by resorting to the banking market and capital markets; The foreign exchange risk to which the Group is exposed is detailed in Section 4.1.3.2. ● balanced repayment profi le of fi nancial debt.

The Group is exposed to fi nancial statement translation risk After the various transactions that took place in 2009, as due to the geographical spread of its activities: its statement described in Section 10, the distribution of sources of fi nancing of fi nancial position and income statement are impacted by at December 31, 2009 was as follows: bank funding represented changes in exchange rates upon consolidation of the fi nancial 30% of gross fi nancial debt (excluding bank overdrafts, amortized statements of its foreign subsidiaries outside the euro zone. cost, and derivatives effect), and capital markets fi nancing (securitization accounted for 3% and bonds 40%) represented For investments denominated in non-euro currencies, the 43% of the total. The balance is largely fi nanced by GDF SUEZ. Group’s hedging policy is to contract liabilities denominated in the same currency as the cash fl ows generated by these assets. At December 31, 2009, cash equivalent assets represented €3,883.8 million, and confi rmed lines of credit €1,807.7 million, Among the hedging instruments used, borrowings in the €754 million of which had been drawn. As of that date the Group relevant currency constitute the most natural hedging tool. The also had total liquidity consistent with its size and the maturities Group also uses foreign exchange derivative products (foreign it has to meet. exchange swaps), which enable the creation of synthetic currency debts. The fi nancial instruments held by the Group to The liquidity risk is regularly monitored by the Treasury hedge foreign exchange risks are detailed in Note 14.1.4.1 to Committee; the monthly reporting of the consolidated group the Consolidated Financial Statements, Section 20.1. debt includes a schedule of the debt for the current year, for years y+1 to y+4 and future years.

Access to the long-term capital markets is primarily through the parent company SUEZ ENVIRONNEMENT COMPANY for new bond issuance and bank debt.

26 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 RISK FACTORS Risk Management and Control within the Group

4.2.4.4 MANAGEMENT OF COUNTERPARTY RISK 4.2.5 ETHICS PROGRAM The counterparty risk to which the Group is exposed is described in Section 4.1.3.4. The Group’s presence in many countries means that it must pay particular attention to sharing and respecting ethical values as The Group’s policy for managing counterparty risk is based on well as to the related regulations and obligations. the diversifi cation of its counterparties (excluding commodity- related risk) on one hand and on an assessment of the fi nancial Accordingly, the Group adheres to and actively participates position of those counterparties on the other. in the Ethics Program implemented by the GDF SUEZ Group, which is designed to promote a group culture that encourages The Group invests the majority of its cash surpluses and responsible behavior (in compliance with the applicable ethical negotiates its fi nancial hedging instruments with high quality values and regulations) by each employee of the Group. counterparties. Within the framework of its counterparty risk management policy, the Group has implemented management The Ethics Program consists primarily of the GDF SUEZ and control procedures based, on the one hand, on charter “Our Values, our Ethics”, as well as the rules for the counterparty qualifi cations as a function of external rating and organization and conduct of GDF SUEZ Group companies, as objective market aspects (credit default swaps, stock market supplemented and specifi ed by charters, codes, and guidelines. 4 capitalization), and on the other hand, on the defi nition of risk These documents are available to all Group employees on the limits. Similarly, the Group selects its insurers in a way that limits SUEZ ENVIRONNEMENT intranet site. These documents have its counterparty risk. been prepared to refl ect standards on ethics and conduct issued by national and international bodies (such as the Global Compact, The balance of cash surpluses not invested with banks is the Conventions of the International Labor Organization, and the invested with GDF SUEZ. At December 31, 2009, that balance OECD guidelines for multinational companies). represented 24% of the Group’s cash on hand. The Ethics Program, whose aim is to prevent or detect behaviors 4.2.4.5 MANAGEMENT OF EQUITY RISK that are contrary to the Group’s ethical rules, is coordinated within the Group by the General Secretary, who serves as The equity risk to which the Group is exposed is described in Group Ethics Offi cer and who is also responsible for the Legal Section 4.1.3.5. and Audit departments. The Ethics Program is applied by all The Group’s portfolio of listed equities is part of its long-term the main subsidiaries, which have a designated ethics offi cer. investment policy. As of the date of this document, the equity The ethics offi cers are responsible for ensuring the roll-out and risk is not subject to any particular hedging, but the Finance effectiveness of the Ethics Program within their subsidiary and Department monitors price changes in the Group’s holdings in for implementing internal and external investigation procedures various companies on a regular basis. for any issue brought to their attention that may potentially be in breach of the Group’s Ethics rules.

4.2.4.6 MANAGEMENT OF COMMODITY Each year, the ethics offi cers at each main subsidiary send AND ENERGY RISKS a report on the application of the Ethics Program in their The commodity risk to which the Group is exposed is described subsidiary to their executive management and to the Group in Section 4.1.1. Ethics Offi cer. A compliance letter signed by the Chief Executive Offi cer of each major subsidiary is sent to the Group Ethics The Group’s hedging policy primarily concerns risk related Offi cer every year. to fl uctuations in oil prices, particularly because of the fuel consumption of the main subsidiaries active in the waste sector The Group Ethics Offi cer then produces an annual report on the (SITA France, SITA Deutschland, SITA Nederland). activities of the Ethics Program within the Group.

Volumes that are not purchased under contracts where revenues In 2008, the Board of Directors of the Company set up an Ethics are indexed to the change in diesel prices are considered “at and Sustainable Development Committee, which is responsible, risk“ volumes and are fi nancially hedged through the use of among other things, for monitoring the Group’s Ethics and derivative products (particularly swaps). Sustainable development policies and for ensuring that Group employees are complying with the individual and collective At December 31, 2009, the Group considers that the diesel values on which the Group’s activity is based. (For a description consumption of its main subsidiaries in the waste management of the Ethics and Sustainable Development Committee, see sector (SITA France, SITA Deutschland, SITA Nederland) Section 16.3.3 of this document). is approximately 70% hedged for 2010 and 51% for 2011 (approximately 30% through contractual indexing and the In 2009, the Group Ethics Offi cer presented an annual report balance through derivative products). on the activities of the Ethics Program within the Group to the Company’s Ethics Committee. In order to best implement the planned hedges, the Group’s Treasury and Financial Operations Department monitors changes in the market and hedging prices and makes recommendations to the Treasury Committee and to interested subsidiaries.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 27 4 RISK FACTORS Risk Management and Control within the Group

4.2.6 MANAGEMENT AND FINANCING Property damage and interruption of business OF INSURABLE RISKS The protection of Group assets covers property the Group owns as well as property that it leases or that has been entrusted to it.

To limit the impact of certain events on its fi nancial situation, Facilities are covered by programs that are generally or to meet contractual or legal requirements, the Group has underwritten at the Group level. However, insurance policies created dedicated insurance programs to cover its main risks of are also taken out by subsidiaries and, under exceptional damage to property, civil liability, and personal insurance. circumstances, by sites, if justifi ed by contractual requirements. The policy for transferring risks to the insurance market is fi xed These local insurance policies are identifi ed and checked by the every year and updated as necessary in order to refl ect not only Insurance Department. changes in the Group, in its activities and in the risks it faces, but The underwriting limits for property damage cover the maximum also changes in the insurance market. possible loss assessed for each site.

The Insurance Department organizes the policy defi ned by the With respect to interruption of business resulting from property Group: selection of the brokers and insurers, monitoring of the damage, the coverage periods take into account an estimate policies and, if necessary, control of the prevention or protection of the consequences of the total or partial shutdown of a site policies. For this purpose, it works with a network of specialists (repair period, amount of daily losses, additional expenses, and or agents within the subsidiaries of the Group. redundancy).

For each of the traditional areas of insurance (i.e., property Construction projects are covered by a “Construction All Risks“ damage and interruption of business, civil liability, and employee or “Erection All Risks“ policy taken out by the project manager, benefi ts), the Group transfers risks to both the insurance and the general contractor or the main company involved. internal fi nancing markets: Civil liability ● the transfer of risks to the insurance market is performed as often as possible through transversal programs in areas The Group’s third party civil liability is covered by various types that are considered strategic, either because of the potential of civil liability insurance. intensity of the risks covered or because of the economies of Coverage for general civil liability, product liability, professional scale generated by the transversal programs; liability, or liability for environmental damage is part of a Group

● the fi nancing of random risks of low or moderate intensity program taken out and managed by SUEZ ENVIRONNEMENT on relies mostly on internal fi nancing plans, especially through behalf of all its subsidiaries. deductibles or risk retention. In the event of claims that exceed the maximum coverage The Group does not have a captive insurance company, however, under this policy (€50 million), the Group will benefi t from the in support of the risk management policy; about ten insurance civil liability insurance coverage of the GDF SUEZ Group. contracts are partially reinsured by a captive reinsurance Insurance for certain types of civil liability that correspond to company owned by GDF SUEZ. legal obligations (vehicle fl eet, workplace accidents) are covered In 2009, the premium volumes (including taxes and retentions) by specifi c policies. relating to the main insurance programs established by the Group in the areas of asset protection (property damage and Employee benefi ts interruption of business) and third party recourse amounted In accordance with legislation currently in force, and with to approximately 0.4% and 0.2% of consolidated revenues, Company agreements, programs for protecting employees respectively. against the risk of accidents and medical costs are set up at the operating entity level. These programs may either be fi nanced through retention based on capacity or transferred to the insurance market. In France, mutual and insurance programs are largely consolidated and are subject to at least one review per year to analyze risks and trends as well as to anticipate changes in the economic balance of the plans concerned.

28 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 5 INFORMATION ABOUT THE GROUP

Z 5.1 HISTORY AND REORGANIZATION OF THE GROUP

5.1.1 LEGAL NAME 5.1.5 HISTORY OF THE GROUP 5 Since February 11, 2008, the Company’s legal name is For 129 years, the SUEZ Group has focused on providing SUEZ ENVIRONNEMENT COMPANY. public utility services to local public entities, businesses, and individuals in the electricity, gas, water, and waste management Its previous legal name was Houlival. sectors. Since 2003, SUEZ ENVIRONNEMENT has handled all the expertise in water management, wastewater treatment and waste management services within the SUEZ Group. This expertise is deployed by internationally-known trademarks such 5.1.2 TRADE AND COMPANY REGISTER as Degrémont, Safege, Lyonnaise des Eaux and SITA, which are renowned for the know-how they have accrued (over more than The Company is registered at the French Trade and Company a century in certain cases) to serve their customers. Register under the number 433 466 570 RCS PARIS. 1880, CREATION OF SOCIÉTÉ LYONNAISE DES EAUX ET DE L’ECLAIRAGE 5.1.3 DATE OF INCORPORATION AND TERM The company was involved in the public services of water, OF THE COMPANY electricity, and gas distribution in rapidly growing cities and suburbs such as Cannes, Bordeaux, Lille and Rouen. From the very beginning, Lyonnaise des Eaux also developed its activities The Company was incorporated on November 9, 2000, for a term abroad. of 99 years. Except in the event of early dissolution or extension, the Company will cease to exist on November 9, 2099. 1919, CREATION OF SITA The Société Industrielle des Transports Automobiles (SITA) was one of the two service providers selected to collect household 5.1.4 HEADQUARTERS, LEGAL FORM waste in Paris. At that time, SITA had two activities: transport AND APPLICABLE LEGISLATION of all kinds and delegation of public services. It diversifi ed into passenger transport and corporate vehicle leasing. The Company’s headquarters are located at 1, rue d’Astorg, 75008 Paris - France. 1946, PARTIAL NATIONALIZATION OF LYONNAISE DES EAUX Telephone: +33 (0)1 58 18 50 00. In 1946, France nationalized the gas and electricity sectors. The Company is a French Société Anonyme (public limited Société Lyonnaise des Eaux et de l’Eclairage was partially company) with a Board of Directors and is governed by the nationalized. At that time, the company focused on water- provisions of Book II of the French Commercial Code, applicable related activities to meet the growing demand for services to commercial companies as well as to all legal provisions and network development in the suburbs of large cities. In line applicable to commercial companies. It is governed by the legal with this same growth strategy, Lyonnaise des Eaux became a and regulatory provisions currently in force and yet to come, as majority shareholder in Degrémont, a water treatment company well as by its bylaws. established in Paris in 1939.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 29 5 INFORMATION ABOUT THE GROUP History and Reorganization of the Group

1971, ACQUISITION OF SITA 2003, FORMATION OF SUEZ ENVIRONNEMENT In the 1970s, to meet the increasing requirements in terms In 2003, the water and waste activities were reorganized within of environmental protection, SITA set up a waste sorting and SUEZ ENVIRONNEMENT following the merger of SITA with Ondeo recycling branch. In 1971, Lyonnaise des Eaux acquired a stake in Services, which changed its name to SUEZ ENVIRONNEMENT. SITA, which became the group’s “waste management division.” SUEZ ENVIRONNEMENT then united nearly all the environmental SITA has been wholly owned by the SUEZ Group since 2000. activities of the SUEZ Group in the water, waste, and engineering sectors. 1974, COMPAGNIE FINANCIÈRE DE SUEZ, MAJORITY SHAREHOLDER OF LYONNAISE DES EAUX 2008, LISTING OF SUEZ ENVIRONNEMENT COMPANY In 1974, Compagnie Financière de SUEZ became the majority As part of the merger between SUEZ and Gaz de France, which shareholder of Lyonnaise des Eaux. After being nationalized by created a global leader in the gas and electric sectors with a the French government in 1982, Compagnie Financière de SUEZ strong French-Belgian base, SUEZ has decided to complete the was privatized in 1987. consolidation of all its environmental operations within a new company - SUEZ ENVIRONNEMENT COMPANY (the “Company”). 1997, MERGER OF COMPAGNIE FINANCIÈRE DE SUEZ SUEZ has contributed all the shares of the former company AND LYONNAISE DES EAUX SUEZ ENVIRONNEMENT to this new company, and distributed 65% of the Company’s capital to SUEZ shareholders prior to In 1997, the merger between Lyonnaise des Eaux and Compagnie the merger. Following this distribution, the merged GDF SUEZ Financière de SUEZ resulted in SUEZ Lyonnaise des Eaux, the entity held a stable investment of 35.41% in the Company at world’s leading group for local services. December 31, 2009.

2001, SPIN-OFF OF THE SUEZ GROUP WATER ACTIVITIES In 2001, SUEZ Lyonnaise des Eaux became SUEZ and, through a contribution in kind, combined all of its water-related activities within Ondeo as part of a spin-off process. Water activities in France were consolidated under the name Lyonnaise des Eaux France.

30 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 INFORMATION ABOUT THE GROUP Investments

Z 5.2 INVESTMENTS

5.2.1 PRINCIPAL INVESTMENTS MADE 5.2.3 PRINCIPAL INVESTMENTS PLANNED BY SUEZ ENVIRONNEMENT COMPANY OR SUBJECT TO FIRM COMMITMENTS OVER THE PAST TWO FISCAL YEARS BY THE MANAGEMENT BODIES

A description of the principal investments made by the Group None. over the course of 2008-2009 is provided in Section 9.3.1. of this Reference Document.

5.2.2 PRINCIPAL INVESTMENTS OF THE COMPANY IN PROGRESS

● In October 2009, the Group signed a preliminary binding agreement involving a global transaction on Aguas de 5 Barcelona (Agbar). This deal, the details of which appear in Section 9.1.2.1 of this Reference Document, is subject to various regulatory and legal approvals.

● In December 2008, the Group signed, via its subsidiary Lyonnaise des Eaux with Veolia Environnement (via its subsidiary Compagnie Générale des Eaux) a Memorandum of Understanding (MoU) aiming at modifying or terminating the agreements that combine their resources within joint subsidiaries active in the distribution of drinking water and wastewater treatment. This operation is in progress.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 31 5 INFORMATION ABOUT THE GROUP

32 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 6 OVERVIEW OF ACTIVITIES

Page

6.1 GENERAL INFORMATION 34

6.2 GROUP ASSETS 37

CONTENTS 6.3 STRATEGY 40 6.3.1 Sustainable development and operational and technical know-how, the Group’s core strategic ambitions 41 6.3.2 Pursuit of a global development plan that maintains local integration of its businesses 41 6.3.3 Maintaining balance in the industrial model, ensuring the transition to new business models, 6 and improving operating performance 43 6.3.4 2010 Outlook 45

6.4 PRESENTATION OF THE MARKET AND COMPETITIVE POSITION 46 6.4.1 Presentation of the water and waste sectors 46 6.4.2 Competition 52

6.5 DESCRIPTION OF THE GROUP’S PRINCIPAL BUSINESSES 54 6.5.1 Presentation of the Group’s Activities 54 6.5.2 Presentation of Water Europe Activities 58 6.5.3 Presentation of Waste Europe activities 63 6.5.4 Presentation of the Group’s International activities 66

6.6 DEPENDENCE FACTORS 73

6.7 LEGAL AND REGULATORY FRAMEWORK 74 6.7.1 Interdisciplinary regulations 74 6.7.2 Regulation relating to businesses 77

6.8 ENVIRONMENTAL POLICY 81 6.8.1 Environmental management 81 6.8.2 The environmental program 83 6.8.3 Health protection 83 6.8.4 Conservation of resources 85 6.8.5 Prevention of climate change 86 6.8.6 Expenditure aimed at guaranteeing the protection of the environment 88

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 33 6 OVERVIEW OF ACTIVITIES General Information

Z 6.1 GENERAL INFORMATION

With total revenues of €12.3 billion, and 65,895 employees as of The Group’s activities in the waste sector particularly include: December 31, 2009, the Group is a reference player in the global ● waste collection (household waste, waste from local environmental market (water and waste). authorities, and industrial waste; non-hazardous and The Group is active in each stage of the water and waste cycles, hazardous waste, with the exception of radioactive waste and therefore has expertise in this area. It operates both on from nuclear activities) and urban cleaning services; behalf of public authorities and private sector players. ● pre-treatment of this waste; The Group’s water-related activities specifi cally include: ● sorting, recycling, and material, biological or energy recovery ● catchment, treatment, and distribution of drinking water; of recoverable portions;

● maintenance of networks and operation of plants; ● incineration and landfi lling of residual portions;

● customer management; ● integrated management of industrial sites (industrial sanitation, pollution clean-up, and remediation of polluted ● collection and treatment of municipal and industrial sites or soil); and wastewater; ● sludge treatment and recovery. ● design, building, sometimes fi nancing, and operation of drinking water production and wastewater treatment plants, The Group engages in its activity through public and private as well as desalination and water treatment plants, for customers, under various types of contracts: purposes of recovery; ● in the water sector, the Group primarily enters into public ● studies, master plans, modeling of underground water tables services delegation contracts (leases or delegation of and hydraulic fl ows, and general contracting for water public services), and public contracts, as well as service, management infrastructure projects; and operational, and maintenance contracts, and building and engineering projects; ● biological and energy recovery of treated sewage sludge. ● 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, building and operation contracts.

In 2009, 52% of the Group’s consolidated revenues was earned in the water segment, and 48% in the waste segment.

34 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 OVERVIEW OF ACTIVITIES General Information

The Group is organized around three main segments: Water business units. Another segment, known as “Other”, covers Europe, Waste Europe, and International (Degrémont and only corporate functions. The following diagram shows the activities outside Western Europe), which are divided into nine organization of the 9 business units:

SUEZ ENVIRONNEMENT Corporate Functions

Water Europe Waste Europe International

SITA France North America Degrémont Lyonnaise des Eaux

SITA United Kingdom + Asia-Pacific Scandinavia AGBAR Central Europe SITA Benelux + Mediterranean Basin Germany & Middle East

The graph below shows the distribution of the Group’s this organization (the “Other“ segment is not shown, as it covers consolidated revenues as of December 31, 2009, according to only corporate functions within SUEZ ENVIRONNEMENT): 6

24% 43% International Waste Europe

33% Water Europe

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 35 6 OVERVIEW OF ACTIVITIES General Information

Europe is the Group’s historic development area and remains its the distribution of the Group’s revenues by geographic region as region of reference. Thanks to this foothold in Europe, particularly of December 31, 2009 (1): in France, the Group is able to mobilize its know-how and skills and adapt them to other continents. The following map shows

North Europe Asia America 78% 4% 6%

Africa & Middle East 7%

South America 2% Oceania 3%

The Group benefi ts from an extensive network of subsidiaries with public or private local actors (industrial, fi nancial, or joint and agencies; as of year-end 2009, the Group was active as an ventures) that have an in-depth knowledge of the local context, operator in over 35 countries. Thus, outside of Europe, major cities following the model of the historic partnership with La Caixa such as Indianapolis, Hong Kong, Casablanca, Perth, Jakarta, and (Agbar in Spain) or New World (Sino-French Holdings in China). most recently Melbourne have awarded the Group all or part of The Group is active around the world under various very well- the management of their water, wastewater, and waste-related known brands, particularly SITA for waste, and Lyonnaise des services, and even the building of major infrastructure in these Eaux, United Water, Degrémont, and Ondeo Industrial Solutions areas. The Group is most often active through partnerships for water.

(1) This chart shows the geographic distribution of the Group’s revenues irrespective of the accounting segmentation assumed in the Group’s Consolidated Financial Statements at Section 20.1 of this document.

36 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 OVERVIEW OF ACTIVITIES Group Assets

This map shows the locations of the Group’s principal subsidiaries and principal brands around the world as of December 31, 2009:

Worldwide presence

Water Activity 6

Waste Activity

Water & Waste Activities

Finally, the Group has always placed research and development UCLA in the United States) and private actors (R+i Alliance at the core of its activity, particularly through major partnerships, partnership between Lyonnaise des Eaux, Agbar, United Water, joining with both public players (for example, with Cemagref Northumbrian Water and SUEZ ENVIRONNEMENT, participation and CNRS in France, Tongji and Tsinghua Universities in China, in the Global Water Research Coalition (GWRC)).

Z 6.2 GROUP ASSETS

A MAJOR PLAYER IN ENVIRONMENTAL Group believes it holds leading positions in all its businesses (in BUSINESSES terms of revenues):

● no. 2 in France, Europe and the world in the water sector; With total 2009 revenues of €12.3 billion, the Group is one ● no. 1 in water business activities in Spain, through Sociedad of the two main global environmental players and the only General de Aguas de Barcelona (Agbar); and international player completely dedicated to water and waste services. Through its presence in all water and waste cycles, the ● no. 2 in France and in Europe, and No. 4 worldwide in the waste sector.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 37 6 OVERVIEW OF ACTIVITIES Group Assets

In the water sector, in 2009 the Group operated over 1,900 drinking Finally, the development of new technologies to address water production units, serving a population of 90 million the growing complexity of environmental problems and the people (1). The Group also operated over 1,600 wastewater increasing role of private operators (the portion of the global treatment sites, meeting the needs of 58 million people (1). population served by the private sector in the water segment went from 5% to 12% between 1999 and 2009 (source: Pinsent In 2009, the Group treated nearly 40 million tons of waste, and Masons Water Yearbook 2009-2010), are also positive factors for served nearly 46 million people and over 460,000 clients in the expansion of the Group’s markets. services and industry through its waste collection activities.

It also holds a key competitive advantage that sets it apart from its competitors in the form of Degrémont, the world leader (in terms of revenues) in the design and building of water treatment plants. AN INTEGRATED PLAYER THROUGHOUT THE ENTIRE WATER AND WASTE VALUE CHAIN Finally, the Group enjoys an excellent reputation in all markets in which it is active, as well as brand recognition. The Group has completely mastered each step of the water and waste cycles, allowing it to implement commercial and technological synergies within each segment.

A STRONG ENVIRONMENTAL MARKET The Group is thus able to offer a complete range of services in terms of types of services and contracts, adapted to all The Group’s strategy is based on solid long-term growth factors: categories of customer, including both local authorities and the strengthening of health and environmental regulations, private industrial players. population growth and urbanization.

The environmental market benefi ts from favorable demographic and social changes. A PLAYER CAPABLE OF BENEFITING Growing urbanization in certain areas and growing infrastructure FROM THE COMPLEMENTARY ASPECTS needs are also economic and social assets that benefi t the OF THE WATER AND WASTE BUSINESSES Group. Thus, while 550 million inhabitants are going to be added to the current urban population over the next 20 years – thereby While they initially follow unrelated industrial logic, the water considerably increasing water infrastructure needs – 2.4 billion and waste segments nevertheless offer certain complementary people – i.e., approximately 36% of the world population – do features, which the Group has made one of its strengths. not currently have access to a wastewater treatment system. (source: SAM Insight, November 2009). Thus, the Group is able to generate synergies between the two activities, particularly by sharing certain technologies (for Regulatory changes brought about by increasing concerns for example, in sludge or compost treatment), combining research environmental protection are an additional factor driving the and development in certain target programs (such as biomass growth of this market. This regulatory pressure – increasingly management for material or energy recovery purposes), and approved by populations – resulted in an increasing realizing operating synergies by pooling certain corporate demand for complex services and favors the growth of functions. To illustrate, the Group’s development in China with players in these markets, particularly global players such as the Shanghai Chemical Industrial Park (SCIP) marks an important SUEZ ENVIRONNEMENT. For example, according to the European step in trade collaboration between the two activities, by Commission, 78% of Europeans are in favor of an increased combining a wastewater treatment plant and China’s largest allocation of money by the European Union to environmental hazardous waste incineration plant at a single site. protection, even if it implies that other sectors would receive less money (source: Eurobarometer 2008).

(1) The basis for the calculation of the population served in the Water segment is the “managed“ scope of consolidation (fully consolidated companies, proportionately consolidated companies, and companies consolidated by the equity method). Plants in operation, for which Degrémont provides complete wastewater treatment or drinking water services, are included. The significant difference in the portion of the population served in 2009 compared to 2008, therefore, is due to a more accurate accounting of Degrémont’s operating activities.

38 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 OVERVIEW OF ACTIVITIES Group Assets

AN EMPHASIS ON RESEARCH The equilibrium of the Group’s economic model is also due to AND DEVELOPMENT AT THE CORE the variety of its exposure: service contracts, short-, medium- OF THE GROUP’S CULTURE or long-term contracts, local authorities or industrial customers, and regulated/non-regulated markets.

For 70 years, the Group has been the source of signifi cant innovation: the fi rst collection trucks with waste compacting in 1936 (the “Rey-SITA compacting dumper“), the fi rst reverse TARGETED INTERNATIONAL GROWTH BASED osmosis desalination plant in the world producing urban ON A STRONG CULTURE OF PARTNERSHIP drinking water in 1985, the fi rst compartmentalized collection trucks allowing the separate collection of recyclable packaging since the early 1990s (“combi system“), the fi rst hazardous The Group is pursuing a selective international growth waste stabilization-solidifi cation processes in 1993, and the fi rst strategy (outside Europe) based on identifying the fastest- water ultra-fi ltration process in 1998. growing markets with controlled risk profi les. For example, the positioning of United Water in the United States in regulated The Group’s research is based on a global scientifi c and technical activities addresses this issue and allows the Group to establish network consisting of experts grouped within expertise and the solid position it needs for future development. research centers; technological developments resulting from this research are the fruit of close collaboration and a sharing The Group maintains a strong partnership culture, particularly of knowledge between internal experts, as well as with the in countries offering high growth potential in the environmental Group’s university and industrial partners. Thus, in 2009, the segments and where teaming up with local partners deepens Group had implemented over 65 research and development its understanding of local challenges, while allowing risks and programs in 200 laboratories around the world. The research and invested capital to be shared. development teams have some 500 researchers, technicians, A few examples include: and experts, and an effective budget of €65 million (the Group’s share of the expenses). Moreover, in order to jointly spearhead ● LYDEC, the Group’s spearhead in Morocco since 1997, is 6 the R&D efforts of the various operating units of the Group in the an example of a partnership with local investors in a listed water business and develop joint research programs, the Group company, which distributes water and electricity to the cities created a research body called “R+i Alliance“ with a budget of of Casablanca and Mohammedia; €9 million in 2009. ● Sino-French Holdings (“SFH“) has operated since 1985 The Group believes its technological expertise allows it to meet in an equal partnership with New World Holding, a Hong its customers’ expectations effectively and to rank among Kong-based company, to meet the water and wastewater the leading players as regards technological developments in treatment needs of around 14 million people; SFH is an environmental management services. example of an operating partnership, which is itself based on a large number of partnerships with local municipalities for the co-fi nancing of assets.

A BALANCED ECONOMIC MODEL

A FLEXIBLE ECONOMIC MODEL One of the Group’s principal strengths lies in the diversity and THAT PRESERVES THE ECONOMIC BALANCE balance of its business and geographic exposure. OF LONG-TERM CONTRACTS The Group’s total revenues shows a balance between its water and waste activities. SUEZ ENVIRONNEMENT has a A signifi cant portion of the Group’s activity is carried out through strong European base: 78% of its revenues is earned in Europe. delegated management contracts (delegation of public service SUEZ ENVIRONNEMENT’s position favors developed markets, in France, or the equivalent outside France), entered into for with stable political and legal systems: 87% of its total revenues long periods of time. is earned in Europe, North America and Australia. These contracts generally afford the Group the fl exibility needed to maintain their economic balance, notably by continually improving quality and sophistication of the services provided, thus meeting the needs of both parties by offering innovative and profi table services or technologies.

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A BALANCED FINANCIAL STRUCTURE 4. Build our development with all our stakeholders: AND A SELECTIVE DEVELOPMENT PROJECT ● pursue active dialogue with stakeholders, MANAGEMENT POLICY ● be an actor in sustainable local development,

The Group has a balanced fi nancial structure. ● provide regular and accessible information on our sustainable development activities. The development choices are based on a strict fi nancial discipline that allows the Group to maintain a sound balance sheet. A set of 22 performance indicators have been defi ned. Published and analyzed regularly, these indicators allow the Group to monitor its progress in meeting these twelve commitments.

SUSTAINABLE DEVELOPMENT AT THE CORE In 2009, the Group also defi ned progress goals on the 2012 OF THE GROUP’S ORGANIZATION horizon for each of these commitments. (For more information: http://www.suez-environnement.com/ The Group’s steady ambition is to be a responsible player both document/?f=profi le/en/DD-190709.pdf) socially and environmentally, and to this end the Group has The Group’s sustainable development policy also takes shape implemented a structured approach within the company. through a “Sustainable Development Roadmap,“ which This approach was formalized in 2008 and is applicable to the details the technical and managerial challenges faced by the entire Group through its 4 main priorities, broken down into Company in environmental, corporate, social and governance- 12 commitments: related issues. This roadmap also allows the Group’s progress in exercising its corporate responsibility to be measured. All 1. Conserve natural resources and promote the circular major subsidiaries of the Group have their own “Sustainable economy: Development Roadmap“ spelling out the Group’s objectives at their operational level. ● optimize waste recycling and recovery rates, This sustainable development policy will afford the Group a ● increase the technical yields of drinking water networks; stronger competitive post-crisis position. 2. Innovate to meet environmental challenges:

● reduce greenhouse gas emissions,

● improve energy effi ciency, A STEADY SHAREHOLDING

● increase the production of renewable energy, GDF SUEZ’s interest in SUEZ ENVIRONNEMENT COMPANY share ● incorporate biodiversity into site management; capital constitutes an element of stability offering guarantees to 3. Have our employees play a leading role in sustainable the customers and industrial or fi nancial partners of the Group, development: and which enables the Group to enjoy synergies with GDF SUEZ, such as industrial cooperation in energy or environmental ● develop professional expertise, fi elds and the sharing of a number of administrative/ ● continually improve work safety, support functions. The listing on the stock exchange gives SUEZ ENVIRONNEMENT COMPANY greater visibility and direct ● commit to diversity; access to the fi nancial markets.

Z 6.3 STRATEGY

SUEZ ENVIRONNEMENT’s ambition is to strengthen its position as sustainable and profi table growth, combined with a balanced a reference player in environmental protection and sustainable risk profi le. This plan is aimed at establishing the Group as one development areas, by offering its customers complete control of the leaders in one and/or the other business activities, in of the water and waste cycles. Its industrial plan refl ects this each country where it operates. desire for development in all its businesses by giving priority to

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SUEZ ENVIRONNEMENT’s strategy is perfectly in line with in industrial circuits, and organic matter may be recovered in the broader strategic orientation of the GDF SUEZ Group, an the form of energy or compost. The Group is thus active in the international industrial group able to provide the most effective progressive evolution toward a closed cycle of materials, one of technical solutions to meet the main challenges of sustainable the major challenges of the 21st century. Likewise, in the water development in energy, water and waste. sector, wastewater treatment stations are becoming a kind of refi nery, producing water that can be reused, renewable energy, soil fertilizers, and fi nal waste to be eliminated without risk to the environment. 6.3.1 SUSTAINABLE DEVELOPMENT AND OPERATIONAL AND TECHNICAL 6.3.1.3 MAKE RESEARCH AND TECHNICAL KNOW-H OW, THE GROUP’S CORE KNOW-HOW A PRIORITY IN THE GROUP’S STRATEGIC A MBITIONS FUTURE DEVELOPMENT At the heart of the Group’s strategy is research focused on applications that strive to improve its operational performance 6.3.1.1 OFFER ITS CLIENTS SOLUTIONS (anticipation and control of health and environmental risks, FOR SUSTAINABLE DEVELOPMENT energy effi ciency) and perfect its technical expertise (treatment The growing aspiration for harmonious and sustainable of sludge, desalination, reuse of wastewater, environment- development involves increased attention to environmental compatibility of landfi lling). protection and reasonable consumption of non-renewable The Group also seeks to continue developing the best technical resources. The supply and distribution of drinking water, solutions with the best experts, specifi cally to: wastewater treatment services, waste management and recovery are services essential to the well-being of people ● adapt to climate change and prevent it from worsening, and the successful operation of businesses, and constitute preserve natural resources, and protect the environment real challenges in certain regions of the world. The demand for and the quality of life; 6 these services, and for the expansion and improvement in their ● improve the quality of drinking water and services to quality, will continue to increase over the long term. In offering consumers; and high-quality water and waste management services, the Group will specifi cally seek to: ● expand its technological leadership to new areas, particularly those related to waste recovery and elimination. ● assist its customers in managing resources in a sustainable and reasonable way, and assist them in limiting their environmental impacts and identify alternative resources;

● offer optimized solutions in energy consumption and, 6.3.2 PURSUIT OF A GLOBAL DEVELOPMENT as applicable, solutions that combine protection of the PLAN THAT MAINTAINS LOCAL environment and the production of renewable energy; and INTEGRATION OF ITS BUSINESSES

● continue its involvement in establishing better environmental management governance in emerging countries, to promote The Group’s activities are local by nature, and the Group’s the emergence of conditions favorable to development of objective is therefore to be recognized by its clients as a local the Group’s activities in those countries. player. Its strategic goals refl ect the dynamics of each region and the positions achieved by the Group. 6.3.1.2 IDENTIFY AND USE ENERGY AND MATERIAL GENERATION POTENTIALS IN THE VALUE 6.3.2.1 CONSOLIDATE AND STRENGTHEN CHAINS THE GROUP’S POSITIONS IN EUROPE The water and waste activities are facing new challenges, to (a) In water which the Group must respond and adapt. Waste, through appropriate treatment, can and must be recovered and In France, a market in which it is fi rmly rooted, the Group intends reincorporated in the economic cycle: landfi lls and incinerators to retain its market share in the drinking water segment and to may also be operated as renewable energy production sites, drive the growth and profi tability of its activities by (i) developing recycled materials may be used as secondary raw materials wastewater activities (increase connections, advanced

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treatments, public services investments) through private or industrialization of alternative treatment techniques, such as delegation of public services contracts, and (ii) enhancing its new recycling activities or methanization, and (ii) to strengthen offer through the sale of high value-added services (preservation the structuring of its positions in emerging sectors (remediation of water resources, predictive management of swimming-water of polluted soils and sites, dismantling of vehicles at the end of quality, dynamic management of sewage network fl ows) and their lives, processing of electrical and electronic equipment). additional services offered to consumers (automatic meter- In Benelux and Germany, the Group intends to continue to reading, etc.). These actions should also strengthen the Group’s integrate itself in the value chain, and to position itself to competitiveness, particularly in terms of the renewal of certain take advantage of opportunities in the recycling industry. Its of its major contracts. functional services have also been consolidated to take utmost In Spain, the Group aims at developing an approach that is both advantage of opportunities for synergies presented by these dynamic and local, to take advantage of growth opportunities regions in their border areas. In the Netherlands, the Group’s goal offered (wastewater, building and operation of desalination is also to pursue development of its collection activities through plants and wastewater recycling plants, etc.), while taking a dynamic commercial policy and the sale of complementary into consideration very specifi c regional characteristics. In services, as well as to develop its waste treatment capacities. October 2009, the Group announced an agreement with Criteria In the United Kingdom and Scandinavia, the Group plans to CaixaCorp that will allow it to increase its share in Agbar’s support changes in treatment methods in recycling and recovery share capital (focused on its water and environment activities) of various material fl ows. In Great Britain, the Group will also up to 75%. This deal, which is due to be completed in mid- pursue its policy to win complex integrated waste management 2010, will allow SUEZ ENVIRONNEMENT to develop a second projects. European pillar in the water segment (see Section 6.5.2.2 of this document). In Central Europe, progressive compliance with European regulations, supported by European Community fi nancing, and In Italy, benefi ting from its positions in Tuscany, the Group seeks, the growing sophistication of waste management methods will either alone or through partnerships, to seize the development make the coming years positive for the Group’s activities. It will opportunities offered specifi cally by the Ronchi Decree-Law seek to strengthen its positions in Poland, the Czech Republic, (described in Paragraph 6.5.2.3.(a)). and Slovakia, and to seize opportunities in new markets. In Germany, the Group will consider development opportunities, specifi cally in local public companies (in the context of opening 6.3.2.2 DEVELOP GROUP STRONGHOLDS up the Stadtwerke equity), where applicable, by using the local IN THE UNITED STATES, CHINA waste activities of SITA or of Electrabel in energy, through AND AUSTRALIA industrial and trade cooperation. (a) The United States In Great Britain, the Group may also pursue development in the water businesses, notably through Agbar’s activities in this Through United Water, a water and wastewater treatment market. services operator, the Group’s objective is to develop (i) its regulated activities through investments in maintenance and in Finally, in Central Europe, the obligation to ensure that water the expansion of its asset base and through the corresponding management infrastructures are in compliance with EC rate increases expected from the regulatory authorities, and (ii) standards will push the public sector to try to better defi ne its service contract activities, specifi cally by entering into new the concept of a “public-private” partnership. Therefore, the contracts and selling technical assistance. At the same time, coming years should be conducive to the development of these the Group intends to increase its portfolio of regulated and non- partnerships. regulated activities around its current bases.

(b) In waste (b) China The Group’s ambition is to consolidate its traditional collection In the water sector, through Sino French Holdings (SFH), a joint and treatment business activities, by controlling the entire venture with the Chinese group New World, the Group intends waste value chain, and by bolstering certain positions, both to pursue selective growth by developing new concessions, geographically and in terms of business expertise. The Group also in particular drinking water for municipalities, as well as seeks to strengthen and develop its recycling activities (paper, wastewater treatment services for municipalities and industrial cardboard, glass, plastic, tires, wood, ferrous and non-ferrous parks, and particularly the area of integrated sludge management metals) and its activities involving energy recovery from waste. (see Suzhou contract awarded in September 2009) focusing on In France, the Group intends (i) to continue its growth and its bases in Macao, Shanghai, Beijing and Chongqing, in line improve profi tability in its traditional business activities with its current investment structures (joint companies and (collection and treatment) through productivity efforts, by partnerships). raising operating and innovation standards, and through the

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In the waste sector, the Group seeks to pursue development ● in the Mediterranean Basin (notably Northern Africa and around its Hong Kong and Shanghai bases, by offering technically Turkey), the Group intends to rapidly expand its activities advanced solutions for integrated treatment and management through targeted partnerships or management contracts, of waste, particularly for industrial parks. primarily in the water segments (wastewater treatment, distribution); Finally, as illustrated by its location at the Shanghai industrial and chemical park, the Group intends to promote its two activities, ● the Gulf countries also present numerous development water and waste, through a common trading approach, to meet prospects (industrial parks, etc.), which are being studied the growing demand from industrial sites for an integrated with the Group’s partners. multi-utility management service.

(c) Australia 2009 was a particularly favorable year for the Group, which saw 6.3.3 MAINTAINING BALANCE its market share rise despite the economic crisis in the waste IN THE INDUSTRIAL MODEL, ENSURING sector, and which strengthened its position in the water sector THE TRANSITION TO NEW BUSINESS by winning the highly sought-after contract for the Melbourne MODELS, AND IMPROVING OPERATING desalination plant. PERFORMANCE

In the waste sector, the Group will continue to take advantage of the growth opportunities that have arisen, specifi cally in several 6.3.3.1 MAINTAINING BALANCE IN THE INDUSTRIAL Australian states, due to the increase in the tax on landfi lls. MODEL The Group will also continue to take advantage of growth One of the Group’s principal strengths lies in the diversity and opportunities that arise in niche markets, such as collection balance of its exposure: service contracts, short-, medium- or and treatment associated with the recycling of electronic and long-term contracts, local authorities or industrial customers, medical waste and plastics. regulated/non-regulated, and mature countries or emerging 6 In the water treatment sector, Degrémont won a major coup markets. in the form of the public-private partnership agreement for the The Group seeks to allocate the capital employed in order to building and operation of a desalination plant at Wonthaggi (near preserve the diversity and balance of its business portfolio Melbourne) in July 2009. Development opportunities in 2010 will depending on the expected profi tability and risks incurred by include new desalination and wastewater recovery contracts, each activity. This approach is all the more signifi cant since as well as delegation of public services projects. some of the Group’s businesses will experience growing capital intensity despite the development of new service businesses. 6.3.2.3 SEIZING ATTRACTIVE DEVELOPMENT The Group considers itself well positioned to address this OPPORTUNITIES IN CERTAIN REGIONS change, and has the fi nancial soundness needed to make such OF THE WORLD investments. The Group is researching countries in which the “risk/return on The Group’s investment policy is carried out in accordance with investment“ ratio will allow it to establish long-term bases for strict fi nancial criteria addressing the principles set forth in development. It is using the full range of possible delegation Section 6.3.4 of this document. of public services contracts and is seeking new forms of partnerships adapted to the specifi c features of the markets in question. Thus: 6.3.3.2 EXPLOITING POTENTIAL SYNERGIES The Group is organized to favor maximum integration between ● on a global scale, Degrémont and Safege give the Group a very upstream position in its businesses and provide the the two segments, water and waste:

Group with a signifi cant competitive advantage. In this ● joint research programs (odor treatment and energy recovery); regard, Degrémont intends to pursue its growth in its four ● business sectors (design and build, operating services, implementation of shared technologies (composting activities, equipment, managing BOT contracts) in both the mature methanization, treatment and recycling of sludge and countries where it is active, and in emerging markets; treatment of leachates in wastewater treatment plants);

● generation of commercial synergies, such as in France, with a joint development department, or outside Europe, where some subsidiaries assume management of the two activities;

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● joint commercial activities in the water and waste segments, SUEZ ENVIRONNEMENT hopes to continue these efforts, and to ensure an integrated multi-utility management service; in early 2010 launched a new COMPASS plan (COMPASS 2) for 2010-2012, with a goal of €250 million in net EBITDA gains ● savings in general expenses generated by combining versus 2009. corporate functions (fi nance, strategy, human resources, IT, communications, legal and development). With respect to purchases, COMPASS directly addresses purchase volumes of €2.1 billion on a total base of €5 billion in The Group also intends to pursue the exploitation of operational 2009. A portion of the effi ciency gains is shared with customers. synergies with the GDF SUEZ Group’s energy activities: In addition, savings realized in the regulated sector (in the ● combined project management, such as the recovery United States for instance) are returned to clients when rates of renewable energy from waste, or the desalination of are fi xed. Savings on purchases are achieved through initiatives seawater (plants that combine energy production, thermal that frequently span the entire Group, such as the settling desalination, and membrane desalination); of bid invitations or negotiating framework agreements at the European level, even internationally in some cases, or by ● developing synergies as part of global service offerings for implementing synergies between countries or business units the metering of fl uids (in case of identical client issues); based on local characteristics. For example: ● pooling resources in order to benefi t from signifi cant scale ● negotiations for chemical products are jointly conducted by effects, especially in purchases and R&D efforts. the Water and Waste purchase teams in France. Standardized specifi cations between countries facilitate negotiation at an 6.3.3.3 IMPROVED PERFORMANCE international level for equipment such as containers, tires Historically, the Group has given high priority to the optimization and dumpsters in the Waste services, and pumps, pipes and of business profi tability, notably through ongoing performance instruments in Water services; improvement plans. ● in addition to savings in unit prices, these projects aim at The Group plans to pursue and expand its efforts at profi tability developing long-term partnerships with strategic suppliers through the COMPASS program, which is part of an ongoing enabling technological development, a control of operational effort that has been in place for a number of years. COMPASS processes and long term continuous improvements in is an internal benchmark for excellence, which aims both to overall costs. promote industrial excellence and control operating costs. In terms of industrial effi ciency, COMPASS is deployed across a The program generated results of €55 million in 2008 (1), with wide variety of activities at all levels of the organization, in order to €19.2 million in purchases, €25 million in operating profi ts, foster a sound culture of performance improvement, conveying €5.8 million in SG&A and €5 million in health, safety and claims the Group’s intention to adapt to diffi cult macroeconomic management. conditions. These activities cover three main topics:

In 2009, additional COMPASS gains totaled €135 million (2), ● the gradual optimization of certain commercial contracts including €32 million in purchases, €56 million in operating (United Water, Degrémont, Agbar, Australia, Sweden, gains, €43 million in SG&A and €4 million in health, safety and Mexico, etc.), reduction of leaks in water networks (Lydec, risk management. Lyonnaise des Eaux, Palyja, etc.), focused management of large numbers of clients in the Water services as well In 2008-2009, the Group saw cumulative gains of €190 million as the promotion of electronic invoicing, the conversion and in two years exceeded the goal it had set for itself for a three- of incoming correspondence systems to paperless, the year period (2008-2010). This goal was initially €125 million, and increasing use of professional techniques in operations was revised upward to €180 million at the presentation of the scheduling and in the use of GPS tools (Lyonnaise des Eaux), 2008 fi nancial statements. the optimization of waste fl ow management, which was particularly strong in 2009 (growing in-sourcing of fl ows in

(1) In 2008, distribution by segment was as follows: Water Europe €11 million, Waste Europe €23 million, International €14 million and Other €7 million. (2) In 2009, distribution by segment was as follows: Water Europe €25 million, Waste Europe €70 million, International €24 million and Other €16 million.

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the United Kingdom, orientation toward more cost-effective 6.3.3.4 MOBILIZING EMPLOYEES AROUND treatment systems, optimization of cross-border fl ows THE INDUSTRIAL PROJECT such as in the case of an incinerator at the border between Implementation of this strategy involves the permanent Germany and the Netherlands, etc.), the optimization in mobilization of the Group’s expertise and employees. Priority collection cycle costs (use of alternative fuels, maintenance is given to local recruitment, centralized career management, of vehicles, a reduction in kilometers traveled, optimization and increased employee mobility among the Group’s various of vehicle fl eets), a highly professional management of subsidiaries and activities. To improve mobility, professional operating processes in household and industrial waste experience, and diversity in recruiting, strong links are (“Excellence” programs at SITA France) and more generally, maintained with GDF SUEZ and the various businesses. thanks to ongoing benchmarking of all Water and Waste sites to promote the spread of best practices. Lastly, the Group To offer employees incentivizing professional career paths, the has strongly emphasized bringing down the costs of energy Group will continue to anticipate changes in the businesses and consumption and enhancing production capacities as best adapt skills to new needs through a dynamic training policy. as possible (incinerators, treatment stations, new processes, The Group intends to promote long-term relations with its promotion of new energies, biogas); employees and develop their commitment.

● the reduction of general and administrative costs gained Finally, the Group’s strategic planning includes a chapter on the renewed signifi cance in 2009 due to the economic crisis, long-term challenges facing Human Resources, to ensure that which has increasingly compelled a rationalization of the the objectives that have been set are consistent with projected Group’s organizations and operating processes: integrated growth in activities. management, both in France, especially at SITA and Lyonnaise des Eaux (reorganization of regions and business lines, and overseas (rationalization of administrative and commercial costs, setting up shared services centers with a large scope 6.3.4 2010 OUTLOOK of intervention). The regrouping of the head offi ces of the 6 main French entities (SUEZ ENVIRONNEMENT, SITA France, Economic conditions have deteriorated signifi cantly since the Lyonnaise des Eaux, Degrémont and OIS) at a single site at la end of 2008, with a 3.9% decline in GDP in 2009 in the euro zone, Defense is expected to lead to important synergies between and 3.2% for the advanced economies (source: IMF). now and the end of 2010, with SITA France having already moved to this site in November 2009; For 2010, visibility is low with regard to macroeconomic prospects, with projections of low growth. ● efforts in the area of workplace health and safety have been pursued and have resulted in additional reductions in the In this economic context, and based on GDP growth estimates number of days lost at work, particularly due to accidents of 1% in the euro zone and stable average prices for secondary (the accident severity rate declined from 0.65 to 0.64). These raw materials compared to December 31, 2009, the Group has efforts are seen more broadly in the context of the Group’s set the following goals for 2010: twelve commitments to sustainable development. Lastly, the ● growth in total revenue equal to or greater than 5% compared number and scale of claims are globally declining, especially with 2009, at constant exchange rates; in the area of waste activities, which bear the most risk: the improvements made in 2008 were again confi rmed in 2009. ● growth in EBITDA greater than or equal to 8% compared with 2009, at constant exchange rates; Notwithstanding the COMPASS program, it must be noted that the listing of SUEZ ENVIRONNEMENT COMPANY on the stock ● 2010 free cash fl ow greater than or equal to €0.7 billion exchange has led to additional annual structural costs of around (which corresponds to the total 2009 free cash fl ow excluding €10 million based on the Company’s new obligations as a listed non-recurring items (1)); company, over the 2007 cost base. These costs were assumed for a full year in 2009, compared to slightly over six months the previous year.

(1) €76 million of refund of income tax prepayments paid in 2008 and €105 million in financial accrued interest but not paid out, linked to bonds issued in 2009.

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● total net investment less than or equal to €1.3 billion (1), to which With 2009 performance in line with the stated objectives, the will be added €0.6 billion corresponding to the Agbar deal and Company will propose a 2010 dividend payment of €0.65 per Agbar’s full consolidation into the SUEZ ENVIRONNEMENT’s share, i.e., a total of €318 million. fi nancial statements once the deal is fi nalized. The dividend should be approved by the general shareholders’ These goals include completing the takeover of 75% of Agbar’s meeting to be held May 20, 2010. It will be subject to a resolution share capital, which is set to occur in mid-2010. At the close of to distribute a dividend of €1.30 per share, because it will also this deal, Suez Environnement’s consolidated net fi nancial debt include the €0.65 per share interim dividend already paid in should increase by some €1.3 billion. June 2009.

On the 2012 horizon, the Group’s objectives include a net This outlook is based on data, assumptions and estimates the fi nancial debt / EBITDA ratio reaching approximately 3, with: Group considers appropriate. It may change or be modifi ed due to uncertainties, especially in economic, fi nancial, competitive, ● implementation of a new COMPASS 2 plan for 2010-2012, regulatory, and climatic conditions. In addition, the occurrence the goal of which is a net EBITDA increase of €250 million of certain risks described in Section 4 “Risk Factors“ of this cumulative over three years, compared to 2009; document would impact the activities of the Group and its ability ● continuing its policy of selectiveness in identifying investments. to achieve its objectives. Moreover, to achieve these objectives requires the successful implementation of the strategy The Group confi rms its long-term strategy, based on a described in paragraph 6.3 of this Reference Document. As a resilient economic model, with solid long-term growth factors result, the Group does not make any commitments or give any (regulation, population increase, urban development and guarantees for the realization of the objectives and forecasts increasing scarcity of resources requiring optimized water described in this Section 6.3.4. management and waste recovery). The Group has a balanced position in attractive markets, with a presence in all the water These objectives and prospects were based on accounting and waste value chains, and in terms of geographic presence principles defi ned by the Group in drawing up the Consolidated and mix of contracts with regard to greater or lesser levels of Financial Statements presented in Section 20.1 of this Reference capital intensity. Document.

6.4 PRESENTATION OF THE MARKET Z AND COMPETITIVE POSITION (2)

6.4.1 PRESENTATION OF THE WATER and industrial customers relating to (i) the production and AND WASTE SECTORS distribution of drinking water or water for industrial uses, wastewater collection and treatment, waste management (activities that represented, for example, approximately 80% 6.4.1.1 GENERAL PRESENTATION of total environmental expenses in France in 2007; source: OF THE ENVIRONMENTAL MANAGEMENT IFEN 2009), as well as (ii) air protection, anti-noise measures, SERVICES SECTOR protection of biodiversity, and management of radioactive nuclear waste (which together represented approximately 20% (a) General characteristics of total environmental expenditures in France in 2007; source: The environmental management services sector covers all IFEN 2009). services provided to private parties, local public entities,

(1) Net investments excluding additional strategic acquisitions (they include investments in maintenance, and organic and financial development net of disposals). (2) The market data presented in this document come primarily from databases and studies carried out by Eurostat and l’Institut Français de l’Environnement (IFEN [the French Institute for the Environment], presently 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 2007 are not available for all countries in which the Group operates, to the knowledge of the Group.

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Increased demand for high levels of environmental protection has (c) Growth factors in the environmental management resulted in an increasingly strict, dedicated regulatory framework. services sector This requires major investments within the required deadlines The Group believes that the environmental management and effective and global management of related issues, which services markets will grow in the long term, notably because of has led to the emergence of European or global players that a combination of macroeconomic factors such as: specialize in environmental management services. This change is occurring at different speeds, depending on the country. ● world demographic growth (average annual growth of 1.1% between 2007 and 2020) (source: OECD, 2008); The public’s expectations for measures and actions for environmental protection are not diminishing, even within the ● increased urbanization, particularly in emerging countries (in most advanced countries in this regard. Thus, 92% of the French 2030, nearly 60% of the world’s population (versus less than say they are concerned about the condition of the planet, and 50% in 2007) will be living in urban regions), (according to the say they are concerned about environmental protection (source: OECD: Environmental Outlook to 2030, 2008); TNS Sofres, 2009). ● world economic growth, which despite the current crisis, The growth in expenditures related to environmental protection is estimated at an average of 3.6% per year for 2010-2015 is generally greater than growth in the gross domestic product. (source: Oxford Economics 2009); Thus, in France, from 1990 to 2007, the average annual rate of ● increase in the prices for raw materials, which should growth in expenditures linked to environmental protection was recover and rise over the long term, increasing the economic 6.3%, compared to 3.6% for gross domestic product during the attractiveness of waste recovery, through either recycling or same period (source: IFEN, “The economy and the environment energy recovery; in 2007,“ 2009 edition). ● the need to adapt to climate change, which will affect water (b) Growth in environmental management services resources most particularly. Changes in regulatory requirements, higher expectations from In addition to these macroeconomic factors, the Group believes 6 end users and, consequently, the increasing complexity and these markets should expand through a combination of various capital intensiveness of the corresponding infrastructure and factors specifi c to the sector: services encourage local public entities to seek the expertise ● and collaboration of private operators. greater attention paid to environmental protection around the world; Like local public entities, in order to concentrate on managing ● their core business and satisfy the need to control environmental greater demands from the public for better hygiene, quality costs, large international companies in the industrial and service of life and health, and changes in consumption methods sectors are increasingly outsourcing to specialized players with linked to improved standards of living; the technical and operational resources to effi ciently provide ● stricter and better-applied environmental regulations; these environmental management services. ● very large and still-unmet needs for access to drinking water The use of specialized private operators by these major and wastewater treatment (currently, around 900 million international players in the industrial and service sectors is also people have no access to a permanent supply of drinking increasing because of the global deployment of these companies; water, and it is estimated that 2.5 billion people do not have concerned with effi ciently managing these problems, they want an improved wastewater treatment system) (source: Joint to entrust these services to specialists that are just as global, Monitoring Program for Water and Sanitation – WHO/UNICEF, in order to facilitate management and be assured of receiving 2008); uniform service at all their sites. ● the growing number of areas affected by insuffi cient water resources (or that are in a state of water stress), particularly related to global warming. By 2030, the number of individuals in a situation of severe water stress is expected to increase by 1 billion, from 2.8 to 3.9 billion (source: OECD – Environmental outlook to 2030, 2008).

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6.4.1.2 PRESENTATION OF THE WATER SECTOR

(a) A value chain that uses complex industrial processes

MUNICIPALITIES

Pumping and Customer/ Wastewater Discharge of Treatment drinking water consumer collection and treated water into and recovery production service treatment natural environment of sludge

Synergies between Water and Waste INDUSTRIAL CLIENTS services Storage Distribution Process water Biological Industrial recovery wastewater treatment Waste management services

(b) A sector characterized by signifi cant investment In the United States, the Group believes the size of the and customized growth based on specifi c local environmental management service sector for water is characteristics US$85 billion, including US$63 billion for site operation activities. It offers major opportunities for consolidation because of The Group believes that, for the European Union, the water- the very high number of small local players as well as acute related environmental service sector represents approximately needs in terms of infrastructure replacement (US$500 billion in €70 billion per year (2004 estimate). The largest European investments is anticipated for the 2006-2025 period) (source: countries are expected to invest approximately US$800 billion Financing water and wastewater to 2025, D. Lloyd Owen, 2006). in water production and distribution and wastewater treatment between 2006 and 2025 (source: Financing water and Finally, in emerging countries, where very signifi cant needs are wastewater to 2025, D. Lloyd Owen, 2006). The Group believes it still unmet, the Millennium Goals, adopted in 2000 by members is possible to achieve growth in this sector on the order of GDP of the United Nations during the World Sustainable Development +2% to 3% (empirical estimate) in Europe. Summit, stress the fact that access to drinking water as well as adequate wastewater treatment services are necessary to In the supplying of drinking water in some developed countries, protect human health and the environment. In this regard, the a slight decrease in volumes consumed is being observed, Millennium Declaration invites states to commit to reduce by notably due to the increasing use of water-saving equipment, half the proportion of people who do not have access to drinking and the implementation of industrial production processes water or wastewater treatment by the year 2015. Meeting these that consume less water. For example, in France, the Group objectives will require highly signifi cant annual investments in estimates that the volumes of water billed have declined on the near future. These countries, therefore, offer signifi cant average by roughly 1% a year, for the last fi fteen years. growth opportunities for the building and operation of water Nevertheless, this trend has been offset by the provision of treatment plants, and for water management services. In this more sophisticated interventions and additional consumer second case, opportunities are associated with potentially high services in water production, water distribution and wastewater risks that must be controlled by defi ning appropriate contracts treatment. prior to planning operations in these countries.

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(c) A market increasingly occupied by private players ● in Germany, municipalities largely manage their services through the Stadtwerke system (local public companies The Group believes that private players (the portion of the world responsible for managing certain public services), with population served by the private sector totaled 12% in 2009) private operators in a partnership position; the Group (source: Pinsent Masons Water Yearbook 2009-2010) will be believes the private sector could grow by opening up the increasingly used in the long term, particularly in the form of equity of the Stadtwerke and by pursuing the development public-private partnerships, particularly for the following reasons: of management contracts, particularly in wastewater ● private operators, which benefi t from longstanding and treatment; and diversifi ed experience, have top-level skills; ● in the United States, the Group believes the private sector ● consumer requirements in terms of water quality and related is responsible for managing 8% of operating activities; the services are increasing; Group believes that the private sector share should increase in coming years; with regard to service contract activities, ● regulations continue to tighten throughout the world; growth may come from the growing use of private operators particularly in the European Union, environmental European by the municipalities, and regarding regulated activities, the Directives and their various revisions defi ne and strengthen private sector is expected to benefi t from the consolidation the current regulatory obligations; of this sector. ● among the 15 “initial members“ of the European Union (1), some are late in transposing in domestic law the technical 6.4.1.3 PRESENTATION OF THE WASTE SECTOR European Directives related to water, particularly the 1991 The existence of a market for waste management services European Directive on urban wastewater; requires: ● the new members of the European Union (2) must comply ● a minimum level of economic development: fi rms only with the European standards; allocate a portion of their wealth to the management of ● pressure on public expenditures, greater demand from waste services after meeting their other, higher-priority 6 consumers for effi cient public services, and the business needs (particularly access to drinking water); activity’s increased technical level are encouraging many ● identifying and applying environmental regulations; public entities to take the path of public-private partnerships. ● guaranteeing a certain level of contractual stability; Local situations vary as to the use of the private sector by local authorities with regard to water services; thus: ● public awareness of the environmental issues.

● in France, municipal water systems often entrust Each country presents specifi c characteristics and therefore management to the private sector, with municipalities the nature of the services proposed by operators must be retaining ownership of their assets; adapted accordingly. Thus, in the least developed countries, demand corresponds essentially to waste collection and ● in the United Kingdom, the water sector has been almost removal services provided by local operators; in emerging entirely privatized since 1989, while operators, in this case, countries (those of Central and Eastern Europe, North Africa, the own the infrastructure. These operators are increasingly Middle East and China), demand extends to additional selective focused on managing investment programs, and tend to collection services, pretreatment, and sorting; fi nally, for more subcontract operations and maintenance; mature countries (“initial members“ of the European Union, ● in Spain, the Group believes private operators currently North America, Japan and Australia), demand is for complete represent 56% of the drinking water production and services that also include biological treatment, material recovery distribution sector, and 62% of the wastewater treatment (sorting and recycling, composting and biological recovery), and sector (source: 2008 fi gures from a study performed by BIPE energy recovery. in January 2010); the Group believes the use of the private sector should increase in coming years;

(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, Czech Republic, Bulgaria, Slovakia, Lithuania, Latvia, Slovenia, Cyprus, Estonia and Malta.

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(a) A complex value chain integrating several segments

Waste management chain

Collection & Logistics PretreatmentRecovery & Recycling Elimination

Waste Waste producers flows Biological recovery

Households and Household Composting municipalities (MSW) Urban cleaning Incineration with Commerce Commercial and energy recovery and industry Industrial (I&C)

Building and Synergies with water Building Demolition and energy activities

Waste collection Sorting Industrial pretreatment maintenance

Hazardous Dismantling waste (HW) Hazardous waste Material recovery Soil depollution Landfilling Contaminated treatment sites and soils

(b) The various types of waste The volumes of household and municipal solid waste produced grew steadily in Europe between 1995 and 2007 (average annual Four principal sources of waste defi ne the scope of the Group’s growth of 1%) (source: Eurostat, 2007 data (2)) but the trend activities: household and municipal solid waste, industrial seems to have shifted since 2000, with the increase having and commercial waste, building and demolition waste, and slowed in the “original” member countries of the European hazardous industrial waste (excluding waste likely to be Union in particular. contaminated by radionuclides resulting from nuclear activity). In 2006, these sources represented an annual waste volume of The volume of household and municipal solid waste depends approximately 2 billion tons in Europe (source: Eurostat, 2006 primarily on: data); this total includes a range of situations between the more ● growth in the economy and in consumption trends: a mature countries and the countries less developed in terms of richer population consumes more, acquires more complex waste management services. products (electrical and electronic products, for example), Waste products from agricultural activities, mining activities, which it replaces frequently, thereby generating greater and quarries also represent very signifi cant fl ows, but are not quantities of waste requiring more elaborate treatment; included, or count for very little, in the scope of management of ● population growth and its social organization: thus, for example, the sector’s operators (1). the increasing number of single-individual households results (i) Household and municipal solid waste in increased individual packaging; In 2006, household and municipal solid waste production ● the level of development of the country and its environmental totaled 206 million tons within the European Union 27 member culture: the higher the level of development and the greater countries (source: Eurostat, 2006 data). The “original” members the awareness to environmental problems, the more the of the European Union represent more than 87% of the population agrees to allocate a greater part of its income to household solid waste generated. waste management services; this evolution can go as far as a reduction in the production of waste.

(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 the European level, and even more so at the 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 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 historic data when it was updated.

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The Group believes that the volume of household and municipal Hazardous waste may be treated for recovery and/or solid waste in Europe should increase by an average of 1.5% per elimination according to three main methods: physical-chemical year to 2020, nevertheless with signifi cant disparities between or biological treatment, thermal treatment (incineration, co- the “original” and the “new” members of the European Union incineration), and landfi lling. (source: ETC/RWM). (c) Waste treatment methods (ii) Industrial and commercial waste The level of treatment applied to waste after collection (number The production of industrial and commercial waste totaled and complexity of stages) is an important parameter that is 802 million tons in 2006 in the European Union (source: Eurostat, inseparable from the analysis of growth in tonnages. 2006 data). European Union “original” members generate more than 65% of this waste. Waste is collected and sorted, then treated using different methods: The production of this waste and its growth depend on the type and scope of industrial activities. The increase in the relative ● after collection, the waste is directed towards recovery sites weight of the services sector, relocation (for the more developed (monofl ow), either towards transfer and sorting platforms, countries), and industry efforts to reduce manufacturing or directly to treatment facilities; the volumes sent directly residues are the principal factors limiting this volume of waste. to fi nal treatment facilities are sharply declining due to measures implemented to achieve regulatory targets for The Group believes that the volume of industrial and commercial waste recovery as set by domestic or European Community waste generated in Europe up to 2020 (“original” members only) governments (for example, the obligation to exclusively should grow on average 2.5% per year (source: ETC/RWM). landfi ll “fi nal“ waste, i.e., waste that has undergone prior sorting/pre-treatment); (iii) Building and demolition waste The production of building and demolition waste totaled ● sorting consists of identifying and separating: the portions 952 million tons in 2006 in the European Union (source: Eurostat, that can be recovered as a resource for the production of 2006 data). “secondary raw materials“ (metals, plastics, glass, wood, 6 etc.); portions recoverable in the form of energy (production The types of waste included in this category are the ones of refuse-derived fuel, or RDF, incineration with energy that vary the most signifi cantly from one country to another. production); recoverable organic portions in the form of Moreover, only a small part of this waste is optimally managed. product and/or energy (composting and methanization); The Group is relatively underexposed to this type of waste. inert portions recoverable in the form of fi ll material; and fi nally, the residual portions treated by landfi lling; (iv) Hazardous waste ● The production of hazardous waste totaled 90 million tons in landfi lling is the oldest disposal technique; on the other hand, 2006 in the European Union (source: Eurostat, 2006 data). The it has been considerably improved and currently requires criteria for the hazard level of waste are defi ned by regulatory advanced technical know-how: for example, the installation classifi cation. Based on these criteria, European regulations of sealing membranes, management by compartments (cells) have developed a list of types of hazardous waste. Changes in to reduce impacts and diminish the surface area in contact the characteristics of the waste or of the classifi cation may lead with rain water, management of leachates, monitoring after to a change in the scope of this source. site closure (generally 30 years), proactive management of the decay of organic product to produce energy (bioreactors); Hazardous waste consists primarily of industrial waste. ● Production of this waste and its growth depend on the type energy recovery through incineration generates energy and scope of industrial activities in a given region. The location production (electrical or thermal) from waste: this high of industries and their efforts to better adapt the quantities of value-added technique is currently highly used in the most materials used in their manufacturing processes, and to reduce environmentally developed countries; it often requires residual quantities, are therefore critical factors for this source signifi cant investments. of waste.

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(d) Regulatory framework gradual transposition of European Directives by all members of the European Union by 2020 should result in signifi cant The European waste policy, particularly regarding the treatment investments in waste recovery methods and should require of waste, now focuses on waste recovery. The Directives set technical skills suitable for the building and operation of these medium- and long-term targets for reduction of the volumes facilities. Although it is not impossible that we will see certain of waste generated and increase in recovery rates. The various communities try to take over industrial and commercial waste Member States then choose the most appropriate methods to management (as occurred in 2008 in France), these changes achieve these targets at a domestic level by implementing, for should lead local authorities to use private operators more example, fi nancial incentive systems for recovery, by imposing often, which will especially benefi t integrated private operators pre-required standards (mandatory sorting, defi ning maximum that are active in all segments and that combine broad fi nancial thresholds for organic portions or the caloric power of acceptable expertise with advanced technical skills. wastes at landfi lls), by levying taxes on tonnages eliminated, or even by implementing broader manufacturers’ liability plans (for example, in terms of packaging, or for electrical or electronic products at the end of their lives). 6.4.2 COMPETITION The breakdown among the various methods of waste treatment used varies considerably from country to country. Thus, while The Group’s main private competitor is Veolia Environnement. the United Kingdom and Spain still currently treat over half of This company provides a combination of services including their household and municipal solid waste by landfi lling (57% water and waste, and is also active in the energy and transport and 60%, respectively), the Netherlands and Germany only sectors; Veolia Environnement and the Group are the only marginally use landfi lls (2% and 1%, respectively), favoring “global providers“ in the environmental management services methods that allow for waste recovery. market on a worldwide scale. (e) Cost of treatment The Group also faces competition from a number of other players, including: Price ranges vary signifi cantly from one treatment method to another. The average price of landfi lling, excluding tax, is ● public operators who may decide to retain or resume historically less than other treatment methods. This is followed management of their infrastructures after analyzing and by composting. Incineration, biomechanical treatment, and comparing the services offered by private operators; they biomethanization carry the highest prices (1). may also offer proposals for markets in other regions or cities; Several European countries, however, have implemented tax systems intended to enhance the relative attractiveness ● large private operators, already well established in their of other sectors in the context of regulatory targets limiting domestic markets and seeking to expand their activities volumes sent to landfi lls. This is the case in the Netherlands, the or services and use their expertise in regions or areas that United Kingdom and France, since January 2009. show strong potential;

In some of these countries, this tax has now reached signifi cant ● local operators adopting aggressive strategies when levels, which for end users means a squeeze in the range of participating in bidding processes; prices for available treatment solutions. ● new fi nancial players (private equity and infrastructure According to the Group, in the future the trend should converge funds) investing in markets through asset and company toward more elaborate treatment solutions (for example, acquisitions; sorting, recovery, energy-from-waste production) under the ● companies involved in related industrial sectors seeking combined effects of the regulatory targets resulting from the to expand their offerings to environmental management application of European Directives and the increase in the price services, particularly building and public works companies of raw materials and energy. in the waste sector and equipment suppliers in the water (f) Intervention by private operators sector (for example, General Electric and Siemens), by positioning themselves for “BOT“ (Build, Operate, and In Europe, the rate of penetration in the waste market by Transfer) contract segments, thus allowing them to apply private operators varies signifi cantly from one country to their building expertise, complemented by services to another for both collection and treatment activities. The manage and operate the assets they build.

(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, and composting.

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Most of these players, however, are not active in a as broad a companies owned by municipalities–particularly Stadtwerke–do range of segments as the Group’s, either in terms of services, not hesitate to participate in tenders to bid for the delegation of technical skills, or geographic locations, even though through services organized by other municipalities in the same region. grouping or diversifi cation strategies, these competing In December 2009 Veolia Environnement also joined in venture companies are working to expand the scope of their activities with the Greek investment fund Marfi n Investment, and signed to satisfy customer expectations. an agreement to create a joint venture–Veolia MIG Greece–to invest specifi cally in the energy, water and property sectors in 6.4.2.1 COMPETITION IN THE WATER SECTOR Greece and the Balkans. In terms of revenues, the Group ranks second, behind Veolia The emergence of credible local players in drinking water and Environnement, in the global market for environmental water- wastewater facilities, particularly in Asia: the Singapore group related services. The Group and Veolia Environnement are the Hyfl ux and the Philippine group Manila Water, and the Chinese only two global players present throughout the entire value groups, Beijing Capital and Beijing Enterprises Water, or even chain, while other companies active in this market (for example, SABESP in Brazil. the British companies Thames Water, United Utilities Water plc, and Severn Trent) have a more local management scope and lower revenues. 6.4.2.2 COMPETITION IN THE WASTE SECTOR The Group ranks fourth in terms of revenues in the international At the domestic and regional level, competition often comes market for waste-related environmental services, behind Waste from local players in the building and public works sectors (Saur Management, Veolia Environnement, and Republic Services in France, Aqualia (FCC Group) in Spain). (including Allied Waste since the end of 2008). Except for Veolia In the United States, American Water Works is the largest player, Environnement, most of the Group’s competitors in the waste but it operates only in the U.S.; the Group (through United sector are national players and/or do not provide all the services Water) faces competition primarily from Aqua America and offered by the Group. Veolia Environnement. In Asia, competition comes primarily In Europe, the Group’s primary competitors are Veolia 6 from local conglomerates that engage their water business on Environnement, Remondis, FCC, and Urbaser. Over the past a partnership basis. three years, the German group Remondis has become the Portfolio rationalization strategies were continued in 2008 and waste industry leader in Germany; it is ranked third in Europe in 2009: RWE fi nalized its plan for withdrawal from American Water terms of revenues; however, it is still focused on Germany and Works at the end of 2009 (after having sold Thames Water in Central Europe. 2006). Consolidation trends also remained strong: in 2009 Aqua The waste sector has been undergoing acquisitions and America continued its policy of acquisitions in the United States, consolidation in recent years, mainly in Northern Europe and in May 2009 Gelsenwasser became the sole shareholder of (Germany, the Netherlands, and the United Kingdom). These Nantaise des Eaux. trends illustrate the three methods of diversifi cation or In Spain, private operators benefi t from effects of the “Agua Plan“ expansion of waste service management activities: (i) presence (a program to build twenty desalination plants as an alternative over the entire cycle or extension of geographic coverage, (ii) to the Ebro as a water source). The Spanish company FCC has integration of energy production activities, and (iii) integration of been particularly active in recent years, notably through the recycling activities. Specifi cally, FCC purchased Waste Recycling acquisition of the third largest national water services operator Group and also acquired the Austrian operator ASA. Veolia in the Czech Republic (Severomoravské Vodovody), through its Environnement purchased Cleanaway UK and Biffa Belgium development in China by its subsidiary Aqualia, and agreements (thereby becoming the leader in the United Kingdom and that this same subsidiary recently signed with the EBRD to establishing a modest position in Belgium). In 2007, the waste fi nance its development in Eastern Europe. sector witnessed the sale of Sulo (Germany), TMT (Italy) and Bartin (No. 3 in the metals recycling business in France) to Veolia In Germany, competitors include, on the one hand, major energy Environnement; of Saur (and therefore Coved) to a consortium groups such as E.On, RWE and EnBw, and on the other, major composed of Séché, the Caisse des Dépôts et Consignations players in environmental services, such as Veolia Environnement and Axa Asset Management, and of U-plus by EnBW to Alba. and, to a lesser extent, Remondis. Companies in the fi rst group are largely active in the water sector, often as minority Germany also recorded two signifi cant consolidation trends shareholders in Stadtwerke, companies that own and manage illustrating the consolidation of waste management services and municipal distribution networks for water, electricity and gas. recycling activities in 2006 and 2007: the alliances (in various Water distribution is not at the core of their strategies. Finally, forms) of Remondis and TSR on the one hand, and of Alba and

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Interseroh on the other. This is in addition to the acquisition of Nettoyage and Multiservices (urban sanitation) in France, and a 68.4% interest in a German company, BellandVision GmbH Montenay International (specializing in energy recovery from (active in the business of services and royalties relating to the waste) in the United States. recycling of industrial and large scale distribution packaging) by Given the relative fragmentation of the waste market, which SITA Deutschland in 2008. comprises a signifi cant number of small local players, the Group The crisis, which severely affected the waste sector in the expects a continuing trend of mergers and acquisitions in this second half of 2008 and in 2009, signifi cantly slowed this market, notably with regard to recycling activity, as the crisis consolidation trend. By contrast, Veolia Environnement has left major opportunities for consolidation. rationalized its activities portfolio by selling Veolia Propreté

Z 6.5 DESCRIPTION OF THE GROUP’S PRINCIPAL BUSINESSES

The Group provides services and equipment essential to life 6.5.1 PRESENTATION OF THE GROUP’S and environmental protection in the areas of water and waste: ACTIVITIES delegated management of drinking water distribution and treatment and wastewater collection and treatment, water treatment engineering, as well as waste collection, recovery, 6.5.1.1 THE WATER ACTIVITIES and treatment activities for both public authorities and private sector customers. (a) Complete management of the water cycle In 2009, the Group earned total revenues of €12.3 billion. The Through its subsidiaries, the Group covers the entire water cycle various activities break down as follows: value chain for all its customers (public authorities and private sector customers): ● Water Europe, which represented 33% of the Group’s consolidated revenues in 2009, i.e., €4.0 billion; ● studies and master plans, modeling of networked and natural water fl ows (water tables, rivers, coastlines), and engineering ● Waste Europe, which represented 43% of the Group’s of water management infrastructure projects; consolidated revenues in 2009, i.e., €5.3 billion; and ● engineering, design, and building of water treatment plants ● International (Degrémont and activities outside Western through its subsidiary Degrémont (whose activity is described Europe), which represented 24% of the Group’s consolidated in Section 6.5.4.1 below); revenues in 2009, i.e., € 3.0 billion. ● drinking water distribution and wastewater services, In the water sector worldwide: including: ● in 2009 the Group provided approximately 90 million ● production and distribution of drinking water: catchment, people with drinking water; it operated 1,888 drinking treatment, and distribution of drinking water, water production sites, and produced some 2.6 billion m3 of drinking water; and ● wastewater service (collective and non-collective): collection, clean-up, and disposal of wastewater and ● in 2009 the Group provided wastewater treatment services rainwater, to 58 million people; it operated 1,643 wastewater treatment plants, and biologically treated some 2 billion m3 of ● customer management: relations with end users, meter wastewater; reading and the collection of payments made by end users, and In the waste sector worldwide: ● for private sector customers, defi ning, building, and ● as of December 31, 2009, the Group provided collection operating tailored and scalable water management services to over 46 million people; solutions and selling high-end water treatment ● it used a fl eet of over 12,600 trucks and operated 110 equipment; the Group’s offer to private sector customers composting platforms, 49 incineration sites (46 of which includes the management of water resources, process have energy recovery capacity), 581 sorting and transfer water, wastewater and effl uents, as well as sludge. stations, and 142 landfi lls.

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The Group offers a broad range of services, from drinking water (b) Contractual relations with customers in the water production to wastewater treatment. It offers services in the sector following fi ve areas: The Group’s customers consist largely of local public authorities, ● Water pumping and treatment while private sector customers (notably through Ondeo Industrial Solutions in Europe) represent a largely minority share Pumping is the operation that extracts water from rivers, of its revenues. However, under public services contracts, the water tables, and reservoirs to be piped to treatment plants. Group also serves local industrial and commercial customers. Treatment depends on the quality of the raw water and may involve numerous stages: pre-treatment (screening), (i) Contractual relations with local public authorities clarifi cation, fi ltration (elimination of fi ner particles), refi ning In general, local authorities are responsible for organizing both (elimination of micro-pollutants), and disinfection (elimination drinking water distribution and wastewater treatment services. of viruses and bacteria). They may choose to manage these directly (as a state-owned ● Storage and distribution company) or rely on an outside operator, which may be public, private, or semi-public. Reservoirs constitute security in the event of production problems, consumption peaks, or pollution of resources. The Contracts entered into by the Group and public authorities underground distribution network is controlled in order to are governed by the rules for public contracts and/or specifi c ensure stability of water quality and to prevent leaks. competitive procedures.

● Customer service The Group distinguishes:

Specialized units are responsible for ensuring relations ● the delegation of public services contracts in France, or their with consumers, according to the local situation: contract equivalent outside France, including leasing and delegation signings, meter reading, invoicing, and account adjustment of public services contracts, and all intermediate contractual or maintenance. forms; under these contracts, the Group is responsible for all service management (water production and distribution 6 ● Wastewater collection and treatment and/or wastewater treatment): it is involved in managing Sewage networks are an essential factor in combating relations with end users, meter reading, preparing invoices domestic pollution. They must pipe all wastewater to the and collecting payments made by end users; the Group wastewater treatment plant. Wastewater treatment requires engages in this activity at its own risk and peril and is a set of complex physical and biological procedures. Sewage compensated by billing users; a portion of the sums billed is networks are also used to collect and drain rainwater, paid back to the local authorities to fi nance new investments; using techniques that make it possible to separating it from leasing contracts are distinguished from delegation of public wastewaters, if needed. services contracts depending on the size of the investment, which is the responsibility of the private operator; most of ● Sludge the Group’s contracts in France are leasing contracts; these Treating 1 m³ of wastewater produces 350 to 450 grams of generally involve long-term contracts, generally 10 to 20 raw sludge. Sludge drying and treatment processes reduce years; and its volume. In France, most sludge is recycled in agriculture ● contracts for services and works; in this case, operations and through spreading, conversion to compost, or recovery as works are billed to the relevant local authority; this involves energy. medium- or long-term contracts, generally 5 to 20 years. The Group has recently offered its clients new dedicated In general, public authorities own the assets involved in drinking environmental services (audits and assistance in reducing water and wastewater services. However, in certain countries the environmental footprint of their water services in the (notably Great Britain and the United States), the Group owns territories, quantitative management of resources to counter the assets it operates; in this case, there are no contractual the impact of climate change, a service to improve the water relations with public authorities; relations between the private quality of rivers, lakes and swimming areas), and also offers a operator and the various customers and other stakeholders new range of services for habitats and people, to control water are then governed by a regional or national regulator under an consumption (leak alert, remote meter-reading, leak insurance operating license issued by the regulator. Moreover, in France, and assistance). for historic reasons, the Group owns certain assets (see Section 8 of hereto).

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(ii) Contractual relations with industrial customers The Group has a fl eet of trucks suitable for all types of waste The Group is also active in the entire water cycle with collection: mixed waste collection, selective collection, bulk industrial customers under design and build contracts, service items, medical waste, and industrial waste, in urban and rural contracts, such as operating agreements, and/or equipment environments. It adapts to national geographic contexts (for sale agreements. Contracts are then generally entered into for example, suburban sprawl and urban density vary signifi cantly shorter terms, most often from 1 to 5 years, such as within the from one country to another). Waste from selective collection context of service contracts. (plastic, glass, metal, paper, etc.) is sent to sorting sites to be prepared for recycling; residual waste is sent either to transfer/ 6.5.1.2 THE WASTE ACTIVITIES sorting/pretreatment platforms or directly to incineration plants or landfi lls. Certain waste products may be highly polluting (a) Complete management of the waste cycle (batteries, aerosol cans, etc.). They are then sent to specialized sites for cleaning and packaging before treatment or recovery. The Group manages the entire waste cycle by getting involved in all stages of waste management services in practically all of MATERIAL RECOVERY their forms: Household or industrial waste from selective collection is sent to one of the 313 sorting sites operated by the Group. It ● collection of non-hazardous waste from municipalities and companies, sorting, pretreatment, recycling, and material is then sorted by type (plastic, glass, paper, cardboard, metal), and biological recovery (which mainly includes agricultural packaged, and consolidated by the recovery division on recovery and the remediation of poor soils), energy recovery appropriate platforms. Recoverable materials are then sent to (incineration, co-incineration and methanization), and appropriate processing areas, and sorted (non-recyclable) waste landfi lling, including the recovery of biogas; is recovered for energy whenever possible by incineration; if not possible, it is landfi lled. ● hazardous waste management (with the exception of radioactive waste generated by active nuclear facilities); The economics of recycling are intended to afford industrial operators a steady supply of quality recycled materials, and ● urban sanitation and cleaning: maintenance of municipal and provide waste producers ongoing management of their waste industrial networks and participation in cleaning industrial in compliance with applicable regulations. Recycling activities production tools; street washing/sweeping, maintenance of (for example, metals and plastics) are also organized around urban fi xtures; beach cleaning; and snow removal; specifi c collections.

● soil remediation: treatment of polluted sites, soil, subsoil, and In 2009, the Group managed over 19 million tons of waste set water tables, dismantling and reconversion of buildings; and for recycling. Of this total, around 13 million tons were treated for material recovery. This made it possible to put 8.6 million ● dismantling and disassembly of end-of-life vehicles, aircraft tons of secondary raw materials (paper, cardboard, glass, metal, and boats. plastic, and wood) back on the market. In addition to its “classic“ The Group offers services in the following areas: recycling activities, the Group has put in place dismantling and recovery facilities for Waste Electrical and Electronic Equipment (i) Non-hazardous waste (collection, recovery, treatment, (WEEE), End-of-Life Vehicles (ELV), and is in the process of elimination) implementing business involved in the dismantling of end-of-life In the waste segment, the Group collects, sorts, recycles, airplanes and ships: recovers, and eliminates waste of municipal or industrial origin. ● Through the company “Re-source Industries”, established COLLECTION in partnership with the automobile dismantling company Each day the Group collects waste of all kinds from private INDRA, in 2007, the Group opened its fi rst European center individuals, companies, and public entities: household waste, for the dismantling and recovery of ELV vehicles and in 2009 organic waste, non-hazardous industrial waste, medical waste, a new center opened at the SITA Agora eco cluster, in Pas- and liquid and solid waste. de-Calais (North of France).

● Finally, the Group has also joined with Airbus to develop the best techniques for dismantling end-of-life airplanes.

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At its clients’ request, the Group is also pursuing the implementation This activity is subject to numerous regulatory and technical of industrial processing solutions to recover residual waste such constraints designed to reduce impact (smoke discharges, as mechanical and biological treatment (MBT). production of bottom ash and fl y ash) and to recover energy produced by waste combustion in the form of heat and/or COMPOSTING AND BIOLOGICAL RECOVERY electricity. Composting is a natural process that consists of converting organic waste into soil conditioner. Four types of waste are Organic waste may also be recovered for energy through involved: (i) green waste from households and local authorities, methanization. This process of decomposition of natural organic as well as by-products of the wood industry (bark, sawdust, matter – through microorganisms and in the absence of oxygen etc.); (ii) the organic portion of household waste, restaurant – has long been known. Its use on an industrial scale is more and supermarket waste; (iii) sludge from wastewater treatment recent. Methanization produces a biogas that may be recovered plants; and (iv) sludge and by-products from paper and agri-food for electrical energy and a residue that after composting may be producers. recovered for use as an organic soil conditioner.

Numerous analyses are performed on organic waste before, ELIMINATION OF WASTE AND LANDFILLING during, and after its conversion to compost. Air from the Landfi lling remains the predominant treatment method in composting process is captured and treated to reduce odor many countries. Upstream, the search for a site must conform pollution. to legally mandated specifi cations and conditions specifi cally concerning soil quality, the protection of water tables, and Sludge management is at the core of the Group’s know-how. distance from housing. During the operating stage, discharges The Group assists local authorities in their sludge recovery and must be controlled, effl uents (biogas and leachates) captured, waste composting projects. recovered or treated, and environmental parameters measured ENERGY RECOVERY regularly. Once closed, sites remain subject to monitoring for Waste may also be recovered through incineration. Thermal 30 years. treatment of waste has several advantages: it reduces waste The Group operates 142 landfi lls around the world, particularly 6 mass and volume, it is rapid and hygienic, and it produces in Europe. In the course of these activities, the Group develops energy (largely renewable) that can be recovered in the form of and operates innovative industrial solutions for recovery in the electricity and/or heat. form of renewable biogas energy from landfi lls. Six types of waste may be recovered for energy: (i) household (ii) Hazardous waste waste, (ii) industrial waste similar to household waste, (iii) waste from sorting sites, (iv) medical waste, (v) sludge from wastewater Waste representing a danger to humans or the environment treatment plants, and (vi) hazardous waste. requires special precautions when being treated. Once collected, it is analyzed, sorted by type, and then gathered. It is In the incineration plants operated by the Group, waste is then sent to the most appropriate site. burned at high temperatures, in accordance with regulatory requirements (in Europe, for example, combustion gases must There are several treatment possibilities for this waste, which be subjected to a minimum temperature of 850° Celsius for include: at least two seconds). Heat released by the combustion is ● recovery as fuel substitute, notably in cement kilns, after recovered in steam boilers. This steam allows electricity to be being subjected to any necessary physical pretreatment; produced and also supplies heat networks. ● incineration at high temperatures with energy recovery (as in In 2009, the Group’s incineration units treated approximately the case of halogenated, toxic, and reactive wastes); 5.8 million tons of waste, and produced nearly 2,600 GWh of electricity, allowing for the sale of more than 920 thermal ● treatment using physical-chemical and biological methods GWh. The gases produced by waste combustion are purifi ed (as in the case of aqueous wastes: acids, bases, chromate using dedicated treatment systems prior to discharge into the baths, etc.); and atmosphere. Solid waste essentially consists of bottom ash, ● treatment, depollution or solidifi cation before being landfi lled which is reused for road beds after undergoing suitable treatment at suitable sites. Paint residue, for example, is mixed with or disposed of at landfi lls, as well as ash and purifi cation residue reagents to form a concrete that stabilizes pollutants within from smoke, which is landfi lled after stabilization. a mineral matrix before landfi lling;

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● regeneration for purposes of materials recycling, i.e., Spécialités, is now providing for the clean-up and restoration purifi ed for reuse (this is the case notably for oils and certain of the “Avenue” industrial complex in Chesterfi eld, United solvents). Kingdom. This project, carried out in collaboration with Volker Stevin UK and DEME Environmental Contractors (DEC NV), is one SITA France treats hazardous waste in France and elsewhere of the largest public projects of this type in the United Kingdom, in Europe. and one of the largest sites for the clean-up of derelict industrial The Group may thus offer its customers solutions suitable land in Europe. All clean-up stages began in September 2009 for all types of hazardous waste (except waste potentially and will be staggered over 5 years, until fi nal restoration of the contaminated by radionuclides from nuclear sites), such site, which is scheduled for 2014. as packaging ranging from 100 grams (in particular special household or laboratory waste) up to hundreds of tons. In 2009, (b) Contractual relations with customers in the waste 3.2 million tons of hazardous waste were treated by the Group: segments pretreatment on ad hoc platforms, stabilization and landfi lling The Group is involved with two types of customers: at Class I sites, incineration of waste with high chlorine or sulfur content, and co-incineration at cement plants. ● local authorities (municipalities or other): contracts entered into with local authorities are generally medium- or long-term (iii) Urban sanitation, maintenance, and cleaning (generally with a term of 3 to 7 years for collection, and up to 20 The Group provides local authorities, private individuals, and or even 30 years for treatment), and involve locally regulated industrial operators with sanitation and industrial cleaning activities in which public utilities play a major role; and

(particularly during plant shutdowns), services and collection of ● industrial operators: contracts with industrial customers are hazardous industrial waste, as well as more specifi c services generally short- or medium-term (often one year, renewable, such as the cleaning of water towers, oil-related work, or control for collection), and involve activities for which industrial of wastewater treatment networks in nuclear plants. operators increasingly outsource to subcontractors all their Urban cleaning is a concern of local authorities and a health waste services management. requirement. In this regard, the Group notably offers the The Group offers energy produced during waste treatment and following services: mechanized and manual street sweeping, materials from this treatment and recycling (secondary raw maintenance of urban fi xtures, sign, graffi ti, and snow removal, materials) to both public authorities and industrial customers. beach cleaning, emptying and maintenance of paper receptacles and public awareness efforts. Depending on the country, additional services may be offered, such as the maintenance of public parks and gardens. 6.5.2 PRESENTATION OF WATER EUROPE ACTIVITIES (iv) Depolluting and conversion of polluted industrial sites There are two types of soil pollution: organic and mineral. There Europe is the core of the Group’s activity in the water sector. are three types of treatment: Companies operating in the Group’s Water Europe segment ● in situ treatment, for subterranean clean-up of water tables contributed €4.0 billion to the Group’s consolidated revenues in or soils without excavation; 2009. In 2009, Lyonnaise des Eaux France represented 50% of consolidated revenues generated in Europe, while the surplus ● on-site treatment, whereby the soil is extracted but treated came primarily from Spain through the Group’s stake in Sociedad on site; and General de Aguas de Barcelona (Agbar) (43% of the Group’s ● off-site treatment, when the soil must not only be extracted, consolidated revenues in Europe), Ondeo Industrial Solutions but sent to special sites, where it undergoes biological, (3%), Safege (2%), Eurawassser and the Group’s activities in Italy thermal, or physical-chemical treatment and/or landfi lling. (approximately 2%).

Through its specialized subsidiaries, the Group has been In Europe, the Group supplies about 31 million people developing innovative solutions for 25 years in terms of cleanup with drinking water, and provides wastewater services for and conversion of industrial sites. approximately 26 million people.

To illustrate, after having cleaned up and restored the former Metaleurop Nord foundry site in France, the Group, through SITA

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6.5.2.1 WATER-RELATED ACTIVITIES IN FRANCE The term of these contracts for both water production and distribution services and wastewater collection and treatment (a) Specifi c characteristics of the water sector services is generally between 10 and 20 years, and the average in France residual term of the delegation of public services contracts The Group estimates amounts billed in France for water and portfolio (weighted by revenues) was 8 years. wastewater treatment services by all providers (public and A signifi cant portion of LDEF’s activity is carried out under leasing private) at a total of about €12.3 billion; private operators are contracts awarded by delegating public authorities. Under the estimated to represent 40% of this total, while the rest goes Sapin law (for a description of this law, see Section 6.7.1(a)), to public authorities, water agencies, and the State. The size LDEF is subject to competition for the awarding and renewal of the drinking water production and distribution sector is of these contracts. If a lease or a concession is not renewed, approximately €6.3 billion, and that of wastewater treatment is under current regulations, the outgoing awardee receives no €6 billion. It is also estimated that private operators represent compensation. Moreover, upon expiration of the contract, all 71% of drinking water volumes billed and 56% of wastewater plants belonging to the delegating authorities must be in good services billed in France (source: 2008 fi gures from the study operating condition. carried out by BIPE in January 2010). Over the period from 2004-2009, the LDEF delegation of public (b) Lyonnaise des Eaux France services contracts renewal rate was 81% in terms of number of contracts, and 88% in terms of revenues. Historically, on The Group operates in France with public authorities, primarily average, contracts nearing expiration represent fewer than 10% through its subsidiary Lyonnaise des Eaux France (“LDEF“) of the total number of contracts in portfolio each year. and its subsidiaries. Since its creation in 1880, LDEF has been involved in the water-related services sector in France, and today In 2009, LDEF renewed 163 delegation contracts out of 210 engages in activities over the entire water cycle, from drinking contracts nearing expiration, and entered into 50 new delegation water production through wastewater treatment, notably contracts with local authorities. Moreover, in 2009, 630 service through services in water pumping and treatment, storage contracts were entered into with industrial operators or local 6 and distribution, customer service, wastewater collection and authorities. treatment, and sludge treatment. LDEF maintains good relations with its clients, and has a good In 2009, LDEF’s contribution to the Group’s consolidated reputation; its technical expertise is recognized, and it is able to revenues was €2.0 billion (51% for drinking water production offer a very wide range of services. and distribution services, 24% for wastewater collection The following are examples of contracts entered into in 2009: and treatment services, 14% for other services (for example, metering), and 11% for work on distribution facilities and ● wastewater treatment delegation of public services contract networks); combined with all its subsidiaries, it employed over for the construction and operation of the Port-Saint-Louis- 9,900 people as of December 31, 2009. du-Rhône treatment system signed with the Syndicat Ouest Provence. This concession-type contract includes the The Group estimates that LDEF supplies approximately fi nancing and operation of a wastewater transfer network, a 12 million people with drinking water, i.e., approximately 20% storm reservoir and a new purifi cation station with a capacity of the French population. In 2009, LDEF operated 1,497 drinking of 16,000 Eq./ inhabitant; water production sites and produced over 1,100 million m3 of drinking water. ● renewal of delegation of public services contract for water and wastewater for the city of Libourne. To meet the The Group estimates that LDEF provides wastewater services requirements of the “2009 Libourne Water Charter”, LDEF has to some 20% of the French population connected to a sewage undertaken to implement a system for the remote metering network. In 2009, LDEF operated nearly 1,400 treatment plants, of water in multi-resident buildings, a carbon assessment for which treated nearly 600 million m3 of wastewater. LDEF is thus the wastewater treatment service, social subsidies for at- the second-largest private player in France (source: 2008 fi gures risk individuals, and “public control” for an enhanced level from the study carried out by BIPE in January 2010). of governance;

(c) Lyonnaise des Eaux France contracts ● renewal of the delegation of public water service contract for the city of Biarritz. LDEF has specifi cally committed to The LDEF contracts portfolio included nearly 2,600 delegation of implementing water network asset management tools, such public services contracts as of December 31, 2009. as remote meter-reading, a system for the pre-localization of leaks, a corrosion diagnostic for pipelines, and dedicated asset modeling software;

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● services provision contract for the Greater Havre Community, ● the simultaneous sale to Criteria of the 54.8% stake held by for a duration of four years, involving the replacement of Agbar in Adeslas, for €687 million; 2,600 lead pipeline connections per year. In particular, the ● at the same time, Criteria will take full control of Adeslas contract includes access to a specifi c warning system to via the additional acquisition of the 45% held by Malakoff report cases of cutoffs to customers, and offers optimized Médéric. management of appointments and fi eld investigations; Criteria will retain a signifi cant minority interest in Agbar and ● delegation of public wastewater service contract for the a new shareholders’ agreement will enter into force upon Greater Hauts-de-Bièvre Community. LDEF specifi cally completion of the Group’s acquisition of the Agbar and Hisusa undertakes to implement a global asset management shares. This new agreement will terminate the July 18, 2006 system for wastewater networks based on an optimization agreement currently in effect. of fl ushing measures and electromechanical maintenance, accompanied by the deployment of remote monitoring The new agreement provides specifi cally for: devices and a multi-year televised inspection program. ● the Group’s exclusive control of Agbar and consequently the Finally, an agreement was signed in December 2008 between full consolidation of Agbar within the Group’s consolidation Veolia Environnement and Lyonnaise des Eaux, aimed at scope; unwinding the stakes the two entities hold jointly in common ● the new governance of Agbar and Hisusa. As a shareholder, companies known as “sociétés paritaires”. The process of Criteria will enjoy certain rights to object to certain unwinding is currently underway. transactions submitted for approval to the Board or the General Meeting of Shareholders; 6.5.2.2 WATER-RELATED ACTIVITIES IN SPAIN ● clauses relating to joint withdrawal right and right of fi rst (a) The Group in Spain refusal. As of December 31, 2009, the Group held the following in Agbar: The Group and Criteria anticipate that the withdrawal of Agbar’s listing on the stock exchange will be fi nalized at the beginning of (i) an indirect interest of 33.88%, through the holding the second quarter of 2010, and that the entire transaction will company Hisusa (of which the Group holds 51% through be complete in mid-2010. SUEZ ENVIRONNEMENT España, with Criteria CaixaCorp. (Criteria) holding 49%); and The Agbar general shareholders’ meeting of January 12, 2010 approved by majority vote the resolutions for their company’s (ii) a 12.02% interest through SUEZ ENVIRONNEMENT España. squeeze-out tender offer, and the sale of its interest in Adeslas In October 2009, the Group announced the signing of a to Criteria. preliminary binding agreement with Criteria relating to a At the time this document was drafted, the squeeze-out transaction aimed at acquiring control of all of Agbar’s water tender envisioned by Agbar remains subject to approval of the and environment activities. tender documentation by the CNMV, the Spanish stock-market This transaction includes (1): authority.

● a squeeze-out tender offer made by Agbar on its own shares, Moreover, on January 14, 2010, the Group signed the agreement for €20 (2) per share to be capped at €299 million (3). The with Criteria to acquire Agbar and Hisusa shares in order to shares acquired at the time of this squeeze-out tender offer hold, directly and indirectly, 75.01% of the Agbar shares. On the will be subsequently cancelled; same day, Agbar and Criteria signed the agreement for the sale of all Adeslas shares held by Agbar. The deal remains subject to ● SUEZ ENVIRONNEMENT’s acquisition of Agbar shares held by various regulatory and legal approvals, specifi cally approval by Criteria, for €20 per share, to reach a fi nal 75.01% stake in the anti-trust authorities of the Group’s acquisition of exclusive Agbar (4), i.e., a total amount of €647 million (5);

(1) Inter-conditionality of the sale of Adeslas and the takeover of Agbar’s water and environment activities. These two transactions are contingent upon the actual completion of the squeeze-out tender offer. (2) Price determined by assuming that no dividend would be distributed before withdrawal from stock market trading of the 10% of shares not held directly or indirectly by the Group and Criteria. (3) Assuming complete success of the squeeze-out tender offer. (4) Directly or indirectly via Hisusa. The number of shares sold by Criteria to the Group will be adjusted as a function of the success rate of the squeeze-out tender offer. (5) Acquisition of Agbar shares held directly by Criteria and Hisusa shares at a price equivalent to €20/share. Based on a theoretical response rate of 0% to the squeeze-out tender, the total amount paid to Criteria would be €871 million, with no expenditure by Agbar.

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control of Agbar. Criteria’s acquisition of Adeslas is also subject (iii) Customer portfolio to approval by the Spanish insurance authorities. Agbar’s customers primarily consist of local public authorities. Agbar’s 2009 consolidated revenues were €3.3 billion, with 57% The average remaining duration of the Agbar contracts portfolio pertaining to services related to water management and 43% to (weighted by revenues) is 19 years (excluding Barcelona, health-related services; it employed nearly 14,900 people as of Santiago de Chile and Bristol). Agbar’s contract renewal rate December 31, 2009. In 2009, Agbar’s contribution to the Group’s over the past 7 years has been approximately 99% (in terms of consolidated revenues was €1.7 billion. revenues).

Upon completion of the transaction described above, Agbar will (iv) Development outside Spain become the Group’s second pillar in the Europe Water sector. Agbar is also present:

Moreover, since the end of October 2007, the Group has held a ● in South America: in particular in Chile through its subsidiary 33% interest in Aguas de Valencia. Aguas Andinas (production and distribution of drinking water to nearly 6 million inhabitants, as well as the treatment (b) Agbar’s Water activities of wastewater for 4.7 million inhabitants). In 2008, Agbar acquired a 53.5% stake in Essal, the fourth largest water (i) Specifi c aspects of the water sector in Spain distribution company in Chile. Agbar also has a presence The Group estimates that the water sector in Spain represents in Mexico (Saltillo, services provided to more than 860,000 some €4.5 billion. The Group estimates that private operators inhabitants), Colombia (services provided to more than represent approximately 56% of the drinking water production 920,000 inhabitants) and Cuba (services provided to more and distribution sector, and 62% of the wastewater treatment than 1.3 million inhabitants). In 2009, the contract for building sector (source: 2008 fi gures from a BIPE study carried out in the third purifi cation station in Santiago, Chile, with capacity January 2010). of 2.2 m3/s, was awarded to Agbar and Degrémont;

● (ii) Agbar Water’s activities in the United Kingdom: through Bristol Water company, 6 Agbar is active throughout the entire water cycle: drinking water acquired in 2006, and serving approximately 1 million people production, transport, treatment and distribution; collection, (see Section 6.5.2.3(b)); treatment and re-use of wastewater; re-use of treatment ● in China, in November 2007, Agbar created a joint venture sludge; services to customers. in China with Golden State Water Group Corporation (a In 2009, Agbar’s water business contribution to the Group’s Chinese player in the engineering, building, and supply consolidated revenues was €959 million. In the water sector, of environmental services), which provides services to Agbar earned 69% of its revenues in Spain, and 31% in the rest approximately 1.5 million people in Jiangsu Province; of the world. ● in Algeria, through a contract with Seor (Société de l’Eau et Agbar’s drinking water services cover 12.7 million people in de l’Assainissement d’Oran), which began in April 2008, and Spain and 11 million in the rest of the world. In 2008, Agbar through which the company provides drinking water to some operated 204 drinking water production sites in Spain, and 36 1.6 million people. in the rest of the world. The largest desalination plant in Europe (with capacity of 200,000 m3/day), which Agbar will operate (c) Agbar’s Health activities for two years, was inaugurated in Barcelona in 2009. The DBO Agbar is also active in the health sector in Spain through its (Design, Build, Operate) contract was awarded in 2006 to a joint subsidiary Compañia de Seguros Adeslas (“Adeslas“) (54.8% stake venture consisting of Agbar, Degrémont, Dragados and Drace. held by Agbar and 45% stake held by the Malakoff Médéric Group).

Agbar provides wastewater services to 9.2 million people in Relations between Agbar and Médéric in Adeslas are governed Spain, and more than 9 million in the rest of the world. In 2008, by a shareholders’agreement entered into on June 18, 2002, Agbar operated 442 purifi cation stations in Spain and 15 in the which specifi cally provides for a right of fi rst refusal in favor rest of the world. of the other shareholder in the event of a disposal (except in the case of an intragroup disposal) of all or part of its stake in The Group estimates that Agbar is the leading private player in Adeslas by either of the two shareholders. the water sector in Spain. The transaction envisioned by the Group, to acquire control of Agbar has been a member of R+i Alliance since 2006, and is at all of Agbar’s Water and Environment activities, provides for the core of the Group’s technological development. the sale to Criteria of Agbar’s 54.8% interest in Adeslas (see Section 6.5.2.2. (a)).

In 2009, the contribution of Agbar’s health business to the Group’s consolidated revenues was €736 million; as of December 31, 2009 it had approximately 4,700 employees.

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Adeslas is Spain’s leading health insurer. As of December 31, Through Ondeo Italia, the Group also formed Acque Blu (a 2009, the company had approximately 3 million subscribers, i.e., Tuscan operator specializing in drinking water distribution and an estimated 20% share of the private medical insurance sector wastewater treatment) with Acea in December 2008. in Spain. (b) United Kingdom Additionally, it operates its own hospitals and analysis, diagnostic, and treatment centers. It also manages public health centers. The Group believes that the United Kingdom water sector represents approximately €11 billion, and that private operators En 2009, 83% of Adeslas’ revenue was earned through its represent about 87% of the drinking water production and insurance business, with the remainder generated by its medical distribution sector, and 85% of the wastewater treatment sector. and hospital activities. The Group is active in the United Kingdom through Bristol Water, 6.5.2.3 OTHER WATER EUROPE ACTIVITIES an Agbar subsidiary acquired in June 2006. In 2009, Bristol Water served over 1 million people in Bristol and the surrounding area.

(a) Italy Bristol Water’s contribution to the Group’s consolidated revenues The Group estimates that the water sector in Italy represents (already included in the contribution of Agbar’s water activity, as approximately €4.2 billion. This sector shows signifi cant noted in Section 6.5.2.2(b) (ii)) was €57 million in 2009. development potential because of its delay in transposing European regulations, and is seeing a major consolidation trend. (c) Germany

The Group estimates that private operators represent about Germany’s water sector is the largest in Europe; the Group 30% of this sector (in portion of the population served). estimates that it represents nearly €19 billion, and that private The percentage held by the private sector, however, should operators represent approximately 30% of the drinking water increase in the future due to the “Ronchi Decree-Law”, which production and distribution sector, and 10% of the wastewater the government approved in November 2009, involving the treatment sector. liberalization of public water services management. This In 2009, the Group generated revenues of €62 million in decree requires competitive bids for the allocation of water Germany. The Group is active through its subsidiary Eurawasser, management services (allowing private fi rms to play a larger notably in Rostock-Güstrow, Schwerin, Cottbus, Goslar, and in role in the sector). Moreover, for contracts signed without the Saale-Unstrut-Leuna region, primarily through water and competition, it limits local municipalities to a 40% ownership wastewater delegation of public services contracts or interests interest in companies currently 100% publicly owned, and 30% in public/private corporations, as well as in management and in listed companies (e.g., Acea, Iride and Hera) by 2015. The maintenance contracts. additional population that might be served by the private sector as a result of this law is 35 million. After obtaining the Grafschaft and Rheingau contracts in 2007 and 2008, respectively, Eurawasser continued its development The Group is active in Tuscany, as the operator of two water and in western Germany by winning a new competitive bid in the wastewater companies: town of Bad Breisig (population 13,000). Starting January 1, 2010,

● Acque Toscane manages water and wastewater services Eurawasser will thus be responsible for technical management in the cities of Montecatini Terme, Ponte Buggianese and and water supply, customer management and planning of the Fiesole (two contracts); and town’s water-related civil works.

● Nuove Acque, which has been managing water and (d) Greece wastewater services for 37 towns around the city of Arezzo The Group believes that the water sector in Greece has (Tuscany) with approximately 350,000 inhabitants. signifi cant growth potential because of its delay in transposing In addition, it is a member of the pools of operators covering European regulations. water and wastewater companies active in Florence and Pisa The crisis is increasingly forcing Greece to undertake structural (Publiacqua and Acque), which are headed by Acea. reforms, and the government, in its desire to make water supply As of December 31, 2008, the Group also held 4.99% of Acea, a companies more effi cient, has announced that it wants to see company listed on the Milan stock exchange, which is active in the private sector play a more important role. the area of integrated water management, energy generation and distribution, public lighting, and natural gas distribution.

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The Group is active in Greece through a 5.33% holding in Eyath, a The economic crisis affecting the industrial clients of Ondeo company listed on the Athens stock exchange, which manages Industrial Solutions has forced the company to focus on its the Thessalonica water service. most important markets, such as the gas and petrochemicals markets, as well as the energy market, by promoting solutions (e) Safege that are most suited to improving its clients’ economic and environmental performance. Safege, a wholly-owned subsidiary of SUEZ ENVIRONNEMENT, specializes in providing assistance to the contracting owner, in project management, general contracting, studies and consultancy for any issue or structure related to water management, sustainable development and urban and land-use 6.5.3 PRESENTATION OF WASTE EUROPE planning. ACTIVITIES

In 2009, Safege’s contribution to the Group’s consolidated Europe is the heart of the Group’s business in the waste sector. revenues was €80 million, 40% of which came from outside Companies operating in the Group’s Waste Europe segment France; it had facilities or representation offi ces in over 25 contributed €5.3 billion to the Group’s consolidated revenues in countries, and as of December 31, 2009, employed over 700 2009. The Group’s Waste Europe activity is primarily carried out individuals in France. by SITA France and its specialized subsidiaries, SITA Belgium, Safege’s expertise and its in-depth knowledge of local sites in SITA UK, SITA Nederland, SITA Deutschland and SITA Sverige in France and worldwide, acquired over almost 60 years, benefi t Scandinavia. In 2006, SUEZ ENVIRONNEMENT created Terralys, the Group as a whole. a joint subsidiary of SITA France and LDEF specializing in the composting and treatment of sludge in France. (f) Ondeo Industrial Solutions Companies in the Group’s Waste Europe segment generated Ondeo Industrial Solutions, a wholly-owned subsidiary of 54% of their revenues in France, 16% in the United Kingdom, 8% SUEZ ENVIRONNEMENT created in 2002 and active in France in Germany, 8% in the Netherlands, 9% in Belgium, and 5% in the 6 and the rest of Europe, deals with industrial customers and Scandinavian countries. specializes in the optimization and global management of the water cycle in the industry sector: outsourcing and partnerships, In Europe, in 2009, the Group’s collection activities served over design and building of wastewater treatment plants, related 37 million people and over 385,000 industrial and commercial equipment and services, turnkey solutions, operations, customers; the Group collected over 19 million tons and maintenance and technical assistance, consulting and research processed over 35 million tons of household, industrial, and in solutions adapted to customer needs. medical waste.

In 2009, Ondeo Industrial Solutions’ contribution to the Group’s 6.5.3.1 WASTE-RELATED ACTIVITIES IN FRANCE consolidated revenues totaled €137 million; Ondeo Industrial Solutions employed over 660 people as of December 31, 2009, The Group is active in France in the waste sector through its and is active in France, Italy, the United Kingdom, Spain, and subsidiary SITA France and SITA France’s subsidiaries. Benelux. (a) Specifi c characteristics of the waste sector Ondeo Industrial Solutions offers solutions tailored to a in France specifi c activity sector (notably aviation, automotive, agro-food, The French waste sector represents approximately €10.8 billion chemicals, energy, metallurgy and steel, micro-electronics, (source: IFEN, “Economic evaluation of ecological services in paper, pharmaceuticals, oil industry, petrochemicals, and glass) 2007”, 2009 edition – estimate of total domestic waste service to meet the specifi c needs of industrial operators in water management expenditures). More specifi cally, the Group resource management, process water treatment, wastewater estimates that private operators represent approximately half purifi cation and sludge and by-product recovery. of household waste collection. Of a total of 444 million tons of Ondeo Industrial Solutions has over 200 operating and service waste, 80% is generated by building and demolition activities, contracts in Europe with industrial customers and to date has 12% by commercial and industrial activities, 6% by municipalities constructed over 1,800 process water treatment stations and and households, and 2% are hazardous waste (source: Eurostat, over 2,000 wastewater treatment plants. 2006 data). Regarding household and municipal solid waste, 34% is disposed of at landfi lls, 30% is subjected to thermal In 2009, Ondeo Industrial Solutions won several contracts for treatment, and 36% is recovered or subjected to biological the construction, operation and/or maintenance of process treatment (source: Eurostat, 2007 data); the Group believes the water treatment facilities (Repsol, Alstom, EDF, Electrabel, recycling portion will grow in the future. Galp Energia) and wastewater treatment facilities (Hellenic Petroleum, Geostock, Scottish & Newcastle, SCA Valdèze, Arkema Lavéra).

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(b) SITA France 6.5.3.2 WASTE-RELATED ACTIVITIES IN THE UNITED KINGDOM AND SCANDINAVIA SITA France is active throughout the entire waste cycle: collection, sorting, recovery and elimination (material (a) United Kingdom recovery, biological recovery, energy recovery and landfi lling), management of hazardous waste, soil remediation, industrial The Group operates in the United Kingdom primarily through its cleaning and maintenance. subsidiary SITA UK.

SITA France has been active in France in the waste sector since (i) Specifi c features of the United Kingdom waste sector it was incorporated in 1919. The Group has signifi cant landfi ll The Group estimates the waste sector in the United Kingdom at capacity, a diversifi ed portfolio of contracts, special expertise approximately €10 billion. Of a total of 259 million tons of waste, in treatment (landfi ll, incineration and methanization), the 42% is generated by building and demolition activities, 43% advantage of the geographic coverage of its network, and ability by commercial and industrial activities, 12% by municipalities to innovate by offering new treatment and recovery solutions. and households, and 3% is hazardous waste (source: Eurostat SITA France is currently active in the recovery of cardboard, – 2006 data). 57% of municipal solid waste is landfi lled, 34% is metals, wood, plastic, and technical rubber. In September 2008, recycled or recovered, and 9% is incinerated (source: Eurostat, SITA France acquired Boone Comenor Metalimpex (a French 2007 data). Given the rapid changes in recent years, the Group company specializing in the recovery of ferrous and non-ferrous believes the proportion of waste landfi lled should currently be metals in France and 11 other countries). With the acquisition less signifi cant, particularly under the effect of measures such of this company, the Group now has a total capacity for ferrous as taxes on volumes landfi lled and penalties for exceeding metal recovery of 2.2 million tons and has expanded its offering authorized quotas. to industrial customers both in France and abroad. Confi rmation by the government, in its annual budget, that the The Group has especially become more visible in the plastics tax on landfi lled waste will increase by £8 per year until 2013, recycling segment: in effect, in June 2009 France Plastiques further increases the viability of alternative options for waste Recyclage (FPR) – a subsidiary created in 2008 and held jointly treatment, such as recycling and energy recovery technologies. by SITA France and the PAPREC Group – inaugurated its fi rst This sector is undergoing signifi cant consolidation and is PET bottles recycling unit. This plant will handle recycling of characterized by under-capacity in terms of treatment plants. 40,000 tons of bottles per year, directly usable in the form of granules, for the manufacture of new bottles or food packaging. (ii) SITA UK In 2009, SITA France’s contribution to the Group’s consolidated In 2009, SITA UK’s contribution to the Group’s consolidated revenues totaled €2.8 billion. SITA France employed over 18,900 revenues was €856 million; it employed over 5,800 people as of people as of December 31, 2009. December 31, 2009.

In 2009, SITA France provided waste collection services to SITA UK is active throughout the entire waste cycle, except 15 million inhabitants and over 51,000 commercial and industrial for waste likely to be contaminated by radionuclides resulting customers; SITA France treated over 18 million tons of waste from nuclear activity. The Group relies on its size, which allows (including the activities of Teris and Boone Comenor abroad, for it to participate in all bid tenders in this sector, particularly approximately 800,000 tons). As of December 31, 2009, SITA since it has signifi cant expertise in integrated waste services France operated 75 composting platforms, 38 incineration sites management through Private Finance Initiative (PFI) contracts. (36 of which have energy recovery ability), and 270 sorting and It has also demonstrated its ability to obtain renewals of its transfer stations. contracts, and to pursue development through complementary activities, notably recycling. The Group believes that SITA France is the 2nd-largest private operator in France. SITA UK is in the process of fi nalizing a partnership with Cyclamax, a specialist in energy recovery, specifi cally in order to develop six gasifi cation plants that will treat over 600,000 tons of commercial and industrial waste.

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SITA also increased its waste management capacity in early In April 2009, SITA Sverige acquired one of its Swedish 2009 by acquiring Swansea—a subsidiary of Shanks specializing competitors, Allren AB (a company that earned 2008 revenue in the collection of commercial and recyclable waste. Finally, in of approximately €11 million), and successfully took it over. This 2009 SITA UK sold its interest in LondonWaste incineration plant acquisition strengthened SITA Sverige in the country’s southern to North London Waste Authority. In 2008, LondonWaste earned regions and in the recycling and hazardous waste segments. total revenue of 84 million pounds.

In 2009, SITA UK served nearly 4 million people and nearly 50,000 6.5.3.3 WASTE-RELATED ACTIVITIES IN GERMANY, commercial and industrial customers through its collection THE NETHERLANDS AND BELGIUM activities; SITA UK treated 10 million tons of waste. The Group operates in Germany, Belgium and the Netherlands through its subsidiaries SITA Deutschland, SITA Belgium and The Group estimates SITA UK to be the second-largest private SITA Nederland. player in the United Kingdom in terms of revenues. (a) SITA Deutschland (b) Scandinavia The Group is also active in waste collection and treatment (i) Specifi c features of the waste sector in Germany activities in Sweden and Finland through its SITA Sverige and The waste sector in Germany represents over €18 billion per SITA Finland subsidiaries. year (Source: Ecoprog – 2009). Of a total of 315 million tons of waste, 59% is generated by building and demolition activities, (i) Specifi c aspects of the waste sector in Sweden 23% by commercial and industrial activities, 11% by and Finland municipalities and households, and 7% are hazardous waste The waste sector in Sweden represents approximately (source: Eurostat, 2006 data). Less than 1% of municipal solid 50 million tons of waste, including 16% from building and waste was landfi lled in 2007 (1), with 34% incinerated and 65% demolition activities, 71% from commercial and industrial recovered or converted (Eurostat, 2007 data). activities, 8% generated by municipalities and households, and 6 5% consisting of hazardous waste (source: Eurostat, 2006 data). (ii) Activities of SITA Deutschland 4% of household waste is landfi lled, 50% is recycled, and 46% is In 2009, SITA Deutschland contributed €453 million to the incinerated (source: Eurostat, 2007 data). Group’s consolidated revenues; it had over 3,100 employees as The waste sector in Finland represents approximately 50 million of December 31, 2009. tons of waste, including 46% from building and demolition SITA Deutschland provided waste collection services to activities, 46% from commercial and industrial activities, 2% approximately 8 million people and 90,000 commercial generated by municipalities and households, and 6% consisting and industrial clients in 2009; SITA Deutschland treated of hazardous waste (source: Eurostat, 2006 data). With regard approximately 1.4 million tons of waste. to household waste, 36% is recycled or recovered, 11% is incinerated, and 53% is landfi lled (source: Eurostat, 2007 data). The Group estimates SITA Deutschland to be the 4th-largest private operator in Germany.

(ii) SITA Sverige and SITA Finland The Group’s presence is concentrated in western Germany SITA Sverige, a wholly-owned subsidiary of the Group, is (Baden-Wurttemberg, Hesse, North Rhine-Westfalia, Saxony), active throughout the waste cycle, except for incineration particularly in municipal collection and selective collection; it and treatment of electronic and electrical waste. SITA Finland, also has a strong position in the incineration segment through a wholly-owned subsidiary of SITA Sverige, is active in the its Zorbau site in the area of Leipzig. Its cooperative arrangement waste collection, sorting and recycling segments. In 2009, with SITA Nederland is also an advantage, providing the benefi ts SITA Sverige’s and SITA Finland’s contributions to the Group’s of staff exchanges, an international network, and shared services. consolidated revenues totaled €255 million. The companies employed over 1,500 people as of December 31, 2009. In 2009, through their collection activities, SITA Sverige and SITA Finland served approximately 2.6 million people and 58,000 commercial and industrial clients; they treated 685,000 tons of waste.

(1) The share of municipal solid waste landfilled in Germany is probably “undervalued”, because the treatment, which consists of storing waste in salt mines, may be classified by the German authorities as recovery (the volumes stored in these salt mines are therefore probably included in the 65% recovered or converted).

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Since 2008, SITA Deutschland has held a 68.4% interest in a (ii) Activities of SITA Belgium German company, BellandVision GmbH, which is active in the In 2009, the Group generated revenues of €477 million in business of services and royalties relating to the recycling of Belgium. As of December 31, 2009 it employed over 1,100 industrial and large-scale distribution packaging. people.

(b) SITA Nederland The Group estimates that it is one of the main operators in the Belgian waste sector due to its very strong position in collection (i) Specifi c features of the waste sector activities, mainly from industrial and commercial waste in the Netherlands activities. The Group provided collection services to 5 million The Group estimates the waste sector in the Netherlands people and over 52,000 commercial and industrial customers to represent approximately €6 billion. Of a total of 91 million in 2009. tons of waste, 59% originate from construction and demolition activities, 26% from commercial and industrial activities, 10% is generated by municipalities and households, while 5% is hazardous waste (source: Eurostat, 2006 data). 2% of the 6.5.4 PRESENTATION OF THE GROUP’S municipal solid waste is landfi lled, 32% is incinerated, and 66% I NTERNATIONAL ACTIVITIES is recycled (source: Eurostat, 2007 data). The Group estimates this sector to be among the most advanced in terms of In addition to Europe, the Group is an operator in the water and environmental regulations. waste sectors in more than 15 countries. As a result of selective growth abroad, this position is based primarily upon a strong (ii) Activities of SITA Nederland presence in four regions: In 2009, SITA Nederland’s contribution to the Group’s ● consolidated revenues was €421 billion; it employed about North America;

2,200 people as of December 31, 2009. ● Asia-Pacifi c;

SITA Nederland is active in the entire waste cycle. SITA Nederland ● Central Europe; and provided waste collection services to about 1.6 million people ● and more than 80,500 commercial and industrial customers the Mediterranean Basin and the Middle East. in 2009; SITA Nederland treated 1.4 million tons of waste. The A joint organizational structure in water and waste activities Group believes that SITA Nederland is the second-largest private has generated synergies in operating expenses, and combined operator in the Netherlands. product offers. In addition, depending on the country, the Group In 2009, SITA Nederland was awarded contracts for the has been able to rely on its commercial growth already achieved treatment of combustible household waste in three major by each of the segments as a basis for further development, as cities of the Netherlands. These contracts, which had previously in Central Europe, China and Australia, for example. been handled by AVR/Van Gansewinkel, represent an additional treatment volume of 300,000 to 500,000 tons per year. 6.5.4.1 DEGRÉMONT

The Group has also improved its positions in energy recovery, Degrémont is at the core of the Group’s international growth through the commissioning of the EVI incinerator on the border strategy due to its presence on the 5 continents. between the Netherlands and Germany. For over 65 years, Degrémont, a wholly owned subsidiary of SUEZ ENVIRONNEMENT, has designed, built, equipped and (c) Waste-related activities in Belgium operated drinking water plants and industrial process water plants, desalination plants for sea and brackish waters, urban (i) Specifi c features of the waste sector in Belgium and industrial wastewater treatment, recycling and sludge The Group believes that the waste sector in Belgium represents treatment plants. Degrémont is present in over 70 countries about €3 billion. Of a total of 59 million tons of waste, 21% and employed over 4,400 employees (36% of whom are in is generated by building and demolition activities, 64% by France, 15% in Europe, and 49% in the rest of the world) as of commercial and industrial activities, 8% by municipalities and December 31, 2009. households, and 7% is hazardous waste (source: Eurostat – 2006 data). The Group estimates that 4% of the household waste is Degrémont contributed €1,053 million to the Group’s landfi lled, 33% is incinerated, and 63% is recycled or recovered. consolidated revenues in 2009; Design-Build activities represented 60%, managing BOT contracts and services, 22%, and the equipment business, 18% of Degrémont’s total

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revenues. Approximately 1 billion people are served by nearly Degrémont offers all the following services: 10,000 plants designed, built or equipped by Degrémont throughout the world, since the company was created. (i) Design and Build This is the traditional activity of Degrémont. It is conducted (a) Degrémont’s businesses under turnkey contracts that state that Degrémont guarantees To respond to the needs of its clients (primarily local authorities the completion and satisfactory performance of their and other public authorities) in water treatment, Degrémont plants within a predetermined period. This service includes provides a global offer based on plants designed for the: engineering, provision of plans, purchase of equipment, building site supervision, installation of equipment, and the preliminary ● production of drinking water (over 3,000 sites designed or operating of the facility. built throughout the world); (ii) Operation and Services ● desalination of sea water or brackish water by reverse osmosis (at least 250 sites designed, built or equipped Degrémont’s Operation and Services activities are based on throughout the world); its exceptional know-how, in offering the Group’s clients an expertise as builder-operator that distinguishes itself in its ● purifi cation and recycling of wastewater (more than 2,500 market. wastewater treatment plants built throughout the world); Degrémont’s product offer in Operation and Services is adapted ● treatment and recovery of treated sewage sludge (over 60 to customer needs, from the operation and overall maintenance incinerators and dryers built throughout the world). of a site to the supply of replacement parts, after-sale services, In the industrial sector, in addition to wastewater purifi cation, renovation of plants, and employee training. Degrémont has the capacity to produce industrial processing Plants built and operated by the Group benefi t from the double water that meets the needs of the most sensitive industries (oil expertise of a builder-operator (ergonomics are incorporated in refi ning, steel, thermal plants, or paper and agri-food industries). the design stage, and their startup is secured). The plants also 6 To adapt to the operating methods and specifi c needs of its gain from the innovations and know-how developed by the customers, Degrémont also provides a varied offer that includes entire Group. Teams supervise the preservation of the resources Design-Build, operating and related services, and high value entrusted to them, ensure continuity of the public service while added equipment. Degrémont also has related expertise in controlling operating costs through predefi ned, transparent developing and managing BOT contracts with project fi nancing. investment policies.

Degrémont serves its customers under four types of contracts: (iii) Equipment

● “DB” contracts - “Design Build”, under the terms of which Degrémont’s technology division – Degrémont Technologies Degrémont is responsible for the design and building of a – supplements its line-up by providing compact equipment or project, generally as a result of a public bidding process; units such as: membrane ultrafi ltration by Aquasource, sludge drying at Innoplana, UV or ozone disinfection by Ozonia, thermal ● “DBO” contracts - “Design, Build and Operate”, under the oxidation by Infi lco Degrémont, and “pure” water production terms of which Degrémont is responsible for the design, technologies for industrial or medical activity by Anderson and building and operation of a site; Water & Power Technologies (WPT).

● “BOT” contracts - “Build, Operate and Transfer”, under the Degrémont also offers its customers high value-added, patented terms of which Degrémont is responsible for fi nancing the technologies, which are standardized and “packaged“ to equip project, designing and building the site, and transferring it to municipal, industrial and recreational water treatment plants. the owner at the end of an operating period; in this type of A full range of after-sale services is offered in addition to the project, Degrémont is usually not the sole investor; provision of equipment.

● equipment contracts, under which Degrémont is responsible for providing sites operated by its clients with the necessary (iv) BOT contracts equipment, and related services. Under the terms of a BOT contract, Degrémont is responsible for the design, construction and operation of the site. It is also responsible for fi nancing the project although it is not generally the sole investor. At the term of the operating period, the contract is transferred to its owner, which then takes over the operation.

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(b) Research and development United Water has facilities in 26 states of the Union, especially in the Midwest and Northeast, and is active in two types of Degrémont is known for the quality of its technological businesses: innovation and for its contribution to innovation in water treatments. In 2009, it committed approximately €14 million to ● “regulated activities“ (primarily in the fi eld of drinking water research and innovation projects. It has a dedicated staff of over services): operators own their water production/treatment 100 people in its four research centers (in France, Switzerland, assets. This sector is characterized by its high capital and the United States). It held a portfolio of 137 patents as of intensity and a lower fi nancial risk, since rates are fi xed by December 31, 2009. the regulator, based on required investments, among other considerations; (c) Degrémont’s international presence ● services contracts (primarily in the fi eld of wastewater In 2009, 75% of Degrémont’s revenues were generated outside services): operators enter into operating and maintenance France. Degrémont carries out its international activities through contracts with local municipalities covering sites or assets, numerous subsidiaries: which the municipalities own and remain the owners of. This sector is characterized by its lower capital intensity and offers ● in Europe (United Kingdom, Switzerland, Denmark, Belgium, Spain, Italy, Portugal, Hungary and Norway); and in Russia lower margins. The usual term of contracts varies from 3 to 10 years. The average residual life of United Water’s portfolio ● in Latin America (Mexico, Chile, Argentina, Brazil, Peru, and of contracts (weighted by revenues) is approximately 6 years. Colombia); for example, in Mexico, Degrémont has built and fi nanced water treatment plants, which it now operates, in The acquisition on August 1, 2008 of Utility Service Group (USG) Culiacan, Ciudad Juarez, San Luis Potosi, Pemex and Puebla; enabled the Group to considerably increase its coverage of the United States. This company manages and maintains over ● in the Middle East (Lebanon, Jordan, United Arab Emirates, 4,000 water storage tanks on behalf of 2,000 municipalities in Oman, and Bahrain); 41 states. It also provides other asset management services, such as the sale or leasing of new tanks or the management ● in Africa (Egypt, Algeria, Morocco, South Africa, and Nigeria); of communication antennas installed on the tanks. As USG’s ● in Asia (India, China, Malaysia, Indonesia, Japan, and South facilities and activities complement those of United Water, this Korea); for example, Degrémont has been active in China for operation opens the way to growth opportunities in all business 30 years, and has built 190 plants with industrial clients and lines. local public authorities; In 2009, these different activities contributed €547 million to ● in Australia and New Zealand; the Group’s consolidated revenues, 53% of which came from “regulated“ activities and 47% from services contracts. These ● in North America (United States and Canada). activities employed over 2,300 people as of December 31, 2009 In the rest of the world, Degrémont has the ability to deploy its (USG included). SUEZ ENVIRONNEMENT has thus developed a sales, building and operating teams to pilot major projects. balanced portfolio between these two primary areas of activity, which the Group sees as complementary, while the services 6.5.4.2 THE GROUP’S OTHER INTERNATIONAL contracts segment has been strengthened by the acquisition of ACTIVITIES USG and of the Earth Tech operating contracts. Other activities by the Group’s International segment generated United Water holds a 12% market share of the private sector revenues of €1.9 billion in 2009. involved in producing and distributing drinking water and providing wastewater treatment services in the United States. (a) North America Its drinking water and wastewater treatment activities serve 2.1 million people in the “regulated“ business sector, and (i) United States (Water) 5.1 million through service contracts (excluding USG). In 2009, The Group operates in the management of water and wastewater United Water had 20 operations in 8 states in the regulated services in the United States through SUEZ ENVIRONNEMENT sector and 237 services contracts in 26 states, excluding the North America (SENA) and its wholly-owned subsidiaries, United USG water tank maintenance contracts. Water (UW) and Utility Service Group (USG). The various external growth operations carried out in 2008 and 2009 have made the Group the second largest private operator in the water sector in the United States in terms of total revenues in the two above-mentioned primary fi elds of activity (“regulated activities“ and services contracts).

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The Group estimates the American market to be approximately share in terms of number of inhabitants served is estimated US$88 billion (representing US$63 billion for operating activities at 60%). The CNA estimated that annual billings for water and and US$25 billion for engineering, building and equipment wastewater treatment services in 2007 totaled US$2.2 billion, activities) and that private operators represent about 8% of US$104 million of which was billed by private companies (i.e., the operating activities sector. This sector is characterized by the Group’s market share in value is estimated at 53%). long term stability and increasingly high expectations for quality The Group estimates that it is the largest private operator in and service. It is a very fragmented market (with almost 53,000 water related services in Mexico. water supply systems and over 21,000 wastewater treatment systems) and offers major opportunities for consolidation. (b) Asia-Pacifi c In 2009, United Water obtained the renewal of 75% of its expiring contracts. Specifi cally, the West Basin contract in California was (i) China renewed for fi ve years. This is the largest municipal project In 2009, companies in which the Group has an interest generated for the reuse of wastewater in the United States, and is also total revenues of €866 million in China. a key benchmark for the Group, as this activity is becoming increasingly vital in regions experiencing water stress. WATER SERVICES The Group has a presence in China through its water and United Water also announced in 2009 the signing of a services electricity management concessions in Macao, and its 22 agreement with the city of Hyannis (Cape Cod, Massachusetts) subsidiaries established through partnerships with local public for a period of fi ve years. The Group will be responsible for entities for the production of drinking water and wastewater the operation, management and maintenance of the water treatment services. It operates under several types of contracts, distribution system as well as customer management (billings, such as BOT contracts for building and renovating water collections, servicing). This contract may be extended for an treatment plants and delegation of public services agreements. additional three years. The Group has two delegations of public services contracts with the city of Macao. The fi rst, a public services contract for the (ii) Mexico (Water) provision of water services, started in 1985 (for a period of 25 6 Present in this fi eld since the mid 1960s through Degrémont years) and was renewed in November 2009 for an additional 20 (see Section 6.5.4.1(c)), the Group fi rst entered into a service years. The second contract is for the production and distribution contract for Mexico City in 1993. of electricity.

Since that date, the Group’s activities in public services In 2009 the Group generated €187 million from the water and contracts have been provided by a local company, Bal-Ondeo, electricity businesses in China; it had over 5,800 employees jointly owned by the Group and the Mexican company Peñoles, as of December 31, 2009. The Group provided drinking water a subsidiary of the BAL Group, which specializes in mining and services to over 11 million inhabitants. refi ning non-ferrous metals. The Group estimates that it is one of the three largest private The Group had over 1,450 employees in Mexico as of operators in the Chinese market for drinking water and December 31, 2009. wastewater treatment services.

Bal-Ondeo’s activities are expanding primarily: The Group estimates that the water sector in China will gradually open to private operators; the market is characterized by ● in Cancun, under a delegation of public services contract to supply and distribute drinking water, and collect and treat diffi culties in supplying water affecting almost 60% of Chinese wastewater; with an initial 30-year term, this contract will cities, and by strict regulation of these activities (despite varying expire in 2023; interpretations of regulations depending on the Chinese region). The Group estimates that China is among the most dynamic ● in Mexico City, where the Group has entered into two services markets in the world in these sectors in terms of volume growth contracts with the city to cover the management of customer and development of urbanization. accounts and provide maintenance for the secondary distribution network for drinking water and water meters. The Group is active in the Chinese water sector primarily These contracts, which cover half of the Mexican capital, through the jointly owned company Sino-French Holdings, represent 5.4 million inhabitants and 1.2 million customers; incorporated in 1985, which has been owned since 1998 by they were renewed in 2009 and will run until 2010. SUEZ ENVIRONNEMENT and Lyonnaise Asia Water Limited on the one hand, and by Beauty Ocean Limited, whose obligations The Group is also active in Mexico through activities conducted are guaranteed by New World Infrastructure Limited, on the by Agbar (see Section 6.5.2.2). other hand. The relationship among the parties is governed by a shareholders’ agreement that provides for equal representation In 2006, according to data provided by the CNA (Comisión on the company’s Board of Directors. This agreement also sets Nacional del Agua), people with access to drinking water forth a right of fi rst refusal benefi ting the other shareholders in totaled 96 million inhabitants and people served by private the event that one of the parties sells all or part of its holding. companies amounted to just 2 million (i.e., the Group’s market

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The Group’s presence in China was strengthened by the signing ● Finally, in December 2009 Degrémont, in association with of several major contracts since 2006. Ondeo Industrial Solutions, signed a contract to build an industrial wastewater treatment plant at the Petrochina site ● The joint venture owned equally by the Chongqing Water in Chengdu. Starting in 2012, this facility, with a capacity of Group and Sino-French Water Development, a subsidiary 60,000 m3/day, will treat wastewater from the refi nery. The of Sino-French Holdings, was granted delegation of public operating processes will also handle recycling of one third of services rights in 2006 for 30 years to manage, operate and the wastewater, which will be reused in the refi ning process, maintain a wastewater treatment plant in Tangjiatuo. thereby saving water resources in the region. ● In 2006, the Group also entered into a concession contract The Group is also present in China through the activities of to manage water services for the city of Changshu, near Degrémont (see Section 6.5.4.1(c)). Shanghai. This contract has a 30-year term and represents cumulative revenues of over €1 billion. The growth of the Group’s activities in China has also been achieved through Agbar, which established a jointly owned ● The Group has launched an industrial water production company in November 2007 with the Chinese company Golden plant, a wastewater treatment plant, and an incinerator for State Water to supply drinking water and treat wastewater in hazardous waste in the Shanghai Chemical Industry Park the province of Jiangsu. (SCIP), the largest petrochemical industrial site in Asia. In 2006, it also witnessed the inauguration of the fi rst Research Finally, in September 2009 the Group, in collaboration with and Development Centre dedicated to industrial wastewater Tsinghua University, inaugurated a laboratory for scientifi c and hazardous waste, by the Shanghai city authorities. These research and environmental engineering experimentation events demonstrate the determination to explore new paths (water, wastewater treatment, waste and air pollution), thus for industrial cooperation and improved quality of service. rounding out its plan for the transfer of its knowledge and expertise to China. ● In April 2008, the Group and its partner, New World, announced they were contemplating strengthening their WASTE relations with their local partner in Chongqing, through the The Group has been active in the Hong Kong waste sector since acquisition of a 15% interest in Chongqing Water Group for 1998 through the company Swire-SITA Waste Services. Swire- €140 million. The acquisition was completed in August 2008. SITA Waste Services – historically one of the major players in

● In 2009 the Group—through its subsidiary Sino French Water waste treatment in Hong Kong – was a joint company controlled Development—and Chongqing Water Group, continued to in equal parts by SUEZ ENVIRONNEMENT and Swire Pacifi c. In strengthen their cooperation with the city of Chongqing, 2008, the Group initiated the purchase of Swire shares in the by winning a new drinking water distribution concession joint venture Swire-SITA, to become its sole owner. The deal was contract for the Yuelai region. Over a period of 40 years, the approved by the Hong Kong government in late December 2009, total additional revenue will be nearly €3 billion, one quarter and the company is now known under SITA Waste Services. of which is the Group’s share. With over 1,200 employees, SITA Waste Services operates 12 municipal solid waste transfer stations and 2 landfi lls (over ● In March 2009 the Tianjin authorities also gave their approval 3 million tons of waste landfi lled in 2009). to a transfer of equity between Earth Tech and SUEZ ENVIRONNEMENT, through its subsidiary Sino French Water In addition, the Group provides renovation services to Hong Development, to establish a joint venture for supplying water Kong public authorities for closed landfi lls; it monitors these to Tianjin. Over the next 14 years, the Group will operate the sites for a thirty-year period. Jieyuan water station, which supplies 1 million inhabitants, Through a joint venture with local partners, it designed, or one third of Tianjin’s urban population. participated in the building of, and now operates an incineration

● In September 2009 the China-Singapore Suzhou Industrial plant for hazardous industrial waste with an annual capacity of Park also awarded the Group the design, construction and 60,000 tons on the Shanghai Chemical Industry Park (SCIP) site. operation of the fi rst sludge treatment plant in Jiangsu This unit is the largest of its kind in China. The Group also has province, through a 30-year contract. a presence in Macao, where, through a jointly owned company with a local businessman, it provides collection of household, commercial and industrial waste and street cleaning for the municipality.

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In 2009, the Group earned total revenue of €63 million in China waste treatment (Alternative Waste Technologies), involving through SITA Waste Services in its waste activities. Every year, sorting, composting and, in the near future, methanization, will the Group collects over 360,000 tons of household, commercial, continue to play an important role. Moreover, the consolidation agricultural and medical waste in Hong Kong and Macao. trend in the Australian waste market should continue in 2010.

The waste sector in China is characterized by a gradual opening The Group is active in the Australian waste sector through SITA up to private operators and is experiencing strong growth in Environmental Solutions (“SITA Australia“). SITA Australia is volume and urban development. The Group therefore anticipates a company jointly owned by the Group (60%) and SembCorp that the volume of domestic waste will increase substantially. Industries (40%), a group based in Singapore that is active in China is a country that generates large amounts of hazardous engineering, logistics and building. waste, which is not currently being appropriately treated. All SITA Australia serves nearly 43,000 commercial and industrial the conditions for growth in this business seem to be in place, customers and 3 million inhabitants through its collection particularly with the adoption of more rigorous environmental services in the country’s main cities. In 2009, SITA Australia regulations and the establishment of regulatory bodies in 2003. was particularly active in the municipal waste collection sector, In Taiwan, the Group operates a waste incineration plant. specifi cally due to the startup of several new contracts. SITA Australia is Australia’s leader in the MBT (Mechanical Biological (ii) Australia Treatment) market, and is among the top three in waste recycling WATER SERVICES and treatment. SITA Australia’s services include collecting and recycling municipal, commercial and industrial waste, collecting The Group believes that the Australian water sector is organic waste and recycling it through compost, waste characterized by acute problems related to water resources production audits, product destruction, advanced engineering due to recurrent, long-lasting droughts and by a strong link services for waste, and waste transfer. to problems related to climate warming. This sector offers interesting growth opportunities due to an increased use of SITA Australia contributed €272 million to the Group’s desalination and reuse of wastewater after treatment. consolidated revenues in 2009 and had 960 employees as of 6 December 31, 2009. Opportunities related to the recovery of water used in the industrial and mining sectors, in particular, should become The Group is the third-largest operator in the waste sector increasingly numerous in years to come. in Australia and the leader in waste sorting and processing technologies. In 2009 SITA received the Frost & Sullivan 2009 The Group is active in the Australian water sector through Award as the best waste-management company in the Asia- Degrémont (see Section 6.5.4.1), which in July 2009–through Pacifi c region. the AquaSure Consortium–was awarded the contract for a seawater desalination plant that will allow the State of Victoria (iii) Indonesia (Water) to meet approximately one third of the water needs of the city of Melbourne by the end of 2011. The Group is active in the Indonesian water sector through its 51% owned subsidiary PT PAM Lyonnaise Jaya (“Palyja“). In 2006, This contract is the largest Private-Public Partnership project the Group sold 30% of its holding in Palyja to a local partner (PT in the world, in the desalination sector. It provides fi nancing, Astratel Nusantra) and 19% to Citigroup Financial Products Inc. design and construction of a plant with a capacity of 450,000 m3 The Group remains the majority shareholder with 51% of the of drinking water per day and an 85-km water pipeline network share capital. and then for 27 years of the plant’s operation. The total investment amount will be €2 billion. The Group is active in this sector through a 25 year delegation of public services contract (beginning in 1998) for water production WASTE and distribution in western Jakarta. The decision of Jakarta’s The Group believes that the waste sector in Australia represents public entities to delegate the management of water supply approximately €1 billion. The Group considers this sector to have services for the city is the result of the need to improve the level major growth potential: in effect, the country’s policy in terms of service and address the city’s explosive demographic growth. of waste management has continued to evolve, specifi cally Palyja contributed €73 million to the Group’s consolidated with the preparation of a “National Waste Policy” and the revenues in 2009. It had almost 1,400 employees as of implementation, in most states, of landfi lled waste reduction December 31, 2009. The Group provides water production and goals. Within this context, recourse to alternative solutions for distribution services to over 3 million inhabitants.

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(c) Central Europe 900,000 tons of waste and served over 21,000 clients. The Group estimates that it is among the two private key players Companies in which the Group had interests generated for industrial and household waste and urban sanitation; revenues of €492 million in Central Europe in 2009. ● in the Czech Republic and Slovakia, through its subsidiaries WATER SERVICES SITA CZ and SITA SK, respectively, which contributed The Group has been active in the water sector for many years in €63 million to the Group’s consolidated revenues in 2009. several new member States of the European Union. The Group It collected over 500,000 tons of waste and treated over provides, alone or through partnerships: 700,000 tons of waste in the Czech Republic and Slovakia. The Group had nearly 1,000 employees in these two countries ● in the Czech Republic: drinking water and wastewater treatment services in several cities where it has been present as of December 31, 2009. The Group estimates that it is the since 1993. The Group is the second largest private operator third-largest private operator in the waste sector. in the Czech Republic’s water sector (the Group estimates In these countries, the Group has developed signifi cant expertise this market at €1 billion); in the treatment of hazardous waste, supplemented through the recent acquisition of a hazardous waste incinerator and a ● in Hungary: drinking water services in Budapest (through its partnership with RWE). The Group’s contract at Kaposvar hazardous waste landfi ll. expired in January 2009 (the concession has been returned to The waste treatment sector in Central and Eastern Europe state ownership) and the Pécs contract was suspended. The is characterized by a signifi cant potential for growth based Group is one of the top two private operators in Hungary’s on improved standards of living and the region’s economic water sector (the Group believes that this sector represents development as well as the necessity for these countries to €1 billion); comply with European environmental regulations.

● in Slovakia: drinking water services since 1999 in Trencin. The Group is the second largest private operator in Slovakia’s (d) The Mediterranean Basin and the Middle East water sector (the Group believes that this sector represents (i) Mediterranean Basin (Water and Waste) €0.6 billion); In Morocco, the Group is active in the water sector through the ● in Slovenia: the operation of the purifi cation plant of Maribor company Lyonnaise des Eaux de Casablanca (LYDEC) in which that it built. it owns a 51% stake, with the other 49% held by Fipar Holding, and RMA Wataniya, which together own 35%, with the remainder In addition, the Group is paying close attention to growth traded on the Casablanca stock market. LYDEC is responsible opportunities, specifi cally in Poland (a sector that the Group for water distribution, wastewater treatment and electricity estimates at €3 billion), in Croatia, Romania and Bulgaria, as well distribution to 3 million customers in Casablanca under a contract as in Russia and the Ukraine. entered into in 1997 for a 30-year term. In 2009, LYDEC contributed The contribution of water activities in Central and Eastern €482 million to the Group’s consolidated revenues, generated Europe to the Group’s consolidated revenues was €52 million notably from activities related to electricity (65%), drinking water in 2009. distribution (19%), and wastewater treatment (6%).

The Group estimates that the water sector in Central and LYDEC has been listed on the Casablanca stock exchange since Eastern Europe is characterized by lower consumption in certain 2005. As of December 31, 2009, it had over 3,400 employees. countries and diffi culties in adjusting the rates; however, growth In the context of the amendment process of the delegated opportunities exist because these countries must comply with management agreement entered into between the delegating European environmental regulations and there is increasing entity and LYDEC, a memorandum of understanding (“MoU“) use of private investment, particularly in Slovakia, Hungary and was entered into on March 14, 2008. An amendment to the potentially in Poland. delegated management agreement was signed in March 2009.

WASTE LYDEC’s main objectives for improvement are the safety and The Group is active in the waste sector in various Central and quality of the drinking water supply and management of the Eastern European countries: distribution network, development of wastewater treatment

● in Poland, through its subsidiary SITA Polska, which infrastructures (particularly fl ood prevention) and as to its contributed €111 million to the Group’s consolidated electricity activities, the development of infrastructure and revenues in 2009. The Group had approximately 2,500 improvements in the electrical transmission network. employees as of December 31, 2009. It collected over

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The Group also conducts waste activities in Morocco through projects soon to come into the region. The Group also signed the company SITA El Beida. Since March 2004, SITA El Beida a contract in late 2009, via AQSS, to build and operate a operates the delegated waste management of Casablanca hazardous waste incinerator at Abu Dhabi for 15 years; city center, pursuant to an agreement entered into for a 10- ● in Saudi Arabia, the Group and its partner Aqua Power year term. SITA El Beida is in charge of city cleanup, household Development signed, on behalf of a joint venture – Jeddah waste collection, waste transportation to treatment sites, and Water Services – created in 2009 and held in equal shares a program aimed at increasing inhabitants’ awareness to the by the two partners, a 7 year-contract for the management need for the protection of their environment. of water and wastewater services in the city of Jeddah. This In 2009, SITA El Beida was awarded 2 contracts for the delegated contract, valued at US$61 million, is aimed at upgrading and management of waste collection, and transfer to landfi lls, as modernizing the city’s water and wastewater services. It sets well as for urban sanitation in the municipalities of Oujda (for concrete and ambitious objectives in terms of improving 10 years) and El Jadida (for 7 years), and at the end of the year a the service quality (permanent access to drinking water, waste collection and sanitation contract for the city of Novaceur. reducing deadlines for emergency operations on the drinking In Algeria, the Group entered into a management contract on water network, and preventing overfl ows in wastewater November 28, 2005, under which it contributes its expertise and collection networks). Jeddah, which has a population of provides employees to Société des Eaux et d’Assainissement 3.5 million, is facing sustained demographic growth with d’Alger (SEAAL) to contribute to the improvement of drinking almost non-existent water resources: recourse to alternative water distribution and wastewater treatment services for water resources is the only solution to ensure a regular the city of Algiers (SEAAL provides drinking water services to and sustainable water supply to the city. 98% of the water 3.5 million people). This fi ve-year contract came into force in consumed in Jeddah comes from seawater desalination 2006. In addition, in November 2007, Agbar was declared the plants. Type of production, in a location where water is at successful bidder for the contract to manage water services for a premium, requires the optimization and preservation of the city of Oran, beginning in January 2008. water resources and the elimination of any waste. In 2009, Jeddah Water Services was awarded an extension of the 6 (ii) Middle East (Water and Waste) Jeddah contract covering wastewater management. WATER SERVICES WASTE The Group has the advantage of a historic presence in the Middle Apart from Degrémont, the Group is active in the United Arab East, notably through Degrémont: it built the fi rst desalination Emirates through its subsidiary Trashco, which is positioned site using the reverse osmosis technique in Saudi Arabia in primarily in the collection of waste generated by industrial and 1975, entered into 20 DBO contracts in this country between commercial activities in the Emirates of Dubai, Sharjah and 1975 and 1986, built the world’s largest hybrid desalination site Ajman. in the United Arab Emirates in 2003, and won the contract for the design, build and operation (DBO) of the largest wastewater In 2008, Trashco acquired a company in Abu Dhabi – Trashco purifi cation plant in Qatar, intended for the reuse of treated Abu Dhabi – in order to manage the collection of industrial and water, in 2005. commercial waste in the emirate.

Moreover, the Group is active through local partnerships: In late 2009, the Group signed an operating agreement for a landfi ll at Muscat (Oman). This agreement, which has a term of ● in the United Arab Emirates, the Group entered into a 5 years, will be performed by a joint venture – SITA Al Basheer – strategic partnership agreement with the Al Qudra Group created for the purpose, in which the Group holds 60% and the on March 11, 2007. This cooperation agreement also gave other partners are Omani. rise, in 2008, to the establishment of a joint venture – Al Qudra Suez Services (AQSS) – held in equal shares by the The company provides services to approximately 1,700 clients two partners, and whose primary mission is to respond to and earned 2009 revenues of €13 million. growth opportunities in water and wastewater treatment

Z 6.6 DEPENDENCE FACTORS

Information concerning these dependence factors appears in Section 4 of this document.

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Z 6.7 LEGAL AND REGULATORY FRAMEWORK

The Group’s regulatory framework derives from both management contract defi nes the respective obligations of interdisciplinary regulations, and regulations specifi cally related the delegated agent and the delegating party as well as the to the business lines. pricing policy; no transfer of ownership of existing assets to the delegated agent (who is only the operator) is provided for. The Group’s activities in Europe are governed by European The operator is required, under law No. 95-127 of February 8, regulations, applicable directly and in a standardized manner to 1995, pertaining to public contracts and public services, to all member states, by European directives that are transposed issue a technical and fi nancial report on an annual basis for into domestic law, and, where applicable, by legislative the delegating authority. provisions specifi c to each country. Alongside these two traditional methods of awarding public The Group’s activities outside Europe, particularly in the United contracts, partnership contracts come under a special States, are also subject to both federal and local regulations in system. As a result of ordinance No. 2004-559 of June 17, the areas of the environment, health, and safety. 2004, such contracts have been reformed, with the adoption A detailed presentation of the most signifi cant applicable of law No. 2008-735 of July 28, 2008 and law No. 2009-179 of regulations is set out below. February 17, 2009. They allow the local authorities, under certain conditions, to entrust a company with an all-encompassing mission of fi nancing, designing, constructing, maintenance and long-term management of work necessary to the execution of a 6.7.1 INTERDISCIPLINARY REGULATIONS public service. They are just starting to develop and may play a bigger role in the waste segment and water segment.

In the United States, the federal government plays a major role (A) EUROPEAN REGULATION in the water sector, but the individual states retain authority in the areas of management and regulation of operations and Regulations on the awarding of public contracts investment planning. There are two broad coexisting contract In the European Union, contracts signed by the Group with methods: a regulated method, comparable to the English system, local public authorities are classifi ed as either public work or in which the assets belong to the operator, and an unregulated service contracts, or concession contracts. In contrast to a method, in which the local authority entrusts the management public contract, the concession is defi ned as a right to operate of its assets to an operator following competitive bidding. In a public service, with transfer of a portion of the risks borne by regulated activities, each state has a Public Utility Commission the delegating authority to the delegated agent. that sets both prices (for water and wastewater treatment services) and the return on shareholders’ equity allowed per European Directives (2004/17/EC and 2004/18/EC) regulate company operating in the regulated sector. For public-private the terms and conditions for awarding contracts based on partnership agreements in the non-regulated sector, the rules competitive bidding: public notice and award procedures. They for allocation of projects and operating conditions vary for each also set various rules that apply to public works concessions. municipality. As a general rule, operators are selected through Only the general principles of the European Treaties currently requests for proposals. apply to delegations of public services. Generally, methods for awarding contracts vary depending on In France, public service contracts are awarded through two the nature of the public-private partnership, whether it is the main methods: delegation type (long-term concession of public services, PFI in ● service and building contracts are subject to the French the United Kingdom, BOT or short-term provision of service) or Public Contract Code; the method of regulation. A clear defi nition of the regulatory framework is of the utmost importance for the growth of the ● delegation of public service contracts (DPS) are governed Group’s activities. by law No. 93-122 of January 29, 1993 regarding the prevention of corruption and the transparency of economic Environmental Liability transactions and public proceedings (so-called “Sapin Law“), which defi nes the procedures applicable to such awards; Directive 2004/35/EC on environmental liability regarding these contracts are used particularly in the water sector; the prevention and compensation of environmental damage local authorities (communes or groupings of communes) (known as the Environmental Liability Directive) had to be have the choice between direct control, the public services transposed within the Member States of the European Union by market, or delegation. In the case of the DPS, the delegated April 30, 2007 at the latest. This transposal is effective in most

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European countries, including France, since law No. 2008-757 of The European Pollutant Release and Transfer Register August 1, 2008. Regulation 166/2006/EC established a European Pollutant The directive establishes a legal framework for environmental Release and Transfer Register (known as the PRTR Register) to liability founded on the “polluter-payer“ principle, with a view monitor the release of pollutants into water, air and soil at EU to preventing and remedying damage to animals, plants, level (replaces the European Pollutant Emission Register (EPER)). natural habitats and water resources, and damage affecting This new register, which is an electronic database accessible the land. Damage may be recognized (by administrative bodies) to the public since November 9, 2009, is aimed at facilitating without any evidenced fault, even if the facility that is the access to information concerning the emission of pollutants. source of the damage is compliant with applicable licenses The great majority of waste and wastewater treatment activities and authorizations. According to the Environmental Liability are affected by this regulation (although certain thresholds do, Directive, the operator is the fi rst party to incur liability. The however, exist) and consequently, the operators concerned text of the law does however impose non-retroactivity, and will must provide precise data on their emissions every year (the therefore only apply to damage for which the generating event initial year of reference was 2007). occurred after April 30, 2007. REACH Particular vigilance is now required with regard to areas in which remarkable habitats and environments are protected: the The regulation concerning the Registration, Evaluation, “eco-regions“ identifi ed worldwide, the “Natura 2000“ sites in Authorization and Restriction of Chemical substances (REACH) Europe and – specifi c to France – sensitive rivers and corridors has been in force since June 1, 2007. In order to offer better or reservoirs of biodiversity defi ned in the “Grenelle“ draft laws. protection to human and environmental health against risks that can be caused by chemical substances, it makes industry In terms of criminal liability, the Parliament and Council of the responsible for evaluating and managing the risks of the said European Union adopted a new directive (2008/99/EC) on the substances and for providing adequate safety information to protection of the environment through criminal law, which was their users. published in the Offi cial Journal of the European Union (OJEU) on 6 December 6, 2008. Member States have 24 months in which to REACH involves specifi c communication throughout the life transpose the directive into national law, so as to establish penal cycle of substances, so as to guarantee regulatory compliance sanctions that are effective, proportionate and dissuasive for and to ensure that the planned uses (including at end-of-life) serious violations of the provisions of Community law relating are taken into account. Henceforth, the Group – like all those in to the protection of the environment. This EU law relates in the industry - must therefore check with their suppliers that the particular to the release of substances or ionizing radiation substances they use in the context of their activities are indeed into air, soil or water, the transfer of waste, the destruction or REACH-compliant. capture of specimens of protected species of wild fauna and Since December 1, 2008, companies must also have pre- fl ora and the commercialization of substances that will weaken registered all substances produced above the threshold of one the ozone layer. ton per year and per legal entity with the European Chemicals Elsewhere in the world, the most signifi cant developments in Agency (ECHA), unless the product in question is the subject of regulating environmental liability are the following: an exemption. They then have a period of about 2 to 10 years (depending on the tonnage concerned) to complete the full ● in the United States, the concept of “polluter-payer“ has substance registration process or to justify new exemptions. been recognized in the law; The Group’s activities are affected by this registration obligation

● China is currently reinforcing its environmental regulations in the context of the sale of recycled substances (secondary raw to set higher standards, notably in marine and air pollution, materials) as well as for certain substances produced in situ. protection of groundwater, species and natural habitats. In However, after study, the number of substances likely to require particular, it has promulgated a specifi c law on liability in the registration is very low, as the majority of recycled substances event of environmental damage that reverses the burden of sold on the market may be subject to exemptions due to their proof, and provides for various liability and compensation similarity to existing substances. schemes. This more rigorous approach will eventually have This should be the case, for example, where substances are an impact on the costs of managing water and waste. In its recycled and marketed as products, which could highlight their contracts, the Group therefore remains extremely vigilant similarity to existing substances. concerning new developments in Chinese environmental law.

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The Energy-Climate Package ● the initial fi nance law for 2009, No. 2008-1425, details the fi nancing methods for the measures adopted within the On December 17, 2008, the European Parliament adopted context of “Grenelle”, as well as the new ecological tax several proposals aimed at both fi ghting climate change and instruments; guaranteeing the European Union a safer and more sustainable energy supply. ● the corrective draft fi nance law for 2007, No. 2007-1824, takes note of the measures taken by decree prior to the The “Energy-Climate Package”, as it is commonly known, brings adoption of the “Grenelle Laws”, such as the “Bonus/Malus“ together: (bonus/penalty) scheme for vehicles. ● a directive which modifi es and extends the greenhouse gas The “Grenelle Laws“ and the regulatory provisions supplementing emission allowance trading scheme, from which the water them, represent both new obligations and new opportunities for and waste sectors continue to be excluded; the environmental sector. ● a decision relating to the distribution of effort among the They establish a massive program for reestablishing water Member States in domains that are not covered by this quality by forcing the various economic players to take system – such as transport, construction, or services to the responsibility: local authorities must meet sanitation standards, environment; farmers must reduce their use of pesticides, and manufacturers ● a directive intended to promote renewable energies, such whose activities pollute must fulfi ll new obligations. as biogas and energy produced from waste biomass or Within the domain of waste management, the main objectives are: wastewater treatment by-products; ● to reduce the production of waste by 7% per person per year ● a directive on the geological storage of CO ; 2 for the next 5 years; ● new guidelines concerning state aid to the conservation of ● to reduce the quantity of waste landfi lled or incinerated by the environment published April 1, 2008 aimed at supporting 15% between now and 2012, notably by raising the general the investment effort necessary to achieve these objectives tax on polluting activities (TGAP) on landfi lling and the as set forth in the aforementioned laws. creation of a TGAP on incineration; This initiative is part of the ambitious “climate“ action plan, ● to improve the recycling rates of packaging, household, adopted by the European Council in March 2007, whose main industrial and commercial, building and public works waste; recommendation is a European Union commitment to reduce its greenhouse gas emissions by 20% between now and 2020, ● to promote incentivizing measures through the establishment a compulsory objective of 20% of renewable energy in energy of proportional pricing on waste collection, greater consumption within the same timescale, and lastly an increase enforcement of Extended Producer Responsibility and the of 20% in energy effectiveness (program known as “3x20“). application of tax measures on products that generate high levels of waste; (B) FRENCH REGULATIONS ● fi nally, to enhance planning by strengthening local plans to In order to implement the commitments made in 2007 within prevent the production of waste. the context of the Grenelle Environment Forum (Grenelle Environnement), four legislative proposals were presented in (C) CHINESE REGULATION 2008, and have currently been adopted or are in the process China recently approved a law to promote the circular economy of adoption: which, if actually implemented, may constitute an important ● programming Law No. 2009-967, relating to the lever of development for eco-industries, and specifi cally the implementation of the Grenelle Environment Forum, known recycling industry in the country. This law should, in effect, as the “loi Grenelle 1” (Grenelle Law 1), defi nes the main result in the preparation of a national development plan for the orientations: it translates the commitments made at the circular economy aimed at reducing the consumption of natural “Grenelle“ into legal terms; resources. The measures anticipated by the law specifi cally include implementation of the principle of producer responsibility ● the draft providing for a national environmental commitment, in certain sectors, environmental labeling rules, tracking known as the “loi Grenelle 2” (Grenelle Law 2), should lay out methods and national statistics, environmental criteria in public the conditions for implementation of the commitments made procurement procedures, tax benefi ts for certain sectors, as well in 2007. It is currently in the examination process, and should as the creation of research and development funds. receive fi nal approval for adoption in the spring of 2010;

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6.7.2 REGULATION RELATING TO BUSINESSES called upon to vote on a list of 13 additional priority substances between now and the end of 2010. The directive was published in the OJEU on December 24, 2008, and will come into effect 6.7.2.1 WATER SERVICES after transposal within the Member States between now and mid-2010. (a) European law The goals of Directive 2006/118/EC on the protection of Framework for an EU policy in the water sector groundwater against pollution and deterioration are primarily the good chemical condition of water and the prevention or Directive 2000/60/EC established a framework for the European limitation of the introduction of pollutants into groundwater. It Union’s water sector policy aimed at restoring the quality of must be transposed by the Member States before January 16, groundwater and surface water between now and 2015. 2009. In France, the directive has been partially transposed In addition to this outcome objective, it sets forth requirements within the context of the Law on Water and Aquatic with regard to the methods to be implemented: the reduction Environments (LEMA No. 2006-1772 of December 30, 2006) of the disposal of “priority“ substances, which are considered to and the corresponding regulatory measures amending the be most harmful for the environment and to human health, the environment code. drafting and implementation of master plans and action plans, monitoring the results of the actions aimed at restoring the Directive on drinking water quality of environments and reporting on this to the European The 98/83/EC directive on the quality of water intended Commission. for human consumption has raised requirements in terms of several parameters (turbidity, chlorites, arsenic, volatile The directive recommends that water usage and its impact organohalogenates, nickel) and notably concerning lead be analyzed on an economic basis, and provides for increased (25 μg/l end-2003 and 10 μg/l end-2013), which means that public participation and consultation. It sets the objective of eventually no contact will be authorized between drinking full recovery of service costs and establishes the polluter-payer water and lead pipes, which is the reason for replacing all principle. 6 existing lead pipes, and why work is needed inside individual The directive also proposes a strengthened legal and institutional and shared accommodation to remove all lead pipe. It also framework for the water resource management policy, which is raised requirements regarding public information on the quality very similar to the French system of management through large of water distributed. After having consulted the stakeholders river basin districts. concerned in 2003 and then again in 2008, the Commission was able, in 2010, to propose a revision of this directive – with a Two European Commission progress reports on implementation specifi c view to integrating the recommendations of the World of the directive, published on March 22, 2007 and April 1, 2009, Health Organization on the preventive management of sanitary specify this approach by recommending the drafting, between risks (“Water safety plans“). now and December 2009, of river basin management plans, combined with the setting up of programs of measures, which Directives on wastewater treatment activities must become operational between now and 2012 and which European Directive 91/271/EEC, regarding urban wastewater will help to achieve the directive’s environmental objectives treatment, introduced several major categories of obligations between now and 2015. to: The 2000/60/EC directive is separated into two application ● effi ciently collect and provide for secondary treatment of directives (known as daughter directives) which specify the wastewater in municipalities with over 2,000 inhabitants; “good condition“ everyone should expect from ground and surface water between now and 2015. ● defi ne “sensitive areas“ at a domestic level, where treatment of nitrogen and/or phosphorus is required; The 2008/105/EC directive, relative to environmental quality standards applicable to surface waters, sets concentration ● require a high degree of reliability of wastewater treatment thresholds for 33 chemical substances or groups of chemical systems and impose the obligation to monitor these systems; substances identifi ed as having priority because of the signifi cant and risk they present for the environment and/or for human health ● pursue the option of using non-collective wastewater via the aquatic environment. Thirteen of these substances have treatment “when the organization of a collection system is been classifi ed as hazardous; their emissions in surface water not justifi ed, whether because it is not in the best interests should cease between now and 2021. The other substances are of the environment or because the cost would be excessive”, subject to national reduction objectives to be defi ned by the provided that the system provides “an identical level of Member States. Moreover, the European Commission shall be environmental protection“.

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The European Council’s Directive 91/676/EEC, regarding the The main regulatory changes of the past few years are as protection of water from nitrate pollution of agricultural origin, is follows: intended to protect water resources and requires the defi nition In the drinking water sector, the EPA adopted regulations of “vulnerable areas“ where codes of good agricultural practices relating to the treatment of surface water (Long-Term 1 must be established. Enhanced Water Treatment Rule) in 2002, and then in 2006 The 2006/07/EC directive (transposed into French law in tightened the regulations relating to disinfection by-products 2008) pertains to surface water that could serve as swimming (Stage 2 Disinfectants and Disinfection Byproducts Rule). The water. Member States must provide for the supervision and Ground Water Rule, which was promulgated in 2006, established assessment of their swimming water. Information regarding multiple constraints designed to avoid the contamination of the classifi cation, description of swimming water, and potential drinking water by bacteria or viruses. water pollution must be easily accessible to the public and In the wastewater treatment domain, many facilities are now provided close to the area concerned. obliged to implement a tertiary treatment phase of phosphorus Both the 2006/44/EC directive on the quality of fi sh farming removal and the elimination of nutrients in order to conserve water, and the 2006/113/EC directive on the quality required for fragile environments. Under the provisions of the Clean Water shellfi sh farming water apply to water that requires protection Act, the municipalities are further led to invest in the renovation or quality improvement to be fi t for raising fi sh and shellfi sh of their wastewater treatment infrastructures as well as in respectively. the reduction of fl ows at source in, order to improve control of diffuse waste – rainwater and wastewater from sewers, in (b) French regulations particular – in the natural environment. In France, a number of laws regulate water pollution, and (d) Chinese regulation numerous public authorities implement them. Some discharges and various other activities that show a potential negative China has recently promulgated a law on the prevention and impact on the quality of surface water or groundwater are control of water pollution covering both underground and subject to authorization or declaration. Public authorities must surface waters. therefore be informed of any installation of a pumping system for groundwater that exceeds predetermined volumes and the 6.7.2.2 WASTE law forbids, or limits, the release of various substances into water. Violation of these laws is subject to civil and criminal In many countries, waste treatment sites are subject to laws sanctions and the company may itself be held criminally liable. that require service providers to obtain authorizations from public authorities to operate their sites. Obtaining these Law No. 2006-1772 on water and aquatic environments, authorizations requires that specifi c studies be presented dated December 30, 2006, is intended to modernize the legal covering environmental impacts, human health and valuation framework for water management and improve water quality in of the risks pertaining to the facility concerned. Operators of order to achieve the objectives of good ecological and chemical landfi lls must provide specifi c fi nancial guarantees (often in status set forth in the 2000/60/EC directive by 2015. It is also the form of bank guarantees) that cover the restoration of the intended to improve public water and wastewater treatment site and monitoring after the closing of the site (for a 30 year services (access to water and transparency). period in most countries). Operators must also observe specifi c standards with respect to discharge and emission arising from The delays observed in the application of the directive on urban processes implementation; incineration plants are usually wastewater treatment (91/271/EC) have made heavy-handed subject to regulations intended to limit emissions of pollutants. governmental intervention necessary in the case of late- Waste fl ows are also subject to specifi c regulations depending coming local authorities. A schedule of measures and dedicated on their type. fi nancing has been implemented within the context of the “Borloo Plan to standardize the treatment of wastewater from (a) European law French municipalities” to meet the goal of 100% compliance by all purifi cation stations before the end of 2011, as defi ned in the Waste framework directive framework of the “loi Grenelle 1”. The new Waste Framework Directive (2008/98/EC) was (c) United States regulations published in the OJEU on November 22, 2008. This directive simplifi es existing legislation by repealing the former directive In the United States, the primary federal laws regarding water on waste, the directive on hazardous waste and part of the distribution and wastewater treatment services are the Water directive on the disposal of used oils. Member States have two Pollution Control Act of 1972, the Safe Drinking Water Act of 1974, years in which to transpose the directive into national law. and the regulations issued in the context of implementation of these laws by the Environmental Protection Agency (EPA). Each By establishing a new framework for waste services state has the right to establish higher standards and criteria than management in Europe, the European authorities wish to those established by the EPA, and several states have done so. encourage national waste prevention programs and promote recycling and recovery.

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The new directive thus reinforces the principle of hierarchy The objective it sets out is for Member States to reduce the in waste treatment methods, encouraging Member States to quantity of landfi lled biodegradable waste: in 2009, the quantity employ, in order of priority, prevention, reuse, recycling, energy of biodegradable waste landfi lled must not exceed 50% of total recovery and fi nally – as a last resort – disposal in a landfi ll. biodegradable waste produced in 1995, with this goal dropping An analysis based on the “life-cycle” approach will, however, to 35% in 2016. The directive also provides that only waste that allow certain adjustments to be made within this hierarchy. At has been subjected to prior treatment be allowed, and that the same time, the Member States envisage setting ambitious decommissioned sites be subject to surveillance and analyses recycling objectives: 50% of municipal waste and 70% of non- as long as the competent authorities deem necessary (duration hazardous construction and demolition waste by 2020. set at 30 years in France).

The directive clarifi es the defi nitions of recycling and recovery, Future industrial emissions directive and recognizes incineration with energy recovery – if certain In the spring of 2010, the European Parliament will be called upon effi ciency criteria are met – as a recovery operation. Lastly, it to vote on the project for a new directive on industrial emissions introduces two new notions: that of the by-product and that proposed by the European Commission in December 2007. This of the “end-of-waste status”; regarding the latter, more precise new directive will bring the 96/61/EC directive on Integrated criteria regarding this matter are currently being defi ned within Pollution Prevention and Control (IPPC) together with six the context of the comitology process. This process should sector-based directives, including the directive on incineration also result in the identifi cation of a calculation methodology for (2000/76 EC) and the directive on limiting emissions of certain waste-recovery goals, which currently does not exist. pollutants into the air from large combustion plants (2001/80/EC).

Regulations relating to cross-border shipment of waste Today, as a complement to the environmental thresholds put in The 1013/2006/EC regulation governs cross-border shipments place by the directive on the incineration and co-incineration of waste; the objective being to provide management that is of waste, the “IPPC” directive provides that certain industrial ecologically rational. It establishes a preliminary authorization and agricultural activities – one of which is waste services system for the shipment of waste, making a clear distinction management – must be subject both to a request for prior 6 between waste that is destined for recovery – whose movement authorization, and to certain environmental conditions being is, in principle, unrestricted – and waste destined for defi nitive met. Through the adoption of specifi c measures (for example: disposal (landfi ll, incineration), for which export is, in principle, recycling, prevention of accidents and treatment of sites at prohibited unless there is a specifi c agreement between end-of-life), and through meeting operating requirements Member States. The regulation also makes the provisions of (for example, limits for the emission of polluting substances the Basel Convention an integral part of European legislation, and monitoring of discharge), companies are responsible for insofar as it relates to the cross-border movement and disposal prevention and reduction of the pollution they are likely to of hazardous waste. cause. The revision under discussion introduced more stringent BREFs (documents defi ning the best techniques available), a The regulation provides for more rigorous performance modifi cation to the limit values for emissions, and broadened measures. It requires Member States to carry out inspections the scope of application to new types of facilities, including and opinion poll testing. It also authorizes physical controls of recycling facilities. transferred waste, in particular the opening of containers, and requires Member States to notify the European Commission Directives relating to specifi c waste of their domestic legislation covering illegal transfers and Directive 94/62/EC aims to reduce the environmental impact applicable sanctions to such transfers. of packaging and packaging waste. This directive established Directive on landfi lling of waste quantifi ed objectives for recycling and recovery of packaging used in the European market for December 31, 2008, which The 1999/31/EC directive on landfi lling waste sets the technical objectives are expected to be revised soon: and operational requirements applicable to both waste disposal sites and the waste deposited. It aims to prevent or reduce the ● a minimum of 60% of packaging waste must be reused or environmental impact of the landfi lling of waste – in particular incinerated at energy recovery facilities; on surface water, groundwater, soil, air and human health. It ● between 55 and 80% of packaging waste must be recycled; defi nes the various categories of waste (municipal, hazardous, non-hazardous, and inert) and distinguishes between three ● the following objectives must be met for materials contained types of facilities: landfi lls for hazardous waste (known as in packaging waste: 60% for glass, paper and cardboard; 50% “Class I” in France), landfi lls for non-hazardous waste (known for metals; 22.5% for plastics and 15% for wood. as “Class II” in France) and landfi lls for inert waste (known as “Class III” in France).

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The directive was revised in 2004 to clarify the defi nition of the cadmium in a proportion greater than a preset threshold, and sets term “packaging,” then again in 2005 to allow new Member two collection targets (25% minimum by September 26, 2012 States extra time for implementation. and 45% minimum by September 26, 2016). This directive was modifi ed by the 2008/12/EC directive, which came into force on The 2002/96/EC directive on waste electrical and electronic March 30, 2008, and which specifi cally introduced changes in the equipment (WEEE) imposes measures concerning product implementing powers conferred on the European Commission. design (notably the reduction in the use of heavy metals used), the establishment of systems of collection, treatment The 2000/53/EC directive, relating to end-of-life vehicles, and in particular recovery (systematic selective treatment of requires owners of end-of-life vehicles (ELVs) to return them certain components and substances said to be hazardous) and to an authorized operator for destruction, on penalty of participation of manufacturers in these measures in such a being unable to deregister their vehicle. Destruction involves way as to encourage them to integrate recycling right from the extracting all materials and optimizing their reuse, recycling design stage. or recovering what can be recovered. The recycling rate must reach 80% and the recovery rate 85% beginning in 2006, and By introducing the principle of broader producer liability, this respectively 85% and 95% by 2015. directive makes it mandatory for them to fi nance collection from the collection point, treatment, and the recovery and The 86/278/EEC directive on the conservation of the environment disposal of WEEE (for both household and professional WEEE). and more particularly of the soil, regulates the use of sewage sludge in agriculture, so as to avoid harmful effects on soil, These obligations go hand in hand with quantitative objectives plants, animals and humans. Thus, in order for sludge treated relating to: in purifi cation plant to be recovered for agricultural purposes, ● selective collection: the annual average minimum rate of it must comply with extremely strict traceability requirements selective collection of waste from electrical and electronic with regard to organic compounds and the various metallic trace equipment from households must be on the order of elements that it may contain (heavy metals such as cadmium, 4 kilograms per inhabitant starting January 1, 2007; mercury or lead). French standard NFU 44-095, drafted in 2002 and now applicable in France, goes further, defi ning a strict ● recovery: by the same date, the rate of recovery, by average framework for recovery into soil conditioner of remaining weight per appliance, must be 80% for large appliances, substances after composting, produced by the treatment of 70% for small appliances and 75% for computer and wastewater or by the organic portion of household waste. telecommunications equipment; In compliance with the Waste Framework Directive, the ● re-use: 80% for discharge lamps, 75% for large appliances, European Commission must assess the management of bio- 50% for small appliances and 65% for computer and waste so as to submit a legislative proposal. telecommunications equipment.

Because the directive proved complicated to implement, (b) French regulation the European Commission presented a draft revision on In France, in compliance with Articles L. 511-1 et seq. of the December 3, 2008, in order to improve several of the provisions ICPE (Environmental Code regarding Plants Classifi ed for the (particularly with regard to tracking), to both simplify and reduce Protection of the Environment), ministry and prefecture decrees costs. The draft also contains proposed quantitative objectives and orders defi ne the rules governing the treatment of waste. for the years to come. A similar revision is underway for the They specifi cally regulate the design, building, operation and 2002/95/EC directive aimed at restricting the use of hazardous monitoring after closure of these facilities. Hazardous waste substances (RoHS) in the WEEE, in the spirit of the action plan is subject to strict tracking obligations throughout the entire for sustainable production and consumption, published by the treatment chain. Traceability of hazardous waste is provided by European Commission on July 16, 2008. These two proposals a waste tracking form (BSD). Energy recovery units are subject should be examined and adopted in accordance with the co- to numerous restrictions, notably limitations on emissions of decision procedure in the spring of 2010. pollutants. A third ICPE system that complements the reporting The 2006/66/EC directive lays down the rules for the collection, and authorization systems, this one known as the registration recycling, treatment and disposal of batteries and accumulators. system, was introduced in 2009 in order to simplify the It prohibits the sale of certain batteries containing mercury or administrative regulation of certain low-pollution facilities.

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Z 6.8 ENVIRONMENTAL POLICY

Through the nature of its activities in water and waste, the Group To carry out a veritable Environment Policy, SUEZ ENVIRONNEMENT is at the very center of the following environmental challenges: relies on two strategic axes:

● preservation of the environment: water, air, soil and human 1) Environmental management: health, and control of potential impacts from the operation ● prevention plans; of water and waste treatment plants; ● declaration of commitment for the entire Group; ● climate change and reduction of greenhouse gas emissions; ● an organization and system to track environmental and ● reduction in energy resources and the need for development operational performance; of renewable energies; ● environmental certifi cation; ● reduction of raw material resources; 2) an Environment Program: ● preservation of water resources; ● integration of the environment in sustainable development ● protection of natural environments and biodiversity. strategy and policy; Regarding protection of the environment, the originality of the ● action and progress plans for the environment and protection services that SUEZ ENVIRONNEMENT offers its customers, local of health. authorities and industries, as part of “delegation of service,” is to treat-purify their waste or effl uent, and to recover through a circular economy the recoverable portions of waste or energy. 6 Thus, SUEZ ENVIRONNEMENT is a major and positive contributor 6.8.1 ENVIRONMENTAL MANAGEMENT to the efforts to reduce nuisances and preserve resources and habitats. The Group implements an environmental policy aimed at reducing Alongside this positive impact on the environment, there are the fi nancial risk related to environmental management, among nevertheless “negative contribution” aspects of as for all other objectives. Furthermore, complying with national, regional industrial activities, resulting from the operation of waste or and European regulations is a permanent goal: water treatment centers, although they have a quantitatively ● the Group develops innovative solutions in order to offer lower impact on the environment. For this reason, they are customers, whether they be municipalities or businesses, governed by regulatory provisions applying to construction and solutions that will solve their environmental problems operating activities, in order to protect the environment. effi ciently and at the lowest possible cost, and to better The remaining risks of impact on natural habitats and resources assume the water and waste management responsibilities must be measured, controlled, and reduced to a minimum entrusted to them by the legislative authorities; in a process of continuous improvement, through veritable ● the Group constantly monitors the adequacy of all the plants environmental management of the facilities and procedures used. and services it provides or manages to ensure that they Potential environmental nuisances or damage expose the meet the growing demands of environmental regulations; it Group to various risks, which are likely to generate additional also anticipates new legislation in order to be in the optimum costs, but also affect its image and reputation. position to meet the expectations of its customers and interested parties; In general, and particularly for “service businesses activities”, the Group’s environmental performance is related to its ● it encourages its subsidiaries to implement their own operating performance. Because of increasingly strict regulatory environmental policies, based on their activities, local restrictions in terms of environment, the local authorities economic conditions, and the expectations of their industrial are often required to call upon the expertise of qualifi ed and local authority customers. professionals to manage their assets and services. RISK PREVENTION PLANS Risk management is performed on a daily basis due to the growing number of certifi ed environmental management systems that have been set up within the Group and to the risk management plans that have been actioned for this purpose.

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Employee training, innovation, and research programs all The reporting exercise carried out in 2009 and the Group’s contribute to the operational control of such risks. practices in the area have continued, through a process of continual improvement, to improve the procedures for The Group also carries out studies on the environmental impact gathering and disseminating information on the environment, of its activities. among other subjects. This information is also disseminated via SUEZ ENVIRONNEMENT’s Activities and Sustainable THE ENVIRONMENTAL COMMITMENT DECLARATION Development Report and via the reports published by its OF JANUARY 2005 Business Units. When it adopted the Environmental Commitment Declaration in Environmental reporting is closely linked to operating performance January 2005, the Group set three clear objectives: reporting and thus becomes a true management tool. ● “the quality of its activities must be certifi ed by an independent In the environmental businesses, indicators enabling the body, in accordance with international standards (ISO 14001- measurement and improvement of environmental and operating type certifi cation of the environmental management system, performance are reported to the headquarters and the results for example)”; are returned to the operating managers. They show the progress ● “all plants and services must be brought up to the standards made and provide an overall view as well as specifi c views of of increasingly stringent environmental regulations”; each of the activity units, which are comparable within the Group (Benchmarking-type analysis). ● “the company must be a force for innovation for its customers, local public entities and companies”. The Group’s desire to make the environment one of the pillars of its sustainable development policy and an integral part of its Managers at all levels, known as “Environmental Offi cers,” have management is supported by the Group’s senior executives and been appointed to implement this plan, with specifi c objectives is implemented in the Business Units by the operating teams. and timetables. Performance indicators enable the monitoring of Auditors trained in the Business Units and at headquarters progress made over the years. The Business Units implemented perform environmental audits to check that environmental Environment Programs applying to a share of their activity that regulation is complied with at the operating level and to assess represented 87% of the Group’s 2009 total revenues. major environmental risks. Audits are also organized in order to check that all necessary means are made available to the AN ORGANIZATION AND SYSTEMS FOR MEASURING environmental coordinators, so that they are able to gather and AND CHECKING ENVIRONMENTAL AND OPERATIONAL report the best information available on their operating and PERFORMANCE environmental performance. In order to manage the roll-out of its environmental policy, An annual letter of “engagement for environmental compliances” control environmental risk and facilitate the communication attests to the involvement of the operating management (CEOs of its environmental and operating performance to interested of the Business Units), which undertakes to provide quality parties, SUEZ ENVIRONNEMENT undertook to put in place a information which complies with the benchmarks and which is specifi c reporting system from 2003 onwards. This system checked, verifi ed and validated. was developed, under GDF SUEZ’s leadership, on the basis of recommendations resulting from work carried out in forums for international dialogue such as the Global Reporting MANAGEMENT SYSTEMS CERTIFICATION Initiative (GRI) and the World Business Council for Sustainable The Group has adopted the objective that, by 2011, the quality Development (WBCSD). It complies with the provisions of the of all the sites for which it is responsible and of the entities in French NRE (New Economic Regulation) law. charge of the services it offers should be ISO 14001 or 9001 certifi ed, or the equivalent according to international standards.

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The indicators below show the progress made by the Group in terms of certifi cation and environmental policy by business line:

Indicator 2009 Data

WASTE SERVICES Household and municipal solid waste tonnage, treated by the Group, certifi ed by an environmental management system (SME) 35.5 Mt Portion of waste treatment activity covered by an environmental management system (SME) 87.33%

WATER SERVICES Volumes covered (Drinking water + wastewater) by certifi cation issued by an environmental management system (SME) 3,237 Mm3 Portion of activity covered by an environmental management system (SME) 57.3%

6.8.2 THE ENVIRONMENTAL PROGRAM Improve energy effi ciency by reducing the amount of power required by the Group’s operations (consumption of fossil fuels, network energy consumption: electricity, gas, etc.)

THE ENVIRONMENT, AN INTEGRAL PART Increase the production of renewable energy from energy OF SUEZ ENVIRONNEMENT’S SUSTAINABLE recovery plants, sludge recovery or landfi ll biogas. DEVELOPMENT POLICY AND STRATEGY Incorporate biodiversity into site management: by putting in The SUEZ ENVIRONNEMENT environmental program was place action plans on sensitive sites and share in national and merged with the economic and employee programs in order regional conservation and biodiversity policies. to build a “sustainable development” program. This program 6 will be implemented throughout the entire Group through four priorities and 12 undertakings, which will be monitored on a concrete basis via well defi ned performance indicators (see Section 6.2 of this document). 6.8.3 HEALTH PROTECTION

The undertakings which have a specifi c bearing on the Concern for the health of residents, users and consumers is the environmental issues covered by the program are defi ned in motive for the implementation of control mechanisms within Priorities 1 and 2 of the program: the Group, as well as for the methods and tools for anticipating a potential health crisis. Priority 1: Conserve resources and engage in the “circular economy” In addition to these ongoing control procedures, the Group anticipates health crises in order to avoid the consequences on Optimize waste recycling and recovery rates by increasing the production and distribution of water or on the collection of the proportion of the waste volumes we manage that is reused waste. Work organization, identifi cation of employees subject or recycled and recovered in the form of new materials, in order to rigorous constraints, and the availability of vaccines and to minimize the impact of the life cycle of products. other medication are evaluated in order to ensure continuity of Increase the yield of drinking water networks and reduce service in the event of a crisis like the one created by bird fl u. leaks in order to avoid wasting a precious resource. WATER: QUALITY MONITORING Priority 2: Innovate to respond to environmental challenges In Western societies, the treatment of drinking water, the development of collective water supply systems, and the Reduce greenhouse gas emissions (tons-equivalent of CO ), 2 protection of capture areas, together with the collection and to contribute to the fi ght against climate change. In order to treatment of wastewater and vaccination and health awareness achieve this objective, the Group will rely, on the one hand, on campaigns, have gradually eliminated large-scale epidemics of the reduction of emissions from the vehicle fl eet, plants and water-borne illnesses. buildings which are necessary to the conduct of its businesses, and on an increase in its contribution (thanks to recycling, In France, the requirements for tap water quality are determined energy recovery, etc.), on the other. by European regulations as translated in national legislation.

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The Group’s sites are subject to systematic surveillance thanks, 2013 objectives, given the presence of lead in pipes for which for example, to remote surveillance and a 24-hour operating private individuals are responsible and over which the Group alert system. has no control.

Regulation defi ning quality standards develops in response to Besides bacteriological and physical-chemical criteria, certain the identifi cation of new risks. France has been campaigning substances known as “emerging” substances (e.g., chemical for several years to eliminate lead pipe systems by 2013. The molecules, endocrine disruptors, etc.) are of particular concern Group thus offers its clients replacements for lead pipelines and to experts and operators in the water sector. The Group has pipe systems: these additional works are the subject of contract put in place specifi c research programs in this area, to better renegotiations. However, the Group cannot rule out that this detect, monitor, understand and handle these new molecules. policy is insuffi cient and does not enable it to meet the end-of

The indicators below show measures put in place by the Group in order to limit the emission (linked to its activity) of substances in water and soil:

Indicator 2009 Data

WASTE SERVICES Quantity of leachates treated 2.761 Mm3

WASTEWATER TREATMENT Purifi cation yield on organic substances in DBO 87.5% Proportion of sludge recovered in the form of fertilizer 58.0%

WASTE: CONTROLLING AIR EMISSIONS In addition, in France, several studies have established that no serious argument can be made for establishing a causality link In the waste sector, emissions are controlled and constantly between incinerators and cancers (2004 Afssa study (1), InVS monitored. The main potential pollutants, particularly the dioxins 2004 (2), etc.). emitted by household waste incinerators, are thus the subject of constant monitoring, in accordance with the European regulations in force.

The indicators below show the Group’s performance in emission of major pollutants:

Indicator 2009 Data

INCINERATION (NON-HAZARDOUS WASTE) SOx emissions 220t NOx emissions 4,679t Emissions of dust and particles 64t

HAZARDOUS WASTE TREATMENT SOx emissions 31t NOx emissions 406t Emissions of dust and particles 13t

(1) The AFSSA Agence Française de Sécurité Sanitaire des Aliments (French Food Safety Agency) study addresses impregnation by dioxins (using blood and urine samples) around 8 sites located close to an incinerator in several French departments and in contrasting geographic and culinary areas. (2) The InVS - Institut National de Veille Sanitaire (National Institute of Health Monitoring) study addresses the evaluation of the risk of cancers in people living next to household waste incinerators in four French departments between 1972 and 1985: Bas-Rhin, Haut-Rhin, Isère and Tarn.

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WATER AND WASTE: LIMITING NOISE AND ODOR systems have resulted in growing pressure on water resource. POLLUTION In some regions, particularly those experiencing an increasing incidence of droughts, climate change risks adding to this SUEZ ENVIRONNEMENT (through its R&D) has recently pressure. developed a service called “NOSE,” which enables the objective evaluation and modeling of the impact of the olfactory footprint Water is a very unequally distributed resource, which must be of wastewater collection and treatment activities or sites, protected. Some countries have already experienced situations sludge recovery or waste management on local residents. of water stress, which are harder to manage when they are at a low level of economic development. By 2025, two thirds of the This service enables the Group to suggest solutions to control world’s population may be living in regions affected by strains the olfactory footprint, by keeping it below the level of two in the water supply, particularly the Middle East and certain units of odor per m3 (UO.m-3 ) and thus meeting regulatory regions of Africa, Asia and Latin America. requirements (footprint below the threshold of fi ve units of odor per m3) when these exist. Reduction of water usage has received particular attention throughout the world, through programs to manage demand. SITA is also experimenting with new solutions to reduce noise Those include infrastructure measures (reducing leaks) and nuisance and limit the CO emissions of its collection activities. 2 other measures targeting user behavior: putting in place rate Thus, since October 2008, SITA France has been testing the structures to encourage water saving, awareness campaigns fi rst hybrid propulsion household waste container vehicle in to combat waste. In addition, the objectives of such programs the Lyon region, with the aim of reducing the consumption of increasingly exceed the mere optimization of economic energy, and therefore CO emissions, by 30%. The Group has 2 effi ciency (reducing costs of consumable materials), and a long experience using electric vehicles for the collection of include careful management of the resource as an end in itself. household waste: these vehicles are adaptable and very silent, The use of “non-conventional” water resources is expected to but they are handicapped by the weight and the cost of the grow signifi cantly. In particular, the reuse of wastewater for batteries which are used to store energy. agricultural and industrial purposes, for the upkeep of public parks, or even for the replenishment of groundwater reserves, 6 is likely to increase by 10% to 12% per year.

6.8.4 CONSERVATION OF RESOURCES Through its activities as a drinking water and wastewater treatment services operator, the Group’s contribution to the protection of water resources and ecosystems falls into two WATER CONSERVATION specifi c categories:

Population growth, changing eating habits and the resulting ● controlling the quality of discharges from wastewater agricultural demand for water, and the inadequacy of cleanup treatment systems into the natural environment;

The indicators featured below relate the water consumption linked to the Group’s processes:

Indicator 2009 Data

WASTE SERVICES Water consumption excluding cleaning services (urban, industrial) 7.85 Mm3

WATER (DRINKING WATER) Linear Loss Rate 9.7 m3/km/day Technical yield of the drinking water supply networks 75.5%

● managing the protection zones around drinking water biodiversity. Among those indicators were the number of capture areas, which are favorable environments for sensitive sites listed, the number of environmental tests carried biodiversity. out and the number of action plans drawn up for water and waste. These indicators will be presented in greater detail in the In 2008, the Group tested new indicators aimed at better Activities and Sustainable Development Report. evaluating the impact of building and operating its sites on

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 85 6 OVERVIEW OF ACTIVITIES Environmental policy

SORTING In the waste sector, conservation of resources is carried out through the development of waste re-use and recycling, as shown by the following indicators:

Indicator 2009 Data

Number of sorting centers 313 Tonnage received in sorting centers 11.2 Mt Tonnage of materials recovered from the sorting centers (excluding monofl ow) 6.75 Mt

Besides household or industrial and commercial waste sorting impetus to the SUEZ ENVIRONNEMENT Group’s waste recycling centers, activities for the recovery of materials in monofl ow and recovery sector. were also developed; these feed directly into the recycling subsidiaries. SOIL DEPOLLUTION Through the recent acquisition of companies engaged in the As a specialized subsidiary, SITA Remediation runs a depollution recovery of ferrous and non-ferrous metals, particularly the activity – rehabilitation of contaminated soil both for the private acquisition in September 2008 of Boone Comenor Metalimpex sector and public authorities. These treatments are conducted (a French company specializing in the recovery of ferrous and either in situ or by excavation and treatment in the appropriate non-ferrous metals), SITA France is actively pursuing growth in plants under the Group’s ownership. For example, SITA FD, a the recycling sector. Boone Comenor is active in 12 countries subsidiary of SITA France, has developed multimodal treatment (particularly France, Spain, Portugal and Romania). platforms capable of treating most of the pollutants encountered: hydrocarbons, non-biodegradable organic substances, organic In 2009, Boone Comenor recycled 570,000 tons of ferrous materials and heavy metals. metals and 30,000 tons of non-ferrous metals, lending new

Indicator 2009 Data

Tonnage of soil treated/recovered 866,000t

This treatment is performed under close environmental Community Emission Trading Scheme (EUETS). The EUETS supervision, with a traceability, which enables all parties involved Directive, which sets the European market for quotas, affects in the procedure to be more responsible for their actions. almost 12,000 facilities in Europe and has an impact on almost

50% of European CO2 emissions. European Directive 2004/101/EC of the European Parliament 6.8.5 PREVENTION OF CLIMATE CHANGE and the European Council of October 27, 2004 (known as the “Projects Directive”), which was an amendment to the EUETS Directive, established the means whereby companies could use emission reductions generated abroad in connection with CDM PRESENTATION OF THE REGULATORY FRAMEWORK (clean development mechanism) and JI (joint implementation) FOR CLIMATE CHANGE projects in order to meet their European targets for greenhouse In recent years, there has been a signifi cant increase in regulation gas reduction within the EUETS system. The translation of this relating to reduction of emissions of CO2 and other greenhouse European Directive into the national laws of the 27 Member gases at the global and European Union level in particular. States must still defi ne the utilization limits and practical conditions via which projects can be submitted for approval. The institutional framework regulating carbon constraints is the result of the United Nations Framework Convention regarding climate change dated May 9, 1992, the Kyoto Protocol of IMPACT ON THE WATER AND WASTE BUSINESSES December 11, 1997, and, in Europe, the European Community Even if the contribution of the water and waste management Directive 2003/87/EC of the European Parliament and the business activities to greenhouse gas emissions is modest, European Council of October 13, 2003, relating to the European and the latter are not currently covered by restrictive

86 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 OVERVIEW OF ACTIVITIES Environmental policy

regulatory provisions, the Group’s companies play an active as well as landfi lling and incineration, which represent the role in controlling such emissions. The Group believes that it primary components of direct and indirect emissions in this is responsible for making every effort to avoid contributing to sector (over 95%). global warming. In 2009 they represented 5,231,125 Teq CO2; The Group’s greenhouse gas emissions (water and waste sectors ● unlike in the waste sector, in the water sector the Group is combined) were fairly low in 2009. SUEZ ENVIRONNEMENT is more interested in indirect greenhouse gas emissions due nonetheless intent on reducing its contribution, in particular in to energy consumption of all kinds from the production and the area of direct emissions such as methane emissions from distribution of drinking water, as well as the treatment of landfi lls. wastewater and sludge (which represent over 90% of direct The Group increasingly seeks to reduce emissions linked to and indirect emissions in this sector). waste collection and transportation activities, cleaning activities In 2009 they represented 760,564 Teq CO . and wastewater treatment activities carried out with a fl eet of 2 over 12,000 heavy vehicles. The purpose of this effort is mainly to In addition, SUEZ ENVIRONNEMENT, thanks to its efforts look for savings in fuel consumption, through the optimization of in materials recovery (sorting and recycling) and energy collection rounds (frequency and distance traveled) for example, (incineration and landfi ll) allows other participants to reduce the procurement of new engines and by training drivers to drive their greenhouse gas emissions. in ways which save fuel. Moreover, efforts have been made The Group’s activities have a benefi cial effect on greenhouse to use alternative fuels which do not contribute as much to gas emissions. the greenhouse effect, such as biofuels, gas and electricity. However, technical factors relating to specifi c waste collection Landfi lls are the second sector where the Group is active in the constraints do not allow a more important development of the battle against climate change. Methane, which is released by the use of such alternative energies. decomposition of fermentable waste, is a greenhouse gas with a greater warming potential than CO . It can be recovered to The following indicators show the Group’s direct and indirect 2 produce electricity, heat or fuel for vehicles. Waste incineration 6 emissions of greenhouse gases: also provides an opportunity for energy recovery. If it is not ● as regards waste, the Group is more interested in direct recovered, the methane is collected and burnt in fl are towers. greenhouse gas emissions due to collection and transport,

In 2009, the Group continued its efforts to improve and spread the capture and recovery of biogas from its landfi lls.

Indicator 2009 Data

Proportion of waste disposed of in landfi lls equipped with a biogas collection and treatment system 87%

In 2009, 5.85 million tons of household and municipal solid That production should be compared with the electricity waste were incinerated and thus recovered via the generation consumption of SUEZ ENVIRONNEMENT: of 2,613 GWh of electricity and the sale of 921 thermal GWh.

Indicator 2009 Data

Electricity Consumption (Waste) 481 GWhe Electricity Consumption (Water) 2,189 GWhe

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 87 6 OVERVIEW OF ACTIVITIES Environmental policy

6.8.6 EXPENDITURE AIMED AT GUARANTEEING THE PROTECTION OF THE ENVIRONMENT

By the nature of its businesses, the Group has a direct impact In accordance with European regulations, the Group records on the environment. There is therefore not much sense in provisions intended to cover the expenses of the long-term separating expenditures which have a direct or indirect impact monitoring of landfi lls after their closure. Other provisions are on the environment. also recorded to deal with potential environmental risks:

Indicator 2009 Data

Provisions for closure and post-closure €490.5 million Provisions for environmental risks €11.5 million Provisions for dismantling non-nuclear facilities €10.9 million

88 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 7 ORGANIZATIONAL CHART

Z 7.1 SIMPLIFIED GROUP ORGANIZATIONAL CHART

SUEZ ENVIRONNEMENT COMPANY

100%

SUEZ ENVIRONNEMENT SAS

Waste Europe Water Europe International 7 5% 45% 10% Terralys 40% 100% 100% LDE F 100% SITA France Novergie Degrémont 100% 35% 65% 40% 100% 100% Teris OIS S.E. NA United Water 100%

100% 100% 60% 100% SITA Waste S.E. UK SITA UK Safege USG Services 100% 51% (formerly 100% 100% Hisusa 100% S.E. Deutschland SITA Deutschland Swire Sita) SFWD 66.44% 75% 25% 100% 50% 85% SITA NL S.E. España S.E. España Agbar SFH Macao Water 12% 8.7% 54.79% 91.3% CEM SITA Belgium Adeslas 38% 51% 100% Palyja 100% 100% 100% SOCALUX Lamesch S.E. Deutschland Eurawasser 60% SembSITA 100% SITA Australia Pacific Acque Toscane 100% 51% LYDEC 100% ONDEO Italia Nuove Acque 46.16% 100% SITA El Beida ACEA 5.33% 4.99% 100% 100% Eyath S.E. Holding BE S.E. Polska

Water CZ 100 % S.E. Holding 100 % 100 % SITA CZ SITA Sweden SITA Finland & Hungary* 100% BE 50% * Interests in water companies in Czech Republic and Hungary BAL Ondeo

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 89 7 ORGANIZATIONAL CHART Presentation of the Group’s main subsidiaries

Z 7.2 PRESENTATION OF THE GROUP’S MAIN SUBSIDIARIES

The presentation of the Group’s main subsidiaries is found in Section 6 of this document. Note 28 of the appendix to the consolidated fi nancial statements (see Section 20.1) gives the list of the Group’s main companies.

Z 7.3 RELATIONS WITH SUBSIDIARIES

SUEZ ENVIRONNEMENT COMPANY is a holding company with no Other cash fl ows within the Group consist primarily of employee. As of December 31, 2009, it held as its sole interest loans granted by SUEZ ENVIRONNEMENT SAS to some of its 100% of the shares of SUEZ ENVIRONNEMENT SAS. It carries subsidiaries. the Group’s bond debt (see Section 10.3 of this Reference In addition to cash fl ows related to cash management and Document). fi nancings, SUEZ ENVIRONNEMENT SAS receives dividends from On January 1, 2008, a consolidated tax group was created in its subsidiaries; relating to fi scal year 2008, these dividends France between the Company and the subsidiaries in which it totaled €550 million, which were fully paid in 2009. holds at least 95% of the capital. Forming this tax group has led In addition, SUEZ ENVIRONNEMENT SAS provides different types of SUEZ ENVIRONNEMENT COMPANY and each of the consolidation services to the other Group subsidiaries, particularly administrative tax group member companies to enter into tax consolidation and fi nancial services, as well as technical assistance. In exchange agreements. for these services, SUEZ ENVIRONNEMENT SAS bills the other The Group has established a centralized cash management system Group’s subsidiaries. In 2009, total compensation received by for its main French and international subsidiaries, which optimizes SUEZ ENVIRONNEMENT SAS in connection with these services net cash positions at the level of SUEZ ENVIRONNEMENT SAS. amounts to €82 million.

90 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 8 REAL ESTATE AND EQUIPMENT

Z 8.1 GROUP REAL ESTATE AND EQUIPMENT

The Group owns and operates several drinking water production The Group also operates a number of waste incineration plants, plants, wastewater treatment plants, storage reservoirs, and mainly in Europe, as well as numerous landfi lls, primarily located water distribution networks. in France and the United Kingdom.

Information on the main facilities and plants operated by the Group at December 31, 2009, is provided in the table below:

Country City/Area/State Activity Capacity

Germany Zorbau Waste incineration 300,000 t/yr Australia Sydney (PWP) Production of drinking water 3,000,000 m3/d Belgium Brussels Waste incineration 550,000 t/yr Sleco Fluidized bed waste incineration 450,000 t/yr Beveren ROX Waste incineration 380,000 t/yr Chile Santiago Wastewater treatment plant 1,217,000 m3/d China Chongqing Production of drinking water 520,000 m3/d 8 Wastewater treatment plant 300,000 m3/d Tanzhou Production of drinking water 150,000 m3/d Zhengzhou Production of drinking water 360,000 m3/d Zhongshan Production of drinking water 1,000,000 m3/d Changshu Production of drinking water 675,000 m3/d Tianjin Production of drinking water 500,000 m3/d Qingdao Production of drinking water 726,000 m3/d Boading Production of drinking water 260,000 m3/d Sanya Production of drinking water 230,000 m3/d Tanggu Production of drinking water 280,000 m3/d Macao Production of drinking water 330,000 m3/d Macao Production of electricity 471 MW Shanghai SCIP Production of water, 200,000 m3/d Demineralization, 45,000 m3/d Treatment of industrial wastewater 26,500 m3/d Incineration of hazardous industrial waste 60,000 t/yr

Spain Barcelona Production of drinking water 1,340,000 m3/d France Bègles Waste incineration 273,000 t/yr Créteil Waste incineration 235,000 t/yr Argenteuil Waste incineration 185,000 t/yr Lyon Waste incineration 160,000 t/yr Bessières Waste incineration 170,000 t/yr Villers St Paul Waste incineration 157,000 t/yr Lagny Waste incineration 150,000 t/yr

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 91 8 REAL ESTATE AND EQUIPMENT Group real estate and equipment

Country City/Area/State Activity Capacity France Carrières sur Seine Waste incineration 140,000 t/yr Nantes Waste incineration 130,000 t/yr Vedène Waste incineration 180,000 t/yr Lunel Viel Waste incineration 125,000 t/yr Carrières sous Poissy Waste incineration 115,000 t/yr Ouarville Waste incineration 125,000 t/yr Chartres Waste incineration 115,000 t/yr Bordeaux Production of drinking water 316,000 m3/d Morsang Production of drinking water 225,000 m3/d Le Pecq-Croissy Production of drinking water 160,000 m3/d Aubergenville Production of drinking water 140,000 m3/d Hersin Coupigny Final waste landfi ll 600,000 t/yr La Roche Molière Final waste landfi ll 540,000 t/yr Les Aucrais Final waste landfi ll 250,000 t/yr Roussillon Incineration of hazardous industrial waste 115,000 t/yr Pont de Claix Incineration of hazardous industrial waste 70,000 t/yr Dijon Wastewater treatment station 400,000 m3/d Production of drinking water 114,000 m3/d Indonesia Jakarta Production of drinking water 450,000 m3/d Mexico Ciudad Juarez Wastewater treatment station 300,000 m3/d Culiacan Wastewater treatment station 150,000 m3/d The Netherlands Coevorden Waste incineration 365,000 t/yr United Kingdom Cleveland Waste incineration 235,000 t/yr Kirklees Waste incineration 136,000 t/yr Albury Domestic waste landfi ll 340,000 t/yr Clifton Marsh Domestic waste landfi ll 300,000 t/yr Packington Domestic waste landfi ll 800,000 t/yr Path Head Domestic waste landfi ll 300,000 t/yr Sidegate lane Domestic waste landfi ll 350,000 t/yr Whinney Hill Domestic waste landfi ll 350,000 t/yr Bristol Production of drinking water 560,000 m3/d USA Haworth Production of drinking water 624,000 m3/d Idaho Production of drinking water 397,000 m3/d New Rochelle Production of drinking water 230,000 m3/d Czech Republic Brno Production of drinking water 247,000 m3/d

Particularly for its water business, the Group also has numerous to a clause that provides for return to or take-over by the client assets, which are governed by service agreements with a limited or the Group’s successor upon the term of the contract. For term, under which the group carries out most of its operations. the duration of the contract, and depending upon the legal systems involved, the Group may or may not be the legal owner, At the beginning of a project, the client awards the Group but it practically always controls the assets needed for the the right to use pre-existing buildings and facilities, which are operations and provides for their maintenance and renovation, made available, for the duration of the contract. Any initial as necessary. investments, at least specifi c investments, are generally subject

92 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 REAL ESTATE AND EQUIPMENT Environmental constraints that may affect the Group’s use of its fi xed assets

8.2 ENVIRONMENTAL CONSTRAINTS THAT MAY AFFECT Z 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 of this Reference Document.

8

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 93 8 REAL ESTATE AND EQUIPMENT

94 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 9 FINANCIAL REVIEW

Page

9.1 GENERAL INFORMATION 96 9.1.1 Introduction 96 9.1.2 Signifi cant events 97

CONTENTS 9.2 ANALYSIS OF INCOME STATEMENT 98 9.2.1 Explanation of the principal items on the income statement 98 9.2.2 Comparison of the fi nancial periods ended December 31, 2009 and 2008 100

9.3 FINANCING AND NET DEBT 105 9.3.1 Cash fl ows in 2009 and 2008 105 9.3.2 Net debt 110 9.3.3 Return on capital employed (ROCE) 111

9.4 PROVISIONS 112

9.5 CONTRACTUAL COMMITMENTS 113 9.5.1 Borrowings 113 9.5.2 Secured, pledged and mortgaged assets 113 9.5.3 Financing commitments 113 9.5.4 Firm commitments to purchase property, plant and equipment 114 9.5.5 Other contractual investment commitments 114 9.5.6 Commitments related to fi nance leases 114 9 9.5.7 Operating leases 115

9.6 PARENT COMPANY FINANCIAL STATEMENTS 115

9.7 2010 OUTLOOK 115

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 95 9 FINANCIAL REVIEW General information

The following fi nancial review for the Group should be read in conjunction with the consolidated fi nancial statements set out in Section 20.1 of this document.

Z 9.1 GENERAL INFORMATION

9.1.1 INTRODUCTION In a sharply deteriorated economic environment, cash generated from operations before fi nancial expenses and taxes was up slightly on 2008 at €1,797 million. Free cash fl ow(2) before The year 2009 was marked by a slight downturn in business disposals and development expenditure was €891 million, (-0.5%) linked to the sharp economic slowdown and adverse 49.5% higher than 2008. This strong improvement is primarily exchange rate effects (primarily GBP), partially offset by attributable to control of maintenance capital expenditure and the positive scope effects. Excluding exchange rate effects, working capital requirements, a refund of tax prepayments on revenues grew by 0.6%. The Water Europe and International companies paid in 2008 in France and refunded in 2009, and segments posted positive organic growth (+2.7% and +3.6% accrued interest not yet payable on bond issues increasing net respectively). In contrast, the Waste Europe segment suffered a debt but not appearing in free cash fl ow. Capital expenditure decline in volumes collected and treated as well as a fall in the (net of disposals) was €1,062 million, very much lower than price of secondary raw materials (metals, papers and plastics) in 2008 (€2,433 million including €708 million for the Agbar public the sorting / recovery / recycling business with negative organic offering). Net fi nancial debt rose by €310 million compared to growth of -7.5%. December 31, 2008, to €6,282 million, and represented 142.2% This drop in revenues was refl ected in a 2.0% fall in EBITDA(1) of shareholders’ equity at the end of 2009 versus 143.2% at the (down 1.2% excluding exchange rate effects) which was end of 2008. contained, however, thanks to the contribution of the program Performances in 2009 were in line with the Group’s to reduce the cost structure (COMPASS). The additional stated objectives. Based on the results for 2009, deterioration of current operating income compared to SUEZ ENVIRONNEMENT COMPANY will propose the payment in EBITDA (-12.6% and -12.1% excluding exchange rate effects) is 2010 of a €0.65 dividend per share (totaling €318 million). The primarily attributable to the increase in amortization and net dividend to be proposed as a resolution at the Shareholders’ disbursements under concession contracts and by a net change Meeting on May 20, 2010 will, however, be €1.30 per share as in provisions of -€30 million. it will also include the €0.65 per share interim dividend already Net income Group share was €403 million, down from 2008 paid in June 2009. (€533 million including €131 million in non recurring tax savings).

(1) The Group uses EBITDA to measure its operating performance and capacity to generate cash flow from operations. Current operating income reconciled with EBITDA is presented in Section 9.2.1 of this document. (2) The Group uses the free cash flow indicator to measure cash generated from existing operations before development investments. Cash generated from operations before income tax and financial expenses reconciled with free cash flow is presented in Section 9.3.1 of this document.

96 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL REVIEW General information

9.1.2 SIGNIFICANT EVENTS 9.1.2.2 SIGNIFICANT CONTRACTS

New build and operate contract in the Melbourne 9.1.2.1 PRELIMINARY AGREEMENT WITH CRITERIA agglomeration in Australia CAIXACORP FOR THE TAKEOVER SUEZ ENVIRONNEMENT via its subsidiary Degrémont has won, BY SUEZ ENVIRONNEMENT OF THE WATER as part of the AquaSure Consortium (SUEZ ENVIRONNEMENT, AND ENVIRONMENT ACTIVITIES Degrémont, Thiess, an Australian construction and services OF AGUAS DE BARCELONA company, and Macquarie Group, an international provider of banking, fi nancial and asset management services), the On October 22, 2009, SUEZ ENVIRONNEMENT and Criteria seawater desalination plant project led by the State of Victoria CaixaCorp (Criteria) signed a preliminary agreement for a that will meet about a third of the water needs of the Melbourne takeover of Aguas de Barcelona (Agbar). agglomeration from the end of 2011. This operation includes: This contract covers the fi nance, design and build of a plant ● a delisting tender offer in cash and launched by Agbar on with output capacity of 450,000 m3 drinking water a day and its own shares at a price of €20 per share up to a maximum an 85 km water distribution network, plus operation of the plant total of €299 million. The shares acquired under this delisting until 2039. The total investment is €2 billion. tender offer will then be cancelled; This contract represents revenue (for building and operating) of ● the purchase by SUEZ ENVIRONNEMENT of Agbar shares €1.2 billion over 30 years for Degrémont. held by Criteria, at a price of €20 per share, to establish a 75% stake in Agbar for a total of €647 million; Renewal of the Macao water services concession SUEZ ENVIRONNEMENT via its subsidiary Macao Water signed ● the simultaneous sale to Criteria of the 54.8% held by Agbar in Adeslas for a total of €687 million; an agreement to renew its concession for the provision of water services for the next 20 years in the Special Administrative ● at the same time, Criteria will take total control of Adeslas via Region of Macao, China. SUEZ ENVIRONNEMENT’s share of the an additional purchase of the 45% held by Malakoff Mederic. total revenue generated by this contract over the period will be about €500 million. The two transactions between SUEZ ENVIRONNEMENT and Criteria (the sale of Adeslas and takeover by SUEZ Commissioning of the EVI waste-to-energy plant ENVIRONNEMENT of all of Agbar’s Water and Environment activities) are linked and are contingent on the prior completion The EVI incineration plant located in the Europapark international of the delisting tender offer launched by Agbar on its own industrial park at Emlichheim-Coevorden on the German-Dutch shares. border went into service on April 2, 2009. This incineration plant with a total capacity of 365,000 tons allows all solid waste This delisting tender offer was approved by an Agbar collected in Benelux-Germany to be processed internally. Extraordinary Shareholders’ Meeting on January 12, 2010 and is subject to approval by the CNMV (the Spanish Stock Exchange 9.1.2.3 ACQUISITIONS authority). SUEZ ENVIRONNEMENT took exclusive control of Swire-SITA, This transaction is also subject to various regulatory and legal a company that it previously owned at a level of 50%. This 9 approvals (the relevant competition authorities in particular). operation, launched in 2008, was approved by the Hong Kong Lastly, this operation, which has no impact on the 2009 authorities on December 22, 2009. accounts, should increase the Group’s net debt in 2010 by SUEZ ENVIRONNEMENT, via its subsidiary Sino French Water €1.3 billion and generate an estimated additional contribution Development (SFWD), participated in forming a new joint from Agbar to the EBITDA of approximately €100 million, based venture to supply water in Tianjin, China. Tianjin Sino French on the assumption that the operation becomes fi nalized on Jieyuan Water Co. is a joint venture owned by SFWD (52%) July 1, 2010. It corresponds to an investment based on a 7.9 X and Tianjin Water Works Group (48%). This company will be 2010 estimated EBITDA multiple, with the simultaneous disposal responsible for operating the Jieyuan water supply plant, which of Adeslas. This operation will be accretive as soon as 2010. provides water for 1 million inhabitants, a third of the urban population of Tianjin.

During the second quarter of 2009, SUEZ ENVIRONNEMENT, via its subsidiary SITA Sverige (Sweden), acquired Allren i Sverige AB which collects, sorts and recycles solid waste.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 97 9 FINANCIAL REVIEW Analysis of income statement

9.1.2.4 DISPOSALS 9.1.2.6 OTHER MAJOR EVENTS The Group sold its entire stake in the Wasteman Group, a Bond issues specialist in waste collection and treatment in South Africa. As part of its policy for fi nancing, diversifying and extending the Over the course of the year, SUEZ ENVIRONNEMENT sold its maturity of its debt, SUEZ ENVIRONNEMENT COMPANY issued entire stake in Gas Natural on the fi nancial markets. a series of bonds under the Euro Medium Term Notes program (EMTN) implemented in March 2009. The amount issued since In December 2009, SUEZ ENVIRONNEMENT, via its subsidiary that date is €3 billion. These operations are detailed in Note 13.3 SITA UK, sold its 50% stake in LondonWaste, a company active to the consolidated fi nancial statements. in incineration. Launch of the fi rst SUEZ ENVIRONNEMENT COMPANY 9.1.2.5 AGREEMENT WITH VEOLIA ENVIRONNEMENT bonus share allocation plan for its employees TO UNWIND EQUITY INTERESTS IN JOINT In accordance with the resolution adopted at the SUBSIDIARIES SUEZ ENVIRONNEMENT COMPANY Shareholders’ Meeting on On December 19, 2008, a memorandum of understanding was May 26, 2009, the Board of Directors decided to allocate 30 signed between Veolia Eau - Cie Générale des Eaux, a subsidiary SUEZ ENVIRONNEMENT COMPANY shares to each of the 68,000 of Veolia Environnement, and Lyonnaise des Eaux, a subsidiary employees of the Group, a total of more than 2 million existing of SUEZ ENVIRONNEMENT, to withdraw from their direct shares. and indirect joint equity interests in certain drinking water distribution and wastewater treatment companies in France. Launch of the fi rst SUEZ ENVIRONNEMENT COMPANY This decision by the two groups was in response to a ruling by stock option and performance share schemes the French Competition Commission on July 11, 2002. On December 17, 2009, the Board of Directors decided to allocate 3,464,440 stock options and 173,852 performance The unwinding process was underway at December 31, 2009 shares to employees of the SUEZ ENVIRONNEMENT Group. See (see Section 20.1, Note 26.1 to the consolidated fi nancial Note 23 to the consolidated fi nancial statements. statements). SUEZ ENVIRONNEMENT head offi ce team and French subsidiaries’ head offi ce teams move premises SUEZ ENVIRONNEMENT Group has decided to bring together on the same premises all SUEZ ENVIRONNEMENT head offi ce teams as well as those of its subsidiaries Lyonnaise des Eaux, SITA France, Degrémont and OIS. The move to a single site at La Défense should be completed by the end of 2010.

Z 9.2 ANALYSIS OF INCOME STATEMENT

9.2.1 EXPLANATION OF THE PRINCIPAL ITEMS Revenues arising from waste collection are generally based on ON THE INCOME STATEMENT the tonnage collected and the service provided by the operator. Revenues from other forms of waste treatment (primarily sorting and incineration) are based on volumes processed and services REVENUES by the operator and the revenues generated by recycling and Revenues generated by water supply are based on volumes reuse, such as the sale of raw materials (paper, cardboard, glass, delivered to customers, either specifi cally metered and invoiced metals, plastics, etc.) for sorting centers and the sale of energy or estimated based on the output of the supply networks. (electricity or heat) for incinerators.

For wastewater services and effl uent treatment, the price of the Revenues from engineering, construction and service contracts service is either included in the water supply invoice or specifi cally are determined using the percentage of completion method. invoiced to the relevant local authority or industrial client. Depending on the contract concerned, the stage of completion

98 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL REVIEW Analysis of income statement

may be determined either based on the proportion of costs and fees to intermediaries, and taxes other than corporate incurred to date, or on the physical progress of the project income tax. based on factors such as contractually defi ned stages. CURRENT OPERATING INCOME PURCHASES Current operating income is an indicator used to present Purchases primarily include purchases of unpurifi ed water a certain level of operating performance. It is a sub-total intended for treatment prior to delivery to customers, as well which facilitates interpretation of the Group’s performance as purchases of equipment, parts, energy, combustibles and by excluding elements which, in the Group’s view, are recyclable materials. insuffi ciently predictable due to their unusual, irregular or non- recurring nature. These elements relate to asset impairments OTHER OPERATING INCOME AND EXPENSES and disposals, restructuring costs and marked-to-market on fi nancial instruments for operational purposes. Other operating income includes reinvoicing direct charges and overheads. EBITDA Other operating expenses primarily include costs relating to sub- The Group uses EBITDA to measure its operating performance contracting and other external services, maintenance and repair and capacity to generate operating cash fl ows. costs for waste collection and treatment equipment, production costs, water and waste treatment costs, and administrative EBITDA is not defined in IFRS and does not appear directly in costs. This item also includes other routine operating expenses the Group’s consolidated income statement. Current operating such as rental expenses, external personnel costs, commissions income can be reconciled with EBITDA as follows:

Current operating income

– Depreciation, amortization and provisions – Share-based payments (IFRS 2)(1) – Net disbursements under concession contracts(2) EBITDA

(1) This item includes the allocation of stock options, bonus shares, and payments made by the Group in relation to company savings plans (including employer’s top-up contributions). (2) This item corresponds to the sum of the renewal expenditure relating to concessions and to the evolution of assets and liabilities for concessions renewals.

The reconciliation of current operating income to EBITDA for 2008 and 2009 is set out in Note 3.4 to the consolidated fi nancial statements. 9

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 99 9 FINANCIAL REVIEW Analysis of income statement

9.2.2 COMPARISON OF THE FINANCIAL PERIODS ENDED DECEMBER 31, 2009 AND 2008

(in millions of euros) 2009 2008

Revenues 12,296.4 12,363.7 Purchases (2,886.4) (2,677.2) Personnel costs (3,145.7) (3,062.2) Depreciation, amortization and provisions (851.4) (776.0) Other operating income and expenses (4,486.9) (4,789.2) Current operating income 926.0 1,059.1 Marked-to-market on operating fi nancial instruments 2.2 3.2 Impairment (85.3) (1.7) Restructuring costs (60.0) (20.9) Expenses linked to Initial Public Offering (50.8) Disposal of assets 84.2 46.9 Income from operating activities 867.1 1,035.8 Financial expenses (358.8) (420.8) Financial income 98.8 91.0 Financial income/(loss) (260.0) (329.8) Income tax expense (128.8) (92.7) Share in net income of associates 37.6 34.0 Net income 515.9 647.3 Of which minority interests 112.9 114.1 Net income Group share 403.0 533.2

Other income statement items:

(in millions of euros) 2009 2008

EBITDA 2,059.9 2,101.9

REVENUES

(in millions of euros) 2009 2008 Change % change

Water Europe 3,993.3 3,853.1 140.2 3.6% Waste Europe 5,319.0 5,727.9 (408.9) -7.1% International 2,968.6 2,765.4 203.2 7.3% Other 15.5 17.3 (1.8) -10.3% Revenues 12,296.4 12,363.7 (67.3) -0.5%

Group revenue was €12,296.4 million in 2009, slightly down offset by steady business in the Water Europe segment (-0.5%) from 2008. This negative growth breaks down as: (+€105 million) and the International segment (+€99 million);

● -1.8% organic growth (down €218 million) primarily due to ● +2.4% from tuck-in acquisitions including additions of the marked drop in the Waste Europe segment (-€420 million) +€321 million (of which Water Europe +€60 million, Waste resulting from the impact of the economic crisis, which was Europe +€146 million, International +€115 million) and exits

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of -€32 million (of which Water Europe -€13 million, Waste ● sales of services fell less than treatment activities, due Europe -€3 million, International -€16 million); essentially to the decline in wastewater treatment, industrial maintenance and municipal collection; ● -1.1% negative exchange rate impact (-€138 million), primarily due to the translation of revenues from pounds ● the United Kingdom and Scandinavia (-8.3%, -€100 million): sterling (-€122 million), Polish zlotys (-€23 million) and ● SITA UK sales were sharply down due primarily to a Swedish kronor (-€19 million), partially offset by translation volume effect (reduction in tonnage collected, recycled from US dollars (+€30 million). and treated). This decline was partially offset by a slightly At December 31, 2009, 40% of the Group’s revenue was realized positive price effect due in particular to the landfi ll tax in France, 78% in Europe, and 87% in Europe, North America and increase (tax levied on landfi lled waste) from £32 to £ 40 Australia. per ton in 2009,

● in Sweden and Finland, the drop stemmed primarily from Water Europe the contraction in industrial, commercial, and treatment The Water Europe segment contributed €3,993 million to Group contracts; revenues in 2009, up €140 million (an increase of 3.6%). Water ● Europe posted organic revenue growth of 2.7% (+€105 million) Benelux-Germany (-6.8%, -€98 million) was also impacted thanks to: by negative volume (essentially a drop in tonnage collected, with tonnage treated being relatively steady) combined ● the performance of Lyonnaise des Eaux (+3.0%, €68 million). with an equally negative price effect (drop in secondary raw In France, compared to 2008, business was marked by steady materials prices). volumes, rising prices, and a sharp drop in works revenues. Safe ge and Eurawasser also posted positive organic growth. International OIS showed negative organic growth due in particular to less The International segment contributed €2,969 million to Group activity among its industrial customers; revenues in 2009, up €203 million (+7.3%) versus 2008. Organic ● the rise in Agbar business (+2.3%, +€37 million) is due in growth was up €99 million (+3.6%) which came from: particular to the increase in the number of persons insured ● Central Europe – Maghreb – Middle East (+5.7%, +€41 million), in the health business and the slight growth in w ater and in particular Morocco and Poland; w astewater business. Although the latter benefi ted from tariff increases and slightly higher volumes, they were ● increase in Degrémont business (+2.4%, +€24 million), with penalized by a sharp drop in works business refl ecting the contracts launched in Melbourne, Al Dur (Bahrain), Rasafa end of non-recurring 2008 projects (anti-drought measures) (Iraq), Valenton, Cannes, Avignon, Carpentras and Bordeaux combined with the impact of the economic crisis in 2009. (France) , and despite the lower contribution from the Barka II project in Oman and the rescoping of the Jumeirah Golf Waste Europe Estate contract in Dubai;

The Waste Europe segment contributed €5,319 million to Group ● Asia-Pacifi c (+3.6%, +€20 million). In Australia, commercial revenues in 2009, down €409 million (-7.1%) from 2008. successes (Brisbane street cleaning and residential parks The Waste Europe segment posted negative organic growth of cleaning contracts won), an increase in volumes treated (in 9 -7.5% (-€420 million), which came from: particular in the State of Victoria early in the year) and price rises contributed to strong growth. In Water in China, the ● France (-7.5%, -€222 million): rise stemmed essentially from the growth in revenue from Chinese joint ventures and offset the fall in prices in Macao. ● treatment business was down sharply year-on-year, Hong Kong waste business was negatively impacted by the due essentially to the drop in sorting/recycling (drop in drop in the indices used in price reviews; prices and volumes of secondary raw materials such as paper and metals) and the negative growth of hazardous ● North America (+2.9%, +€14 million), thanks to a strongly waste treatment due to high exposure to industrial positive price effect in regulated activities in the United and commercial customers (impacted by the economic States (primarily tariff reviews in New Jersey, Toms River crisis). Despite a drop in volumes, non-hazardous waste and Delaware) partially offset by negative volume (decrease incineration and landfi ll were up year-on-year due to in billed volumes in regulated activity due to very unusual the rise in tariffs and in TGAP (general tax on polluting rainfall patterns). activities),

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Other (at SITA France in particular) and the increase in post- employment expenses (due to unusually low expenses in 2008 The Other segment contributed €16 million to Group revenues following a provisions reversal resulting from outsourcing one of in 2009 compared to €17 million in 2008. the Group’s pension plans in France).

OPERATING EXPENSES Depreciation, amortization and provisions Purchases Net amortization, depreciation and provisions were €851 million in 2009, up €75 million versus 2008, due to higher capital Purchases amounted to €2,886 million in 2009, up €209 million intensity at the Group’s businesses. (+7.8%) versus 2008. This increase was particularly marked in France (water and This increase is primarily due to changes in the presentation of waste sector) and in the United States (regulated water certain cost headings (corresponding to a reduction in “Other activities). operating income and expenses”) that had no impact on current operating income. In the Waste Europe segment, the drop in Other operating income and expenses purchases linked to recycling, the volume of which refl ected the changes in metals prices, was offset by a rise linked to the Other operating income and expenses came to -€4,487 million in integration of new companies into the consolidation scope. 2009, representing an improvement of €302 million versus 2008. The improvement was due to changes in the presentation Personnel costs mentioned above (See "Purchases" item). Personnel costs were €3,146 million in 2009, up €84 million Excluding reclassifi cations, the “Other operating income and (+2.7%) versus 2008 (for a breakdown of personnel costs see expenses” line refl ected increased revenues. Note 4.2 to the consolidated fi nancial statements).

Personnel costs were up due to annual pay increases (in France in particular), contribution of newly consolidated entities

CURRENT OPERATING INCOME

(in millions of euros) 2009 2008 Change % change

Water Europe 432.7 415.4 17.3 4.2% Waste Europe 314.1 468.9 (154.8) -33.0% International 309.1 282.3 26.8 9.5% Other (129.9) (107.5) (22.4) 20.8% Current operating income 926.0 1,059.1 (133.1) -12.6%

The Group’s current operating income was €926 million in 2009, Water Europe down €133 million from 2008. This decrease breaks down as: The Water Europe segment contributed €433 million to the ● -14.5% organic growth (-€152 million) primarily related to Group’s current operating income in 2009, up €17 million the marked reduction in Waste Europe (-€165 million) due to (+4.2%) versus 2008. the impact of the economic crisis, and the decline in Other This improvement was due primarily to high organic growth (-€22 million), which was partially offset by steady activity in (+€13 million) led by Lyonnaise des Eaux France due to stable Water Europe (+€13 million) and International (+€22 million); volumes of drinking water sold, higher tariffs, the impact of ● +2.5% from tuck-in acquisitions including additions to its COMPASS cost optimization program and the favorable business areas of +€35 million (Water Europe +€7 million, resolution of previous litigation. At Agbar, the water sector Waste Europe +€18 million, International +€10 million) and progressed while the insurance sector declined, impacted by exits of -€9 million (in International); an increase in claims.

● -0.7% from adverse exchange rate movements (-€7 million).

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Adverse exchange rate movements (primarily the pound of a slight upturn in the second half of the year) also strongly sterling for Bristol Water) were offset by the contribution of impacted sorting/recycling. In contrast, the contribution of newly consolidated entities in the Agbar Group. treatment activities increased, thanks in particular to the commissioning of treatment facilities (the EVI incinerator). Waste Europe Current operating income in Germany fell sharply due to its The Water Europe segment contributed €314 million to the exposure to industrial customers. Group’s current operating income in 2009, substantially down by €155 million (-33.0%) from 2008. International This negative growth was essentially organic (-€165 million, The International segment contributed €309 million to the -35.8%) and the result of a slowdown in economic activity Group’s current operating income in 2009, up €27 million refl ected in the signifi cant drop in tonnage collected and (+9.5%) versus 2008. This increase was less than the increase treated as well as lower prices of secondary raw materials in revenue (+7.3%). (paper, metals, etc.) compared to 2008, strongly impacting the This increase includes a positive exchange rate effect of sorting/recycling business. Current operating income was also €3 million and a slight positive scope effect of +€1 million, impacted by increased capital intensity in the waste business primarily due to the full consolidation of Swire SITA (Hong Kong) which, this year, was not offset by higher prices. and the full-year contribution of acquisitions made in 2008 (in Adverse exchange rate movements (pound sterling and Swedish particular USG which specializes in operating water storage krona) were offset by the contribution of newly consolidated tanks in the United States), which offset the disposal in 2008 entities in France (full-year contribution of acquisitions in 2008 of Spolana, a specialist in the treatment of polluted soil in the of Boone Comenor and Val Horizon), in Sweden (acquisition Czech Republic. of Allren in 2009) and in the Netherlands (primarily the Organic growth in current operating income in the International commissioning of the EVI incinerator). segment was €22 million. Organic growth in France was sharply lower essentially due to The main contributor to the increase in operating income was the drop in recycled raw materials prices in its sorting/recycling Degrémont, which benefi ted from a strong order book and from business. Services and treatment were also penalized by the winning the Melbourne contract. drop in tonnage collected and treated. This decrease in organic growth was partially offset by an increase in business areas due In North America, positive exchange rate effects and an increase to the full-year contribution of the acquisitions made in 2008 in business areas were slightly offset by negative organic growth. (Boone Comenor and Val Horizon). The negative result was due to the massive drop in volumes sold as a result of particularly unfavorable weather conditions. Activities in the United Kingdom reported a drop in current operating income. This was the combined result of adverse The contribution of Asia Pacifi c to current operating income exchange rate movements (signifi cant drop in the value of the was greater in 2009 than in 2008. This trend is due to increases pound in 2009 compared to 2008), a decline in tonnage collected in areas of activity (primarily from taking a 50% stake in Swire and treated (landfi lled), and recycling business problems resulting SITA in Hong Kong), slightly positive exchange rate effects and from the fall in secondary raw materials prices and in volumes organic growth driven by all the entities in the zone. recycled (primarily metals). These negative impacts were 9 The other subsidiaries (Lydec, and those in Central Europe and partly offset by operational optimization measures (increasing the Middle East) also grew. insourcing of tonnage via better waste fl ow management, cost reductions, structural rationalization, etc.). Other Similarly, business in Benelux saw a signifi cant drop in current Current operating income fell by €22 million from 2008, due operating income in 2009 compared to 2008, affected in this essentially to the increase in recurring expenses arising from case as well by the fall-off in economic activity. The drop in SUEZ ENVIRONNEMENT COMPANY’s initial public offering in secondary raw materials prices (in particular paper in spite July 2008.

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EBITDA

(in millions of euros) 2009 2008 Change % change

Water Europe 865.5 811.6 53.9 6.6% Waste Europe 797.7 924.0 (126.3) -13.7% International 468.3 418.8 49.5 11.8% Other (71.6) (52.5) (19.1) 36.4% EBITDA 2,059.9 2,101.9 (42.0) -2.0%

Group EBITDA was €2,060 million in 2009, down €42 million Restructuring costs (-2.0%) from 2008. Growth excluding exchange rate effects was In 2009, restructuring represented an expense of -€60 million negative (-1.2%) and organic growth was negative (-3.4%). versus -€21 million in 2008. These fi gures correspond to the implementation costs for the COMPASS program. INCOME FROM OPERATING ACTIVITIES Analysis of items included in the reconciliation between current Expenses related to the initial public offering operating income and income from operating activities and change of visual identity The total amount of exceptional expenses relating to the Impairment Company’s initial public offering and the change in visual Impairment of property, plant and equipment, intangible assets identity (rebranding costs) across all Group subsidiaries came to and fi nancial assets amounted to €85 million in 2009 compared €51 million in 2008. There was no equivalent expense in 2009. to €2 million in 2008. Disposal of assets In 2009, the line “Impairment of property, plant and equipment, intangible and fi nancial assets” in the amount of -€56 million Capital gains on disposals of assets generated income of related essentially to the Waste Europe segment (due to the €84 million in 2009, up from €47 million in 2008. In 2009, the two slowdown in activity that faced the Group during the period) principal disposals concerned LondonWaste and Gas Natural and the International segment with a charge of -€24 million (see section 9.1.2.4). The principal asset disposal in 2008 was (€20 million of which is linked to the Jumeirah Golf Estate in the sale by Agbar of its SUEZ SA shares. Dubai following the unilateral declaration by the Client to reduce the service scope, see Note 5.2.2. to the consolidated fi nancial Income from operating activities statements). The contributions of the Water Europe and Other Income from operating activities in 2009 was €867 million, down segments were more marginal. €169 million from 2008. This drop was due mainly to the decline in current operating income (-€133 million). The additional drop corresponds to the increase in depreciation and restructuring expenses which were partially offset by a sharp increase in asset disposals and non-recurrence of exceptional expenses in 2009 linked to the initial public offering and the rebranding costs recognized in 2008.

FINANCIAL INCOME/(LOSS)

(in millions of euros) 2009 2008 Change % change

Cost of net debt (285.9) (330.1) 44.2 -13.4% Other fi nancial income and expenses 25.9 0.3 25.6 N/A Financial income/(loss) (260.0) (329.8) (69.8) 21.2%

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The Group’s fi nancial income was -€260 million in 2009, a The difference between the Group’s average effective tax rate in €70 million improvement on 2008 thanks to lower net debt cost 2009 (21.22%) and the effective rate in France in 2009 (34.43%) combined with an improvement in “Other income and fi nancial is due primarily to the activation of additional deferred tax expenses”. assets (see Note 7 to the consolidated fi nancial statements), the non-taxation of capital gains realized on the disposal of Gas Net debt cost was down €44 million from 2008 (-13.4%) due Natural and LondonWaste, and lower tax rates in the various to the positive impact of Marked-to-market on currency swaps countries in which the Group operates. and lower interest charges. The latter was due to the strategy put in place, in a context of signifi cant falls in interest rates (the The difference between the Group’s average effective tax rate in Group’s average net debt cost falling from 5.6% in 2008 to 4.6% 2008 (13.13%) and the applicable rate in France in 2008 (34.43%) in 2009) despite the Group’s increased average net debt (see was primarily due to exceptional income linked to the deferred section 9.3.2). tax loss carry-forwards transferred from the former SUEZ tax group. The improvement in “Other income and fi nancial expenses” stems essentially from the unwinding of discount adjustments Net income Group share for provisions primarily for long-term monitoring of landfi lls in France and the United Kingdom. Net income Group share was €403 million, down €130 million (-24.4%) from 2008. This reduction was due primarily to the Income tax expense decline in income from operations (-€169 million) during the economic crisis which impacted Waste Europe in particular. The Group income tax expense in 2009 was €129 million versus remaining €39 million is an improvement in fi nancial income €93 million in 2008. This change is the result of two opposing (€70 million) partially offset by a lower tax charge (-€36 million), events. On the one hand, the Group was operating in 2009 in the with associates’ and minority interest profi t shares remaining context of an economic crisis, which resulted in a drop in taxable virtually steady. revenue. On the other hand, 2008 had seen the recognition of deferred taxes due to loss carry-forwards transferred from the former SUEZ tax group in the net amount of €131 million.

Z 9.3 FINANCING AND NET DEBT

9.3.1 CASH FLOWS IN 2009 AND 2008 9 Period ended December 31

(in millions of euros) 2009 2008

Cash from/(used in) operating activities 1,605.7 1,532.2 Cash from/(used in) investing activities (1,024.3) (2,418.5) Cash from/(used in) fi nancing activities 457.7 1,154.5 Impacts of changes in exchange rates and other 4.1 (65.9) TOTAL CASH FLOW FOR THE PERIOD 1,043.2 202.3 Cash and cash equivalents at the beginning of the year 1,668.5 1,466.2 Cash and cash equivalents at the end of the year 2,711.7 1,668.5

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CASH FROM OPERATING ACTIVITIES

Comparison between 2009 and 2008

Change

(in millions of euros) 2009 2008 €m %

EBITDA 2,059.9 2,101.9 (42.0) -2.0% + Net disbursements under concession contracts (226.6) (213.4) (13.2) 6.2% + Impairment of current assets (16.0) (24.0) 8.0 -33.3% + Impact of restructuring operations (45.7) (77.8) 32.1 -41.3% + Dividends received and share in net income/(loss) of associates 31.4 21.7 9.7 44.7% - Net allocation to provisions for employee benefi ts (5.6) (19.6) 14.0 -71.4% Cash generated from operations before income tax and fi nancial expenses 1,797.3 1,788.9 8.4 0.5% Tax paid (114.9) (204.8) 89.9 -43.9% Change in working capital requirements (76.7) (51.9) (24.8) 47.8% Cash from/(used in) operating activities 1,605.7 1,532.2 73.5 4.8%

Net cash from operating activities amounted to €1,606 million in and current assets as well as an increase in dividends 2009 and €1,532 million in 2008. received and the share of net income/(loss) of associates.

The change in net cash from operating activities over the period ● reduction in tax paid due primarily to the reimbursement (+€74 million) primarily stemmed from: of corporate income tax prepayments, paid by SUEZ ENVIRONNEMENT in 2008 and reimbursed by the tax authority ● slight growth in cash generated from operations before in 2009 (resulting from the retroactive establishment as of fi nancial and income tax expenses (+€8 million). Drop in January 1, 2008 of the SUEZ ENVIRONNEMENT COMPANY tax EBITDA and increase in net disbursements under concession consolidation group for French companies); contracts were offset by a drop in restructuring (2008 was marked by exceptional expenses linked to the IPO and ● very slight deterioration in the working capital requirement rebranding) and to a lesser extent by an improvement in in 2009. It improved in Waste Europe thanks to good other lines (reduction in net provisions for employee benefi ts management and was higher in Water Europe and International which saw an increase in revenues.

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CASH FLOWS FROM INVESTING ACTIVITIES

Comparison between 2009 and 2008

Change

(in millions of euros) 2009 2008 €m %

Investments in property, plant and equipment and intangible assets (1,083.3) (1,143.9) 60.6 -5.3% Financial investments(1) (330.4) (1,455.5) 1,125.1 -77.3% Acquisitions of entities net of cash and cash equivalents acquired (206.0) (1,419.4) 1,213.4 -85.5% Acquisitions of available-for-sale securities (124.4) (36.1) (88.3) 244.6% Disposals of property, plant and equipment and intangible assets 16.9 39.7 (22.8) -57.4% Disposals of entities net of cash and cash equivalent sold 8.2 (18.2) 26.4 -145.1% Disposals of available-for-sale securities 326.7 144.8 181.9 125.6% Interests received on non-current fi nancial assets 3.8 4.3 (0.5) -11.6% Dividends received on non-current fi nancial assets 39.8 33.0 6.8 20.6% Change in loans and receivables issued by the Company and others (6.0) (22.7) 16.7 -73.6% Cash from/(used in) investing activities (1,024.3) (2,418.5) 1,394.2 -57.6%

(1) The item “Financial investments” corresponds to the sum of the items “Acquisitions of entities net of cash and cash equivalents acquired” and “Acquisitions of available-for-sale securities”. Group fi nancial investments broke down as follows in 2009: €39.2 million for Water Europe, €32.5 million for Waste Europe, €3.5 million for International and €262.2 million for Other (primarily acquisition of 50% stake in Swire SITA and participation in the Gas Natural capital increase); in 2008 they were as follows: €708 million in respect of the Agbar takeover, €135.4 million for Water Europe, €330.3 million for Waste Europe, €271.0 million for International and €10.8 million for Other.

Net cash used in investing activities amounted to -€1,024 million In 2008, SUEZ ENVIRONNEMENT made substantial fi nancial at December 31, 2009 and -€2,419 million at December 31, investments including the purchase of Agbar shares 2008. The change in net cash used in investing activities over (€708 million), the acquisition of Boone Comenor, USC, the period (+€1,394 million) stemmed primarily from the change BellandVision and Val Horizon. 9 in fi nancial investments (+€1,125 million), disposals of available- In 2009, the principal disposal was the sale of all Gas Natural for-sale securities (+€182 million) and investments in property, shares. Note that the disposal of LondonWaste shares at the plant and equipment and intangible assets (+€61 million). end of 2009 will generate inward cash fl ow in the second In 2009, the principal fi nancial investments concerned the quarter of 2010. acquisition of the 50% not yet held in Swire SITA and the In 2008, the main disposal involved SUEZ shares, recognized in participation in the Gas Natural capital increase. the “Disposals of available-for-sale securities” item.

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Maintenance and development capital expenditure operated by the Group as well as investments made in order and free cash fl ow to comply with new regulations; and

Within property, plant and equipment and intangible assets, the ● development capital expenditure(1), corresponding to Group distinguishes between: investments incurred to build new machinery or facilities for operations. ● maintenance capital expenditure, corresponding to investments incurred to renew the equipment and machinery

The maintenance capital expenditure at December 31, 2009 and 2008 is presented in the following table:

(in millions of euros) 2009 2008

Total maintenance capital expenditure(1) (568.8) (664.4) Of which maintenance capital expenditure (583.9) (614.3) Of which change in maintenance asset supplier debt(2) 15.1 (50.1)

(1) Total maintenance capital expenditure for 2009 breaks down as follows: €198.4 million for Water Europe, €255.5 million for Waste Europe, €109.9 million for International and €5.0 million for Other. The breakdown was as follows at December 31, 2008: €182.2 million for Water Europe, €369.1 million for Waste Europe, €111.1 million for International and €2.0 million for Other. (2) Change in trade payables concerning the acquisition of maintenance-related property, plant and equipment and intangible assets.

The Group uses free cash fl ow as an indicator to measure the The reconciliation of cash generated from operations before generation of liquidity from the Group’s existing operations income tax and fi nancial expenses with free cash fl ow at before development investment. December 31, 2009 and 2008 is presented in the following table:

(in millions of euros) 2009 2008

Cash from operations before fi nancial income/(expense) and income tax 1,797.3 1,788.9 Total maintenance capital expenditure (568.8) (664.4) Change in WCR (76.7) (51.9) Tax paid (114.9) (204.8) Financial interests paid (217.9) (352.6) Financial interests received on cash and cash equivalents 21.9 41.1 Interests received on non-current fi nancial assets 3.8 4.3 Dividends received on non-current fi nancial assets 39.8 33.0 Other 6.7 Free cash fl ow 891.2 593.6

The breakdown of free cash fl ow by segment was as follows In 2008, the breakdown was as follows: Water Europe segment: in 2009: Water Europe segment: €249.1 million, Waste Europe €271.8 million, Waste Europe segment: €326.7 million, segment: €341.4 million, International segment: €174.3 million International segment: €143.8 million and Other segment: and Other segment: €126.4 million. -€148.7 million.

(1) The breakdown of the total amount of development investments (€514.5 million in 2009 and €479.5 million in 2008) was as follows in 2009: €156.8 million for Water Europe, €207.4 million for Waste Europe, and €150.3 million for International. The breakdown in 2008 was as follows: €116.2 million for Water Europe, €190.3 million for Waste Europe, and €173.0 million for International.

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CASH FLOW FROM FINANCING ACTIVITIES

Comparison between 2009 and 2008

Change

(in millions of euros) 2009 2008 €m %

Dividends paid (431.4) (496.6) 65.2 -13.1% Repayment of debt (1,911.8) (494.3) (1,417.5) 286.8% Change in fi nancial assets at fair value through income (1,084.4) 129.3 (955.1) -738.7% Financial interests paid (217.9) (352.6) 134.7 -38.2% Financial interests received on cash and cash equivalents 21.9 41.1 (19.2) -46.7% Increase in borrowings and long-term debt 4,052.9 2,326.4 1,726.5 74.2% Increase in capital 12.9 1.2 11.7 975.0% Change in shareholders’ equity 15.5 15.5 N/A Cash from/(used in) fi nancing activities 457.7 1,154.5 (696.8) -60.4%

Net cash from fi nancing activities amounted to €458 million at In 2009, the amount in “Increase in borrowings and long-term December 31, 2009, down €697 million from December 31, 2008. debt” (+€4,053 million) was linked in particular to the refi nancing implemented in 2009 (essentially by bond issues) which repaid This decrease in net cash from fi nancing activities in 2009 part of the debt due (in particular the repayment of GDF SUEZ compared to 2008 was mainly due to changes in “Repayment of Finance current accounts in the amount of €982 million) and debt” (-€1,418 million), “Change in fi nancial assets at fair value subscribed to mutual funds in the amount of €1,078 million (in through income” (-€955 million) partially offset by “Increase in “Change in fi nancial assets at fair value through income”). borrowings and long-term debt” (+€1,727 million). In 2008, the amount in this line (+€2,326 million) was linked primarily to acquisitions realized during the period.

9

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9.3.2 NET DEBT

NET DEBT AT DECEMBER 31, 2009 AND 2008

Change

(in millions of euros) 2009 2008 €m %

Bond issues 3,794.0 944.4 2,849.6 301.7% Draw downs on credit facilities 754.0 504.1 249.9 49.6% Borrowings under fi nance leases 464.5 492.3 (27.8) -5.6% Other bank borrowings 2,097.0 1,893.7 203.3 10.7% Other borrowings 1,933.4 2,055.1 (121.7) -5.9% TOTAL BORROWINGS 9,042.9 5,889.6 3,153.3 53.5% Overdrafts and current accounts 936.6 1,823.2 (886.6) -48.6% TOTAL OUTSTANDING DEBT 9,979.5 7,712.8 2,266.7 29.4% Financial assets at fair value through income (1,141.1) (51.0) (1,090.1) 2,137.5% Cash and cash equivalents (2,711.7) (1,668.5) (1,043.2) 62.5% NET DEBT EXCLUDING DERIVATIVE FINANCIAL INSTRUMENTS AND AMORTIZED COST 6,126.7 5,993.3 133.4 2.2% Impact of derivative fi nancial instruments and amortized cost 154.8 (22.1) 176.9 -800.5% NET DEBT 6,281.5 5,971.2 310.3 5.2%

Net debt (excluding derivative fi nancial instruments and the Group’s debt in 2009, refl ected in bond issues (increase amortized cost) amounted to €6,127 million in 2009 and of €2,850 million) which in particular enabled the repayment €5,993 million in 2008. of some bank overdrafts and current accounts (-€887 million including -€982 million to reimburse the GDF SUEZ Finance The increase in net debt (excluding fi nancial derivatives and current account) and increase in Group cash (-€1,043 million in amortized cost) for the 2008-2009 period was €133 million. The “Cash and cash equivalents”). sharp line to line changes are due to the refi nancing of part of

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9.3.3 RETURN ON CAPITAL EMPLOYED (ROCE)

ROCE is calculated by dividing net operating profi t after tax The calculation of NOPAT, capital employed, and return on (NOPAT) for the period (see details below) by the opening capital capital employed for 2009 and 2008 are presented in the employed adjusted for the scope effects on a pro rata temporis following table: basis as well as for material exchange rate effects.

(in millions of euros) 2009 2008

Current operating income 926.0 1,059.1 Share in net income of associates 37.6 34.0 Dividends 39.8 33.0 Interest and income from receivables and current assets 7.5 10.1 Other fi nancial income and expenses (18.0) (36.9) Income tax expense(1) (232.2) (145.1) NOPAT 760.7 954.1

(1) This increase in tax expense stems essentially from a reduction in fi nancial expenses and the constitution of a provision for tax risk.

(in millions of euros) 2009 2008

Goodwill (net) 2,897.5 2,720.2 Property, plant and equipment and intangible assets (net) 8,073.0 7,631.5 Available-for-sale securities 682.5 756.0 Investments in associates 265.6 237.7 Provisions (1,328.0) (1,296.4) Impact of exchange rate fl uctuations and material changes in areas of activity 342.2 500.1 Other (464.7) (766.6) CAPITAL EMPLOYED AT JANUARY 1(1) 10,468.1 9,782.5

(1) Opening capital employed adjusted for material scope and exchange rate effects.

9 (in millions of euros) NOPAT Capital employed ROCE(1)

2009 760.7 10,468.1 7.3% 2008 954.1 9,782.5 9.8%

(1) To be compared to the weighted average cost of capital (WACC) estimated at 6.8% in 2009 (steady compared to 2008).

ROCE by segment broke down as follows:

● in 2009, the breakdown was as follows: Water Europe segment: 9.0%, Waste Europe segment: 5.6% and International and Other: 7.9%;

● in 2008, Water Europe segment: 11.1%, Waste Europe segment: 8.9% and International and Other: 9.3%.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 111 9 FINANCIAL REVIEW Provisions

Z 9.4 PROVISIONS

Comparison between December 31, 2009 and December 31, 2008 The movements in provisions between December 31, 2008 and December 31, 2009 are presented in the following table:

Change

(in millions of euros) 2009 2008 €m %

Pensions and other employee benefi t obligations 442.8 428.9 13.9 3.2% Sector-related risks 105.0 102.3 2.7 2.6% Warranties 41.4 34.5 6.9 20.0% Disputes, claims and tax risks 132.7 125.0 7.7 6.2% Site rehabilitation 490.5 485.3 5.2 1.1% Restructuring costs 34.6 19.7 14.9 75.6% Other contingencies 142.0 132.3 9.7 7.3% TOTAL PROVISIONS 1,389.0 1,328.0 61.0 4.6%

The principal provisions at December 31, 2009 were the ● provisions for other contingencies, which amounted to following: €142 million in 2009, up €10 million versus December 31, 2008. This amount mainly includes provisions for ● provisions for site rehabilitation (or closure, post-closure) miscellaneous employee-related and environment-related which were €491 million in 2009, up €5 million versus contingencies and various business risks; December 31, 2008. The purpose of these provisions and the methods for calculating them are explained in Note 16.4 to ● provisions for disputes, claims and tax risks, which the consolidated fi nancial statements; amounted to €133 million in 2009, up €8 million versus December 31, 2008; ● provisions for pensions and other employee benefi t obligations which in 2009 were €443 million (for details of ● provisions for sector risks, which amounted to €105 million pension and other employee benefi ts, see Note 17 to the in 2009, slightly up by €3 million versus December 31, 2008. consolidated fi nancial statements), up €14 million versus This amount primarily includes provisions for risks to cover December 31, 2008; legal proceedings relating to Argentinean contracts, as well as for guarantees given as part of disposals which are likely to be called on.

112 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL REVIEW Contractual commitments

Z 9.5 CONTRACTUAL COMMITMENTS

9.5.1 BORROWINGS

The Group’s total gross debt at December 31, 2009 is set out in the following table:

(in millions of euros) Total 2010 2011 2012 2013 Beyond 2013

Total borrowings 9,042.9 2,619.6 189.4 694.8 686.6 4,852.5 Overdrafts and current accounts 936.6 936.6 - - - - TOTAL OUTSTANDING DEBT 9,979.5 3,556.2 189.4 694.8 686.6 4,852.5 Of which GDF SUEZ share 1,939.2 1,299.5 6.0 6.0 462.8 164.9

9.5.2 SECURED, PLEDGED AND MORTGAGED ASSETS

Items of property, plant and equipment pledged by the Group to guarantee commitments amounted to €135 million at December 31, 2009 and €148 million at December 31, 2008.

The maturities of these commitments are as follows:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

2009 12.1 2010 2.8 5.3 2011 1.1 3.7 2012 1.8 0.4 2013 0.9 3.3 Beyond 128.8 123.5 TOTAL 135.4 148.3

9.5.3 FINANCING COMMITMENTS 9

Financing commitments provided or received by the Group in respect of the fi scal years ended December 31, 2009 and 2008 are presented in the following table with a breakdown of the maturities of the commitments relating to fi nancing at December 31, 2009:

Of which less Of which Of which more (in millions of euros) Dec. 31 2009 than 1 yr 1-5 yrs than 5 yrs Dec. 31, 2008

Personal securities provided for borrowings 752.5 581.0 39.8 131.7 588.2 Financing commitments provided 5.3 3.8 1.2 0.3 2.9 TOTAL COMMITMENTS GIVEN 757.8 584.8 41.0 132.0 591.1 Financing commitments received 1,054.4 286.5 734.4 33.5 954.9 Other guarantees received 13.7 4.3 1.8 7.6 8.2 TOTAL COMMITMENTS RECEIVED 1,068.1 290.8 736.2 41.1 963.1

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 113 9 FINANCIAL REVIEW Contractual commitments

Commitments given and received related to fi nancing mainly Personal securities cover the repayment of the principal amount concern undrawn confi rmed credit facilities (given or received) and interest on debt where the latter is not recognized as a and borrowings contracted before the closing of accounts liability for the Group’s fi nancial situation. date for which the related funds will not be received until the beginning of the following period.

9.5.4 FIRM COMMITMENTS TO PURCHASE PROPERTY, PLANT AND EQUIPMENT

In the ordinary course of their operations, certain Group companies have also entered into commitments to purchase, and the relevant third parties to deliver, property, plant and equipment.

These commitments break down by maturity as follows:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

2009 130.3 2010 164.7 64.5 2011 55.1 42.6 Beyond 2.6 3.0 TOTAL 222.4 240.4

9.5.5 OTHER CONTRACTUAL INVESTMENT COMMITMENTS

The Group has made various investment commitments for a total of €788 million at December 31, 2009.

These investment commitments amounted to €796 million at December 31, 2008.

9.5.6 COMMITMENTS RELATED TO FINANCE LEASES

The main fi nance lease agreements entered into by the Group concern Novergie’s incineration plants.

The future minimum lease payments under these leases were as follows at December 31, 2009 and 2008:

Future minimum lease payments Future minimum lease payments at Dec. 31, 2009 at Dec. 31, 2008

(in millions of euros) Undiscounted value Present value Undiscounted value Present value year 1 60.7 59.2 66.4 63.6 year 2 to 5 inclusive 218.2 199.6 210.6 181.5 Beyond year 5 259.8 185.5 301.1 190.2 TOTAL FUTURE MINIMUM LEASE PAYMENTS 538.7 444.3 578.1 435.3

114 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL REVIEW Parent Company fi nancial statements

9.5.7 OPERATING LEASES

Future minimum lease payments under non-cancelable operating leases can be analyzed as follows:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008 year 1 115.5 120.2 year 2 to 5 inclusive 258.1 196.1 Beyond year 5 225.9 130.3 TOTAL 599.5 446.6

Z 9.6 PARENT COMPANY FINANCIAL STATEMENTS

See Section 20.3 of this Reference Document which also includes the position of accounts payable by maturity.

Z 9.7 2010 OUTLOOK

See Section 6.3.4 of this Reference Document.

9

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 115 9 FINANCIAL REVIEW

116 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 10 CASH AND SHAREHOLDERS’ EQUITY

Page

10.1 COMPANY SHAREHOLDERS’ EQUITY 118

10.2 SOURCE AND AMOUNT OF THE ISSUER’S CASH FLOWS AND DESCRIPTION OF CASH FLOWS 118 CONTENTS 10.2.1 Cash fl ows from operating activities 118 10.2.2 Cash fl ows from investing activities 118 10.2.3 Cash fl ows from fi nancing activities 119

10.3 BORROWING TERMS AND ISSUER’S FINANCING STRUCTURE 119 10.3.1 Debt structure 119 10.3.2 Major operations in 2009 119 10.3.3 Group rating 120

10.4 RESTRICTIONS ON THE USE OF CAPITAL 120

10.5 SOURCES OF FINANCING EXPECTED TO MEET THE COMMITMENTS RELATING TO INVESTMENT DECISIONS 121 10.5.1 Contractual commitments 121 10.5.2 Expected sources of fi nancing 121

10

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 117 10 CASH AND SHAREHOLDERS’ EQUITY Company shareholders’ equity

Z 10.1 COMPANY SHAREHOLDERS’ EQUITY

Total shareholders’ equity as of December 31, 2009 was As noted in section 10.3.1 below, the Group’s net debt now €4,418 million, up €248 million from December 31, 2008. totals €6,282 million. Consequently, the Net Debt / EBITDA This change specifi cally includes the payment of dividends ratio increased from 2.84 at December 31, 2008 to 3.05 at (-€431 million), translation adjustments (+€36 million) and net December 31, 2009. income for fi scal year 2009 (+€516 million).

10.2 SOURCE AND AMOUNT OF THE ISSUER’S CASH FLOWS Z AND DESCRIPTION OF CASH FLOWS

10.2.1 CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operations before fi nancial expenses and income tax

(in millions of euros) 2009 2008 Gross change in %

Water Europe 688 634 +8.5% Waste Europe 739 856 -13.7% International 435 388 +12.1% Other (65) (89) +27.0% TOTAL 1,797 1,789 +0.4%

Cash generated from operations before fi nancial expenses and Europe segment, and a net amount of €258 million for the income tax totaled €1,797 million at December 31, 2009, up International and Other (holding companies) segments; 0.4% versus 2008. ● maintenance capital expenditure of €569 million (€664 million In total, operating activities generated a cash surplus of in 2008), distributed by segment as follows: €198 million €1.6 billion in 2009. for the Water Europe segment , €255 million for the Waste Europe segment, €110 million for the International segment, and €5 million for the holding companies;

● 10.2.2 CASH FLOWS FROM INVESTING development capital expenditure of €515 million (€480 million ACTIVITIES in 2008) distributed by segment as follows: €157 million for the Waste Europe segment, €207 million for the Waste Europe segment, €150 million for the International segment. Investments in 2009 totaled €1.4 billion and included:

● fi nancial investments of €330 million (€1,456 million in 2008), including €33 million for acquisitions in the Waste Europe segment, €39 million for acquisitions in the Water

118 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 CASH AND SHAREHOLDERS’ EQUITY Borrowing terms and issuer’s fi nancing structure

Disposals in 2009 represented €352 million, compared to 10.2.3 CASH FLOWS FROM FINANCING some €166 million in 2008. The largest disposal involved the Gas ACTIVITIES Natural shares held by the Group.

In total, cash fl ows from investing activities resulted in a cash Dividends paid in 2009 totaled €431 million (compared to outfl ow of €1.02 billion. €497 million in 2008). They include the dividend paid by SUEZ ENVIRONNEMENT COMPANY to its shareholders, i.e., €318 million. They also include dividends paid by various subsidiaries to minority shareholders, i.e., €113 million. Net fi nancial interest paid totaled €196 million, versus €312 million in 2008.

In total, cash fl ows from fi nancing activities generated a cash surplus of €0.46 billion in 2009.

Z 10.3 BORROWING TERMS AND ISSUER’S FINANCING STRUCTURE

10.3.1 DEBT STRUCTURE 10.3.2 MAJOR OPERATIONS IN 2009

Gross debt excluding derivative instruments at December 31, In terms of fi nancial policy, 2009 was marked by the increasing 2009 totaled €9,979 million, versus €7,713 million at the end fi nancial independence of SUEZ ENVIRONNEMENT and its access of 2008, and consisted primarily of bonds (largely subscribed to market liquidity, after a year of transition, which was marked by the parent company SUEZ ENVIRONNEMENT COMPANY ) by the Company’s listing on the stock exchange, in 2008. totaling €3,794 million (€944 million in 2008), GDF SUEZ fi nancing Thus, despite the diffi cult market conditions, the Company totaling €1,939 million (€2,935 million in 2008), bank borrowings obtained from various banking institutions, a total of €400 million totaling €2,851 million (€2,398 million in 2008), and other in confi rmed credit lines, maturing from 1 to 5 years, in the fi rst borrowings and cash current accounts totaling €1,395 million half of the year. (€1,436 million in 2008). Moreover, on March 3, 2009, the Company Board of Directors Net debt after hedging was as follows: 57% in euros, 18% in US authorized the launch of a Euro Medium-Term Notes (EMTN) dollars and 7% in pounds sterling at the end of 2009, compared program for €5 billion, as well as an issuance package for the next to 59% in euros, 18% in US dollars and 7% in pounds sterling at 12 months totaling €3 billion; SUEZ ENVIRONNEMENT COMPANY the end of 2008. issued bonds totaling €3 billion during the year. 48% of gross debt and 78% of net debt (after hedging) is at fi xed As part of its growth, the Group also implemented project rates. The Group’s 2010 objective is to implement a dynamic fi nancing in Australia for the construction and operation of a distribution between the various rate benchmarks and be able 10 seawater desalination project in Melbourne (State of Victoria) to adapt to the market context. The average cost of net debt totaling 4,893 million Australian dollars. was 4.65%, compared to 5.61% in 2008. Excluding debt assumed from GDF SUEZ, the average duration of net debt was 5.6 years Finally, on December 17, 2009, the Company Board of Directors at the end of 2009, compared to 4.4 years at the end of 2008. A authorized an update to the EMTN program for a maximum simplifi ed maturity schedule is provided in Section 10.5.1. of €5 billion, for one year starting on that date, as well as the issuance of a maximum €2 billion over the next twelve months, either within or outside the EMTN program.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 119 10 CASH AND SHAREHOLDERS’ EQUITY Restrictions on the use of capital

10.3.3 GROUP RATING a global transaction involving AGUAS DE BARCELONA (see Section 6.5.2.2 for details on this transaction).

SUEZ ENVIRONNEMENT COMPANY has its senior debt rated Moody’s applied the following main adjustments to the Group’s by Moody’s rating agency. The rating awarded on March 4, net debt: 2009 was A3 for long-term debt and Prime 2 for short-term ● addition of the funding shortfall on pension liabilities (see debt. The stable outlook associated with that rating was Section 20.1 Note 17); downgraded on October 27, 2009 following the announcement of the preliminary agreement with Criteria Caixacorp, regarding ● addition of the present value of unconditional future payments on operating leases (see Section 20.1 Note 20).

Z 10.4 RESTRICTIONS ON THE USE OF CAPITAL

As of December 31, 2009, the Group had undrawn confi rmed respect to the principal amount and interest), which is measured credit facilities (which may be used for such purposes as backup by a ratio called the “DSCR” (debt service cover ratio), or with credit facilities for commercial paper programs and treasury respect to interest by a ratio called “ISCR” (interest service bills) totaling €1,054 million. cover ratio).

Some loans contracted by Group subsidiaries or by With regard to project fi nancing, lending banks may also require SUEZ ENVIRONNEMENT COMPANY on behalf of its subsidiaries that the concerned company maintain an actuarial ratio for debt include clauses requiring specifi c ratios to be maintained. Such coverage for the remaining term of the loan, called the “loan ratios, as well as their levels, are known as fi nancial covenants, life cover ratio” (LLCR). Within the context of other fi nancing, and are agreed to with the lenders and may be revised during lending banks may also request company statement of fi nancial the term of the loan. position ratios, which generally take the form of a debt to shareholders’ equity ratio. In most loans to subsidiaries involving negotiation of fi nancial covenants, the lending banks usually require that the relevant The debt securitization agreement contains the following company maintain a minimum level of debt coverage (with covenants:

Level 1 Level 2

Net debt/EBITDA Max. 2.5 Max. 3.5 EBIT/Interests Min. 3 Min. 2.25

According to the securitization agreement, these subsidiaries’CFOs sending representation letters indicating (i) covenants only apply in the event of a loss of control over whether the subsidiary or other legal entities supervised by SUEZ ENVIRONNEMENT COMPANY by GDF SUEZ. These covenants this subsidiary have, as at the last accounting closing, been in therefore do not currently apply and are only communicated to default or potential default situations (situation likely to become the program manager for information purposes. a situation of default contingent on decision of the lenders or the expiry of time limits) or (ii) whether default or potential default The receivables thereby securitized represent less than situations may occur at the next half year closing. These letters €300 million, approximately 3% of gross fi nancial debt (net of representation are supplemented by an appendix listing the of bank overdrafts, amortized cost and derivative effect) at loan agreements, including covenants, types of covenants, and December 31, 2009. the consequences to the borrower in the event of a breach of The Group has implemented a semi-annual procedure for such covenants. monitoring its fi nancial covenants consisting in the major

120 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 CASH AND SHAREHOLDERS’ EQUITY Sources of fi nancing expected to meet the commitments relating to investment decisions

10.5 SOURCES OF FINANCING EXPECTED TO MEET Z THE COMMITMENTS RELATING TO INVESTMENT DECISIONS

10.5.1 CONTRACTUAL COMMITMENTS

The following table shows the gross fi nancial debt schedule at December 31, 2009.

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

Debt with GDF SUEZ 395.0 904.5 507.8 131.9 1,939.2 Bond debt or debt susbscribed from other institutions 1,316.9 939.8 2,604.2 3,179.4 8,040.3 TOTAL 1,711.9 1,844.3 3,112.0 3,311.3 9,979.5

10.5.2 EXPECTED SOURCES OF FINANCING needs, as approved in the annual budgets, and as long as SUEZ ENVIRONNEMENT COMPANY is controlled by GDF SUEZ.

As of December 31, 2009, the Group had available cash totaling The Group anticipates that its fi nancing needs for the major €3,884 million (including €1,141 million in mutual funds held planned investments will be covered by its available cash, the for trading purposes) and unutilized, confi rmed credit facilities sale of mutual fund shares held for trading purposes, its future totaling €1,054 million, of which €286 million will be expiring in cash fl ow resulting from operating activities, and the potential fi scal year 2010. use of available credit facilities.

The Group also benefi ts from a framework fi nancing agreement Moreover, the Group does not exclude the possibility of with GDF SUEZ, authorized by the Company Board of Directors refi nancing a portion of its debt in 2010 by resorting to the debt on June 4, 2008 and signed with SUEZ on June 5, 2008. This and/or banking capital markets, whether short-term or long- framework agreement, expiring at the end of 2010, guarantees term, if market conditions are favorable. SUEZ ENVIRONNEMENT COMPANY’s access to GDF SUEZ’s As necessary, specifi c fi nancing may be implemented for cash at market conditions, within the limits of fi nancing specifi c projects.

10

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 121 10 CASH AND SHAREHOLDERS’ EQUITY

122 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 11 RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

Z 11.1 RESEARCH AND DEVELOPMENT

OVERVIEW Beyond the Group itself, a number of partnerships with public entities (e.g., Cemagref, CNRS, University of Tongji, University of California, Los Angeles (UCLA)), private operators, as well Innovation within the Group is a strategic factor in addressing as skills and innovation networks such as competitiveness current client expectations and anticipating future needs. A centers (notably Axelera, Alsace Lorraine Water Center (process sustained innovation effort ensures improved production tools, of labeling as a competitiveness center is currently underway), and contributes to fi nancial profi tability. It also contributes to Advancity and Vitagora) and European networks (Water Supply improving environmental performance, whether with regard to and Sanitation Technology Platform, KIC Climat) allow the climate impact, impact on resources or impact on biodiversity. Group to leverage its research and development efforts while Research, technology development, and expertise are all benefi ting from collaborative work with some of the best means the Group applies in order to improve the economic research teams in the world. and environmental performance of our operations and the technology changes expected by our clients. In 2009, as in Finally, convinced that the scope of innovation extends beyond 2008, the Group allocated €65 million for research, technology mere research and development, the Group has implemented a development and innovation. voluntary approach to stimulate and promote innovative initiatives and projects in the technical, commercial and managerial fi elds, The research and innovation policy is based on the work of by applying a methodical examination of the proposals of various experts located in the operating units, research programs projects originating with the operational teams. developed in the Group’s research and development (R&D) centers, and the promotion of a policy of innovation in order, on the one hand, to facilitate the sharing of results and information between researchers and experts, and on the other, to deliver PRINCIPAL R&D PROGRAMS innovative offerings and services to our clients.

In total, over 400 researchers and experts are assigned fulltime In addition to the major challenges related to health and to technology research and development at the R&D centers environmental risks, the Group’s research and development and in the networks of experts. Moreover, to further combine efforts are aimed at addressing the signifi cant challenges of the R&D efforts of the Group’s various operating units in the sustainable development. water segments, and to highlight joint research programs, Lyonnaise des Eaux, Agbar, United Water, Northumbrian Water ● The prevention of climate change is a major challenge to and SUEZ ENVIRONNEMENT have established the R+i Alliance which the Group seeks to respond through its research and 11 partnership. R+i Alliance specifi cally carries out studies on the development efforts. management of physical assets, odor control, energy effi ciency, In water and waste, a number of programs have now been the dynamic management of rainwater, emerging water-quality dedicated to reducing greenhouse gas effects, increasing energy terms of reference, the management of water resources, and recovery and the development of renewable energy potential: the management of water demand. In 2009 the R+i Alliance energy production from biogas produced by biomass (landfi ll, budget totaled €9 million. sludge treatment), energy savings, enhancing energy recovery

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 123 11 RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES Research and development

from incineration plants, use of renewable energy linked The Group is active in the very large desalination markets (Perth to treatment processes, recovery of heat from wastewater and, most recently, Melbourne), through Degrémont, as well as (“Degrés Bleus”) and reduction of greenhouse gas generated by in smaller freshwater membrane treatment markets, through waste collection, are just some examples of research work or Ondeo Industrial Solutions. innovations in which the Group is involved. As regards disinfection to supplement ozonation, the range As an illustration, in the collection of domestic waste, the of UV products developed by Degrémont Technologies has compression of waste in the garbage bin (Cyclabelle), pneumatic been extended to meet the needs for higher fl ows. This range transport, and the partnership with Renault to develop the of products, sold directly by Degrémont Technologies, but Hybris alternative fuel solution are all innovations intended also incorporated into Degrémont’s turnkey offerings, tends to reduce the problems caused by collection trucks and their toward drinking water and urban or industrial wastewater. The greenhouse gas emissions. development of these oxidation techniques to treat residual micro-pollutants in wastewater is under study. ● Limiting the impact of the Group’s activities on resources is another major challenge resulting from sustainable In general, in the area of industrial wastewater, the Shanghai development. research center, in collaboration with Shanghai Chemical Industrial Park, is perfecting its expertise in developing special Faced with this challenge, research, development and innovation effl uents and optimizing their treatment, giving Ondeo Industrial efforts are also directed towards recycling in the waste business Solutions an additional advantage. activity, and reusing wastewater and desalinating seawater. With regard to controlling the impact on water resources, major In the waste business, the Group has initiated major programs work is currently being carried out to increase the technical to improve the treatment of solid waste, through the recovery yields of drinking water networks and to reduce leakage in order materials (recycling of plastics, rubber and metals) and organic to avoid wasting water resources. This program also addresses recovery (compost), which now allow the Group to be a major the challenges of replacing infrastructures, whether this involves player in recycling and the recovery of organic matter. 2009 saw drinking water lines or municipal sewage networks. Indeed, it is the commissioning of a PET bottle recycling division (bottle-to- critical to determine their remaining useful life based on local bottle plant at Limay), based on the results of R&D to ensure conditions, age and the specifi city of the material, in order to the quality of recycled products. The analytic experience implement a “sustainable maintenance” policy for underground accumulated by the Water business activity was thus made assets. The signifi cant results obtained will bring changes to available to the Waste business activity. the Group’s internal specifi cations for various products, and In upstream sorting methods, the Group is working on facilitate the implementation of best practices. The program improving automated sorting techniques, for example, optical is focused on three major themes: identifi cation of assets, bottle sorting, and sorting by fl otation for demolition wood or management and maintenance of these assets, and investment metals. The goal is to reduce the laboriousness of the task and projections. also to increase overall sorting effi ciency and thus increase the Work is also being carried out within the context of the R+i subsidiaries’ recycling yields. Alliance program by the Agbar Cetaqua technology center, Research efforts are also intensifying on the recycling of on the use of water table restoration techniques to eliminate materials to meet market expectations. In this case, close certain emerging compounds. coordination with manufacturers is essential. The Group is Finally, an innovative program for the real-time tracking of developing methods for disassembling large equipment such consumption has also been launched (Aviz’eau). The objective as aircrafts, to facilitate the reuse of parts and the recycling of is to develop tools to control consumers’ water consumption, materials (metals, for example). while getting better general knowledge on networks fl ows in In the water activities, Degrémont continues to lead in the area order to optimize them. of desalination with the technique known as reverse osmosis, ● More broadly, the Group’s research and development efforts which has now been found to consume less energy than thermal are centered on controlling the impact on the environment. technology, and therefore better meets requirements linked to climate change. Current work also allows for signifi cantly SUEZ ENVIRONNEMENT has combined nine operating units reducing the environmental impact of this technique, for which (Lyonnaise des Eaux, SITA France, SITA FD, Agbar, Degrémont, the stakes for tomorrow’s world are critical, by using renewable Fairtec, Terralys, United Water, Ondeo Industrial Solutions) energy, and the proper integration of facilities within their around a major program to control odor pollution in areas environment. adjacent to its wastewater and waste facilities.

124 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES Trademarks, patents and licenses

The Group now controls the measurement and modeling of ● Health and environmental risks odor dispersal, it has identifi ed emissions from numerous Finally, true to its tradition, the Group is continuing to invest sources and has fi nally developed the means of addressing signifi cantly in health monitoring programs related to the quality them. An odor laboratory has been set up to analyze odors of drinking water, in order to guarantee perfect food quality of and train personnel and residents in the vicinity of the Group’s water distributed to its consumers’ taps. SUEZ ENVIRONNEMENT operations. All these efforts are intended to design suitable new has one of the best laboratories in the world in this area. This odor-removal facilities and, in case of crisis, to take corrective allows the Group to participate alongside the French and world actions in collaboration with local residents. health authorities in the ongoing analysis and examination of An important program for the prediction and real-time control the reality of emerging pollution risks, any pathogen effects, and of rainwater began in 2006. The goal is to limit disruptions the adaptation of technologies to eliminate these pollutants in caused by high water in the event of environmental restrictions current or new treatment systems. affecting river water, and to offer new services to municipalities In 2010 the Group intends to continue its innovation strategy in an effort to tighten regulatory constraints on water for by bolstering efforts to improve its environmental performance, swimming. The program has developed real-time predictive, and by developing industrial partnerships to integrate outside warning and optimization tools, appropriate for rainwater technologies. networks, by focusing on water quality, the effectiveness of treatment lines, and quantity measurements. Several Group products are commercially available to large cities.

Z 11.2 TRADEMARKS, PATENTS AND LICENSES

The Group takes the development and protection of its There are a number of potential sources of patentable inventions; intellectual property assets, its trademarks, and especially its they may originate from: patents seriously. Indeed the Group believes that those assets ● the Group’s research centers, as would be expected; or offer added value to the services it provides to its clients. The Group’s intellectual protection activity is carried out by a central ● the combining of research resources in the Group (R+i unit based at Degrémont. Alliance, etc.); or

● a one-off collaboration with partners (universities, laboratories, etc.); or

11.2.1 PATENTS ● operating subsidiaries (the initial fi ling is generally performed by the subsidiary; extensions are then carried out by the The Group’s patents portfolio represents 239 families of patents. Group after assignment).

In 2009, the Group registered 22 patents. The Group registered These patents protect products, e.g., a biological reactor for the 23 patents in 2008 and 14 in 2007. treatment of wastewater or a domestic waste bin that compacts waste. They also protect processes, e.g., the treatment of water Patents are registered in the name of SUEZ ENVIRONNEMENT, for small local authorities based on reed beds or the treatment as well as in the name of its subsidiaries such as Degrémont, of rainwater for large urban areas. Signifi cant room is offered Lyonnaise des Eaux France, SITA France and Safege. They cover for the protection of plant operating techniques or services: 11 all water and waste activities. numerous patents have therefore been registered for sensors, In general, patents are registered in the country of origin, are regulations, or operational optimization. then available upon request under the Patent Cooperation Treaty In the environmental sector, where it is very competitive, to receive extended coverage under other national patent laws. the protection given by laws on patents is essential in order The Group holds approximately 2,000 national patents, to be able to permanently take advantage of research and registered in over 70 countries.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 125 11 RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES Trademarks, patents and licenses

development innovations. Nevertheless, a large portion of Finally, the “SUEZ ENVIRONNEMENT” trademark and its know-how remains protected by confi dentiality. English version, “SUEZ ENVIRONMENT”, were fi led in France in March 2005 and received international registration in Procedures for reviewing patents have been established based August 2005. on the activities they cover, so only those patents that cover an existing market are selected. Included in the trademarks representing the Group’s products is “Pulsator,” which survived the eponymous patent and which This rich and varied portfolio of patents represents a signifi cant is now no longer protected. This trademark corresponds to a and reliable intangible asset. water-treatment product sold for over 50 years. Along these same lines, we also note the French trademark “Aquasource”, which designates the ultrafi ltration membranes used in drinking water treatment units. 11.2.2 TRADEMARKS In 2008, the Group, which is fully committed to sustainable growth, created several trademarks dedicated to the deployment As of December 31, 2009, the Group was managing a portfolio of its environmental performance policy, in particular “Edelway”, of approximately 500 trademarks. which is seen as the trademark of the Group’s contractual With regard to institutional trademarks held by SUEZ commitment to the environment, “Améthyst”, the fermentable ENVIRONNEMENT and its subsidiaries, the following are fraction methanization plant for domestic waste at Montpellier, specifi cally used in the water sector: “Ondeo”, “Ondeo “Degrés Bleus”, a heat recovery system for wastewater, and Industrial Solutions”, “Degrémont” and “Safege.” For waste “Green Cubes”, the purifi cation station that has become an sector activities, there is “SITA”, which is the largest institutional environmental platform. trademark. The “SITA” name is also often combined with the Further, the Group has registered a large number of domain corporate names of companies involved in the waste sector. names (specifi cally, suez-environnement.fr, suez- environnement.eu “Lyonnaise des Eaux” is a historic trademark in water-related and suez-environnement.com). activities. It has been registered in various forms both as a Within the context of the spin-off, SUEZ and SUEZ ENVIRONNEMENT trade name and as a semi-abstract trademark in Europe and have entered into a trademark licensing agreement, as described throughout most parts of the world for nine categories of in Section 19. activity, eight of which involve services.

126 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 12 INFORMATION ON TRENDS

The major trends that have affected the Group’s activities since the close of the latest fi scal year are described in Sections 6 and 9 of this Reference Document.

12

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 127 12 INFORMATION ON TRENDS

128 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 13 PROFIT FORECASTS OR ESTIMATES

In an environment still marked by crisis, the Group believes that prospects for economic growth in 2010 will be poor.

Despite this climate, and taking into consideration the assumption of exclusive control of Agbar during the year, the Group has set the objective of reaching a 2010 revenue growth, at constant exchange rates, greater than or equal to 5% over 2009, as well as EBITDA growth greater than or equal to 8% over 2009, at constant exchange rates. The Group is also targeting a level of free cash fl ow in 2010 greater than or equal to €0.7 billion, as well as net investments (excluding the impact of the Agbar transaction) of less than €1.3 billion.

(The description of the change in the economic and fi nancial environment and assumptions applied by the Group appear in Section 6.3.4 of this Reference Document).

13

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 129 13 PROFIT FORECASTS OR ESTIMATES

130 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 14 ADMINISTRATIVE, MANAGEMENT 14 AND SUPERVISORY BODIES AND GENERAL MANAGEMENT

Page

14.1 COMPOSITION AND FUNCTIONING OF THE MANAGEMENT AND SUPERVISORY BODIES 132 14.1.1 Board of Directors 132 14.1.2 Chief Executive Offi cer 139 CONTENTS 14.1.3 Management bodies 139 14.1.4 Independence of the members of the board of directors 140

14.2 CONFLICTS OF INTEREST WITHIN ADMINISTRATIVE BODIES AND GENERAL MANAGEMENT 141

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 131 14 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND GENERAL MANAGEMENT Composition and functioning of the management and supervisory bodies

14.1 COMPOSITION AND FUNCTIONING OF THE MANAGEMENT Z AND SUPERVISORY BODIES

The Company is a French corporation, société anonyme, with of fraud during the past fi ve years; acted as manager in a a Board of Directors. A summary description of the main bankruptcy, receivership or liquidation, nor have had any provisions of the bylaws and internal rules for the Board of criminal proceedings and/or offi cial public sanction been made Directors, particularly its functioning methods and its powers, is by any judicial or regulatory authority; nor have any been provided in Section 21.2, “Corporate charter and bylaws.” forbidden by a court to act as a member of an administrative body, management body or supervisory body of an issuer or There are no family connections between the members of the to intervene in the management or supervision of affairs of an Board of Directors and the Company’s other senior management. issuer in the past fi ve years. To the Company’s knowledge, no members of the Board of Directors, nor any corporate offi cer, have been convicted

14.1.1 BOARD OF DIRECTORS

The following table, updated as of December 31, 2009, shows the composition of the Company’s Board of Directors and the terms of offi ce of the Company’s Directors over the past fi ve years.

Name Title Age Other titles and positions over the past fi ve years

Gérard Chairman of the Mestrallet(i) Board of Directors Age 60 Titles and positions held: Chairman and Chief Executive Offi cer of GDF SUEZ Chairman of the Board of Directors of GDF SUEZ Energie Services, SUEZ-Tractebel (Belgium) and Hisusa (Spain) Vice Chairman of the Board of Directors of Electrabel (Belgium), and Aguas de Barcelona Director of Saint-Gobain, Pargesa Holding SA (Switzerland) Member of the Supervisory Board of Axa Titles and positions expired over the past fi ve years: Chairman and Chief Executive Offi cer of SUEZ Chairman of the Board of Directors of SUEZ ENVIRONNEMENT, Electrabel (Belgium) Vice Chairman of the Board of Directors of Hisusa (Spain) Director of Crédit Agricole SA Member of the Supervisory Board of Taittinger

Jean-Louis Director and Chief Chaussade(i) Executive Offi cer Age 58 Titles and positions held: Permanent Representative of SUEZ ENVIRONNEMENT España to the Boards of Directors of Hisusa (Spain) and Aguas de Barcelona (Spain) (since May 5, 2009) Chairman of the Board of Directors of Lyonnaise des Eaux France, SITA France Director of SITA France, Société des Eaux de Marseille (SEM), Inversiones Aguas Metropolitanas (Chile), ACEA (Italy), Sino French Holdings (China), Swire SITA Waste Services Ltd (China), SUEZ ENVIRONNEMENT España (Spain), Culture Espaces, Lyonnaise des Eaux France. Member of the Executive Committee of GDF SUEZ Titles and positions expired over the past fi ve years: Chairman, CEO and Director of SUEZ ENVIRONNEMENT from October 28, 2008 to December 18, 2008 Chairman of the Board of Directors of Ondeo Degrémont North America (USA), Degrémont SA (resigned October 14, 2009), United Water Inc (USA), United Water Resources (USA), Aguas de Barcelona (Spain) (up to May 5, 2009)

(i) Director appointed on the proposal of GDF SUEZ.

132 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND GENERAL MANAGEMENT Composition and functioning of the management and supervisory bodies

Name Title Age Other titles and positions over the past fi ve years 14 Jean-François Cirelli(i) Director Age 51 Titles and positions held: Chairman of the Board of Directors of Electrabel (Belgium) Vice-Chairman and President of GDF SUEZ Director of GDF SUEZ Energie Services, SUEZ-Tractebel (Belgium) Member of the Supervisory Board of Vallourec Titles and positions expired over the past fi ve years: Chairman and CEO of Gaz de France Chairman of the Gaz de France Foundation Director of Neuf Cegetel Member of the Supervisory Board of Atos Origin

Gérard Lamarche(i) Director Age 48 Titles and positions held: Director of Aguas de Barcelona (Spain) Director of Electrabel (Belgium) Director of GDF SUEZ Energie Services Chairman of the Audit Committee and Director of Legrand Director of BNP Paribas Fortis Director of Europalia International (Belgium) Member of the Management Committee and Executive Committee of GDF SUEZ Titles and positions expired over the past fi ve years: Chairman of the Board of Directors of Leo Holding Company (USA) Director of KKR Guernsey GP Limited (USA) (resigned January 2009) Director of Distrigaz (Belgium) Chairman of the Board of Directors and Director of Genfi na (Belgium) And various positions among the subsidiaries of the GDF SUEZ Group

Alain Chaigneau(i) Director Age 58 Titles and positions held: Member of the Executive Committee of GDF SUEZ, responsible for Strategy and Sustainable Development Director of GDF SUEZ Energie Services, Electrabel (Belgium), SUEZ-Tractebel (Belgium), Chairman of Storengy Member of the Supervisory Board of CNR Titles and positions expired over the past fi ve years: Chief Operating Offi cer of SUEZ ENVIRONNEMENT Chairman of Aguas Argentinas (Argentina) Director of Degrémont SA, Lyonnaise des Eaux France, Sino French Holdings (China), SUEZ ENVIRONNEMENT UK Ltd (United Kingdom), SUEZ ENVIRONNEMENT España (Spain), United Water Inc., United Water Resources Inc., SUEZ ENVIRONNEMENT North America Inc. (USA) (resigned January 4, 2010) Executive Director of Desarrolos Hidraulicos de Cancun (Mexico), Aguakan (Mexico)

Dirk Beeuwsaert(i) Director Age 62 Titles and positions held Chairman of GDF SUEZ Energy North America, Inc. (U.S.A.) Executive Vice-President of GDF SUEZ S.A. (France) Member of the Management Committee of GDF SUEZ (France) Member of the Executive Committee of GDF SUEZ (France) Director of Electrabel (Belgium) Director of Tractebel Energia S.A. (Brazil) Director of Glow Energy Public Company Ltd (Thailand) And various positions held among the subsidiaries of the GDF SUEZ Group Titles and positions expired over the past fi ve years: Vice Chairman of GDF SUEZ Energy Development NA, Inc. (U.S.A.) Vice Chairman of GDF SUEZ Energy Generation North America, Inc. (U.S.A.) And various positions held among the subsidiaries of the GDF SUEZ Group

(i) Director appointed on the proposal of GDF SUEZ.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 133 14 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND GENERAL MANAGEMENT Composition and functioning of the management and supervisory bodies

Name Title Age Other titles and positions over the past fi ve years

Valérie Bernis(i) Director Age 51 Titles and positions held: Director of SUEZ-Tractebel (Belgium), Société Monégasque de l’Electricité et du Gaz (Monaco) Member of the Supervisory Board of Eurodisney SCA Member of the Board of Directors of SERNA -Suez Energy Resources NA Representative of GDF SUEZ to the Board of Directors of the 104 Endowment Fund “Les Mécènes du CENTQUATRE” (City of Paris artistic establishment) Member of the Executive Committee of GDF SUEZ Titles and positions expired over the past fi ve years: Chairman and CEO of Paris Première Director of Société Générale de Belgique Member of the Supervisory Board of Métropole Télévision Permanent Representative of SUEZ Nov Invest and SUEZ Communication to the Board of Directors of Investissements Presse Permanent Representative of Lamiran to the Supervisory Board of Investissements Presse de Libération Director of Storengy

Jérôme Tolot(i) Director Age 58 Titles and positions held: Director of Axima Seitha (start of term December 16, 2009) Director of Cofely Nederland Chairman and Executive Director of GDF SUEZ Energy Services International Member of the Supervisory Board of Savelys Chairman and Director of Tractebel Engineering (start of term February 27, 2009) CEO of GDF SUEZ Energie Services Chairman of the Board of Directors of Fabricom (Belgium) Chairman of GDF SUEZ Energy Services España (Spain) Director of INEO, Société Monégasque de l’Electricité et du Gaz (Monaco), GDF SUEZ University, GDF SUEZ Energie Services Member of the Executive Committee of GDF SUEZ Titles and positions expired over the past fi ve years: Director of Degrémont, Lyonnaise des Eaux France, SITA France, Axima (up to March 31, 2008) , GTI (Netherlands), SUEZ Energy Services España (Spain) Chairman of COFATHEC (from July 23, 2008 – end of term February 3, 2009) Chairman of the Board of Directors of Fabricom GTI (Belgium) Executive Director of Fabricom

Angel Simón Grimaldos(i) Director Age 52 Titles and positions held: (resigned on Director - CEO of the Agbar Group (Spain) January 8, 2010) Chairman – Director CETaqua (Spain) Director of Aguas Municipalizadas de Alicante (Spain), Empresa Mixta de Aguas Residuales de Alicante (Spain), Aquagest Sur (Spain), Fundación Agbar (Spain), Sociedad General de Aguas de Barcelona, S.A. (Spain), Inversiones Aguas Metropolitanas, S.A. (Chile), Compañía de Seguros Adeslas, S.A. (Spain) Chairman of Aqua Development Network, S.A. (Spain), Aquagest Services Company, S.A. (Spain), Aquagest Solutions, S.A. (Spain), Aqua Ambiente Servicios Integrales, S.A. (Spain) Titles and positions expired over the past fi ve years: Regular Director of Inversiones Aguas del Gran Santiago (Chile) Alternate Director of Aguas Provinciales de Santa Fe (Argentina) Alternate Director of Aguas Argentinas (Argentina) Alternate Director of Aguas Andinas (Chile) Director of Hidroser, Servicios Integrales del Agua (Spain), Agbar Capital, SAU (Spain), Applus Servicios Tecnológicos (Spain), SUEZ ENVIRONNEMENT, S.A. (France) Regular Director of the Board of Directors of Aguas Andinas (formerly EMOS)

(i) Director appointed on the proposal of GDF SUEZ.

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Name Title Age Other titles and positions over the past fi ve years 14

Amaury de Sèze(ii) Director Age 64 Titles and positions held: Chairman of the Board of Directors of Carrefour SA Vice-chairman of Power Corporation du Canada (Canada) Director of Groupe Industriel Marcel Dassault SA, BW Group, Groupe Bruxelles Lambert (Belgium), Erbe SA (Belgium) and Pargesa Holding S.A. (Switzerland), Imerys, Thales SA Member of the Publicis Groupe Supervisory Board Titles and positions expired over the past fi ve years: Chairman of the Supervisory Board of PAI Partners SAS, PAI Partners UK Ltd, Financière PAI SAS, Financière PAI Partners SAS, PAI Partners SAS and PAI Partners UK Ltd, Cobepa SA Council Vice-Chairman of the Supervisory Board of Carrefour SA Director of Eiffage, PAI Europe III General Partner NC, PAI Europe III UK General Partner Ltd, PAI Europe IV General Partner NC, PAI Europe IV UK General Partner Ltd, PAI Europe V General Partner NC, PAI Partners Srl, Saeco SpA, Power Corporation du Canada, Gepeco SA, Novalis SAS, Novasaur SAS, Vivarte SA, Carrefour SA Representative of NHG SAS Member of the Supervisory Board of Gras Savoye SCA

Olivier Pirotte(ii) Director Age 43 Titles and positions held: Director of Equity Interests and Investments of Groupe Bruxelles Lambert (Belgium) Director of GBL Treasury Center S.A., Brussels Securities S.A. (Belgium), Belgian Securities BV (Pays-Bas), Manager of GBL Energy S.à.r.l. (Luxembourg). Member of the Investment Committee of Sagard Equity Partners Titles and positions expired over the past fi ve years: Manager of GBL Verwaltung S.à.r.l. (Luxembourg) Director of RTL-TVI S.A. and SN Airholding S.A. (Belgium)

Gérald Arbola(iii) Director Age 61 Titles and positions held: Chairman and CEO of FT1CI Chairman of the Areva Foundation Chief Operating Offi cer of Areva Member of the Board of Directors of Areva Vice-Chairman of the Supervisory Board of STMicroelectronics NV Director of CEA Director of Areva NC and Areva T&D Member of the Management Committee of Areva NP Titles and positions expired over the past fi ve years: Chairman of Areva Finance/Management Chairman of Cogerap Chairman of the Supervisory Board of STMicroelectronics Holding NV Director of Assystem Director of Areva NP

(ii) Director appointed on the proposal of Groupe Bruxelles Lambert. (iii) Director appointed on the proposal of Areva.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 135 14 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND GENERAL MANAGEMENT Composition and functioning of the management and supervisory bodies

Name Title Age Other titles and positions over the past fi ve years

Gilles Benoist(iv) Director Age 63 Titles and positions held: Chairman of the Fédération française des sociétés anonymes d’assurance Director and CEO of CNP Assurances Director of Dexia, Sino French Life Insurance, Caixa Seguros and CNP UniCredit Vita Member of the Management Committee of the Caisse des Dépôts Group, Member of the Supervisory Board of Compagnie Internationale André Trigano Permanent Representative of CNP Assurances to the Board of Directors of CNP Caution Representative of CNP Assurances, manager of CNP Immobilier, Compagnie immobilière de la CNP-CIMO, 83 avenue Bosquet, Ilôt A5B, Issy Desmoulins, Le Sextant, Rueil Newton, Société Civile du 136 rue de Rennes, Société Civile Immobilière l’Amiral, Société Civile Immobilière Montagne de la Fage, Société Civile Immobilière Parvis Belvédère, Société Civile Immobilière de la CNP, Société Foncière de la CNP, Société Immobilière de Construction et d’Acquisition de la CNP, SPIFIC and Vendôme Europe Permanent Representative of CNP Assurances, Chairman of 83 avenue Bosquet, Pyramides 1 and SPIFIC Titles and positions expired over the past fi ve years: Chairman of the Board of Directors of CNP Assurances Member of the Supervisory Board of CDC IXIS Permanent Representative of CNP Assurances to the Supervisory Board of Gimar Finance

Harold Boël(v) Director Age 45 Titles and positions held: Director of Union Financière Boël, Sodavi, Domanoy, United World Colleges Belgium, asbl Executive Director of Sofi na and Henex Titles and positions expired over the past fi ve years: BMF Participation s.a. (resigned November 1, 2008), Finasucre (not renewed on July 1, 2009).

Nicolas Bazire(vi) Director Age 52 Titles and positions held: CEO of Groupe Arnault SAS Member of the Supervisory Board of Rothschild and Cie Banque SCS, Director of Carrefour, Les Echos, LVMH Fashion Group, LVMH Moët Hennessy-Louis Vuitton, Tajan, Atos Origin Titles and positions expired over the past fi ve years: Chairman of the Supervisory Board of LVMH Fashion Group Director of IPSOS

Lorenz d’Este(vi) Director Age 54 Titles and positions held: Director of Union Chimique Belge (UCB) Managing Partner of E.Gutzwiller & Cie Advisor of the General Management of BNP Paribas Titles and positions expired over the past fi ve years: Director of SITA SA

(iv) Director appointed on the proposal of CNP Assurances. (v) Director appointed on the proposal of Sofi na. (vi) Independent director.

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Name Title Age Other titles and positions over the past fi ve years 14

Guillaume Pepy(vi) Director Age 51 Titles and positions held: Chairman and CEO of the SNCF (French Railways) Chairman of Eurostar (up to December 31, 2009) Director of SNCF, Groupe Keolis (up to December 31, 2009) , Eurostar Group Ltd, Eurostar UK Ltd and ICRRL Ltd (up to December 31, 2009) Titles and positions expired over the past fi ve years: Director of Voyages-sncf.com , Wanadoo and Financière Keos

Ezra Suleiman(vi) Director Age 68 Titles and positions held: Director of AXA Financial, Inc. (USA), AXA Equitable Life Insurance Company of America (USA), Mony Life Insurance Company of America (USA) and AXA Groupe Titles and positions expired over the past fi ve years: Associate Professor at the Institut d’Études Politiques (Paris)

(vi) Independent director.

Following the resignation of Mr. Angel Simón Grimaldos on of SUEZ ENVIRONNEMENT. Mr. Chaussade is also Chairman of January 8, 2010, the Board of Directors coopted Patrick Ouart as the Boards of Directors of Lyonnaise des Eaux (France) and SITA director on January 14, 2010. This appointment will be submitted France, and Director of Aguas de Barcelona (Spain). He has been for approval during the May 20, 2010 Shareholders’ Meeting. Chief Executive Offi cer of SUEZ ENVIRONNEMENT COMPANY since July 23, 2008. Gérard Mestrallet, born April 1, 1949, French, is a graduate of Ecole Polytechnique and Ecole Nationale d’Administration. Mr. Jean-François Cirelli, born July 9, 1958, French, is a graduate Mestrallet joined Compagnie Financière de SUEZ in 1984, as of Institut d’Etudes Politiques de Paris and of Ecole Nationale a project manager. In 1986, he was appointed Executive Vice- d’Administration; he also has a law degree. From 1985 to President for industrial affairs. In February 1991, Mr. Mestrallet 1995, Mr. Cirelli held management positions at the Treasury was appointed Deputy Director and Chairman of the Management department of the Ministry of Economy and Finance before Committee of Société Générale de Belgique. In 1995, he became becoming an advisor to the President of the French Republic, Chairman and Chief Executive Offi cer of Compagnie de SUEZ, from 1995 to 1997, then economic advisor from 1997 to then, in June 1997, Chairman of the Management Board of 2002. In 2002, he was appointed Assistant Director of Staff to SUEZ Lyonnaise des Eaux. On May 4, 2001, Mr. Mestrallet was Prime Minister Jean-Pierre Raffarin, responsible for economic, appointed Chairman and Chief Executive Offi cer of SUEZ, a industrial and social matters. A former Chairman and Chief position he held until he became Chairman and Chief Executive Executive Offi cer of Gaz de France, Mr. Cirelli was appointed Offi cer of GDF SUEZ when SUEZ merged with Gaz de France Vice Chairman and President of GDF SUEZ on July 22, 2008. on July 22, 2008. He is also the President of Association Paris Gérard Lamarche, born July 15, 1961, Belgian, is an Economic EUROPLACE. Sciences graduate of Université de Louvain-la-Neuve, INSEAD Jean-Louis Chaussade, born December 2, 1951, French, has and Wharton International. He began his career as a consultant an engineering degree from ESTP (1976) and holds a Master’s at Deloitte Haskins & Sells in 1983; he moved on to Société degree in Economics (Sorbonne, 1976). He is also a graduate Générale de Belgique as an investment manager in 1988 where of Institut d’Etudes Politiques de Paris (1980) and of AMP at he was later appointed controller and advisor for strategic Harvard Business School (1988). He fi rst joined Degrémont operations between 1992 and 1995. In 1995, he joined Compagnie in 1978, and was then appointed Chief Operating Offi cer of de SUEZ as a project manager for the Chairman and Secretary Degrémont Spain in Bilbao in 1989. During this period he was of the Management Committee before becoming the Deputy appointed Director of Aguas de Barcelona. Mr. Chaussade was Director responsible for Planning, Control and Accounting, then also appointed Chief Executive Offi cer of Dumez Copisa Spain Secretary of the Investment Committee and Director and Chief in 1992. In 1997, he was appointed Chief Operating Offi cer Executive Offi cer for Finance of Nalco. In March 2004, he was of Lyonnaise des Eaux in South America and Chief Operating appointed Chief Executive Offi cer for Finance of SUEZ Group, Offi cer of SUEZ for South America. He was appointed Chairman responsible for Financial Operations, Treasury, Taxes, Planning, and Chief Executive Offi cer of Degrémont in 2000 and, in 2004, Accounting and Control. Mr. Lamarche has been Executive Vice- Executive Vice-President of SUEZ and Chief Executive Offi cer President, Chief Financial Offi cer of GDF SUEZ since July 2008.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 137 14 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND GENERAL MANAGEMENT Composition and functioning of the management and supervisory bodies

Alain Chaigneau, born September 8, 1951, French, holds a for Financial and Corporate Communications for the Chairman Master’s degree in Economic Sciences and is a graduate of IAE of the Management Board of SUEZ Lyonnaise des Eaux from in Paris. After beginning his career at Bank of France and moving 1997 to 2001. Since 2001, Ms. Bernis has been Executive Vice into the Treasury Department (Ministry of Finance), he joined President of SUEZ Group, responsible for Communications and Compagnie Financière de SUEZ in 1984 as deputy director. In Sustainable Development and is a member of the Executive 1989, he was appointed Head of Planning and Strategy. He was Committee of SUEZ. Ms. Bernis has been a member of the a Director of Société Générale de Belgique from 1991 to 1995, Executive Committee of GDF SUEZ since July 22, 2008, in charge where he became Chief Financial Offi cer and a member of of Communications and Financial Communications. the Management Committee in 1995. From 1999 to 2003, he Jérôme Tolot, born January 4, 1952, French, has a degree from was Executive Vice-President for Finance and Administration INSEAD and Institut d’Etudes Politiques de Paris and holds a of Ondeo Services. In 2003, Mr. Chaigneau was appointed DESS in Economics. Mr. Tolot joined Lyonnaise des Eaux in 1982, Chief Operating Offi cer for Finance and Administration of as controller, after beginning his career at the consulting fi rm SUEZ ENVIRONNEMENT; in 2005, he was appointed Chief McKinsey and Banque INDOSUEZ. He then became Executive Operating Offi cer for the Americas. In January 2007, he became Vice President for Finance and Development of Degrémont, Executive Vice-President for Strategy and a member of the Director and Chief Executive Offi cer of the GTM and VINCI groups, Executive Committee of SUEZ. He has been a member of the Chairman and Chief Executive Offi cer of SITA, and in 2002, was Executive Committee of GDF SUEZ since July 22, 2008, in charge appointed Executive Vice-President of SUEZ and Director and of Business Strategy and Sustainable Development Department. Chief Executive Offi cer of Suez Energie Services in 2005; he is Dirk Beeuwsaert, born January 14, 1948, Belgian, received a member of the Executive Committee of SUEZ. He has been a a degree in Electromechanical Engineering from Gand member of the Executive Committee of GDF SUEZ since July 22, University in 1971. In 1987, he studied general management 2008, in charge of the Energy Services business line. at CEDEP/INSEAD in Fontainebleau. Mr. Beeuwsaert began his Angel Simón Grimaldos, born on November 9, 1957, Spanish, career in 1971 at Intercom. He held several supervisory and has an engineering degree from Ponts et Chaussées and is a management positions at the company’s electric power plants. graduate of the Polytechnic University in Barcelona. In 1995, When Electrabel was created in 1990, he became Director of Mr. Grimaldos joined Agbar Group as a representative in conventional energy production. In 1994, Mr. Beeuwsaert was Portugal. In 1998, he was appointed International Managing appointed Director of the entire Production Department. He was Director for the Water and Sanitation Sector. In 1999, he was also appointed to the Management Committee of Electrabel and appointed Chief Executive Offi cer of Aguas Andinas. In 2004, appointed Chairman of the Board of Directors of Laborelec and he became Chief Executive Offi cer of Agbar group and then, in Recybel. He became CEO of Tractebel EGI (now SUEZ Energy February 2008, director and Chief Executive Offi cer of the Agbar International) and a member of the Executive Management group. On January 8, 2010, he resigned his offi ce as Director of Committee of Tractebel in 2000. Mr. Beeuwsaert was appointed SUEZ ENVIRONNEMENT COMPANY. Executive Vice-President of SUEZ Energy International in 2003 and is a member of the Executive Committee of SUEZ. He Amaury de Sèze, born May 7, 1946, French, began his career was appointed CEO and Executive Director of SUEZ-Tractebel in 1968, at Bull General Electric. In 1978, he joined Volvo Group SA as well as a Director of Electrabel SA on January 30, 2007. where he held several positions, including Chief Executive On March 5, 2009, Mr. Beeuwsaert took over the Europe and Offi cer, Chairman and Chief Executive Offi cer of Volvo France, International Energy Division of GDF SUEZ and was appointed President of Volvo Corporate Europe, member of the Executive Executive Vice-President, in charge of the Energy Europe and Committee of Volvo Group and member of the Strategic International business line and a member of the Management Committee of Renault Volvo. He joined Paribas Group in 1993, Committee of GDF SUEZ. He also remains a member of the as a member of the Executive Committee of Compagnie Executive Committee of GDF SUEZ and is still the Head of the Financière de Paribas and of Banque Paribas, responsible for International Energy Division of GDF SUEZ. equity interests and industrial affairs, then as the Head of BNP Paribas’ Equity Interests Unit. Mr de Sèze is also Chairman of Valérie Bernis, born December 9, 1958, French, has a degree the Supervisory Board of Carrefour and Vice Chairman of Power from Université des Sciences Economiques in Limoges. From Corporation du Canada. 1986 to 1995, Ms. Bernis held a series of positions including Press Relations Manager for Edouard Balladur, the Economy Olivier Pirotte, born September 18, 1966, Belgian, has an and Privatization Minister, Communications Director of Cerus, engineering degree from Ecole de Commerce Solvay and from Communications Director for Edouard Balladur, the Deputy Université Libre de Bruxelles. He began his career in 1989, at for Paris, and then a project manager for communications Arthur Andersen where he held management positions in the and press relations for Edouard Balladur, the Prime Minister. Business Consulting and Audit divisions. He joined Groupe In 1995, she joined Compagnie de SUEZ as Communications Bruxelles Lambert in 1995, where he was appointed Director of Director and then became Chief of Staff and Deputy Offi cer Equity Interests and Investments in 2000.

138 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND GENERAL MANAGEMENT Composition and functioning of the management and supervisory bodies

Gérald Arbola, born May 29, 1948, French, is a graduate Guillaume Pepy, born May 26, 1958, French, studied at Ecole of Institut d’Etudes Politiques de Paris and has a degree in Nationale d’Administration and is a Legal Advisor at the Conseil 14 economic sciences. Mr. Arbola held several positions with d’Etat (France’s highest administrative court). Mr. Pepy has Cogema Group (which became Areva NC) before joining Areva. served in various positions at SNCF (Director of Major Lines, He joined Cogema in 1982, as Director of Planning and Strategic then Director of Investments, Economy and Strategy, and Studies of SGN; from 1985 to 1989, he served as Chief Financial Chief Executive Offi cer since 2003) as well as in government Offi cer. In 1988, he was appointed Executive Vice-President of Ministries (technical advisor to Michel Charasse, Chief of Staff SGN. In 1992, Mr. Arbola was appointed Chief Financial Offi cer of for Michel Durafour, then Chief of Staff for Martine Aubry). Since Cogema and member of the Executive Committee in 1999, while February 26, 2008, Mr. Pepy has served as Chairman and Chief continuing to serve as Chairman of SGN in 1997 and 1998. A Executive Offi cer of SNCF (French railways). member of the Executive Board of Areva since 2001, Mr. Arbola Ezra Suleiman, born November 20, 1941, American, is a graduate has been the Chief Operating Offi cer of Areva since 2006. of Harvard and Columbia Universities. In 1973, he began his Gilles Benoist, born December 12, 1946, French, has a degree in career as a Professor at the University of California in Los Angeles. law and is a graduate of Institut d’Etudes Politiques de Paris and Mr. Suleiman is a Professor of Political Science at Princeton of Ecole Nationale d’Administration. In 1981, he was appointed University (IBM Chair). He is a member of the Audit Committee of Chief of Staff of the Minister of the Economy and Finance. In AXA Financial Inc., as well as a member of the Audit Committee 1983, he became an auxiliary judge at the Cour des Comptes. of AXA Group and a member of the Selection, Ethics, Governance From 1987 to 1991, he was General Secretary of Crédit Local de and Human Resources Committee of AXA Group. France, a member of the Executive Committee, and advisor to Patrick Ouart, born May 25, 1959, French, appointed as a the Executive Vice-President of the Caisse des Dépôts before Director by the Board of Directors on January 14, 2010 in place being appointed Director of Central Services of the Caisse des of Mr. Simón Grimaldos. Graduated from Ecole Nationale de la Dépôts in 1991. From 1993 to July 1998, Mr. Benoist was General Magistrature. Between 1998 and 2003, he performed various Secretary, a member of the Executive Committee, and Director functions within the SUEZ Group, before joining the LVMH of Human Resources of the Caisse des Dépôts Group. Chairman group in 2004. Patrick Ouart served as advisor to the French of the Executive Committee of CNP Assurances since 1998, Presidency between 2007 and 2009. He is a member of the Mr. Benoist was appointed Chief Executive Offi cer and Director Executive Committee of LVMH and an advisor to the LVMH on July 1, 2007. group chairman. Harold Boël, born August 27, 1964, Belgian, has a degree in Materials Sciences engineering from Ecole Polytechnique Fédérale in Lausanne. He held management positions in the steel industry at Usines Gustave Boël, Corus MultiSteel and 14.1.2 CHIEF EXECUTIVE OFFICER Laura Metaal Holding. Mr Boël is currently Executive Director of Sofi na SA and one of its parent companies, Henex SA. Pursuant to the provisions of the agreement signed on June 5, Nicolas Bazire, born July 13, 1957, French, is a graduate of the 2008, the Board of Directors decided on the separation of duties French Naval Academy, the Institut d’études politiques of Paris and appointed Mr. Jean-Louis Chaussade Chief Executive Offi cer and studied at Ecole Nationale d’Administration. Mr. Bazire was of SUEZ ENVIRONNEMENT COMPANY, on July 23, 2008. an auditor and then an auxiliary judge at the Cour des Comptes. In 1993, he became Chief of Staff and a project manager for Prime Minister Edouard Balladur. Managing Partner of Rothschild & Cie Banque from 1995 to 1999, Mr. Bazire was then appointed 14.1.3 MANAGEMENT BODIES Chairman of the Partnership Board. He has served as Chief Executive Offi cer of Arnault SAS Group since 1999. In exercising his duties as the Company’s Chief Executive Lorenz d’Este, born December 16, 1955, Belgian. After studying Offi cer, Mr. Jean-Louis Chaussade is supported by the following at Université of Saint-Gall, Mr. d’Este obtained a Master’s management bodies: degree in Economic Sciences and Politics from the University of ● the Management Committee, which is an analysis and Innsbruck, Austria. Mr. d’Este joined the Swiss bank E. Gutzwiller decision-making body that examines the Group’s major & Cie in 1983. First banking executive, then senior manager, he decisions and guidelines, and meets every two weeks; has been Managing Partner of E. Gutzwiller & Cie, Banquiers since 1990. He has also served as advisor to the Executive ● the Executive Committee, which meets every month, is Management Committee of BNP Paribas since 1999 and as made up of heads of the major business units and functional a Director of SUEZ ENVIRONNEMENT and a Director of Union divisions. Chimique Belge (UCB) since 2001.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 139 14 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND GENERAL MANAGEMENT Composition and functioning of the management and supervisory bodies

The Management Committee includes seven members, in Marie-Ange Debon, born May 18, 1965, is a graduate of HEC addition to Mr. Jean-Louis Chaussade: and ENA, and has a Master’s degree in law. From 1990 to 1994, she served as a magistrate at the Cour des Comptes. Christophe Cros, born August 3, 1959, was a magistrate at the Ms. Debon joined France 3 and was Management Director, Cour des Comptes (1985-1989), then Head of fi nancial organization then Executive Vice-President for Resources (Finance, Legal, of the Centre National des Caisses d’Epargne. Mr. Cros studied Information Technology, Production and Equipment). She then at Ecole Nationale d’Administration (ENA), and is a graduate of joined the Thomson Group in November 1998, where she was Institut d’Etudes Politiques de Paris and holds a Master’s degree Deputy Chief Financial Offi cer. Since July 2003 she has served as in Economics from Université de Paris I. He joined the SUEZ Group General Secretary, responsible for Legal, Insurance, Real Estate, in 1991, where he became Chief Financial and Treasury Offi cer in Corporate Communications and Shareholder Relations. She is 1993. From 1995 to 1998, he was Chief Operating Offi cer then a member of the Collège de l’Autorité des Marchés Financiers Chairman and Chief Executive Offi cer of Crédisuez, the division (AMF, the French Financial Markets Authority). Ms. Debon joined covering all the Group’s real estate activities. Mr. Cros was the Group on June 1, 2008 as General Secretary, in charge of appointed Chief Operating Offi cer of SITA in 1999, and took over Legal and Audit. Since September 2009, she is also responsible all its European activities in 2002. He is responsible for the Waste for the Water and Waste Project Divisions, Information Systems, Europe activities of SUEZ ENVIRONNEMENT and Chief Executive Risks/Investments, Insurance and Purchasing. Offi cer of SITA France. Frédérique Raoult, born on July 13, 1966, is a graduate of the Bernard Guirkinger was born April 21, 1952 and holds an Institut d’Etudes Politiques de Paris with a master’s degree in engineering degree from the Ecole Centrale de Paris. He has history, and has held a number of communication positions dedicated most of his career to the water industry, of which within the Group relating to the environment. In 1997, she he has extensive knowledge. After serving in various operating joined Degrémont as Director of Communications. She has been positions at several Lyonnaise des Eaux operations in France, Director of Communications for SUEZ ENVIRONNEMENT since Mr. Guirkinger was appointed Regional Director of the Southern 2004 and a member of SUEZ ENVIRONNEMENT’s Management Paris center in the early 1990’s. In 1995, he pursued his career Committee since January 1, 2009. abroad, heading up the operating subsidiaries in Germany, Central Europe and Northern Europe. Leveraging this international Thierry Mallet, born September 4, 1960, is a graduate of experience, Mr. Guirkinger was appointed Chief Executive Ecole Polytechnique (1980), and Ecole Nationale des Ponts et Offi cer of Lyonnaise des Eaux in 1996, then Chairman and Chief Chaussées (1985) and also holds a Master of Sciences degree Executive Offi cer in 2002. Since September 2009, he has been from the Massachussetts Institute of Technology. He started Senior Executive Vice-President of SUEZ ENVIRONNEMENT, his career working for the French Ministry of Transportation in charge of the business coordination for water activities, from 1987 to 1989. He then moved to the Générale des Eaux R&D and Sustainable Development. He is also responsible for Group, where he held different positions and in particular, was Institutional Relations (European affairs, international agencies, in charge of water activities in Spain from 1995 to 1997 and corporate engineering). in North America from 1997 to 1999. He joined Degrémont in December 2002 as Chief Operations Offi cer where he worked Denys Neymon, born June 18, 1960, worked for ten years in the closely with Jean-Louis Chaussade, who held the position construction industry (Bouygues Group) as Director of Human of Chairman and Chief Executive Offi cer, and became Chief Resources. In 2002, Mr. Neymon joined the Group as the Director Executive Offi cer in June 2004 until October 2009 where he of Human Resources of Degrémont. He holds a law degree was appointed Chairman of Degrémont. Since October 1, 2009, (1983) and a human resources degree (1984). He manages Thierry Mallet has been Senior Executive Vice President of the Human Resources and Health and Safety Departments of SUEZ ENVIRONNEMENT, in charge of the International sector, SUEZ ENVIRONNEMENT since 2004. He is also a member of the which includes Degrémont, Asia, North America, Central Europe Human Resources Executive Committee of GDF SUEZ. and the Middle East and became a member of the Group Jean-Marc Boursier, born October 5, 1967, worked as a Management Committee. Statutory Auditor at Mazars in Paris and London from 1993 to 1999. He was a civil engineer for Telecom SudParis and holds a Master’s degree in International Finance from the Ecole des Hautes Etudes Commerciales (HEC Paris). Mr. Boursier joined 14.1.4 INDEPENDENCE OF THE MEMBERS the SUEZ Group in 1999 as fi nancial controller of SITA France. OF THE BOARD OF DIRECTORS He became Head of Financial Control of SITA in 2000, then Head of Financial Control and Mergers and Acquisitions of SITA Information on the number of independent directors, the in 2001. He was appointed Director of Planning and Control of independence criteria applied and the results of the examination SUEZ ENVIRONNEMENT in 2002. Mr. Boursier was appointed relative to the directors’ independence may be found in the Chief Financial Offi cer of SUEZ ENVIRONNEMENT in 2004. Report of the Chairman of the Board of Directors for the fi scal year ending December 31, 2009.

140 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND GENERAL MANAGEMENT Confl icts of interest within administrative bodies and general management

14.2 CONFLICTS OF INTEREST WITHIN ADMINISTRATIVE Z BODIES AND GENERAL MANAGEMENT 14

BOARD OF DIRECTORS GENERAL MANAGEMENT

To the Company’s knowledge, as of the date of this Reference To the Company’s knowledge, as of the date of this Reference Document, there are no potential confl icts of interest among the Document, the CEO has no potential confl icts of interest members of the Board of Directors between their duties vis-à- between his duties vis-à-vis the Company and his private vis the Company and their private interests and/or other duties. interests and/or other duties.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 141 14 ADMINISTRATIVE, MANAGEMENT AND SUPERVISORY BODIES AND GENERAL MANAGEMENT

142 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 15 COMPENSATION AND BENEFITS

15

Page

15.1 COMPENSATION AND BENEFITS IN KIND 144 15.1.1 Total compensation of the Chief Executive Offi cer 144 15.1.2 Compensation of members of the Management Committee 146 15.1.3 Compensation of directors 147 CONTENTS

15.2 SUMS PROVISIONED BY THE COMPANY AND ITS SUBSIDIARIES FOR THE PAYMENT OF PENSIONS, RETIREMENT PLANS, AND OTHER BENEFITS TO MEMBERS OF THE MANAGEMENT COMMITTEE 148

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 143 15 COMPENSATION AND BENEFITS Compensation and benefi ts in kind

Z 15.1 COMPENSATION AND BENEFITS IN KIND

15.1.1 TOTAL COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

2009 COMPENSATION The following tables summarize the compensation for the Corporate offi cer, Chief Executive Offi cer, according to the model defi ned by the AFEP-MEDEF Code of December 2008.

SUMMARY TABLE OF COMPENSATION, OPTIONS AND SHARES ALLOCATED TO THE CORPORATE OFFICER – GROSS AMOUNTS (IN EUROS).

Jean-Louis CHAUSSADE Chief Executive Offi cer Fiscal year 2008 Fiscal year 2009 Compensation due for the fiscal year (see breakdown below) 1,458,154 1,557,797 Value of options allocated during the fiscal year 1,119,600 - Value of performance shares allocated during the fiscal year 170,760 205,920 TOTAL 2,748.514 1,763.717

SUMMARY TABLE OF COMPENSATION OF CORPORATE OFFICER (IN EUROS).

Amounts in fi scal year 2008 Amounts in fi scal year 2009 Jean-Louis CHAUSSADE Chief Executive Offi cer due paid (1) due paid (1) Fixed compensation 642,529 642,529 750,000 750,000 Variable compensation 634,434 510,544 799,208 634,434 Extraordinary compensation(2) 5,452 N/A 0 5,452 Directors fees 172,510 232,675 0 41,578 Benefits in-kind 3,229 3,229 8,589 8,589 TOTAL 1,458,154 1,388,977 1,557,797 1,440,053

(1) Variable compensation paid corresponds to the variable compensation relative to year n-1. (2) Extraordinary compensation corresponds to GDF SUEZ employee profi t sharing due for the period from January 1, 2008 to July 22, 2008.

Since January 1, 2009, Mr. Jean Louis Chaussade has received The 2008 variable portion, paid in 2009, totaled €634,434. It gross annual fi xed compensation of €750,000. His compensation was defi ned based on a dual series of indicators. The fi rst series remains unchanged for 2010. covered the portion of the year when SUEZ ENVIRONNEMENT was 100% controlled by SUEZ. These indicators included Added to this fi xed compensation is a variable portion that may global fi nancial factors relative to the performance of SUEZ range from 0% to 145% of the fi xed portion. The 2009 variable ENVIRONNEMENT and SUEZ, as well as individual factors. The portion paid in 2010 was defi ned based on the criteria of free second series of indicators covered the period from the listing cash fl ow, operating performance, net income, debt to equity of the Company (on July 22, 2008) to December 31, 2008. Five ratio, and the Group’s strategy and management during the criteria were applied for this portion: revenue growth, EBITDA, crisis. The Nominations and Compensation Committee has net income, debt to equity ratio and the success of the Initial been informed of the 2009 results and has assessed the level Public Offering. of attainment of these goals. Consequently, the variable portion paid in 2010 in respect to 2009 totals €799,208.

144 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 COMPENSATION AND BENEFITS Compensation and benefi ts in kind

In addition to the fi xed and variable compensation mentioned Mr. Chaussade also receives group supplementary retirement above, 2009 benefi ts in kind totaled €8,589, corresponding insurance benefi ts applicable to SUEZ ENVIRONNEMENT to €3,249 for a company car, and €5,340 for the special employees. These include, fi rst of all, mandatory group insurance unemployment insurance for Company directors (GSC – Garantie subject to defi ned contributions as stipulated in Article L. 441-1 Sociale des chefs et dirigeants d’entreprise). of the French Insurance Code(2). Second, they include a supplementary group defi ned-benefi ts retirement program(3). In To conform to the Board of Directors’ 2008 decision on his the event they leave the company before retirement benefi ts 15 compensation, Mr. Chaussade resigned his term as director of are paid, unless provided for otherwise by law, potential Aguas de Barcelona(1) and no longer receives director’s fees. benefi ciaries of these programs retain only their rights under In 2009, he received a total of €124,064 in director’s fees and the defi ned-contributions system and lose their rights under the reimbursed SUEZ ENVIRONNEMENT €82,486 for director’s defi ned-benefi ts program. fees received for the period from July 23, 2008 to the end of his term. The difference, of €41,578, is reported in the above Mr. Chaussade also benefi ts from the Company’s current compensation table. group mandatory insurance and health care plans. Finally, SUEZ ENVIRONNEMENT has taken out special unemployment OTHER BENEFITS. insurance for Company directors (GSC) in favor of Mr. Chaussade, amounting to €5,340 in 2009. Pursuant to Articles L. 225-38 and L. 225-42-1 of the French Commercial Code and as authorized by the Board of Directors, The Chief Executive Offi cer’s situation, both contractually and Mr. Chaussade receives benefi ts relating to retirement, social in terms of severance payments in the event of dismissal, is security, healthcare cover, corporate guarantees and severance described in the 2008 Reference Document. It was not changed payments in the event of dismissal. in 2009.

Compensations or benefi ts due or that may become due pursuant to Compensation due Supplementary resignation or a change pursuant to a Employment contract retirement plan in duties non-compete clause

Corporate offi cers Yes No Yes No Yes No Yes No CHAUSSADE Jean-Louis Director and Chief Executive with GDF SUEZ, Offi cer suspended for XX X the term of 15 months of Start of assignment: the corporate 07/23/2008 the total gross assignment compensation(a) End of assignment: at SUEZ at the end of his assignment ENVIRONNEMENT as director, i.e., COMPANY at the 2012 GM for the fi scal year 2011

(a) The allocation of this compensation is subject to performance criteria in accordance with the so-called “TEPA” law dated August 21, 2007. These three criteria were defi ned here: average growth in revenue as provided for in the medium-term plan and measured over the period from 2008 to the year in which the position is relinquished (under similar economic conditions to those prevailing when the medium-term plan was devised); the growth of the share price of SUEZ ENVIRONNEMENT COMPANY, which must be equal to or greater than the average growth of the CAC 40 stock market index over the period starting from July 22, 2008 to the date on which the position is relinquished; and ROCE, which must be greater than the average WACC over this same period of time. If two of these criteria have been fulfi lled by the date on which the dismissal decision is taken, 100% of the severance payment will be due. If only one of these criteria is fulfi lled, only 50% of the payment will be due.

(1) He now sits on the Agbar Board as representative of SUEZ ENVIRONNEMENT España, a company that has been appointed director. (2) The defined-contributions program produces definitive rights acquired through the conversion of contributions withheld for retirement, calculated as a function of contributions paid each year. They amount to 4.196% on revenues up to the first social security ceiling, and 7% on revenues to the next three ceilings. (3) Contingent upon having completed his career within the company, this regime entitles the holder to a life annuity calculated as a function of the number of years of contribution and the reference compensation.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 145 15 COMPENSATION AND BENEFITS Compensation and benefi ts in kind

STOCK OPTIONS AND BONUS SHARES However, at its meeting of December 17, 2009, the SUEZ ENVIRONNEMENT COMPANY Board of Directors resolved to Mr. Chaussade waived the allocation of purchase options for allocate him the performance shares listed below. fi scal year 2009 for SUEZ ENVIRONNEMENT COMPANY and GDF SUEZ. He also waived the benefi t of the global bonus share allocation plans implemented by the two groups in 2009.

PERFORMANCE SHARES ALLOCATED TO THE CORPORATE OFFICER

Value of shares according to the Number of method used for shares allocated the consolidated during the fi scal fi nancial Plan year statements Acquisition date Availability date 12/17/2009 28,800 €205,920 12/17/2009 12/17/2013

All of the 28,800 performance shares allocated to Mr. Chaussade Mr. Chaussade will retain 25% of the shares allocated to him for by the Board of Directors of December 17, 2009 are subject to the duration of his term, up to a total of 150% of his fi xed annual performance conditions (identical to those used to allocate compensation. stock options to members of the Management Committee): SUEZ ENVIRONNEMENT COMPANY stock subscription ● 50% of the shares allocated are subject to market or stock purchase options allocated to the corporate conditions based on the relative performance of the offi cer during the year: SUEZ ENVIRONNEMENT COMPANY share price in relation to the CAC 40 and Eurostoxx Utilities average indexes for the N/A December 17, 2009 to December 16, 2013 period; Options to subscribe or purchase GDF SUEZ shares ● 50% of the shares are subject to an additional condition exercised during the year by the corporate offi cer: based on the cumulative consolidated recurring net income N/A Group share (excluding extraordinary items) between 2009 and 2012, inclusive. GDF SUEZ performance shares that became available Moreover, pursuant to Article L. 225-197-1 of the French to the corporate offi cer during the year: Commercial Code, the Board of Directors resolved at its meeting N/A of December 17, 2009 that for the duration of his term of offi ce,

15.1.2 COMPENSATION OF MEMBERS OF THE MANAGEMENT COMMITTEE

All members of the Management Committee serving as of December 31, 2009 (See section 14.1.3) including the CEO received total gross compensation in 2009 of €4,548,577. The difference between 2008 and 2009 was due primarily to the change in the composition of the Management Committee, which now has eight members (six members in 2008 for part of the year).

The table below specifi es the fi xed and variable parts for the last three years (amounts in euros). It does not include the valuation of stock options and performance shares allocated by SUEZ ENVIRONNEMENT COMPANY and GDF SUEZ.

Year of payment Total fi xed portions Total variable portions Total compensation

2007 1,813,158 1,131,607 2,944,765 2008 1,868,634 1,131,331 2,999,965 2009 2,786,578 1,761,999 4,548,577

Added to the compensation described above is an amount corresponding to employee profi t-sharing and incentive bonuses, which totaled €72,540 paid to the entire Management Committee in 2009 for fi scal year 2008.

146 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 COMPENSATION AND BENEFITS Compensation and benefi ts in kind

Moreover, one member of the Management Committee is a the Company in connection with his role as corporate offi cer, director of Aguas de Barcelona and therefore receives director’s and receives no director’s fees for his role as director of the fees from that group. Total director’s fees paid to Mr. Chaussade, Company. who is no longer a director of Agbar, is reported in the summary Total director’s fees set by the Combined General Shareholders table in Section 15.1.1. meeting of July 15, 2008, i.e., €400,000, did not change in fi scal year 2009. 15 For fi scal year 2010, the May 20, 2010 General Shareholders’ 15.1.3 COMPENSATION OF DIRECTORS Meeting will be asked to raise the total allowance of directors’ fees to €450,000. The Board of Directors will be responsible for The compensation of Mr. Gérard Mestrallet, Chairman of SUEZ establishing distribution rules. ENVIRONNEMENT COMPANY and Chairman and Chief Executive At its meeting of December 18, 2008, the Company Board of Offi cer of GDF SUEZ, is described in the GDF SUEZ Group Directors adopted the following recommendations of the Reference Document. Mr. Mestrallet does not receive any Nominations and Compensation Committee regarding the compensation as Chairman of the Board of Directors of distribution of director’s fees among directors: SUEZ ENVIRONNEMENT COMPANY, or any director’s fees. The total amount is distributed as follows: Ms. Valérie Bernis, and Mr. Jean-François Cirelli, Dirk Beeuwsaert, ● Alain Chaigneau, Gérard Lamarche and Jérôme Tolot are corporate a fi xed portion of €220,000, i.e., €20,000 per director offi cers or employees of the GDF SUEZ Group, and do not receive (excluding representatives of the GDF SUEZ Group), €30,000 any compensation by the Company, or any company controlled per director serving as chairman of a committee, and €40,000 by or controlling the Company, in connection with their position for the director serving as chairman of the Audit Committee; as corporate offi cers within SUEZ ENVIRONNEMENT COMPANY. ● a variable portion of €180,000 allocated based on attendance None of the directors representing GDF SUEZ receive director’s at meetings of the Board of Directors and committees. fees for their role as directors of the Company. The following table shows director’s fees allocated to directors, Mr. Angel Simón, director up to January 8, 2010, and Chief calculated in accordance with the above rules. As the Company Executive Offi cer of the Agbar Group, receives no compensation was listed on the stock exchange on July 22, 2008, total fees for paid by the Company, or any company controlled by or controlling 2008 were allocated on a semi-annual basis.

Directors fees Directors fees Board Members 2008 (iv) 2009 (v) Ezra Suleiman (i) (Chairman of the Audit and Financial Statements Committee) €32,430.55 €64,027.77 Amaury de Sèze €18,055.55 €33,888.88 Olivier Pirotte (i) (iii) €21,930.55 €43,861.10 Gérald Arbola €15,833.33 €34,444.44 Gilles Benoist €16,166.66 €35,111.10 Harold Boël (i) (ii) €17,555.55 €33,111.10 Guillaume Pepy (Chairman of the Ethics and Sustainable Development Committee) €28,597.22 €53,618.05 Nicolas Bazire €21,930.55 €42,767.35 Lorenz d’Este (i) (Chairman of the Nominations and Compensation Committee) €21,666.70 €48,055.62 TOTAL €194,166.66 €388,885.41

(i) These gross amounts are subject to a 25% withholding tax. (ii) The director’s fees were paid to Sofi na. (iii) The director’s fees were paid to Groupe Bruxelles Lambert. (iv) The director’s fees were paid in January 2009. (v) The director’s fees for the second half of 2009 were paid in January 2010.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 147 15 COMPENSATION AND BENEFITS

15.2 SUMS PROVISIONED BY THE COMPANY AND ITS Z SUBSIDIARIES FOR THE PAYMENT OF PENSIONS, RETIREMENT PLANS, AND OTHER BENEFITS TO MEMBERS OF THE MANAGEMENT COMMITTEE

Retirement commitments provisioned in the fi nancial statements as of December 31, 2009 for members of the Management Committee totaled €3.7 million solely for the SUEZ ENVIRONNEMENT retirement programs.

148 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 16 FUNCTIONING OF ADMINISTRATIVE AND MANAGEMENT BODIES

16 Page

16.1 TERMS OF OFFICE OF MEMBERS OF THE ADMINISTRATIVE AND MANAGEMENT BODIES 150

16.2 INFORMATION ON SERVICE CONTRACTS BETWEEN MEMBERS

CONTENTS OF THE COMPANY’S ADMINISTRATIVE AND MANAGEMENT BODIES AND THE COMPANY OR ANY OF ITS SUBSIDIARIES 151

16.3 COMMITTEES OF THE BOARD OF DIRECTORS 151 16.3.1 The Strategic Committee 151 16.3.2 The Audit and Financial Statements committee 152 16.3.3 The Ethics and Sustainable Development Committee 153 16.3.4 The Nominations and Compensation Committee 153

16.4 STATEMENT ON CORPORATE GOVERNANCE 154

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 149 16 FUNCTIONING OF ADMINISTRATIVE AND MANAGEMENT BODIES Terms of offi ce of members of the administrative and management bodies

16.1 TERMS OF OFFICE OF MEMBERS OF THE ADMINISTRATIVE Z AND MANAGEMENT BODIES

The following table shows the initial appointment and termination dates of the mandates of the Company’s offi cers:

Date of initial Start date of Name and title appointment current mandate Termination date of mandate

Gérard Mestrallet, General Shareholders’ Meeting approving the fi nancial Chairman of the Board of Directors December 5, 2007 July 22, 2008 statements for the fi scal year ending December 31, 2011 Jean-Louis Chaussade, General Shareholders’ Meeting approving the fi nancial Director and Chief Executive Offi cer December 5, 2007 July 22, 2008 statements for the fi scal year ending December 31, 2011 Jean-François Cirelli, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Gérard Lamarche, General Shareholders’ Meeting approving the fi nancial Director December 5, 2007 July 22, 2008 statements for the fi scal year ending December 31, 2011 Alain Chaigneau, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Dirk Beeuwsaert, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Valérie Bernis, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Jérôme Tolot, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Angel Simón, General Shareholders’ Meeting approving the fi nancial Director (up to January 8, 2010) July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Patrick Ouart, General Shareholders’ Meeting approving the fi nancial Director January 14, 2010 January 14, 2010 statements for the fi scal year ending December 31, 2011 Amaury de Sèze, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Olivier Pirotte, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Gérald Arbola, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Gilles Benoist, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Harold Boël, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Lorenz d’Este, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Nicolas Bazire, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Guillaume Pepy, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011 Ezra Suleiman, General Shareholders’ Meeting approving the fi nancial Director July 15, 2008 July 22, 2008 statements for the fi scal year ending December 31, 2011

Gérard Mestrallet and Jean-Louis Chaussade were appointed the 2012 Shareholders’ Meeting, the Board of Directors of Chairman of the Board of Directors and Chief Executive Offi cer, February 24, 2010 decided to implement a staggered renewal respectively, at the Board of Directors meeting of July 23, 2008. of director appointments. Thus, Gérald Arbola, Dirk Beeuwsaert, Gilles Benoist, Alain Chaigneau, Guillaume Pepy and Jérôme Pursuant to the AFEP-MEDEF recommendations of Tolot submitted their resignations, effective at the conclusion of December 2008, and in order to avoid renewing the entirety the Meeting of May 20, 2010. of the Board of Directors all at one time at the conclusion of

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Shareholders will therefore be asked at the next Shareholders’ Meeting called to approve the accounts of December 31, 2013. Meeting to appoint Gérald Arbola, Dirk Beeuwsaert, Gilles The details of this staggered implementation are provided in the Benoist, Alain Chaigneau, Guillaume Pepy and Jérôme Tolot for a report of the Chairman of the Board of Directors attached to this term of 4 years, to expire at the conclusion of the Shareholders’ Reference Document (Appendix A).

16.2 INFORMATION ON SERVICE CONTRACTS BETWEEN 16 Z MEMBERS OF THE COMPANY’S ADMINISTRATIVE 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, there are no service contracts between members of the Board of Directors, nor between the Chief Executive Offi cer and the Company or whichever of its subsidiaries that provide for the granting of benefi ts.

Z 16.3 COMMITTEES OF THE BOARD OF DIRECTORS

In accordance with Article 15 of the Company Bylaws, the Board 16.3.1 THE STRATEGIC COMMITTEE of Directors may decide to set up committees responsible for studying issues which the Board or its Chairman put to them The Strategic Committee is composed of seven members, two for investigation. of which are appointed by the Board of Directors from among In this context, the Board of Directors, meeting on July 23, 2008, the independent directors, three from among the directors decided to set up four committees: a Strategic Committee, representing GDF SUEZ, and two from among the directors an Audit and Financial Statements Committee, an Ethics and representing certain other shareholders who have entered into Sustainable Development Committee, and a Nominations the shareholders’ agreement described in section 18.3 of this and Compensation Committee. The composition of these Reference Document. committees was decided by the Board of Directors at the same The Strategic Committee gives its opinion and submits meeting, according to the terms of the shareholders’ agreement recommendations to the Board of Directors concerning: signed June 5, 2008. ● the strategic direction envisaged by the Board of Directors or The composition of the Board of Directors is described in the proposed by the Chief Executive Offi cer; and Report from the Chairman of the Board of Directors annexed to this Reference Document. ● all projects of internal and external growth, divestment, strategic agreements, alliances, or partnerships submitted to the Board of Directors.

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Upon presentation of a report by the Chief Executive Offi cer, ● monitors the quality of procedures ensuring compliance with once a year it carries out a strategy review that it submits, when stock exchange regulations; and needed, to the Board of Directors. The Strategic Committee ● is informed annually on fi nancial strategy and on the terms has the ability to hear anybody it wishes in carrying out its and conditions of the Group’s main fi nancial transactions. assignment. The Committee may ask the Board of Directors for external assistance, if it deems this necessary for carrying out As regards external auditing of the Company, the Committee: its mission. ● examines questions relating to the appointment, renewal or dismissal of the Company’s Statutory Auditors and the amounts of fees to be set for carrying out their legally 16.3.2 THE AUDIT AND FINANCIAL prescribed audit function; STATEMENTS COMMITTEE ● supervises the rules for referring work other than fi nancial statement auditing to the Statutory Auditors and, more The Audit and Financial Statements Committee is composed generally, monitors compliance with the principles that of fi ve members, three of whom are appointed by the Board guarantee the independence of the Statutory Auditors; of Directors from among the independent directors, one from ● grants prior approval for any assignment entrusted to the among the directors representing GDF SUEZ, and one from Statutory Auditors beyond their audit; among the directors representing certain other shareholders ● who have entered into the shareholders’ agreement described examines each year, with the Statutory Auditors, the in section 18.3 of this Reference Document. amounts of fees paid by the Company and the Group to network entities to which the Statutory Auditors belong, The Audit and Financial Statements Committee assists the their audit schedule, the conclusions they reached, their Board of Directors in ensuring the accuracy and fairness of recommendations, and the follow-up of the latter; and SUEZ ENVIRONNEMENT COMPANY’s statutory and consolidated ● fi nancial statements and the quality of the internal control and arbitrates, where necessary, issues that may arise in the information provided to shareholders and the fi nancial markets. course of their work between the Statutory Auditors and The Committee formulates opinions and recommendations to senior executives. the Board of Directors in the fi elds described below. The Board As regards internal auditing of the Company, the Committee: of Directors entrusts the Committee mainly with the following assignments: ● evaluates the effi ciency and quality of the Group’s internal audit systems and procedures; As regards fi nancial statements, the Committee: ● examines, with those responsible for internal audit, the audit ● undertakes prior examination and gives its opinion on the schedules and action plans in the fi eld of internal audit, draft annual, half-yearly and, where applicable, quarterly the conclusions and recommendations reached and their fi nancial statements before these are delivered to the Board consequences, all without the presence of senior executives, of Directors; where necessary;

● assesses the relevance and permanence of the accounting ● is informed by senior executives, or by any other means, of rules and principles used in drawing up the statutory and any complaints from third parties or any internal information consolidated fi nancial statements and prevents any potential revealing criticism of the Company’s accounting documents breach of those rules; or internal control procedures, as well as the corrective

● requests details of any change in the scope of consolidation procedures set up to this end and the solutions to these and where necessary, obtains all necessary explanations; claims or criticisms; and

● ● whenever it deems necessary, meets with the statutory entrusts internal audit with any assignment it deems auditors, senior executives, fi nancial management, internal necessary. auditors and any other member of management; these As regards risks, the Committee: hearings may take place, where necessary, without the presence of senior executives; ● obtains a regular update on the Group’s fi nancial and cash-fl ow positions and main commitments and risks; ● examines, before publication, the draft annual or interim and examines the procedures in place for assessing and fi nancial statements, the activity and income report, and any managing these risks. fi nancial statements (even provisional) drawn up for specifi c major transactions, and important fi nancial press releases before their issuance;

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16.3.3 THE ETHICS AND SUSTAINABLE The Chief Executive Offi cer attends meetings of the Committee DEVELOPMENT COMMITTEE when his/her succession, or compensation or certain other benefi ts reserved for a Chief Operating Offi cer, are an issue.

The Ethics and Sustainable Development Committee consists The Nominations and Compensation Committee is entrusted of three members, two of whom are appointed by the Board of with the following tasks by the Board of Directors: Directors from among the independent directors and one from ● regularly reviews the principles and independence criteria; among the directors representing certain other shareholders who have entered into the shareholders’ agreement described ● examines all applications for appointment to a seat on the in section 18.3 of this Reference Document. Board of Directors or as a Board observer, where applicable, and formulates an opinion and/or recommendation to the The Ethics and Sustainable Development Committee ensures Board of Directors on these applications; 16 compliance with the individual and collective values on which the Group bases its action and the rules of conduct that all staff ● prepares, as and when necessary, recommendations for members must apply. the successor to the Chief Executive Offi cer and, where necessary, the Chairman of the Board of Directors; These values include the Group’s special responsibility for safeguarding and improving the environment and sustainable ● sets, each year, the Chief Executive Offi cer’s targets, which development. The Group ensures that the necessary procedures will subsequently serve as a reference in appraising his/ are in place to: her performance and in determining that part of his/her compensation that is performance-based. ● update the charters in force in the Group and ensure their circulation and application; The Committee is consulted in certain defi ned instances on the appointment of the candidates concerned. ● ensure that foreign subsidiaries implement their own code adapted to the domestic legal and regulatory framework in The Nominations and Compensation Committee also has the the country in which they carry out their business; responsibility to:

● carry out training that accompanies the circulation of the ● make recommendations to the Board of Directors on Group’s charters; and compensation, pension and employee benefi t arrangements, benefi ts in kind, and other pecuniary rights, including from ● obtain from the various Group companies information on time to time the allocation of share subscription or purchase the solutions they have adopted to issues that have been options in the Company, including the allocation of bonus presented to their own committee. shares in favor of the Chairman, the Chief Executive Offi cer, the Chief Operating Offi cers, and any members of the Board of Directors who are also employees; and

16.3.4 THE NOMINATIONS AND ● make recommendations to the Board of Directors on the COMPENSATION COMMITTEE compensation of members of the Board of Directors and, if applicable, any Board observers.

The Nominations and Compensation Committee consists of The Committee is kept informed in certain clearly defi ned three members, two of whom are appointed by the Board of instances of the compensation arrangements for the persons Directors from among the independent directors and one from concerned. among the directors representing certain other shareholders who have entered into the shareholders’ agreement described in section 18.3 of this Reference Document.

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Z 16.4 STATEMENT ON CORPORATE GOVERNANCE

The Company intends to follow the corporate governance At its meeting of October 28, 2008, the Board of Directors recommendations of the AFEP (Association Française des acknowledged and fully accepted the AFEP-MEDEF Entreprises Privées) and the MEDEF (Mouvement des Entreprises recommendations of October 6, 2008 relative to the de France) in the AFEP-MEDEF Code of Corporate Governance of compensation of the corporate offi cers, which are perfectly December 2008, insofar as these principles are compatible with consistent with the policy of transparency followed by the the Company’s organization, size, resources and shareholder Company. The Company referred to the AFEP-MEDEF Code in structure, as well as with the shareholders’ agreement entered drawing up this Reference Document. into by SUEZ ENVIRONNEMENT COMPANY, GDF SUEZ, Groupe Bruxelles Lambert, Sofi na, Caisse des Dépôts et Consignations, Areva and CNP Assurances, the main provisions of which are described in section 18.3 of this Reference Document.

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Page

17.1 HUMAN RESOURCES 156 17.1.1 HR challenges 156 17 17.1.2 Values and ethics 156 17.1.3 HR Teams: “daily participants” 156 CONTENTS 17.1.4 The permanent nature of our corporate commitments 157 17.1.5 Health - Safety 159

17.2 EMPLOYMENT INFORMATION 160 17.2.1 Breakdown of employees 160 17.2.2 Employment and working conditions 162 17.2.3 Training 164 17.2.4 Methodology factors on the 2009 social report 164

17.3 STOCK OPTIONS – BONUS SHARES – EMPLOYEE SHARE PURCHASE PLAN 165

17.4 EMPLOYEE INCENTIVES AND PROFIT SHARING (FRANCE) 167

17.5 GLOBAL PLAN FOR THE ALLOTMENT OF BONUS SHARES 167

17.6 RETIREMENT AND SIMILAR COMMITMENTS 167

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Z 17.1 HUMAN RESOURCES

In 2009, a year of contrasts, the human resources teams played 17.1.2 VALUES AND ETHICS a signifi cant role.

Economic circumstances were diffi cult in certain parts of our We share with GDF SUEZ the same four values: activities, while other sectors grew by demonstrating both a ● Drive: long-term performance for all stakeholders; capacity to adapt, and strong resilience in our business model. ● Commitment: reconciling the Group’s development with In this specifi c economic context, our international presence care for the planet; required suitable responses to resolve diffi culties that arose in some of our European subsidiaries. Moreover, growth in ● Daring: experiencing the present with optimism and building other areas of the world (the Maghreb, the Arabian Peninsula, the future with creativity; Australia) and good performance in the water segment allowed ● Cohesion: energy and environment, lasting sources of us to resolve our workforce adjustment problems in most cases. progress and development. In terms of HR policy, this situation strengthened our convictions These values, shared with our employees, who have been and confi rmed our fundamentals around two key pillars: closely associated with their development, are the foundations ● our ongoing involvement in operating decisions as a daily of our business philosophy as a Fair Company. participant in collaboration with Management; In terms of ethics and compliance, four action principles have ● our desire to strengthen and develop our social commitments been applied: on an ongoing basis. ● acting in conformance with laws and regulations;

● establishing a culture of integrity;

● 17.1.1 HR CHALLENGES demonstrating loyalty and honesty; and ● showing respect for others.

Our environment confronts us with new situations that These principles have been published and discussed in all remind us of the importance of certain essential HR attitudes: business units: commitment, courage, and close management of the teams. ● the practical ethics guide; Addressing disturbing and destabilizing issues when the ● economic situation confronts us with constantly changing the ethical e-mail (which allows for a direct connection with problems is one of our priorities. Group headquarters); ● Our challenges in addressing these issues are the following: training and information modules involving legal and technical issues. ● dialog in the face of diffi culties;

● close management of the teams as a managerial priority;

● proactive solutions to uncertainties. 17.1.3 HR TEAMS: “DAILY PARTICIPANTS” While maintaining and affi rming the direction and the goals of future challenges, and acting in fulfi llment of our Each change results in new attitudes or priorities; 2009 reminded corporate commitments: employment, skills management and us of the importance of HR’s presence in collaboration with the development, a willingness to learn, and career paths. managers during a period of greater social fragility.

Presence and listening constituted the basis of HR’s activities around the following essential actions:

● personnel mobility,

● prudent and structured employment management,

● a training policy supportive of daily activities.

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● Mobility 17.1.4 THE PERMANENT NATURE As an important source of structural fl exibility, mobility OF OUR CORPORATE COMMITMENTS allows us to limit the effects of a decline in activity during certain periods in the structures in question, particularly in Our ambition, focusing on the concept of Fair Company, has been the waste segment. confi rmed through our permanent pillars of HR development.

Mobility committees, which serve as veritable networks ● Anticipating our needs: from employing the younger within the company and work in close collaboration with generations to applying the experience of seniors. GDF SUEZ, have allowed a number of problematic situations Hiring of young people slowed in 2009, particularly in Europe. to be resolved by avoiding a loss of jobs. However, we remain quite active in our relations with the world of education, both in France and internationally. Mobility Twenty targeted schools, the creation of two chairs in Active Predictive Management Lever for jobs and skills university education, international education partnerships and a very dynamic policy for trainees, part-time students Committees meet every three weeks and apprentices allow us to continue to broadly disseminate 17 Clear commitments in terms of action priorities our convictions with regard to the major environmental business lines. Exchanges of information with all corporate participants Concerning seniors, and even beyond the agreement An increase of nearly 10% in the number of executive signed within the framework of the GDF SUEZ group, which transfers in France in 2009 covers commitments for career tracking and individualized assistance, our workforce increased in 2009, demonstrating that the skills held by these employees are valuable and The combined effects: indispensable to the satisfactory exercise of our activities. ● of dynamic mobility, ● Career paths ● of prudent hiring management, Identifying and managing potential talent (leaders for ● of a signifi cant decline in voluntary departures (related tomorrow) through an approach that addresses major turnover has dropped 1.9 point); individual development resources (assessment, training schedule) allow us to prepare the managers and experts have allowed us to largely eliminate diffi culties in certain of tomorrow. Sharing this pool of expertise in an expanded sectors. network that combines the environmental and energy ● Employment management businesses gives each player visibility that strengthens the program. This consists of hiring levels maintained at a signifi cantly high level (some 5,000 permanent workers). Since the New measures have also been implemented in the SUEZ number of voluntary departures is lower, hiring goals have ENVIRONNEMENT structure around the concept of “career been satisfactorily met. path.” Each employee participates in and commits to his own career development, based on his own skills or The skills of confi rmed candidates have been sought on a career choices, and identifi es possible paths as well as the priority basis, but the hiring of young employees, and the conditions that must be met in order to achieve them. contribution of senior workers to our teams, continue.

The use of part-time employees and apprentices is Career management at Lyonnaise des Eaux signifi cant. SUEZ ENVIRONNEMENT’s commitment to hire 500 new workers is being met. Our approach to part-time 2 pillars: work and apprenticeships as a key factor in our hiring policy ● has not been called into question. an actively involved employee, ● a clear support process. ● A training approach in the service of daily tasks

Allowing mobility to be exercised under optimal conditions Dedicated tools: requires proactive measures and a local presence. This is ● professional growth charter, the purpose of training modules to adapt to the new skills ● needed in the business lines and subsidiaries. Internal professional career path booklet, trainers combine the sharing of expertise with assistance in ● competency simulator. mastering new knowledge. A tutoring method is used, which allows for a combination of personal and group commitment.

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● Change in skills and technical expertise ● Concerning male-female equality, the effects of the hiring of female workers are beginning to be seen in Technical competency remains an important part of our HR the company’s statistics: the rate of female hiring is priorities. From identifying teaching segments to recognizing increasing across all professional categories. our experts, it is an essential process that covers integration, training and compensation. ● The issue of seniors has been subject to an agreement within GDF SUEZ that is in the process of being applied This effort is enhanced by the presence of a number of across all structures: it supplements measures already foreign employees, thus strengthening the global nature of implemented for attaining the performance and this approach. communications objectives for the agreed-upon actions. Competency is also central when it comes to developing ● The area of insertion, to which the company has been innovation: creating SUEZ ENVIRONNEMENT’s innovation deeply committed for many years, remains very dynamic awards reinforces this approach. in this diffi cult period. ● The learning attitude, a lever of development

Two pillars of development have been clearly established in SITA Rebond: development is continuing with 2 new our corporate commitments: facilities for a total of 12 insertion structures in four major French regions ● the strengthening of our Business Units’ know-how and technical expertise, ● 176 employees in 2008;

● supporting managers to address the changes in their ● 243 employees in 2009. environment and the new priorities resulting from them. It is, in our waste activity, the challenge of acquiring skills. Outside France, change is important, and the subsidiaries’ recognition of the investment dynamic is signifi cant.

United Water in the US and SITA UK are taking numerous ● A consistent and dynamic compensation policy initiatives focusing closely on the operational skills of Within the framework of our global compensation concepts, employees. Sharing these initiatives allows us to leverage 2009 was characterized by the implementation of an ambitious collaborative tools through e-learning. Bonus Shares Plan. As a symbolic measure following our listing

● The choice of diversity and openness on the stock market in July 2008, this plan allocated 30 shares of SUEZ ENVIRONNEMENT COMPANY to each of our 68,000 Over 50% of our employees are located outside of employees around the world. This measure, approved by France; “transculturation” is already occurring at SUEZ our Board of Directors, marks our desire to closely associate ENVIRONNEMENT. This openness is also a result of the sharing company employees with the company’s growth by expanding of our HR options for diversity. Although terminologies and our employee shareholder base. Further, within the context sensitivities may differ in other countries, the approach is of the corporate agreements signed in 2007, an additional the same, in that it refers to literacy programs, freedom of allocation of 8 GDF SUEZ shares per employee was granted. expression, employee representation, health, disability and insertion. The general increase in compensation remained satisfactory in 2009, in terms of both fi xed salaries and their variable portions, In France, we have dedicated our efforts to four principal given the company’s performance. areas: the disabled, gender equality, insertion and seniors. ● An ongoing social dialog ● The issue of disabled workers is a major one and constitutes a commitment of our Sustainable Development policy. To be close to employees is an essential HR challenge; it is Two thirds of our disabled employees are in France. At addressed in our social and union relations. In this regard, each Lyonnaise des Eaux, an agreement signed in 2006 for subsidiary in France and abroad acts in collaboration with its three years has just been renewed for the same duration, own personnel representatives. thereby highlighting the parties’ commitment to ongoing Respect of these HR challenges and of the Group’s values are actions over the long term. Through implementation of points of consistency to be followed by everyone. a “Disabled Mission,” actions are being carried out in the areas of hiring, integration, and career paths, with a SUEZ ENVIRONNEMENT adheres to and participates in the social stated goal to double the number of new employees. We dynamic of the GDF SUEZ group and contributed to fulfi lling also note that several initiatives have been taken with the several social agreements in 2009: AGEFIPH to contribute to and develop programs in order to maintain these employees in their jobs, to hire them, and promote partnerships with this protected sector.

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● implementation of the new European Group Committee, 17.1.5 HEALTH - SAFETY which created a water and waste work group specifi c to SUEZ ENVIRONNEMENT, Since the creation of SUEZ ENVIRONNEMENT in 2003, the Health ● the seniors agreement, and Safety program has advanced year after year. A set of rules and recommendations, internal controls and external audits, as ● a retirement savings structure (PERCO). well as risk analyses, have been implemented and shared, and Other discussions have been advanced, and concern important have given rise to action plans. These guidelines also constitute topics such as: feedback from experience applied in raising the awareness of each individual, to improve results. ● professional equality, Compliance with practices has increased over the past six years, ● quality of life in the workplace. from 30% to 85%: discussions, training, and the incorporation Within SUEZ ENVIRONNEMENT, various improvements have of goals in the annual reviews of executives have resulted in a been made to the retirement and insurance regimes, thereby very signifi cant improvement in results. The indicators improved allowing employee benefi ts to remain at a high level. from 46.42 to 15.35 with regard to frequency rate, and from 1.28 to 0.64,for rate of severity. 17

By expanding the employee Health and Safety system, control of industrial risk improves (fi re, toxic gases, etc.). Over 2008- 2009, the “damages” rate declined to 50% of the 2006 level.

Major actions in 2010 include our ability to promote rapid progress in companies that join us in contributing to this process.

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Z 17.2 EMPLOYMENT INFORMATION

17.2.1 BREAKDOWN OF EMPLOYEES ● increase of 1,525 employees through external growth, i.e.:

● inclusion in the scope of consolidation of the Swire SITA As of December 31, 2009, the Group had 65,895 employees, up Group (1,232 employees, Hong Kong) and Acque Toscane 513 employees over year-end 2008, i.e., 0.8%. This change may (29 employees), be broken down as follows: ● tuck-in acquisitions (264 employees), largely carried out ● decline of 1,012 employees through organic change, in by SITA France. connection with the slowing of activity faced by the Waste Europe segment;

BREAKDOWN OF WORKFORCE BY GEOGRAPHIC AREA

2007 2008 2009 %

France 31,289 32,835 32,398 49.2% Europe (excluding France) 21,266 22,176 21,295 32.3% North America 2,704 3,250 3,281 5.0% South America 231 222 269 0.4% Africa/Middle East 3,646 3,948 4,479 6.8% Asia/Oceania 2,779 2,951 4,173 6.3% TOTAL (XXX)* 61,915 65,382 65,895 100.0%

* See meaning of (XXX) in section 17.2.4: methodology factors in the social report.

The Group highlights the increasing proportion of employees France, whose workforce declined 1.3% from 2008, is the outside Europe: at end-2009, workforce located outside Europe largest country by number of employees (32,398, i.e., 49.2% of represented 18.5%, 3.4% over end-2007 (15.1%). the total), followed by the United Kingdom (6,055 employees, i.e., 9.2%), and Morocco (4,070 employees, i.e., 6.2%).

BREAKDOWN OF WORKFORCE BY SOCIO-ECONOMIC CATEGORY

2007 2008 2009 %

Managers (XXX)* 7,766 8,358 8,649 13.1% Senior technicians and supervisors (XXX)* 11,365 12,420 12,302 18.7% Workers, employees, technicians (XXX)* 42,784 44,604 44,944 68.2% TOTAL 61,915 65,382 65,895 100.0%

* See meaning of (XXX) in section 17.2.4: methodology factors in the social report.

The Group recorded a gradual increase in the proportion of managers: from 12.5% in 2007 to 13.1% in 2009.

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PERCENTAGE OF WOMEN IN THE GROUP

2007 2008 2009

Proportion of women in the total workforce (XXX)* 18.3% 18.2% 18.5% Proportion of women in management (XX)* 23.9% 23.7% 24.2%

* See meaning of (XX) and (XXX) in Section 17.2.4: methodology factors in the social report.

The proportion of women increased, both with regard to the total population and as a proportion of female managers. At end-2009, the Group had over 2,000 female managers.

BREAKDOWN OF WORKFORCE BY CONTRACT TYPE

2007 2008 2009 17 Permanent contracts (C.D.I.) 92.1% 91.8% 92.3% Other contracts 7.9% 8.2% 7.7%

The share of Group employees working under permanent term contracts before confi rming most new employees under contracts was 92.3%, up 0.5% over 2008. This demonstrates permanent contracts. the Group’s willingness to retain employees for the long term. In Europe, several Group subsidiaries hire under fi xed-

BREAKDOWN OF WORKFORCE BY AGE RANGE (PERMANENT EMPLOYEES ONLY)

* 2007 2008 2009

Under 25 (XX) 4.0% 4.2% 3.6% 25 – 29 (XX) 9.6% 9.7% 9.6% 30 – 34 (XX) 12.5% 11.9% 11.7% 35 – 39 (XX) 16.1% 15.8% 15.2% 40 – 44 (XX) 17.5% 17.2% 16.9% 45 – 49 (XX) 15.7% 15.9% 16.5% 50 – 54 (XX) 12.9% 13.0% 13.6% 55 – 59 (XX) 8.7% 8.9% 9.3% 60 – 64 (XX) 2.7% 2.9% 3.1% Over 65 (XX) 0.5% 0.5% 0.5%

* See meaning of (XX) in section 17.2.4: methodology factors in the social report.

Average age was 43, ranging from 36 to 47 depending on the at end-2009. This change represented over 2,000 additional subsidiary. employees in that age range within two years. Although they represented less than a quarter of the population in 2007 (24.8%), employees aged 50 and over represented 26.5%

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17.2.2 EMPLOYMENT AND WORKING CONDITIONS

HIRING

2007 2008 2009

Number of people hired externally under permanent contracts 7,073 7,169 4,709 Number of people hired externally under fi xed-term contracts 4,760 5,313 5,498 Hiring rate* (XX)*** 19.6% 19.5% 15.7% Hiring rate under permanent contracts ** 59.7% 57.4% 46.1%

* Hiring rate: Number of people hired under permanent and fi xed-term contracts / average workforce ** Hiring rate under permanent contracts: Number of people hired under permanent contracts/Number of people hired under permanent and fi xed-term contracts *** See meaning of (XX) in section 17.2.4: methodology factors in the social report.

The number of people hired under fi xed-term contracts declined this decline in hiring is due to the decline in employee turnover 34% between 2009 and 2008. This decrease was due primarily (see below), which has resulted in a signifi cant reduction in the to Waste Europe, the segment most affected by the economic number of people leaving (over 600), for which replacements crisis, and for which the decline in activity most severely were therefore not needed. affected hiring. It should also be pointed out that a portion of

EMPLOYEE TURNOVER

2007 2008 2009

Turnover* (XX) 8.7% 8.4% 7.4% Voluntary turnover** (XX)*** 5.7% 5.2% 3.3%

* turnover: Number of layoffs and resignations/average workforce ** voluntary turnover: Number of resignations/average workforce *** See meaning of (XX) in section 17.2.4: methodology factors in the social report.

Total employee turnover declined 1%, due to a signifi cant decrease in voluntary turnover (resignations) and an increase in employee turnover linked to layoffs, which especially affected Europe outside France.

WORKING CONDITIONS

2007 2008 2009

Overtime rate * 5.0% 5.0% 4.9% Proportion of part-time workers among total workforce Not measured 4.5% 4.3%

* Overtime rate: Number of overtime hours/Number of hours worked

162 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 EMPLOYEES Employment information

ABSENTEEISM

2007 2008 2009

Absenteeism (days absent/ person) 15.5 14.7 12.1

Based on a theoretical workday of eight hours, the average The Group generally believes that absenteeism is insignifi cant length of absence per employee is 12.1 days in 2009, a signifi cant because it includes absences of all kinds, including illness and regular decline over the past three years. and unpaid vacation days worldwide. This rate is therefore dependent upon the social systems and local situations (especially weather) in the various countries.

DISABLED WORKERS 17 2007 2008 2009

Percentage of disabled / workforce at end of period 1.7% 1.5% 1.5% of which, France 2.1% 1.9% 2.1% of which, Germany 3.6% 4.1% 4.1%

The number of disabled workers is an indicator diffi cult to track Most (87%) disabled employees counted work in France at the Group level, insofar as the defi nition of disabled worker is or Germany, two countries where the Group’s presence is not clearly defi ned in every country where the Group is active. signifi cant and where specifi c laws on this subject have long been applied.

TEMPORARY WORKERS

2007 2008 2009

Average temporary workforce (ETP) 5,511 6,493 6,396 As a % of average contractual workforce expressed in ETP 9.4% 10.5% 10.0%

The principal reasons for resorting to temporary workers are temporary hiring diffi culties, and replacement of absent employees.

WORKPLACE SAFETY

2007 2008 2009

Number of fatal accidents (employees) (XX)*** 6 2 4 Rate of frequency* (XX) 18.47 17.45 15.35 Rate of severity** (XX) 0.74 0.65 0.64

* Rate of frequency: Number of accidents involving sick leaves X 1,000,000/Number of hours worked ** Rate of severity: Number of days indemnifi ed X 1000/Number of hours worked *** See meaning of (XX) in section 17.2.4: methodology factors in the social report.

The frequency and severity rates for workplace accidents generating sick leaves continue to decline, although at a slower rate than previously.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 163 17 EMPLOYEES Employment information

17.2.3 TRAINING

2007 2008 2009

Percentage of workforce trained (XXX)* 60.0% 57.2% 59.7%

DISTRIBUTION OF TRAINED WORKFORCE BY GENDER Women 19.5% 19.7% 18.7% Men 80.5% 80.3% 81.3%

DISTRIBUTION OF TRAINED WORKFORCE BY CATEGORY Managers 16.5% 15.6% 15.1% T.S.M.(1) + OET.(2) 83.5% 84.4% 84.9% Training expenses per person (€/pers) 890 820 579 Number of training hours per person (hr/pers) (XXX) 25 24 23 Number of training hours per woman (hr/pers) 23 22 26

DISTRIBUTION OF TRAINING HOURS BY TOPIC Business technology 31.2% 31.1% 30.6% Quality, Environment, Safety 36.6% 39.7% 41.7% Languages 8.5% 6.4% 4.1% Other 24.1% 22.9% 23.6%

* See meaning of (XXX) in section 17.2.4: methodology factors in the social report. (1) Senior technicians and supervisors [Techniciens supérieurs et agents de maîtrise]. (2) Workers, employees and technicians [Ouvriers, employés et techniciens].

In 2009, the training effort remained signifi cant: nearly 60% of consolidated fi nancial statements, regardless of the percentage the workforce received at least some training, and on average, of share capital held. each employee received 23 hours of training. Each indicator is assigned a scope of coverage corresponding The share of training performed internally increased, which to the coverage of the indicator in question, as a percentage explains the decline in average cost. of Group workforce (workforce of the companies subject to full consolidation in the SUEZ ENVIRONNEMENT COMPANY The distribution of workforce trained by gender and category fi nancial statements). In effect, certain companies may not is consistent with the distribution of total headcount by these have communicated their data, or even the information that same criteria. they have posted may contain certain inconsistencies, thereby Finally, technical training in the activities and training relating to leading us to exclude the data in question from the scope of quality, environment and safety continue to increase: In total, coverage. The HR indicators presented in this document all have this training represented over 72% of training hours expended a coverage greater than 94%, for all three years, 2007, 2008 and in the Group in 2009. 2009. A breakdown of coverage rates by indicator is available upon request.

TOOLS AND METHODS 17.2.4 METHODOLOGY FACTORS ON THE 2009 SOCIAL REPORT HR reporting is based on: ● a network of 180 individuals around the world, who collect and monitor the indicators of their own entities during each SCOPE OF CONSOLIDATION of the quarterly HR reporting campaigns;

The employment analyses carried out in this report correspond ● the “User Guide,” which consolidates all defi nitions and solely to the entities subject to Full Consolidation (FC), procedures comprising the Group’s common reference. companies that SUEZ ENVIRONNEMENT COMPANY controls This guide is translated into six languages: German, English, in terms of share capital and management. When a company Spanish, Dutch, Polish and Portuguese. It is distributed falls within the FC scope of consolidation, 100% of its corporate among all contributors; data are included in the SUEZ ENVIRONNEMENT COMPANY

164 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 EMPLOYEES Stock options – bonus shares – employee share purchase plan

● the Magnitude fi nancial consolidation tool which, through a METHODOLOGY DEFINITIONS AND LIMITS dedicated HR-indicators package, allows for the collection, In relation to the data published in this report, the following processing and reporting of data captured by the local points must be clarifi ed: Group subsidiaries, whether subject to full consolidation (FC), proportional consolidation (PC), or equity method (EM) ● unlike HR reports, Health and Safety reports take into account accounting. An online self-training tool for Magnitude is criteria involving operational control or data reliability. This available to contributors. situation results in a slight difference in the scope of the employees covered by the two reporting methods. In 2009, CONSOLIDATION AND INTERNAL CONTROL work was performed to reconcile the data resulting from the Health and Safety network, and the data resulting from the Once collected, the data is consolidated by the subsidiaries HR reporting network. It yielded a reduction in variances in and the Group Human Resources Division, in accordance with the data resulting from the two collections, or justifi cations clearly defi ned procedures and criteria. This data is controlled of them; during the following stages: ● regarding deadlines, data relating to training is not always ● automated controls: the Magnitude package comprises a fi nalized and therefore corresponds to the latest status; certain number of automated controls that allow contributors 17 to ensure the reliability of the information captured at the ● the concept of “cadre” or “manager” can still be diffi cult level with the greatest detail. Contributors also have the to grasp in countries other than France where the opportunity to participate in the comments sections; Group operates. Consequently, this may lead to a slight underestimate in the number of managers, as some entities ● subsidiary-level controls: the major subsidiaries control the may have only counted their executive managers. consistency of their entities’ data;

● controls at the Group HRD [Human Resources Division] EXTERNAL CONTROL level: then, Group HRD applies consistency controls to the In continuing the precedents applied within the SUEZ group data of all the entities. These controls consist specifi cally of and its Divisions up to 2007, the Group entrusted to specialized analyzing changes in indicators from one period to another. statutory auditor fi rms the task of verifying four HR indicators for In the event of a signifi cant change, the contributor in 2008. For 2009, the Group renewed this request by increasing the question is asked to provide a more in-depth analysis, which number of verifi ed indicators to 14. These are indicated by the may result in a correction. special characters XXX (reasonable assurance) and XX (moderate assurance) in the above tables. The type of work carried out and the conclusions of the statutory auditors will be available in the 2009 Activity and Sustainable Development Report.

17.3 STOCK OPTIONS – BONUS SHARES – Z EMPLOYEE SHARE PURCHASE PLAN

At its meeting of December 17, 2009, the SUEZ ENVIRONNEMENT subject to vesting and performance criteria, under the following COMPANY Board of Directors decided for the fi rst time to conditions: implement a stock options plan, the primary objective of which ● for members of the Management Committee and Executive is to give management and senior offi cers, as well as managers Committee: with high potential and experts, a stake in the company’s growth and the creation of shareholder value. This plan will also ● 35% of allocated options are contingent upon contribute to increasing the loyalty of the management teams. SUEZ ENVIRONNEMENT COMPANY’s stock market performance against the average performance of the 3,464,440 SUEZ ENVIRONNEMENT COMPANY options were CAC 40 and Eurostoxx Utilities indices for the period awarded to 984 benefi ciaries; exercise of these options is December 17, 2009 to December 16, 2013,

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 165 17 EMPLOYEES Stock options – bonus shares – employee share purchase plan

● 35% of the options are additionally contingent on the 1,070 employees benefi ted from this plan, representing Group’s cumulative recurring net income between 2009 145,052 bonus shares with a vesting period of two to four years, and 2012, inclusive. depending upon the country. The allocation of these bonus shares is subject to remaining with the company until vesting, ● for other benefi ciaries, the exercise of 50% of the options is and a performance condition based on growth in the EBITDA of subject only to the stock price condition presented above. the SUEZ ENVIRONNEMENT COMPANY Group. The Chief Executive Offi cer declined the allocation of purchase The Chief Executive Offi cer received an allocation of 28,800 options for 2009. shares. The conditions of this allocation, which differ from those The SUEZ ENVIRONNEMENT COMPANY Board of Directors also of the other benefi ciaries, are described in section 15.1.1. of this decided for the fi rst time, after the same meeting, to implement Reference Document. a bonus share allocation plan for particularly high-performing The largest awards of stock purchase options and allocations employees who are “non-benefi ciaries” of the stock option plan. of SUEZ ENVIRONNEMENT COMPANY bonus shares to Group employees are shown in the following table:

Total number of options allocated / Average Stock options granted to the fi rst ten eligeable non-corporate offi cers shares subscribed or weighted and options exercised by them purchased price Plan date

Stock options awarded by the issuer and any company within the scope of option allocation during the fi scal year, to the ten employees awarded the most options by the issuer or any company within this scope (overall information) 378,286 options €15.49 12/17/2009

Bonus shares awarded by the issuer and any company within the scope of share allocation during the fi scal year, to the ten employees awarded the most shares by the issuer or any company within this scope (overall information) 1,940 shares N/A 12/17/2009 Options held by the aforementioned issuer and companies, exercised during the fi scal year by the ten employees of the issuer or these companies with the highest number of purchased or subscribed shares (overall information) NONE

Upon extending the plans described above, given by the Shareholders’ Meeting of May 20, 2010, to delegate the the shareholder structure between GDF SUEZ and power to the Board of Directors for a period of 24 months, and SUEZ ENVIRONNEMENT COMPANY, on November 10, 2009, the up to the limit of 1% of the share capital as recorded on the GDF SUEZ Board of Directors decided to allocate 399,784 stock date the decision to allocate is made by the Board of Directors, purchase options and 146,656 GDF SUEZ bonus shares to 2,054 to freely allocate existing shares or shares to be issued to the employees of the SUEZ ENVIRONNEMENT Group. Approximately Group employees. one third of the stock purchase options were subject to a It is also envisaged to submit to this same Shareholders’ Meeting performance condition. In keeping with the policy initiated by this the renewal of the resolution allowing for the increase of the group in 2005, the benefi ciaries of the GDF SUEZ stock purchase Company share capital by issuing shares reserved for members options program received a portion of their allocation in the form of the savings plan, with waiver of pre-emptive subscription of bonus shares. rights, in favor of these members, and the renewal of the The history of the SUEZ and GDF SUEZ stock options and bonus resolution to increase the Company share capital, with waiver shares granted to SUEZ ENVIRONNEMENT Group employees of pre-emptive subscription rights, in favor of any entities whose is shown in Section 20.1 – Notes 23.1.2 and 23.2.2 of this sole purpose is to subscribe, hold and sell Company shares or Reference Document. other fi nancial instruments in connection with implementing one of the multiple forms of the SUEZ ENVIRONNEMENT COMPANY’s The Board of Directors of SUEZ ENVIRONNEMENT COMPANY of international employee shareholding plan. March 18, 2010 has decided to submit a resolution for approval

166 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 EMPLOYEES Employee incentives and profi t sharing (France)

Z 17.4 EMPLOYEE INCENTIVES AND PROFIT SHARING (FRANCE)

Each subsidiary of the Group in France has implemented Profi t- In terms of profi t sharing, the amounts paid out in 2009 Sharing agreements (pursuant to the mandatory provisions represented €27.8 million, and benefi ted 25,367 employees, for of French law). Incentive agreements (optional in France) an average of approximately €1,100 per employee. have been implemented within the following companies: At the same time, incentive agreements resulted in payment of SUEZ ENVIRONNEMENT SAS, Degrémont, Lyonnaise des Eaux €17.9 million to 19,396 benefi ciaries, for an average of slightly France, Eau et Force, OIS and approximately 30% of the French over €900 per benefi ciary. subsidiaries of SITA France. In total, these two measures represented €45.7 million, i.e., 5.4% of the gross payroll of the companies concerned. 17

Z 17.5 GLOBAL PLAN FOR THE ALLOTMENT OF BONUS SHARES

A global fi nancial incentive plan was implemented in 2007 The vesting of these shares by the benefi ciaries requires within the former SUEZ Group, to give all employees a stake in remaining with the company through a vesting period ranging the Group’s performance. Subject to meeting certain conditions, from two to four years, depending upon the country. this resulted in every employee receiving bonus shares in 2007 The implementation of this bonus share allocation plan is and 2008. an important stage in the life of SUEZ ENVIRONNEMENT, and Within the framework of the agreement implemented within a major element of its benefi ts policy. Some 68,000 SUEZ the former SUEZ Group, which was entered into for a period ENVIRONNEMENT Group employees in over 40 countries around of three years, employees of SUEZ ENVIRONNEMENT and its the world benefi t from this plan. subsidiaries or companies consolidated in accordance with the In this way, SUEZ ENVIRONNEMENT seeks to pursue its ambition full consolidation method as of April 30, 2009 were allocated 30 to expand the employee shareholder base, and to give all its SUEZ ENVIRONNEMENT COMPANY bonus shares by the Board teams a stake in the group’s success and the future performance of Directors on June 25, 2009, i.e., a total of 2,040,810 bonus of the business. This plan forms part of SUEZ ENVIRONNEMENT’s shares, and 8 GDF SUEZ bonus shares by that group’s Board of strong corporate responsibility approach. Directors, on July 8, 2009.

Z 17.6 RETIREMENT AND SIMILAR COMMITMENTS

A description of the plan governing retirement and similar commitments appears in note 17 to the consolidated annual fi nancial statements (section 20.1).

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 167 17 EMPLOYEES

168 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 18 MAJOR SHAREHOLDERS

Page

18.1 BREAKDOWN OF SHARE CAPITAL AT DECEMBER 31, 2009 170

18.2 VOTING RIGHTS OF THE MAJOR SHAREHOLDERS 171

CONTENTS 18.3 COMPANY CONTROL – SHAREHOLDERS’ AGREEMENT 171 18.3.1 Shareholders’ agreement 171 18 18.3.2 Framework of GDF SUEZ’S control over the Company 172

18.4 AGREEMENT THAT MAY RESULT IN A CHANGE OF CONTROL 173

18.5 SUMMARY OF TRANSACTIONS MADE BY PERSONS INDICATED IN ARTICLE L. 621-18-2 OF THE MONETARY AND FINANCIAL CODE DURING THE FISCAL YEAR ENDED DECEMBER 31, 2009 173

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 169 18 MAJOR SHAREHOLDERS Breakdown of share capital at December 31, 2009

Z 18.1 BREAKDOWN OF SHARE CAPITAL AT DECEMBER 31, 2009

On December 31, 2009, the Company’s share capital totaled The voting rights of major shareholders of the Company are no €1,958,796,240. It consisted of €489,699,060 shares with a different from those of other shareholders. nominal value of €4 each, representing 489,699,060 voting rights. The following table shows the number of shares and percentages At December 31, 2009, the number of shares without voting of capital and voting rights held by the Company’s principal rights (shares held by the Company within the framework of shareholders, based on information available on the date this the share purchase program described in Section 21.1.3 of this reference document was prepared. reference document) totaled 301,000, hence the total number of exercisable voting rights of 489,398,060.

At December 31, 2009 At December 31, 2008 At September 30, 2008

% of % of % of % of % of % of Number of shares voting Number of shares voting Number of shares voting Shareholders shares held held rights shares held held rights shares held held rights

GDF SUEZ 173,406,974 35.41% 35.43% 173,406,974 35.41% 35.51% 173,406,974 35.41% 35.45% Groupe Bruxelles Lambert 35,001,610 7.15% 7.15% 35,001,610 7.15% 7.17% 35,001,610 7.15% 7.16% Caisse des Dépôts et Consignations 9,599,359 1.96% 1.96% 9,599,359 1.96% 1.97% 9,599,345 1.96% 1.96% Areva 6,906,750 1.41% 1.41% 6,906,750 1.41% 1.41% 6,906,750 1.41% 1.41% CNP Assurances 6,191,630 1.26% 1.27% 6,191,630 1.26% 1.27% 6,191,630 1.26% 1.27% Sofi na 4,125,000 0.84% 0.84% 4,125,000 0.84% 0.84% 4,125,000 0.84% 0.84% Total held by shareholders, parties to the Shareholders’ Agreement* 235,231,323 48.04% 48.07% 235,231,323 48.04% 48.17% 235,231,309 48.04% 48.09% Treasury shares 301,000 0.06% 0 1,350,000 0.27% 0 540,000 0.11% 0 Free fl oat and employee shareholders 254,166,737(1) 51.90%(2) 51.93%(2) 253,117,737 51.69% 51.83% 253,927,751 51.85% 51.91% TOTAL 489,699,060 100% 100% 489,699,060 100% 100% 489,699,060 100% 100%

* see shareholder agreement fi led with the AMF on June 6, 2008 (D&I 208C1189 of June 20, 2008) and explained in detail in Section 18.3 below. (1) 53,118,508 shares of which are held by Capital Research and Management (as of January 1, 2010) (2) 10.85% of the share capital and voting rights of which are held by Capital Research and Management (as of January 1, 2010)

On April 24, 2009, Capital Research and Management declared The increase in the share capital and voting rights to 10.85% as it had exceeded the threshold of 5% of the share capital of January 1, 2010 was not the result of an acquisition of shares, and voting rights of SUEZ ENVIRONNEMENT COMPANY by but rather from delegations for the exercise of voting rights by holding 24,859,713 shares, i.e., 5.08% of the Company’s share certain mutual funds (OPCVMs) managed by Capital Research capital. Capital Research and Management communicated and Management Company, which had previously decided to this surpassing of the threshold to the Autorité des Marchés exercise such rights independently. Financiers (AMF) on April 25, 2009; this notifi cation was This declaration was published by the Autorité des Marchés published by the AMF on April 27, 2009. Financiers (AMF) on January 7, 2010. On January 6, 2010, Capital Research and Management declared On January 7, 2010, Capital Research and Management declared that on January 1, 2010 it had exceeded the thresholds of 10% that the Company’s total share capital and voting rights was of the share capital and voting rights of SUEZ ENVIRONNEMENT within the normal scope of its activity as a portfolio management COMPANY, by holding 53,118,508 shares of the Company, company, without any intent to implement any particular representing the same number of votes, i.e., 10.85% of the strategy or to exercise thereby any particular infl uence over share capital and voting rights. SUEZ ENVIRONNEMENT COMPANY. It declared it was not acting in concert with a third party and did not intend to take control of the Company nor request an appointment as a director.

170 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 MAJOR SHAREHOLDERS Voting rights of the major shareholders

GDF SUEZ, Groupe Bruxelles Lambert, Sofi na, Caisse des Dépôts those mentioned above, directly or indirectly or together holding et Consignations, Areva and CNP Assurances are parties to 5% or more of the share capital or voting rights. We note that a shareholders’ agreement entered into on June 5, 2008, in the context of the contribution to SUEZ ENVIRONNEMENT subject to a notice published by the AMF on June 20, 2008, COMPANY of the SUEZ ENVIRONNEMENT shares that it held, the stipulations of which are described in section 18.3 of this GDF SUEZ obtained approval from the tax authorities to benefi t Reference Document, and which, on July 22, 2008, after its from the favorable tax regime stipulated in Articles 210 A listing on the stock market, held 47.16% of the share capital. and 115-2 of the General Tax Code, provided that it keep the SUEZ ENVIRONNEMENT COMPANY shares received in exchange In a letter dated August 22, 2008 and published August 26, 2008, for such contribution for three years after the listing for trading GDF SUEZ, acting in its capacity as manager of the shareholders’ on Euronext Paris of the SUEZ ENVIRONNEMENT COMPANY agreement, informed the Autorité des Marchés Financiers shares. As a consequence of the merger between GDF and that upon completion of the so-called thirty-day stabilization SUEZ, GDF was found to be subject to the rights and obligations period, i.e., August 20, 2008, after the close of trading on the of SUEZ and to this end assumes the obligation to keep the stock market, GDF SUEZ, Caisse des Dépôts et Consignations, SUEZ ENVIRONNEMENT COMPANY shares described in this CNP Assurances, Groupe Bruxelles Lambert, Areva, and Sofi na paragraph. together held 235,231,309 shares of the Company representing the same number of voting rights, i.e., 48.04% of the Company’s The other parties to the shareholders’ agreement described in share capital and voting rights. section 18.3.1 of this Reference Document are also committed to keep the Company shares allocated to them by SUEZ for this Pursuant to Article L. 233-13 of the French Commercial Code, same period, in their capacities as shareholders of the latter and to the knowledge of SUEZ ENVIRONNEMENT COMPANY, within the framework of the Spin-off / Distribution transaction. 18 on December 31, 2009, there were no shareholders other than

Z 18.2 VOTING RIGHTS OF THE MAJOR SHAREHOLDERS

Each Company share entitles the holder to one voting right.

Z 18.3 COMPANY CONTROL – SHAREHOLDERS’ AGREEMENT

18.3.1 SHAREHOLDERS’ AGREEMENT directors appointed by mutual agreement of the parties to the agreement at the proposal of the chairman of the Board of Directors (reduced to three in the event of the appointment On June 5, 2008, GDF SUEZ , Groupe Bruxelles Lambert, Sofi na, of a director representing employee shareholders), two Caisse des Dépôts et Consignations, Areva and CNP Assurances, directors appointed at the proposal of Groupe Bruxelles as well as the Company, entered into a shareholders’ agreement Lambert, one director appointed at the proposal of Areva, as regards their interest in the capital of the Company, for a one director appointed at the proposal of CNP Assurances, renewable fi ve-year term to run from the date of approval of the and one director appointed at the proposal of Sofi na; Spin-off/Distribution, i.e., July 15, 2008, and which specifi cally provides for: ● the appointment of the Chairman of the Company by the Board of Directors, at the proposal of GDF SUEZ, and the ● the composition of the Board of Directors, with nine directors appointment of the Company Chief Executive Offi cer by the appointed at the proposal of GDF SUEZ, four independent Board of Directors, at the proposal of the Chairman;

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 171 18 MAJOR SHAREHOLDERS Company control – shareholders’ agreement

● the creation and composition of four committees of control circle following a divestment of shares and exercise of the Board of Directors (Audit and Financial Statements the right of fi rst refusal. Furthermore, in the event that a party committee, Nominations and Compensation committee, holds less than a third of its initial stake, the agreement will be Ethics and Sustainable Development committee, and terminated as far as it is concerned, but will remain in force and Strategic committee); effect for the other parties.

● passing decisions of the Board of Directors by a simple The shareholders’ agreement constitutes a joint control as majority of its members, with the Chairman having the casting defi ned by Article L. 233-10 of the French Commercial Code, vote in cases of a tie vote, with the exception, in particular, of within which GDF SUEZ plays a leading role. The provisions of decisions affecting the share capital or amending the bylaws the agreement, and specifi cally GDF SUEZ’s right to appoint half or relating to any extraordinary payment of dividends, which the members of the Board of Directors, in which the Chairman are to be passed by a qualifi ed majority of two thirds of the has a casting vote, as well as the appointment of the Company’s members of the Board of Directors; Chief Executive Offi cer at the Chairman’s recommendation, grant GDF SUEZ control of the Company. ● an obligation for consultation among the shareholders that are parties to the agreement prior to any meeting of the As regards possible alterations in the stake held by the Board of Directors and a shareholders’ meeting called to parties to the agreement, other than GDF SUEZ, they have make an important decision; indicated that they may contemplate increasing their interest in SUEZ ENVIRONNEMENT COMPANY share capital ● a reciprocal right of fi rst refusal between the parties to the shortly and, consequently, they might, for a stabilization agreement applying to any proposed divestment of shares period of 30 calendar days after the date of the listing of in SUEZ ENVIRONNEMENT COMPANY (with the exception of SUEZ ENVIRONNEMENT COMPANY share for trading (depending free divestments, which shall include divestments made by on whether market conditions are favorable during this a shareholder of less than 10% of its stake on the last day stabilization period), acquire shares on the market to the effect of the month preceding the concerned sale, calculated over that the overall stake held by the companies could reach a a period of 12 months), on the basis of the procedures and level close to 50% of the share capital and voting rights in the orders of priority set out below: Company (but not exceeding that ceiling). ● in the event of a contemplated sale of shares by GDF Groupe Bruxelles Lambert undertook acquisitions during this SUEZ, a preemptive fi rst-rank right of fi rst refusal in favor period, allowing it to exceed the 7% ceiling of the Company’s of each of the other parties to the agreement, as well as a share capital and to hold 35,001,610 shares, i.e., 7.15% of the second-rank right of fi rst refusal in favor of the Company, share capital. ● in the event of a contemplated sale of shares by one The shareholders’ agreement was submitted to the AMF on of the other parties to the agreement, a fi rst-rank right June 6, 2008, and listed on a notice published in a notice by of fi rst preemptive refusal in favor of each of the other the latter on June 20, 2008 (see D&I 208C1189 of June 20, parties (excluding GDF SUEZ), a second-rank right of fi rst 2008 on the AMF website). The AMF also acknowledged refusal in favor of GDF SUEZ, and a third-rank preemptive the statement by shareholders party to the agreement that right of fi rst refusal in favor of SUEZ ENVIRONNEMENT they may plan to increase their stake in the share capital COMPANY, of SUEZ ENVIRONNEMENT COMPANY shortly during the ● the obligation for each party to provide notifi cation of aforementioned stabilization period. any contemplated acquisition of shares in the Company to GDF SUEZ, who is acting as administrator of the agreement,

● 18.3.2 FRAMEWORK OF GDF SUEZ’S CONTROL the prohibition imposed on the parties to the agreement OVER THE COMPANY from purchasing shares which could result in either an obligation to fi le a tender offer, or for the shareholders acting in concert to fi le a tender offer with share price GDF SUEZ’s control over the Company is within the framework guarantee for SUEZ ENVIRONNEMENT COMPANY, and of the presence of independent directors on the Board of Directors and committees pursuant to provisions of the ● a tag-along right in favor of the other parties to the shareholders’ agreement entered into in the context of the agreement in the event GDF SUEZ were to sell a majority listing of the Company (see sections 16 and 18.3.1 of the of its interest in SUEZ ENVIRONNEMENT COMPANY. reference document); and a number of agreements aiming at The agreement shall be terminated before its term in the event formalizing GDF SUEZ’ and the Company’s relations following that (i) all the shares held by the parties to the agreement the listing of the Company (see section 19 of the reference represent less than 20% of the Company’s share capital, or document). These various measures have been designed to (ii) GDF SUEZ is no longer the leading shareholder in the joint prevent abuse of control of the Company.

172 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 MAJOR SHAREHOLDERS Agreement that may result in a change of control

The criteria applied to qualify an independent director are as set Moreover, this control framework provides a guarantee for the by the AFEP-MEDEF recommendations. Directors are considered stability necessary for value creation in the long term, especially as independent if they have no relations of any kind whatsoever through long-term contracts or partnerships, and to ensure with SUEZ ENVIRONNEMENT COMPANY, its subsidiaries or that all shareholders of the Company continue to benefi t from management, which might compromise the exercise of their synergies between the energy and environmental activities. freedom of judgment.

18.4 AGREEMENT THAT MAY RESULT IN A CHANGE Z OF CONTROL

None. 18

18.5 SUMMARY OF TRANSACTIONS MADE BY PERSONS Z INDICATED IN ARTICLE L. 621-18-2 OF THE MONETARY AND FINANCIAL CODE DURING THE FISCAL YEAR ENDED DECEMBER 31, 2009

Name of shareholder Date of transaction Nature of transaction Number of shares Price/Share

Jean-Louis Chaussade 10/5/2009 Purchase 1,000 € 15.20 Alain Chaigneau* 5/20/2009 Sale 900 € 13.06 Alain Chaigneau* 5/20/2009 Sale 900 € 13.05 Alain Chaigneau* 5/20/2009 Sale 900 € 13.10

* transactions carried out by related individuals

On January 22, 2010, Mr. Patrick Ouart acquired 1,441 shares of the Company at €16.80 each.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 173 18 MAJOR SHAREHOLDERS Summary of transactions made by persons indicated in article L

Following his resignation as director, Mr. Angel Simón gave back on January 19, 2010 the 2,000 shares that had been lent to him by GDF SUEZ.

The above table is based on information provided to the Company by the directors concerned.

NUMBER OF SHARES HELD BY MEMBERS OF THE BOARD OF DIRECTORS AT DECEMBER 31, 2009

Number of shares held at December 31, 2009

Gérald ARBOLA 2,000 Nicolas BAZIRE 2,000 Dirk BEEUWSAERT 3,787(1) Gilles BENOIST 2,000 Valérie BERNIS 2,000(1) Harold BOEL 5,555(2) Alain CHAIGNEAU 3,375(1) Jean-Louis CHAUSSADE 3,500 Jean-François CIRELLI 2,000(1) Lorenz d’ESTE 2,139 Amaury de SEZE 2,000 Gérard LAMARCHE 2,589(1) Gérard MESTRALLET 13,179(1) Guillaume PEPY 2,000 Olivier PIROTTE 2,000 Angel SIMON 2,155(1) Ezra SULEIMAN 2,260 Jérôme TOLOT 34,346(1)

(1) of which, 2,000 shares as a loan granted by GDF SUEZ. (2) of which, 3,555 shares received in the context of an inheritance.

Mr. Patrick Ouart holds 2,000 Company shares, including 559 held prior to his appointment as Director, and 1,441 acquired on January 22, 2010.

This table is based on information provided to the Company by the directors.

174 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 19 RELATED-PARTY TRANSACTIONS

Parties related to the Company include, among others, The main specifi cations of this cooperation and shared services the Company’s major shareholders, its non-consolidated agreement are summarized below. subsidiaries, companies under joint control (proportionately consolidated companies), related companies (equity affi liates), COOPERATION and entities on which various Company offi cers exercise at least a signifi cant infl uence. GDF SUEZ and the Company mutually agree to continue their cooperation, mainly in the areas of strategy, accounting, A breakdown of transactions with these related parties for fi scal internal control, audit, risk, fi nance, tax policy, IT services, and years 2008 and 2009, particularly GDF SUEZ and its subsidiaries, communication. appears in section 20.1, Note 24 of this document. In the fi eld of strategy, GDF SUEZ and the Company will jointly The largest amounts correspond to the Group’s fi nancing perform a process of identifi cation and analysis of strategic 19 activities totaling €1.9 billion in 2009 (i.e., 19.4% of consolidated issues involving the Company for which, in addition, GDF SUEZ gross debt) by the GDF SUEZ subsidiaries (see sections 4.1.3.3, will maintain and develop, jointly with the Company, monitoring 10.3, 10.5 and 20.1 – note 14.1.3.2 of this Reference Document). and analytical tools. GDF SUEZ and the Company shall develop a joint global research policy, and shall support the development The other transactions are not signifi cant on the level of the of joint industrial and commercial projects. SUEZ ENVIRONNEMENT Group. In the fi eld of accounting, internal control, audit and risk, the The Report of the Statutory Auditors on related party agreements Company will continue to comply with the accounting principles and commitments appearing in section 26.3 of this Reference framework as well as the reporting, analysis and audit policies Document describes the notifi ed transactions. and principles of the GDF SUEZ Group. A comprehensive and integrated process of planning preparation, resource allotment, and reporting will also be maintained.

COOPERATION AND SHARED SERVICES In the fi eld of fi nancial and tax policy and to ensure consistency AGREEMENT at the group level, joint teams composed of representatives from GDF SUEZ and SUEZ ENVIRONNEMENT COMPANY will On June 5, 2008, SUEZ and the Company entered into a ensure concerted and all-embracing management at the group cooperation and shared services framework agreement for a level of fi nancial and tax policy as regards the corporate income renewable term of fi ve years. tax. Likewise, the implementation of policies governing cash fl ow, fi nancing, the management of translational fi nancial risks, This contract defi nes the detailed arrangements for future and of fi nancial vehicles will be centralized. Each of the two cooperation between GDF SUEZ and the Company. In particular, entities will nevertheless remain responsible for their fi nancial it sets out the conditions under which GDF SUEZ and the and tax policy. Company, in compliance with their respective corporate interests, principles of good governance, the principle of In the IT fi eld, the Company will comply with IT group governance shareholder equality of treatment, and the mandate of their principles and will take part in group steering committees. governing bodies, intend to continue their close relationships In terms of fi nancial communications, GDF SUEZ and the and develop existing synergies between themselves, with Company will coordinate their fi nancial communications and the objective that SUEZ ENVIRONNEMENT COMPANY and its sustainable development program as well as their internal subsidiaries maintain their attachment to GDF SUEZ “group” communications. policies and continue to benefi t from centralized services provided by GDF SUEZ and some of its subsidiaries.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 175 19 RELATED-PARTY TRANSACTIONS

The agreement also contains provisions relating to cooperation BRAND NAME LICENSING AGREEMENT between GDF SUEZ and the Company in the fi elds of insurance, logistics, procurement, real estate and legal services, as well as On June 5, 2008, SUEZ and SUEZ ENVIRONNEMENT entered into a in the fi eld of relations with public authorities. brand-name licensing agreement under which SUEZ authorizes SUEZ ENVIRONNEMENT to use the brand name “SUEZ.” HUMAN RESOURCES This agreement provides for GDF SUEZ to grant to The Company and GDF SUEZ have reaffi rmed their attachment SUEZ ENVIRONNEMENT, for a tacitly renewable term of fi ve to the GDF SUEZ group “Social Pact” and to the continued years, the non-exclusive right to use, at no cost, the brand name application of the charters and agreements signed within the “SUEZ” in its legal company name as well as in certain other Group and the policies pursued by the group in respect of internal brands. SUEZ ENVIRONNEMENT furthermore is granted the right mobility. The employees of the Company and its subsidiaries will to award licenses for the use of the brand name “SUEZ” to other be eligible for future GDF SUEZ stock option and bonus share Group companies, including SUEZ ENVIRONNEMENT COMPANY. allotments, as well as future employee shareholder plans. In accordance with their respective interests, GDF SUEZ and the In this context, the contract provides for GDF SUEZ to have the Company will ensure a global and integrated management of right to examine communication and promotional campaigns the careers of current executives and their potential future proposed by SUEZ ENVIRONNEMENT. successors within the group.

SHARED SERVICES FINANCING FRAMEWORK AGREEMENT The Company and SUEZ mutually agree that the Company will continue to benefi t from the centralized services provided On June 5, 2008, SUEZ, SUEZ Finance, the Company and by GDF SUEZ and especially the GDF SUEZ expertise centers. SUEZ ENVIRONNEMENT entered into a framework agreement Therefore, SUEZ ENVIRONNEMENT COMPANY will be able to setting the main arrangements for the fi nancing of the Group use (i) existing shared services (in the fi elds of IT, accounting for the upcoming period 2008-2010. consolidation, procurement policy, etc.) and (ii) the tools set up by GDF SUEZ for the management of retirement, employee Financing will be provided by SUEZ Finance or by any other insurance and benefi t systems, or reporting and internal control entity of the GDF SUEZ group so designated by GDF SUEZ. systems. Financing may be granted to any Group entity, the Company, or SUEZ ENVIRONNEMENT that shall guarantee repayment if SUBSIDIARIES fi nancing is granted to one of its subsidiaries. The aggregated amount of fi nancing granted will be limited to the aggregated The cooperation and shared services agreement is also designed amount of the Group’s fi nancing needs as agreed annually to apply to subsidiaries of the Company and GDF SUEZ. In between GDF SUEZ and the Company. particular, the latter may benefi t directly from the rights granted to their parent companies. The contract provides in particular that, aside from the granting of fi nancing to the Group, SUEZ ENVIRONNEMENT COMPANY CONDITIONS and SUEZ ENVIRONNEMENT undertake, for the whole term of the contract and subject to certain exceptions, not to transfer Services provided under the cooperation and shared all or part of their assets without the prior agreement of the GDF services agreement will be invoiced between SUEZ group nor to grant any lien on their assets for the purposes SUEZ ENVIRONNEMENT COMPANY (and/or its subsidiaries) and of obtaining fi nancing. GDF SUEZ at market conditions. The fi nancing commitment of the GDF SUEZ group will cease EARLY TERMINATION and the GDF SUEZ group can demand the repayment of any fi nancing granted should a change of control occur, as evidenced The cooperation and shared services agreement will be by (i) the loss of control by GDF SUEZ over the Company within terminated before its term as of right in the event that GDF SUEZ the meaning of the provisions of Article L. 233-3 of the French loses control over the Company, subject, where applicable, to Commercial Code or loss of the power to appoint or dismiss a transition periods to be determined between the parties on a number of members of the corporate governance, management case-by-case basis. or supervisory bodies of the Company having together a majority of votes in that body, (ii) the loss of control by the Company of SUEZ ENVIRONNEMENT within the meaning of the provisions of Article L. 233-3 of the French Commercial Code, or (iii) the termination of full consolidation (within the meaning of IFRS) of the Company and SUEZ ENVIRONNEMENT by GDF SUEZ.

176 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 RELATED-PARTY TRANSACTIONS

GUARANTEES AND COUNTER-GUARANTEES agreed, through an amendment, to eliminate the obligation to replicate the composition of the Company’s governing bodies within the governing bodies of SUEZ ENVIRONNEMENT, and The Company and GDF SUEZ agree that all commitments involving consequently changed the shareholders’ agreement by an guarantees, bonds, comfort letters, surety and any other similar amendment signed on December 18, 2008. commitments granted by GDF SUEZ as commitments from Company subsidiaries to third parties have been transferred to The signing of this amendment was authorized in advance by the Company, or any subsidiary acceptable by GDF SUEZ, and the Company’s Board of Directors on October 28, 2008. that any commitments unable to be transferred on this date are subject to a counter-guarantee granted by the Company, or any subsidiary acceptable by GDF SUEZ, in favor of GDF SUEZ. GAS NATURAL SHARES

In October 2008, SUEZ ENVIRONNEMENT undertook a transfer SHAREHOLDERS’ AGREEMENT of the Gas Natural shares, held by Hisusa, a 51% subsidiary of SUEZ ENVIRONNEMENT, and 49% of Criteria CaixaCorp. The The Company is party to a shareholders’ agreement entered two shareholders have thus transferred the Gas Natural shares into by GDF SUEZ, Groupe Bruxelles Lambert, Sofi na, Caisse (representing 5% of this company’s share capital) in proportion des Dépôts et Consignations, Areva and CNP Assurances, to the interest of each in the share capital of Hisusa, which for the main provisions of which are described in section 18.3 of SUEZ ENVIRONNEMENT represents 2.55%. this Reference Document. The agreement was amended on Further to the merger operations between GDF and SUEZ, and December 18, 2008. the listing of SUEZ ENVIRONNEMENT on the stock exchange, According to Article 7 of the shareholders’ agreement, the GDF SUEZ and SUEZ ENVIRONNEMENT signed on November 18, composition of the Board of Directors of the Company and 2008 an agreement granting GDF SUEZ an option to purchase 19 of SUEZ ENVIRONNEMENT (a wholly-owned subsidiary of Gas Natural shares at market value until November 20, 2009. the Company) must be identical at all times, with a view to a Since GDF SUEZ has not exercised the option that has been potential merger between these two companies. granted, SUEZ ENVIRONNEMENT sold its Gas Natural shares on In order to simplify the operational functioning of the the fi nancial markets in 2009. SUEZ ENVIRONNEMENT Group, the parties to the agreement

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 177 19 RELATED-PARTY TRANSACTIONS

178 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 20 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES

Page

20.1 CONSOLIDATED FINANCIAL STATEMENTS 180 20.1.1 Consolidated statements of fi nancial position 180 20.1.2 Consolidated income statements 181 20.1.3 Consolidated statements of comprehensive income 181 CONTENTS 20.1.4 Statements of changes in consolidated shareholders’ equity 182 20.1.5 Consolidated cash fl ow statements 183 20.1.6 Notes to the consolidated fi nancial statements – summary 184

20.2 STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS 267

20.3 PARENT COMPANY FINANCIAL STATEMENTS 269 20.3.1 Balance sheet-assets 269 20.3.2 Balance sheet – equity and liabilities 270 20.3.3 Income statement 271 20 20.3.4 Cash fl ow statement 273 20.3.5 Signifi cant facts regarding the fi scal year 273 20.3.6 Financial highlights 274 20.3.7 Appendices to the accounts 274

20.4 STATUTORY AUDITORS’ REPORT ON THE PARENT COMPANY ANNUAL FINANCIAL STATEMENTS 286

20.5 DIVIDEND POLICY 288

20.6 LEGAL AND ARBITRATION PROCEEDINGS 288 20.6.1 Competition and concentration 288 20.6.2 Litigation and arbitration 288 20.6.3 Tax litigation 290

20.7 SIGNIFICANT CHANGE IN THE FINANCIAL OR BUSINESS SITUATION 291

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 179 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

Z 20.1 CONSOLIDATED FINANCIAL STATEMENTS

20.1.1 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions of euros) Note December 31, 2009 December 31, 2008

NON-CURRENT ASSETS Net intangible assets 10 2,235.8 1,867.2 Goodwill 9 3,069.5 2,897.5 Property, plant and equipment net 11 6,487.9 6,205.8 Available-for-sale securities 13 447.8 729.2 Loans and receivables carried at amortizated cost 13 400.3 457.4 Derivative fi nancial instruments 13 44.8 89.6 Investments in associates 322.9 265.6 Other non current assets 121.3 120.0 Deferred tax assets 7 552.9 500.2 TOTAL NON-CURRENT ASSETS 13,683.2 13,132.5

CURRENT ASSETS Derivative fi nancial instruments 13 11.7 0.3 Loans and receivables carried at amortized cost 13 204.6 151.8 Trade and other receivables 13 3,701.4 3,588.4 Inventories 270.4 245.9 Other current assets 823.5 872.6 Financial assets at fair value through income 13 1,141.1 51.0 Cash and cash equivalents 13 2,711.7 1,668.5 TOTAL CURRENT ASSETS 8,864.4 6,578.5 TOTAL ASSETS 22,547.6 19,711.0 Shareholders’ equity, Group share 3,675.9 3,532.4 Minority interests 742.2 637.6 TOTAL CONSOLIDATED SHAREHOLDERS’ EQUITY 15 4,418.1 4,170.0

NON-CURRENT LIABILITIES Provisions 16 1,054.4 1,021.1 Long term borrowings 13 6,400.0 5,100.5 Derivative fi nancial instruments 13 62.5 22.5 Other fi nancial liabilities 13 0.0 18.9 Other non current liabilities 635.5 514.2 Deferred tax liabilities 7 287.0 332.7 TOTAL NON-CURRENT LIABILITIES 8,439.4 7,009.9

CURRENT LIABILITIES Provisions 16 334.6 306.9 Short term borrowings 13 3,680.2 2,620.8 Derivative fi nancial instruments 13 57.1 83.3 Trade and other payables 13 3,741.4 3,863.7 Other current liabilities 1,876.8 1,656.4 TOTAL CURRENT LIABILITIES 9,690.1 8,531.1 TOTAL CONSOLIDATED SHAREHOLDERS’ EQUITY AND LIABILITIES 22,547.6 19,711.0

180 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

20.1.2 CONSOLIDATED INCOME STATEMENTS

(in millions of euros) Note December 31, 2009 December 31, 2008

Revenues 12,296.4 12,363.7 Purchases (2,886.4) (2,677.2) Personnel costs (3,145.7) (3,062.2) Depreciation, amortization and provisions (851.4) (776.0) Other operating income and expenses (4,486.9) (4,789.2) CURRENT OPERATING INCOME 4 926.0 1,059.1 Mark-to-market on operating fi nancial instruments 2.2 3.2 Impairment on property, plant and equipment, intangible and fi nancial assets (85.3) (1.7) Restructuring costs (60.0) (20.9) Expenses linked to initial public offering - (50.8) Disposal of assets 84.2 46.9 INCOME FROM OPERATING ACTIVITIES 5 867.1 1,035.8 Financial expenses (358.8) (420.8) Financial income 98.8 91.0 FINANCIAL INCOME/(LOSS) 6 (260.0) (329.8) Income tax expense 7 (128.8) (92.7) Share in net income of associates 37.6 34.0 CONSOLIDATED NET INCOME 515.9 647.3 Of which, Group share 403.0 533.2 Of which, minority interests 112.9 114.1 20 Consolidated net income (Group share) per share (in euro) 8 0.82 1.09

20.1.3 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions of euros) Note December 31, 2009 December 31, 2008

NET INCOME 515.9 647.3 Available-for-sale securities 13 (45.3) (341.0) Net investment hedges 6.5 23.2 Cash-fl ow hedges 14 (10.8) (37.0) Commodity cash-fl ow hedges 14 38.8 (54.6) Actuarial gains and losses (0.9) (119.9) Deferred taxes 7 25.3 114.9 Translation adjustments 27.2 (90.4) Share of associates (0.3) (0.3) Total income and expenses recognized directly in shareholders’ equity 40.5 (505.1) COMPREHENSIVE INCOME 556.4 142.2 Of which Group share 395.0 103.1 Of which minority interests 161.4 39.1

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 181 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

20.1.4 STATEMENTS OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY

Additional paid-in capital, Reserves and Net Changes Consolidated Income Actuarial in Fair Translation shareholders’ Number of Share (Group Gains and Value and Treasury adjust- equity Group Minority (in millions of euros ) shares capital Share) Losses Other Shares ments share interests Total

SHAREHOLDERS’ EQUITY AT DECEMBER 31, 2007 489,699,060 1,958.6 1,459.8 25.5 386.9 (186.9) 3,643.9 613.0 4,256.9 Consolidated net income 533.2 533.2 114.1 647.3 Income and expenses recognized directly in shareholders’ equity (115.7) (202.6) (111.8) (430.1) (75.0) (505.1) Comprehensive income 533.2 (115.7) (202.6) (111.8) 103.1 39.1 142.2 Employee share issues and share-based payment 47.9 47.9 47.9 Capital increase/reduction 0.2 0.2 0.2 Net acquisition of treasury shares (2.7) (17.1) (19.8) (19.8) Dividends paid (403.0) (403.0) (93.6) (496.6) Movements related to Argentinean dispute 235.4 (a) 235.4 235.4 Other changes (75.3) (b) (75.3) 79.1 (C) 3.8 SHAREHOLDERS’ EQUITY AT DECEMBER 31, 2008 489,699,060 1,958.8 1,795.3 (90.1) 184.2 (17.1) (298.7) 3,532.4 637.6 4,170.0 Consolidated net income 403.0 403.0 112.9 515.9 Income and expenses recognized directly in shareholders’ equity (1.9) (12.0) 5.9 (8.0) 48.5 40.5 Comprehensive income 403.0 (1.9) (12.0) 5.9 395.0 161.4 556.4 Employee share issues and share-based payment 51.9 51.9 51.9 Capital increase/reduction - - 11.4 11.4 Net acquisition of treasury shares 3.1 12.4 15.5 15.5 Dividends paid (317.6) (317.6) (113.8) (431.4) Other changes (1.3) (1.3) 45.6 (d) 44.3 SHAREHOLDERS’ EQUITY AT DECEMBER 31, 2009 489,699,060 1,958.8 1,934.4 (92.0) 172.2 (4.7) (292.8) 3,675.9 742.2 4,418.1

Note 15, “Equity” details certain information provided above. (a) See Note 2 on major transactions, in particular the paragraphs relating to the signing of the contract between SUEZ SA and SUEZ ENVIRONNEMENT COMPANY relating to the management of the Argentinean dispute. (b) Primarily resulting from reclassifi cations of shares between SUEZ SA and SUEZ ENVIRONNEMENT subsidiaries. These transactions between entities under common control have been recorded at their book value. No goodwill has been recognized (see Note 1, Paragraph 1.1). (c) See Note 2 on major transactions. This movement mainly relates to the accounting treatment of the Public Offering for Agbar shares in January 2008. (d) See Note 2 on major transactions. This movement mainly relates to the commissioning of the EVI incinerator at Sita Nederland BV.

182 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

20.1.5 CONSOLIDATED CASH FLOW STATEMENTS

(in millions of euros) December 31, 2009 December 31, 2008

Consolidated net income 515.9 647.3 - Share in net income of associates (37.6) (34.0) + Dividends received from associates 31.4 21.7 - Net depreciation, amortization and provisions 927.1 724.8 - Net capital gains on disposals (84.2) (46.9) - Other items with no cash impact 55.9 53.5 - Income tax expense 128.8 92.7 - Net fi nancial loss 260.0 329.8 Cash from operations before fi nancial income/(expense) and income tax 1,797.3 1,788.9 + Tax paid (114.9) (204.8) Change in working capital requirements (76.7) (51.9) Cash from /(used in) operating activities 1,605.7 1,532.2 Investments in property, plant and equipment and intangible assets (1,083.3) (1,143.9) Acquisitions of entities net of cash and cash equivalents acquired (206.0) (1,419.4) Acquisitions of available-for-sale securities (124.4) (36.1) Disposals of tangible and intangible fi xed assets 16.9 39.7 Disposals of entities net of cash and cash equivalents sold 8.2 (18.2) Disposals of available-for-sale securities 326.7 144.8 Interest received on non-current fi nancial assets 3.8 4.3 20 Dividends received on non-current fi nancial assets 39.8 33.0 Change in loans and receivables issued by the Company and others (6.0) (22.7) Cash from/(used in) investing activities (1,024.3) (2,418.5) Dividends paid (431.4) (496.6) Repayment of fi nancial debt (a) (1,911.8) (494.3) Change in fi nancial assets at fair value through income (b) (1,084.4) 129.3 Financial interest paid (217.9) (352.6) Financial interest received on cash and cash equivalents 21.9 41.1 Increase in fi nancial debt (c) 4,052.9 2,326.4 Increase in share capital 12.9 1.2

Disposals of treasury shares 15.5 Cash from/(used in) fi nancing activities 457.7 1,154.5 Impact of changes in exchange rates and other 4.1 (65.9) TOTAL CASH FLOWS FOR THE PERIOD 1,043.2 202.3 OPENING CASH AND CASH EQUIVALENTS 1,668.5 1,466.2 CLOSING CASH AND CASH EQUIVALENTS 2,711.7 1,668.5

(a) 2009 includes repayment of the GDF SUEZ Finance current accounts of 982 million euros. (b) Including UCITS subscription totaling 1,078 million euros. (c) Including 3-billion euros bond issuance.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 183 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

20.1.6 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – SUMMARY

Page Page Note 1 Basis of presentation – accounting principles Note 16 Provisions ...... 242 and methods ...... 185 Note 17 Pensions and other employee benefi ts Note 2 Major transactions ...... 199 obligations ...... 244 Note 3 Operating segment information ...... 203 Note 18 Construction contracts ...... 250 CONTENTS Note 4 Current operating income ...... 206 Note 19 Finance leases...... 250 Note 5 Income from operating activities ...... 208 Note 20 Operating leases ...... 251 Note 6 Financial income/(loss) ...... 210 Note 21 Service concession arrangements ...... 251 Note 7 Income tax expense ...... 212 Note 22 Cash fl ows ...... 252 Note 8 Earnings per share ...... 216 Note 23 Share-based payments ...... 253 Note 9 Goodwill ...... 217 Note 24 Related party transactions ...... 258 Note 10 Intangible assets ...... 220 Note 25 Executive compensation ...... 259 Note 11 Property, plant and equipment ...... 222 Note 26 Legal and arbitration proceedings ...... 260 Note 12 Interests in joint ventures ...... 223 Note 27 Subsequent events ...... 262 Note 13 Financial instruments ...... 224 Note 28 List of the main companies consolidated Note 14 Management of risks arising from fi nancial at december 31, 2009 and 2008 ...... 263 instruments ...... 231 Note 29 Fees of the statutory auditors and members Note 15 Equity...... 240 of their networks ...... 265

184 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

NOTE 1 Basis of presentation – accounting principles and methods

1.1 BASIS OF PRESENTATION Group’s Consolidated Financial Statements for the year ended December 31, 2009 were prepared in accordance with IFRS as SUEZ ENVIRONNEMENT COMPANY SA, the parent company of the issued by the IASB and endorsed by the European Union (1). Group, which includes all Water and Waste activities (the Group), is a French corporation [société anonyme] subject to the provisions The accounting standards applied in preparing the fi nancial of Book II of the French Commercial Code, as well as to all other statements as of December 31, 2009 are consistent with those legal provisions applying to French commercial corporations. It applied in preparing the fi nancial statements of December 31, was established in November 2000. Its corporate headquarters 2008, with the exception of the items mentioned in are located in Paris at (75008), 1, rue d’Astorg – France. Section 1.2.1 below.

SUEZ ENVIRONNEMENT COMPANY SA shares are listed on the 1.2.1 Mandatory IFRS standards, amendments Paris and Brussels stock exchanges. and IFRIC interpretations applicable to the 2009 In the context of the merger operations with Gaz de France, the annual fi nancial statements

SUEZ Group consolidated all of its subsidiaries and interests in ● Amendments to IFRIC 9 and IAS 39 – Reassessment of the Environment sector into SUEZ ENVIRONNEMENT COMPANY. embedded derivatives; SUEZ ENVIRONNEMENT COMPANY has been listed on the Euronext Paris market (Compartiment A) since July 22, 2008. ● Amendments to IFRS 1 and IAS 27 – Cost of an investment in a subsidiary, jointly controlled entity, or associate; The creation of the Group results from reclassifi cations carried out between different holding companies of SUEZ Group. These ● Amendment to IFRS 2 – Vesting conditions and reclassifi cations have not made any change to SUEZ SA’s control cancellations; of the entities that comprise this Group. These link-ups between ● Amendments to IAS 32 and IAS 1 – Puttable Instruments entities under common control do not fall within the scope of and Obligations arising on liquidation; IFRS 3 – Business Combinations – and were recognized under the “pooling of interests”method at their book value in the ● IFRIC 13 – Customer loyalty programmes; consolidated fi nancial statements. As IFRS does not provide any ● IFRIC 15 – Agreements for the construction of real estate (2); 20 specifi c guidance for business combinations involving entities under common control, the accounting treatment adopted was ● IFRIC 16 – Hedges of a net investment in a foreign operation (2); reviewed by Group management in light of IAS 8 – Accounting ● IFRIC 18 – Transfer of assets from customers (2); Policies, Changes in Accounting Estimates and Errors – and in particular paragraph 10 of the standard – Selection and ● 2008 Improvements to IFRS – Annual improvement to IFRS (3) Application of Accounting Policies. These standards, amendments and interpretations have not On this basis, the Group’s consolidated fi nancial statements resulted in any signifi cant impact on the Group’s fi nancial at December 31, 2009, with their comparison for 2008, were statements. presented according to the “pooling of interests” method. ● Amendment to IFRS 7 – Improvement in disclosures about fi nancial instruments 1.2 ACCOUNTING STANDARDS This amendment requires additional disclosures regarding Pursuant to European Regulation (EC) 809/2004 on Prospectus fair value measurement and liquidity risk. Fair-value dated April 29, 2004, fi nancial information concerning the measurements of items recorded at fair value must be assets, liabilities, fi nancial position, and profi t and loss of disclosed by class of fi nancial instrument, according to a new SUEZ ENVIRONNEMENT COMPANY has been provided for fair-value hierarchy using a three-level hierarchy, depending the last two reporting periods ended December 31, 2008 upon whether the instrument is quoted on an active market, and 2009, and were prepared in accordance with European or whether its measurement uses techniques based on Regulation 1606/2002 of July 19, 2002 relating to the observable market data or based on non-observable data. application of international accounting standards (IFRS). The This amendment also clarifi es information to be provided

(1) Basis of presentation available on the website of the European Commission, http://ec.europa.eu/internal_market/accounting/. (2) Endorsed by the European Union in 2009 but with a mandatory date of application deferred to fiscal year 2010. (3) Except the amendment to IFRS 5, applicable to fiscal years beginning on or after July 1, 2009.

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on liquidity risk relating to derivatives and assets used 1.3 MEASUREMENT BASIS FOR PREPARATION for liquidity risk management. Information on fair-value OF THE CONSOLIDATED FINANCIAL STATEMENTS measurement is presented by class of fi nancial instruments The Consolidated Financial Statements have been prepared in Note 14, as well as relative to liquidity risk in Note 14.1. using the historical cost convention, except for fi nancial ● IAS 1 – Presentation of fi nancial statements (revised in 2007) instruments that are accounted for according to the fi nancial instrument categories defi ned by IAS 39. This revised regulation specifi cally introduces the statement of comprehensive income which presents all items of recognized income and expense in the period, either in one 1.4 USE OF JUDGMENT AND ESTIMATES single statement or in two separate statements: the income The crisis raging across fi nancial markets over the last two statement, displaying components of profi t or loss and the years has prompted the Group to step up its risk monitoring statement of comprehensive income, displaying components procedures and include an assessment of risk. The Group’s of other comprehensive income. The Group has elected to estimates, business plans and discount rates used for impairment present two statements. tests and for calculating provisions take into account the crisis conditions and the resulting extreme market volatility. The Group decided to early apply IFRS 8 in 2008 and IFRIC 12 in 2006. Similarly, the IAS 23 revised, applicable in 2009, 1.4.1 Estimates has no impact on the Group’s fi nancial statements, as the Group has always applied the allowed alternative treatment The preparation of the Consolidated Financial Statements whereby borrowing costs attributable to the construction of requires the use of estimates and assumptions to determine a qualifying asset are capitalized in the cost of that asset. the value of assets and liabilities, the disclosure of contingent assets and liabilities at the statement of fi nancial position date, 1.2.2 IFRS standards and IFRIC interpretations and the revenues and expenses reported during the period. that are mandatory after 2009 and that Due to uncertainties inherent in the estimation process, the have not been adopted early by the SUEZ ENVIRONNEMENT COMPANY Group Group regularly revises its estimates in light of currently available information. Final outcomes could differ from those ● IFRS 9 – Financial instruments; estimates.

● IFRS 3 revised – Business combinations; The main estimates used by the Group in preparing the Consolidated Financial Statements relate chiefl y to: ● Amendment to IAS 32 – Classifi cation of rights issues;

● the measurement of the recoverable amount of property, ● Amendment to IAS 39 – Eligible hedged items; plant and equipment and intangible assets (see Section 1.5.7); ● IAS 24 revised – Related party disclosures; ● the measurement of provisions, particularly for legal and ● IAS 27 revised – Consolidated and separate fi nancial arbitration proceedings and for pensions and other employee statements; benefi ts (see Section 1.5.15.1);

● IFRIC 17 – Distribution of non-cash assets to owners; ● capital renewal and replacement liabilities;

● IFRIC 19 – Extinguishing fi nancial liabilities with equity ● fi nancial instruments (see Section 1.5.10); instruments; ● unmetered revenues; ● Amendment to IFRIC 14 – Prepayments of a minimum ● funding requirement; the measurement of capitalized tax-loss carry-forwards.

● Improvements to IFRS 2009 – Annual improvement to IFRS; 1.4.1.1 Recoverable amount of property, plant and equipment and intangible assets ● Amendment to IFRS 2 – Group cash settled share-based The recoverable amount of goodwill, intangible assets and payment transactions. property, plant and equipment is based on estimates and The impact resulting from the application of these standards assumptions regarding in particular the expected market and interpretations is currently being assessed. outlook and future cash fl ows associated with the assets. Any changes in these assumptions may have a material impact on the measurement of the recoverable amount and could result in adjustments to the impairment losses already booked.

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1.4.1.2 Estimates of provisions 1.4.2 Judgment Parameters with a signifi cant infl uence on the amount of As well as relying on estimates, Group management also makes provisions include the timing of expenditure and the discount rate judgments to defi ne the appropriate accounting treatment to applied to cash fl ows, as well as the actual level of expenditure. apply to certain activities and transactions, when the effective These parameters are based on information and estimates IFRS standards and interpretations do not specifi cally deal with deemed to be appropriate by the Group at the current time. related accounting issue.

To the Group’s best knowledge, there is no information This particularly applies in relation to the recognition of suggesting that the parameters used taken as a whole are concession arrangements, the classifi cation of agreements that not appropriate. Furthermore, the Group is not aware of any contain a lease, and the recognition of acquisitions of minority developments that are likely to have a material impact on the interests. provisions booked. In accordance with IAS 1, the Group’s current and non-current 1.4.1.3 Capital renewal and replacement liabilities assets and current and non-current liabilities are shown This item includes concession operators’ liabilities for renewing separately on the statement of fi nancial position. For most of the and replacing equipment and for restoring sites. The liabilities Group’s activities, the breakdown into current and non-current are determined by estimating the cost of renewing or replacing items is based on when assets are expected to be realized, equipment and restoring the sites under concession (as defi ned or liabilities extinguished. Assets expected to be realized or by IFRIC 12), discounted each year at rates linked to infl ation. liabilities extinguished within 12 months of the statement of The related expense is calculated on a contract-by-contract fi nancial position date are classifi ed as current, while all other basis with probable capital renewal and site restoration costs items are classifi ed as non-current. allocated over the life of each contract. 1.5 SIGNIFICANT ACCOUNTING POLICIES 1.4.1.4 Pensions and other employee benefi t obligations Pension obligations are measured on the basis of actuarial 1.5.1 Scope and methods of consolidation calculations. The Group considers that the assumptions used The consolidation methods used by the Group include the full to measure its obligations are appropriate and documented. consolidation method, the proportionate consolidation method However, any changes in these assumptions may have a and the equity method: material impact on the resulting calculations. ● subsidiaries over which the Group exercises exclusive 20 1.4.1.5 Financial instruments control are fully consolidated;

To determine the fair value of fi nancial instruments that are not ● companies over which the Group exercises joint control are listed on an active market, the Group uses valuation techniques consolidated by the proportionate method, based on the that are based on certain assumptions. Any change in these Group’s percentage interest; assumptions could have a material impact on the resulting ● calculations. the equity method is used for all associate companies over which the Group exercises signifi cant infl uence. In 1.4.1.6 Revenues accordance with this method, the Group recognizes its proportionate share of the investee’s net income or loss on Revenues generated from customers whose consumption is a separate line of the consolidated income statement under metered during the accounting period are estimated at the “Share in net income of associates”. statement of fi nancial position date based on historic data, consumption statistics and estimated selling prices. The Group The Group analyses what type of control exists on a case-by- has developed measuring and modeling tools that allow it to case basis, taking into account the situations illustrated in estimate revenues with a satisfactory degree of accuracy IAS 27, 28 and 31. and subsequently ensure that risks of error associated with The special purpose entities set up in connection with the estimating quantities sold and the resulting revenues can be Group’s securitization programs that are controlled by the considered as not material. Group are consolidated in accordance with the provisions of 1.4.1.7 Measurement of capitalized tax loss IAS 27 concerning consolidated fi nancial statements and the carry-forwards related interpretation SIC 12 concerning the consolidation of Deferred tax assets are recognized on tax loss carry-forwards special purpose entities. when it is probable that future taxable profi t will be available All intra-group balances and transactions are eliminated in the to the Group against which the tax loss carry-forwards can be Consolidated Financial Statements. utilized. Estimates of taxable profi t and utilizations of tax loss carry-forwards were prepared on the basis of profi t and loss A list of the main fully and proportionately consolidated forecasts as included in the medium-term business plan. companies, together with investments accounted for by the equity method, is presented in Note 28 - List of the main consolidated companies at December 31, 2009 and 2008.

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1.5.2 Foreign currency translation methods The cost of a business combination is the aggregate of the fair value, at the date of exchange, of assets given, liabilities 1.5.2.1 Presentation currency of the consolidated incurred or assumed, and/or equity instruments issued by fi nancial statements the acquirer, in exchange for control of the acquiree; plus any The Group’s Consolidated Financial Statements are presented costs directly attributable to the business combination. When in euros (€). a business combination agreement provides for an adjustment to the cost of the combination contingent on future events, the 1.5.2.2 Functional currency Group includes the amount of that adjustment in the cost of Functional currency is the currency of the primary economic the combination at the acquisition date if the adjustment is environment in which an entity operates. In most cases, the probable and can be measured reliably. functional currency corresponds to the local currency. However, The Group may, within 12 months of the acquisition date, certain entities may have a different functional currency from recognize any adjustments to provisional values as a result of the local currency when that other currency is used for an completing the initial accounting of a business combination. entity’s main transactions and better refl ects its economic environment. 1.5.4 Intangible assets 1.5.2.3 Foreign currency transactions Intangible assets are recognized at cost less any accumulated Foreign currency transactions are recorded in the functional amortization and any accumulated impairment losses. currency at the exchange rate prevailing on the date of the transaction. At each statement of fi nancial position date: 1.5.4.1 Goodwill A. RECOGNITION OF GOODWILL ● monetary assets and liabilities denominated in foreign currencies are translated at year-end exchange rates. The Goodwill represents the excess of the cost of a business related translation gains and losses are recorded in the combination (acquisition price of shares plus any costs directly income statement for the year to which they relate; attributable to the business combination) and the Group’s interest in the fair value of the identifi able assets, liabilities and ● non-monetary assets and liabilities denominated in foreign contingent liabilities recognized at the acquisition date (except currencies are recognized at the historical cost applicable at if the business combination is achieved in stages). the date of the transaction. For a business combination achieved in stages – i.e. where 1.5.2.4 Translation of the fi nancial statements the Group acquires a subsidiary through successive share of consolidated companies with a functional purchases – the amount of goodwill is determined separately currency other than the euro: for each exchange transaction based on the fair values of the The statement of fi nancial position is translated into euros at acquiree’s identifi able assets, liabilities and contingent liabilities year-end exchange rates. Income statement and cash fl ow at the date of each exchange transaction. Any difference statement items are translated using the average exchange arising from the application of these fair values to the Group’s rate for the year. Any differences arising from the translation existing interest and to minority interests is a revaluation and is of the fi nancial statements of consolidated companies are therefore recognized as shareholders’ equity. recorded under “Cumulative translation adjustment” as Other In the absence of specifi c IFRS guidance addressing acquisitions Comprehensive Income. of minority interests, the Group continues not to recognize Goodwill and fair value adjustments arising from the acquisition any additional fair value adjustments to identifi able assets and of foreign entities are classifi ed as assets and liabilities of liabilities when it acquires additional shares in a subsidiary those foreign entities. Therefore, they are denominated in the that is already fully consolidated. In such a case, the additional functional currencies of the entities and translated at the year- goodwill corresponds to the excess of the acquisition price of end exchange rate. the additional shares purchased over the Group’s additional interest in the net assets of the company concerned. Translation adjustments previously recorded as Other Comprehensive Income are taken to the income statement on If the Group’s interest in the net fair value of the identifi able the disposal of a foreign entity. assets acquired, and liabilities and contingent liabilities assumed exceeds the cost of the business combination, the excess is 1.5.3 Business combinations recognized immediately in the income statement. For business combinations carried out since January 1, 2004, the Goodwill relating to associate companies is recorded under Group applies the purchase method as defi ned in IFRS 3, which “Investments in associates”. consists in recognizing the identifi able assets, liabilities and contingent liabilities at their fair values at the acquisition date.

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B. MEASUREMENT OF GOODWILL costs are amortized over the useful life of the intangible Goodwill is not amortized but is tested for impairment each asset recognized. In view of the Group’s activities, capitalized year or more frequently when an indication of impairment is development costs are not material. identifi ed. Impairment tests are carried out at the level of cash- generating units (CGUs), which constitute groups of assets B. OTHER INTERNALLY – GENERATED OR ACQUIRED INTANGIBLE ASSETS generating cash infl ows that are largely independent of the cash Other intangible assets include mainly: infl ows from other cash-generating units. ● amounts paid or payable as consideration for rights relating The methods used to carry out these impairment tests are to concession arrangements or public service contracts; described in Section 1.5.7 “Impairment of property, plant and equipment and intangible assets.” ● customer portfolios acquired on business combinations;

Impairment losses in relation to goodwill cannot be reversed ● surface and underground water drawing rights, which are and are shown under “Impairment” in the income statement. not amortized as they are granted indefi nitely;

Impairment losses on goodwill relating to associate companies ● concession assets. are reported under “Share in net income of associates.” Intangible assets are amortized on the basis of the expected 1.5.4.2 Other intangible assets pattern of consumption of the expected future economic benefi ts embodied in the asset. A. DEVELOPMENT COSTS Research costs are expensed as incurred. If this cannot be reliably calculated, the straight-line method is used, as a function of the useful lives presented in the table Development costs are capitalized when the asset recognition below (in years). criteria set out in IAS 38 are met. Capitalized development

Useful Lives

Minimum Maximum

Concessions rights 10 50 20 Customer portfolio 10 25 Other intangible assets 140

Some intangible assets with an indefi nite useful life are not amortized.

1.5.5 Property, plant and equipment In accordance with IAS 16, the initial cost of the item of property, plant and equipment includes an initial estimate of the costs 1.5.5.1 Property, plant and equipment - initial of dismantling and removing the item and restoring the site recognition and subsequent measurement on which it is located, when the entity has a present legal or Items of property, plant and equipment are recognized at constructive obligation to dismantle the item or restore the site. their historical cost of acquisition, production or entry to the In counterpart, a provision is recorded for the same amount. Group, less any accumulated depreciation and any accumulated Property, plant and equipment acquired under fi nance leases impairment losses. are carried in the consolidated balance sheet at the lower of The carrying amount of these items is not revalued as the market value and the present value of the related minimum Group has elected not to apply the allowed alternative method, lease payments. The corresponding liability is recognized under which consists of regularly revaluing one or more categories of fi nancial debt. These assets are also depreciated using the property, plant and equipment. methods and useful lives set out below.

Investment subsidies are deducted from the gross value of the The Group applies the revised IAS 23, which capitalizes assets concerned under the heading they were received. borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.

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1.5.5.2 Depreciation Depreciation is calculated on a straight-line basis over normal In accordance with the components approach, the Group uses useful lives. different depreciation terms for each signifi cant component of The range of useful lives is due to the diversity of the assets and a sole tangible asset when one of these signifi cant components contractual terms in each category. The shortest periods relate has a different useful life from that of the main tangible asset to to smaller equipment and furniture, while the longest useful which it relates. lives concern network infrastructure.

Main depreciation periods (years)

Constructions* 3 to 100 Plant and equipment 2 to 100 Transport equipment 3 to 14

(*) Including fi ttings.

Standard useful lives are as follows: two conditions are satisfi ed:

With respect to the assets accounted for as counterparty for the ● the grantor controls or regulates what services the operator site restoration provisions, they are amortized according to the must provide with the infrastructure and determines to method set forth in Section 16.4. whom it must provide them, and at what price;

● and the grantor controls the infrastructure, i.e. retains 1.5.6 Concessions Arrangements the right to take back the infrastructure at the end of the SIC 29, Disclosure – Concession Arrangements – was published concession. in May 2001 and prescribes the information that should be disclosed in the Notes to the fi nancial statements. Under IFRIC 12, the operator’s rights over infrastructure operated under concession arrangements should be accounted On November 30, 2006, the IFRIC published IFRIC 12 – Service for based on the party primarily responsible for payment. Thus: Concession Arrangements, which deals with the accounting ● treatment to be applied by the concession operator in respect the “intangible asset model” is applied when the operator is of certain concession arrangements. entitled to bill the users of the public service and when the users have primary responsibility to pay for the concession These interpretations set out the common features of services; and concession arrangements: ● the “fi nancial asset model” is applied when the operator has ● concession arrangements involve the provision of a public an unconditional right to receive cash or another fi nancial service and the management of associated infrastructure, asset, either directly from the grantor or indirectly by means together with specifi c capital renewal and replacement of warranties given by the grantor for amounts receivable obligations; from the users of the public service (e.g. via a contractually guaranteed internal rate of return), i.e., the grantor has the ● the grantor is contractually obliged to provide these services primary responsibility to pay the operator. to the public (this criterion must be met for the arrangement to qualify as a concession); “Primary responsibility” signifi es that while the identity of the payer of the services is not an essential criterion, the person ● the operator is responsible for at least some of the ultimately responsible for payment should be identifi ed. management of the infrastructure and does not merely act as an agent on behalf of the grantor; In cases where the local authority pays the Group but merely acts as an intermediary fee collector and does not guarantee the ● the contract sets the initial prices to be levied by the operator amounts receivable (“pass through arrangement”), the intangible and regulates price revisions over the concession period. asset model should be used to account for the concession since For a concession arrangement to fall within the scope of the users are, in substance, primarily responsible for payment. IFRIC 12, usage of the infrastructure must be controlled by the concession grantor. The requirement is met when the following

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However, where the users pay the Group, but the local authority 1.5.7 Impairment of property, plant and equipment guarantees the amounts that will be paid for the duration of and intangible assets the contract (e.g., via a guaranteed internal rate of return), In accordance with IAS 36, impairment tests are carried out the fi nancial asset model should be used to account for the on intangible assets and on property, plant and equipment concession infrastructure, since the local authority is, in whenever there is an indication that the assets may be substance, primarily responsible for payment. In practice, the impaired. Such indications may be based on events or fi nancial asset model is used to account for BOT (Build, Operate changes in the market environment, or on internal sources of and Transfer) contracts entered into with local authorities for information. Intangible assets that are not amortized are tested public services such as wastewater treatment and household for impairment annually. waste incineration).

Pursuant to these principles: Impairment indicators This impairment test is only carried out for property, plant and ● infrastructure to which the operator is given access by equipment and intangible assets with fi nite useful lives when the grantor of the concession at no consideration is not there are indications of an alteration in their value. In general, recognized in the statement of fi nancial position; this arises as a result of signifi cant changes in the operational ● start-up capital expenditure is recognized as follows: environment of the assets or from a poorer than expected economic performance. ● under the intangible asset model, the fair value of construction and other work on the infrastructure The main indications of impairment used by the Group are: represents the cost of the intangible asset and should ● external sources of information: be recognized when the infrastructure is built provided that this work is expected to generate future economic ● signifi cant changes in the economic, technological, benefi ts (e.g., the case of work carried out to extend political or market environment in which the entity the network). Where no such economic benefi ts are operates or to which the asset is dedicated, expected, the present value of commitments in respect ● fall in demand; of construction and other work on the infrastructure is recognized from the outset, with a corresponding ● internal sources of information: adjustment to concession liabilities, ● evidence of obsolescence or physical damage not ● under the fi nancial asset model, the amount receivable budgeted for in the depreciation/amortization schedule, 20 from the grantor is recognized at the time the ● worse-than-expected performance. infrastructure is built, at the fair value of the construction and other work carried out, Impairment ● when the grantor has a payment obligation for only part Items of property, plant and equipment and intangible assets of the investment, the cost is recognized in fi nancial are tested for impairment at the level of the individual asset or assets for the amount guaranteed by the grantor, with cash-generating unit as appropriate, determined in accordance the balance included in intangible assets (“mixed model”). with IAS 36. If the recoverable amount of an asset is lower than its carrying amount, the carrying amount is reduced to the Renewal costs consist of obligations under concession recoverable amount by recording an impairment loss. Upon arrangements with potentially different terms and conditions recognition of an impairment loss, the depreciable amount – and (obligation to restore the site, renewal plan, tracking account, etc.). possibly the useful life – of the assets concerned is revised. Renewal costs are recognized as either (i) intangible or fi nancial Impairment losses recorded in relation to property, plant and assets depending on the applicable model, when the costs are equipment or intangible assets may be subsequently reversed expected to generate future economic benefi ts (i.e. they bring if the recoverable amount of the assets is once again higher about an improvement); or (ii) expenses, where no such benefi ts than their carrying value. The increased carrying amount of an are expected to be generated (i.e. the infrastructure is restored item of property, plant or equipment attributable to a reversal to its original condition). of an impairment loss may not exceed the carrying amount that Costs incurred to restore the asset to its original condition are would have been determined (net of depreciation/amortization) recognized as a renewal asset or liability when there is a timing had no impairment loss been recognized in prior periods. difference between the contractual obligation calculated on a time proportion basis, and its realization. Measurement of recoverable amount In order to review the recoverable amount of property, plant The costs are calculated on a case-by-case basis based on the and equipment and intangible assets, the assets are, where obligations associated with each arrangement. appropriate, grouped into cash-generating units (CGUs), and the carrying amount of each unit is compared with its recoverable amount.

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For operating entities which the Group intends to hold on a 1.5.8.1 Accounting for fi nance leases long-term and going concern basis, the recoverable amount of On initial recognition, assets held under fi nance leases are a CGU corresponds to the higher of its fair value less costs to recorded as property, plant and equipment and the related sell and its value in use. Value in use is primarily determined liability is recognized under borrowings. At inception of the based on the present value of future operating cash fl ows and lease, fi nance leases are recorded at amounts equal to the fair a terminal value. Standard valuation techniques are used based value of the leased asset or, if lower, the present value of the on the following main economic data: minimum lease payments.

● discount rates based on the specifi c characteristics of the 1.5.8.2 Accounting for operating leases operating entities concerned; Payments made under operating leases are recognized as an ● terminal values in line with the available market data expense in the income statement on a straight-line basis over specifi c to the operating segments concerned and growth the lease term. rates associated with these terminal values, not to exceed infl ation. 1.5.8.3 Accounting for arrangements that contain a lease Discount rates are determined on a post-tax basis and applied IFRIC 4 deals with the identifi cation of services and take-or-pay to post-tax cash fl ows. The recoverable amounts calculated on sales or purchase contracts that do not take the legal form of a the basis of these discount rates are the same as the amounts lease but convey rights to customers/suppliers to use an asset obtained by applying the pre-tax discount rates to cash fl ows or a group of assets in return for a payment or a series of fi xed estimated on a pre-tax basis, as required by IAS 36. payments. Contracts meeting these criteria should be identifi ed as either operating leases or fi nance leases. In the latter case, a For operating entities which the Group has decided to sell, the fi nance receivable should be recognized to refl ect the fi nancing related carrying amount of the assets concerned is written deemed to be granted by the Group where it is considered as down to estimated market value less costs of disposal. When acting as lessor and its customers as lessees. negotiations are ongoing, this is determined based on the best estimate of their outcome as of the statement of fi nancial This interpretation applies to some contracts with industrial or position date. public customers relating to assets fi nanced by the Group.

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 1.5.8 Leases value. Net realizable value corresponds to the estimated selling 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 indicators The cost of inventories is determined based on the fi rst-in, fi rst- set out in IAS 17 in order to determine whether they constitute out method or the weighted average cost formula. operating leases or fi nance leases.

A fi nance lease is defi ned 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 with accordance with IAS 32 and IAS 39. the defi nition of a fi nance lease are classifi ed as operating leases. 1.5.10.1 Financial assets The following main factors are considered by the Group to assess whether or not a lease transfers substantially all the risks and Financial assets comprise available-for-sale securities, loans rewards incidental to ownership: whether (i) the lessor transfers and receivables carried at amortized cost including trade and ownership of the asset to the lessee by the end of the lease other receivables, and fi nancial assets measured at fair value term; (ii) the lessee has an option to purchase the asset and if through income including derivative fi nancial instruments. so, the conditions applicable to exercising that option; (iii) the A. AVAILABLE-FOR-SALE SECURITIES lease term is for the major part of the estimated economic life of Available-for-sale securities include the Group’s investments in the asset; (iv) the asset is of a highly specialized nature; and (v) non-consolidated companies and equity or debt instruments the present value of the minimum lease payments amounts to that do not satisfy the criteria for classifi cation in another at least substantially all of the fair value of the asset concerned. category (see below).

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These items are measured at fair value on initial recognition, Financial liabilities are broken down into current and non- which generally corresponds to the acquisition cost plus current liabilities in the statement of fi nancial position. Current transaction costs. Subsequently, available-for-sale securities are fi nancial liabilities primarily comprise: measured by using a weighted average cost formula. ● fi nancial liabilities with a settlement or maturity date within At each statement of fi nancial position date, available-for-sale 12 months of the statement of fi nancial position date; securities are measured at fair value. For listed companies, fair ● fi nancial liabilities for which the Group does not have an value is determined based on the quoted market price at the unconditional right to defer settlement for at least 12 months statement of fi nancial position date. For unlisted companies, after the statement of fi nancial position date; fair value is measured based on standard valuation techniques (reference to similar recent transactions, discounted future ● fi nancial liabilities held primarily for trading purposes; cash fl ows, etc.). ● derivative fi nancial instruments qualifying as fair value Changes in fair value are recognized directly in Other hedges where the underlying is classifi ed as a current item; Comprehensive Income, except when the decline in the value ● all derivative fi nancial instruments not qualifying as hedges. of the investment below its historical acquisition cost is judged signifi cant or prolonged enough to require an impairment if needed. A. MEASUREMENT OF BORROWINGS AND OTHER FINANCIAL In this case, loss is recognized in income under “Impairment”. LIABILITIES Only impairment losses recognized on debt instruments (debt Borrowings and other fi nancial liabilities are measured at securities/bonds) may be reversed through income. amortized cost using the effective interest rate method.

B. LOANS AND RECEIVABLES CARRIED AT AMORTIZED COST On initial recognition, any issue premiums/discounts, redemption This item primarily includes loans and advances to associates or premiums/discounts and issuing costs are added to/deducted non-consolidated companies, and guarantee deposits. from the nominal value of the borrowings concerned. These items are taken into account when calculating the effective On initial recognition, these loans and receivables are recorded interest rate and are therefore recorded in the consolidated at fair value plus transaction costs. At each statement of income statement over the life of the borrowings using the fi nancial position date, they are measured at amortized cost amortized cost method. using the effective interest rate method. As regards structured debt instruments that do not have an On initial recognition, trade and other receivables are recorded equity component, the Group may be required to separate 20 at fair value, which generally corresponds to their nominal value. an “embedded” derivative instrument from its host contract. Impairment losses are recorded based on the estimated risk of The conditions under which these instruments must be non-recovery. This item includes amounts due from customers separated are detailed below. When an embedded derivative is under construction contracts (see Section 1.5.13). separated from its host contract, the initial carrying amount of the structured instrument is broken down into an embedded C. FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH INCOME derivative component, corresponding to the fair value of the These fi nancial assets meet the qualifi cation or designation embedded derivative, and a fi nancial liability component, criteria set out in IAS 39. corresponding to the difference between the amount of the issue and the fair value of the embedded derivative. The This item mainly includes trading securities and short-term separation of components upon initial recognition does not give investments which do not meet the criteria for classifi cation rise to any gains or losses. Subsequently, the debt is recorded as cash or cash equivalents (see Section 1.5.11). The fi nancial at amortized cost using the effective interest method, while the assets are measured at fair value at the statement of fi nancial derivative is measured at fair value, with changes in fair value position date and changes in fair value are recorded in the taken to income. income statement. B. PUT OPTIONS ON MINORITY STAKES 1.5.10.2 Financial liabilities Other fi nancial liabilities primarily include put options granted Financial liabilities include borrowings, trade and other by the Group to minority interests. As no specifi c guidance payables, derivative fi nancial instruments, capital renewal and is provided by IFRS, the Group has adopted the following replacement liabilities and other fi nancial liabilities. accounting treatment for these commitments:

● when the put option is initially granted, the present value of the exercise price is recognized as a fi nancial liability, with a corresponding reduction in minority interests. When the value of the put option is greater than the carrying amount of the minority interests, the difference is recognized as goodwill;

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● at each statement of fi nancial position date, the amount FAIR VALUE HEDGES of the fi nancial liability is revised and any changes in the A fair value hedge is defi ned as a hedge of the exposure to amount are recorded with a corresponding adjustment to changes in fair value of a recognized asset or liability, such goodwill; as a fi xed-rate loan or borrowing, or of assets, liabilities or an unrecognized fi rm commitment denominated in a foreign ● payments of dividends to minority interests result in an currency. increase in goodwill; The gain or loss from re-measuring the hedging instrument ● in the income statement, minority interests are allocated at fair value is recognized in income. The gain or loss on the their share in income. In the statement of fi nancial position, hedged item attributable to the hedged risk adjusts the carrying the share in income allocated to minority interests reduces amount of the hedged item and is also recognized in income the carrying amount of goodwill. No fi nance costs are even if the hedged item is in a category in respect of which recognized in respect of changes in the fair value of liabilities changes in fair value are recognized through equity (Other recognized against goodwill. Comprehensive Income). These two adjustments are presented With fi xed-price put options, the liability equals the present net in the income statement, with the net effect corresponding value of the exercise price. With fair-value or variable-price put to the ineffective portion of the hedge. options, the liability is calculated based on the estimated fair value at the statement of fi nancial position date or in accordance CASH FLOW HEDGES with the contractual conditions applicable to the exercise price A cash fl ow hedge is a hedge of the exposure to variability in based on the latest available information. cash fl ows that could affect the Group’s consolidated income. The hedged cash fl ows may be attributable to a particular risk The difference between liabilities and the carrying amount associated with a recognized fi nancial or non-fi nancial asset or of minority interests is allocated in full to goodwill, with no a highly probable forecast transaction. adjustment to fair value, in accordance with the method used by the Group to account for acquisitions of minority interests. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized directly 1.5.10.3 Derivatives and hedge accounting in equity (Other Comprehensive Income) net of tax, while the The Group uses fi nancial instruments to manage and reduce its ineffective portion is recognized in income. The gains or losses exposure to market risks arising from fl uctuations in interest accumulated in equity are reclassifi ed to the income statement, rates, foreign currency exchange rates and commodity prices. under the same caption as the loss or gain on the hedged item Use of derivative instruments is governed by a Group policy for - i.e., current operating income for operating cash fl ows and managing interest rate, currency and commodity risks. fi nancial income/expense for other cash fl ows - in the same periods in which the hedged cash fl ows affect income. DEFINITION AND SCOPE OF DERIVATIVE FINANCIAL INSTRUMENTS If the hedging relationship is discontinued, in particular because Derivative fi nancial instruments are contracts whose value the hedge is no longer considered effective, the cumulative gain changes in response to the change in one or more observable or loss on the hedging instrument remains separately recognized variables that do not require any material initial net investment in equity until the forecast transaction occurs. However, if a and that are settled at a future date. forecast transaction is no longer probable, the cumulative gain or loss on the hedging instrument is recognized in income. Derivative instruments therefore include swaps, options and futures, as well as forward commitments to purchase or sell HEDGE OF A NET INVESTMENT IN A FOREIGN OPERATION listed and unlisted securities. In the same way as for a cash fl ow hedge, the portion of the gain or loss on the hedging instrument that is determined to HEDGING INSTRUMENTS: RECOGNITION AND PRESENTATION be an effective hedge of the currency risk is recognized directly Derivative instruments qualifying as hedging instruments are in equity, net of tax, while the ineffective portion is recognized recognized in the statement of fi nancial position and measured in income. The gains or losses accumulated in equity are at fair value. However, their accounting treatment varies transferred to the consolidated income statement when the according to whether they are classifi ed as: investment is sold or liquidated.

● a fair value hedge of an asset or liability;

● a cash fl ow hedge;

● a hedge of a net investment in a foreign operation.

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IDENTIFICATION AND DOCUMENTATION OF HEDGING ● the fair value of forward foreign exchange contracts and RELATIONSHIPS currency swaps is calculated based on current prices for The hedging instruments and hedged items are designated contracts with similar maturity profi les by discounting the at the inception of the hedging relationship. The hedging future cash fl ow spread (the difference between the forward relationship is formally documented in each case, specifying price of the contract and the recalculated forward price the hedging strategy, the hedged risk and the method used to based on new market conditions applied to the nominal assess hedge effectiveness. amount);

Only derivative contracts entered into with external ● the fair value of currency or interest rate options is counterparties are considered as being eligible for hedge determined using valuation techniques for options; accounting. Hedges are considered to be effective when changes in fair value or cash fl ows between the hedging instrument and ● commodity derivatives are valued as a function of market the hedged item are offset within a range of 80%-125%. quotes based on discounted future cash fl ows (fi rm contracts: commodity swaps or commodity forwards), and Hedge effectiveness is demonstrated both prospectively and option valuation models (optional contracts) for which it may retrospectively using various methods, based mainly on a be necessary to observe market price volatility. For contracts comparison between changes in the fair value or cash fl ows with maturity exceeding the depth of transactions for which between the hedging instrument and the hedged item. Methods prices are observable, or that are particularly complex, based on an analysis of statistical correlations between valuations may be based on internal assumptions; historical price data are also used by the Group. ● for complex contracts entered into with independent DERIVATIVE INSTRUMENTS NOT QUALIFYING FOR HEDGE fi nancial institutions, the Group uses valuations carried out ACCOUNTING: RECOGNITION AND PRESENTATION by counterparties, on an exceptional basis. These items mainly concern derivative fi nancial instruments used in economic hedges that have not been - or are no longer These instruments are presented in Level 2 of the fair value - documented as hedging relationships for accounting purposes. measurement hierarchy, unless their valuation depends signifi cantly on non-observable parameters. In this case, they When a derivative fi nancial instrument does not qualify or no are presented at Level 3 of the fair value measurement hierarchy. longer qualifi es for hedge accounting, changes in fair value These largely involve derivative fi nancial instruments with are recognized directly in income, under “Mark-to-market” maturities exceeding the observable horizon for the forward or “Marked-to-market on commodity contracts other than prices of the underlying asset, or for which certain parameters, 20 trading instruments”, in current operating income for derivative such as underlying volatility, are not observable. instruments with non-fi nancial assets, and in fi nancial income or expenses for currency, interest rate and equity derivatives. 1.5.11 Cash and cash equivalents

MEASUREMENT OF FAIR VALUE These items include cash equivalents as well as short-term The fair value of listed instruments on an active market is investments that are considered to be readily convertible into a determined based on the market price. In this case, these known amount of cash and where the risk of a change in their instruments are presented at Level 1 of the fair value value is deemed to be negligible based on the criteria set out measurement. in IAS 7.

The fair value of non-listed fi nancial instruments for which there Bank overdrafts are not included in the calculation of cash is observable market data is determined by using valuation and cash equivalents and are recorded under “Short-term techniques such as the valuation models applied for options, or borrowings”. by using the discounted cash fl ow method. 1.5.12 Treasury shares The models used to value these instruments include assumptions Treasury shares are recognized at cost and deducted from based on market data: equity. Gains and losses on disposal of treasury shares are ● the fair value of interest rate swaps is calculated based on directly recorded in equity and do not therefore impact income discounted future cash fl ows; for the period.

1.5.13 Construction contracts The engineering operations carried out by Degrémont and OIS fall within the scope of IAS 11 – Construction Contracts.

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In accordance with IAS 11, the Group applies the percentage of 1.5.14.3 Employee share purchase plans completion method as described in Section 1.5.16 (“Revenues”) Employee share purchase plans enable employees to subscribe to determine the contract revenue and costs to be recorded in to company shares at a lower-than-market price. The fair value the consolidated income statement for each period. of the instruments awarded under employee share purchase When it is probable that total contract costs will exceed total plans is estimated on the allotment date based on this discount contract revenue, the expected loss to completion is recognized awarded to employees and non-transferability period applicable as an expense immediately. to the share subscribed. The cost is recognized in full and offset against equity. Partial payments received under construction contracts before the corresponding work has been carried out are recorded CASH-SETTLED INSTRUMENTS on the liabilities side of the statement of fi nancial position as In specifi c cases where local legislation prohibits employee advances received from customers. The costs incurred plus share purchase plans, share appreciation rights (SAR) are any recognized profi t less any recognized losses and progress granted instead. As these instruments are settled in cash, their billings are then determined. If this amount is positive, it is fair value is recognized in expenses over the vesting period, recognized as an asset under “Amount due from customers with an offsetting entry recorded in employee-related liabilities. under construction contracts” within “Trade and other Changes in the fair value of the liability are taken to income for receivables”. If the amount is negative, it is recognized as a each fi scal year. liability under “Amount due to customers under construction contracts” within “Trade and other payables”. 1.5.15 Provisions

1.5.14 Share-based payment 1.5.15.1 Provisions for post-employment benefi t obligations and other long-term benefi ts Under IFRS 2, the Group is required to recognize an expense Depending on the laws and practices in force in the countries (personnel costs) corresponding to benefi ts granted to where SUEZ ENVIRONNEMENT COMPANY operates, Group employees in the form of share-based payments, in consideration companies have obligations in terms of pensions, early for services provided. These services are valued at the fair value retirement payments, retirement bonuses and other benefi t of the instruments awarded. plans. Such obligations generally apply to all of the employees This payment may take the form of instruments paid in shares within the companies concerned. or in cash. The Group’s obligations in relation to pensions and other EQUITY-SETTLED INSTRUMENTS employee benefi ts are recognized and measured in accordance with IAS 19. Accordingly: 1.5.14.1 Stock option plans ● the cost of defi ned contribution plans is expensed based on Options granted to Group employees are measured at the the amount of contributions payable in the period; grant date using a binomial pricing model for options with no performance conditions, or a Monte Carlo pricing model for ● the Group’s obligations concerning pensions and other those with performance conditions. These models take into employee benefi ts payable under defi ned benefi t plans are account the characteristics of the plan concerned (exercise assessed on an actuarial basis. These calculations are based price, exercise period, performance conditions if any), market on assumptions relating to mortality, staff turnover and data at the time of grant (risk-free rate, share price, volatility, estimated future salary increases, as well as the economic expected dividends), and a behavioral assumption in relation conditions specifi c to each country or subsidiary of the to benefi ciaries. The value determined is recorded in personnel Group. Discount rates are determined by reference to the costs over the vesting period and offset against equity. yield, at the measurement date, on high-quality corporate bonds in the related geographical area (or on government 1.5.14.2 Allotment of bonus shares bonds in countries where no representative market for such The fair value of bonus share plans is estimated based on corporate bonds exists). the share price on the allotment date, taking into account Provisions are recorded when commitments under these plans the absence of dividend payments over the vesting period, less the unrecognized past service cost exceed the fair value the turnover rate for the relevant staff in each plan and the of plan assets. When the value of plan assets (capped where likelihood of the Group’s performance. The estimation of the fair appropriate) is greater than the related commitments, the value of the plans also takes into account the non-transferability surplus is recorded as an asset under “Other current assets” or period associated with these intruments. The cost is expensed “Other non-current assets”. over the vesting period of the rights and offset against equity.

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As regards post-employment benefi t obligations, the Group has 1.5.16 Revenues elected to use the option available under IAS 19 to discontinue Group revenues (as defi ned by IAS 18) are mainly generated the corridor method, and to recognize actuarial gains and losses from the following: resulting from changes in actuarial assumptions and experience adjustments directly to Other Comprehensive Income (equity) ● water services; items. ● waste services; Where appropriate, adjustments resulting from applying the ● engineering and construction contracts and other services. asset ceiling to net assets relating to overfunded plans are treated in a similar way. Revenues on sales of goods are recognized on delivery, (i.e., when the signifi cant risks and rewards of ownership are However, actuarial gains and losses on other long-term benefi ts transferred to the buyer), or as a function of the progress of the such as long-service awards, continue to be recognized contract, in the case of provisions of services and construction immediately in income. contracts, when the price is set or calculable and receivables The interest cost in respect of pensions and other employee are likely to be recoverable. benefi t obligations, and the expected return on related plan Revenues are measured at the fair value of the consideration assets, are presented as a fi nancial expense. received or receivable. Where deferred payment has a material impact on the measurement of the fair value of this 1.5.15.2 Other provisions consideration, this is taken into account by discounting future The Group records a provision where it has a present obligation receipts. (legal or constructive), the settlement of which is expected to result in an outfl ow of resources embodying economic benefi ts 1.5.16.1 Water services with no corresponding consideration in return. Revenues generated by water distribution are recognized based A provision for restructuring costs is recorded when the general on volumes delivered to customers, either specifi cally metered criteria for setting up a provision are met, i.e., when the Group and invoiced or estimated based on the output of the supply has a detailed formal plan relating to the restructuring and has networks. raised a valid expectation in those affected that it will carry The price for wastewater services and wastewater treatment out the restructuring by starting to implement that plan or is either included in the water distribution invoice, or is sent in announcing its main features to those affected by it. a separate invoice to the local municipality or industrial client. 20 Provisions with a maturity of over 12 months are discounted Commission fees received from the grantors of concessions are when the effect of discounting is material. The Group’s main recorded as revenues. long-term provisions are provisions for site restoration costs (relating to the waste services business). The discount rate (or 1.5.16.2 Waste services rates) used refl ect current market measurements of the time In most cases, waste collection revenue is calculated based on value of money and the risks specifi c to the liability concerned. tonnage collected and the service provided by the operator. Expenses corresponding to the reversal of discounting adjustments to long-term provisions are recorded under other Revenues from other forms of treatment (principally sorting and fi nancial income and expenses. incineration) are recognized based on volumes processed by the operator and the incidental revenues generated by recycling A provision is recognized when the Group has a present legal and reuse, such as the sale of paper, cardboard, glass, metals or constructive obligation to restore a site. The counterpart for and plastics for sorting centers, and the sale of electricity and this provision is included in the carrying amount of the asset heat for incinerators. concerned. Adjustments to the provision due to subsequent changes in the expected outfl ow of resources, the site 1.5.16.3 Engineering and construction contracts restoration date or the discount rate are deducted from or and other services added to the cost of the corresponding asset in a symmetrical Revenues from construction contracts are determined using manner. The impacts of unwinding the discount are recognized the percentage-of-completion method and more generally in expenses for the fi scal year. according to the provisions of IAS 11 (see Section 1.5.13). Depending on the contract concerned, the stage of completion may be determined either based on the proportion that costs incurred to date bear to the estimated total costs of the contract, or on the physical progress of the contract based on factors such as contractually defi ned stages.

Revenues also include revenues from fi nancial concession assets (IFRIC 12) and lease receivables (IFRIC 4).

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1.5.17 Current operating income 1.5.19 Income Tax Expense Current operating income is an indicator used by the Group to The Group computes taxes in accordance with prevailing tax present “a level of operational performance that can be used legislation in the countries where income is taxable. as part of an approach to forecast recurring performance” In accordance with IAS 12, deferred taxes are recognized (in accordance with CNC Recommendation 2009-R03 in the according to the liability method on temporary differences fi nancial statements of companies applying IFRS). Current between the carrying amounts of assets and liabilities in the operating income is a sub-total which helps management to consolidated fi nancial statements and their tax bases, using better understand the Group’s performance because it excludes tax rates that have been enacted or substantively enacted elements which are inherently diffi cult to predict due to their by the statement of fi nancial position date. However, under unusual, irregular or non-recurring nature. Such elements relate the provisions of IAS 12, no deferred taxes are recognized to asset impairments and disposals, restructuring costs, the for temporary differences arising from goodwill for which cost of listing SUEZ ENVIRONNEMENT COMPANY on the stock impairment losses are not deductible for tax purposes, or from market, and Marked-to-market on commodity contracts other the initial recognition of an asset or liability in a transaction than trading instruments, which are defi ned as follows: which (i) is not a business combination; and (ii) at the time of ● impairment includes impairment losses on non-current the transaction, affects neither accounting income nor taxable assets; income. In addition, deferred tax assets are only recognized to the extent that it is probable that taxable income will be ● disposals of assets include capital gains and losses on available against which the deductible temporary difference disposals of non-current assets, consolidated companies can be utilized. and Available-for-Sale securities; Temporary differences arising on restatements of fi nance leases ● restructuring costs concern costs corresponding to result in the recognition of deferred taxes. a restructuring program planned and controlled by management that materially changes either the scope of a A deferred tax liability is recognized for all taxable temporary business undertaken by an entity, or the manner in which that differences associated with investments in subsidiaries, business is conducted, based on the criteria set out in IAS 37; branches and associates, and interests in joint ventures, except if the Group is able to control the timing of the reversal of the ● the cost of listing SUEZ ENVIRONNEMENT COMPANY on temporary difference and it is probable that the temporary the stock market concerns fees payable to external service difference will not reverse in the foreseeable future. providers working on the stock market listing project in 2008 and costs linked to changes in the brand and visual identity; Net balances of deferred tax are calculated based on the tax position of each company or on the total income of the ● marked-to-market on commodity contracts other than companies included within the consolidated tax group and the trading instruments corresponds to changes in the fair net position of each fi scal entity is recorded on the statement value (mark-to-market) of fi nancial instruments relating to of fi nancial position under assets or liabilities, as appropriate. commodities, gas and electricity, which do not qualify as either trading or hedging instruments. These contracts are Deferred taxes are reviewed at each statement of fi nancial used in economic hedges of operating transactions. position date to take into account factors including the impact of changes in tax laws and the prospects of recovering deferred 1.5.18 Cash fl ow statement tax assets arising from deductible temporary differences.

The Group cash fl ow statement is prepared based on net Deferred tax assets and liabilities are not discounted. income, using the indirect method. 1.5.20 Earnings per share “Interest received on non-current fi nancial assets” is classifi ed within investing activities because it represents a return on Basic earnings per share are calculated by dividing the net investments. “Interest received on cash and cash equivalents” income Group share for the fi scal year by the weighted average is shown as a component of fi nancing activities because the number of shares outstanding during the fi scal year. The interest can be used to reduce borrowing costs. average number of shares outstanding during the fi scal year is the number of ordinary shares outstanding at the beginning Cash fl ows related to payment of taxes are treated separately. of the year, adjusted by the number of ordinary shares bought back or issued during the course of the year.

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NOTE 2 Major transactions

2.1 SIGNIFICANT EVENTS IN 2009 2.1.2 Signifi cant contracts

2.1.1 Preliminary agreement with Criteria CaixaCorp New construction and operation contract in Melbourne, for the takeover by SUEZ ENVIRONNEMENT Australia of the Water and Environment activities Through its Degrémont subsidiary and the AquaSure joint- of Aguas de Barcelona venture (SUEZ ENVIRONNEMENT, Degrémont, Thiess, an On October 22, 2009, SUEZ ENVIRONNEMENT and Criteria Australian construction and services company and Macquarie CaixaCorp (Criteria) signed a binding preliminary agreement Group, international provider of banking, fi nancial and funds regarding a global transaction on Aguas de Barcelona (Agbar). management services), SUEZ ENVIRONNEMENT was awarded the contract for the seawater desalination plant project This transaction includes: managed by the State of Victoria, which will provide one-third of metropolitan Melbourne’s water needs by the end of 2011. ● a delisting tender offer in cash to be launched by Agbar on its own shares, at a price of €20 per share, for a total This contract includes the fi nancing, design, construction and consideration of up to €299 million. The shares acquired operation, for the period to 2039, of the plant, which will have through this delisting tender offer will be subsequently a daily capacity of 450,000 m3 of drinking water, and the 85-km redeemed; water distribution network. The total amount of the investment is €2 billion. ● SUEZ ENVIRONNEMENT’s acquisition of AGBAR shares held by Criteria, for €20 per share, to achieve a fi nal 75.01% stake This contract represents total revenues of €1.2 billion over in Agbar, i.e., a total amount of €647 million; 30 years for SUEZ ENVIRONNEMENT and Degrémont.

● the simultaneous disposal to Criteria of the 54.8% stake held Renewal of the Macao water services concession contract by Agbar in Adeslas, for €687 million; Via its Macao Water subsidiary, SUEZ ENVIRONNEMENT ● at the same time, Criteria will take full control of Adeslas signed the renewal of a concession contract to provide water via the additional acquisition of the 45% held by Malakoff services for the next 20 years in the Macao (China) Special Mederic. Administrative Region. This contract will generate total revenues 20 The two transactions between SUEZ ENVIRONNEMENT and of approximately €500 million (SUEZ ENVIRONNEMENT share) Criteria (sale of Adeslas and takeover by SUEZ ENVIRONNEMENT over the period. of Agbar’s Water and Environment activities) are linked and are dependant on the prior effective completion of the delisting Commissioning of the EVI incinerator tender offer made by AGBAR on its own shares. The EVI incineration plant, located in the Europapark international industrial park in Emlichheim-Coevorden on the German-Dutch This delisting tender offer is subject to approval by Agbar’s border, was commissioned on April 2, 2009. This incineration plant, Extraordinary Shareholders’ Meeting and the approval of the which has a total capacity of 365,000 tons, is used to internalize transaction by CNMV (Spanish Stock Exchange authority). the treatment of fl ows of waste collected in the Benelux-Germany In addition, this transaction is subject to various regulatory and zone. legal approvals (notably, the relevant competition authorities), as regards both SUEZ ENVIRONNEMENT’s acquisition of 2.1.3 Acquisitions exclusive control of Agbar and Criteria’s acquisition of control of SUEZ ENVIRONNEMENT took exclusive control of Swire-SITA, a Adeslas. This latter transaction is also subject to the approval of company previously owned at 50%. This transaction, launched the Spanish insurance supervisory authority. in 2008, was approved by the Hong Kong authorities on December 22, 2009. (See section 20.1 – Note 27 “Subsequent events” for detailed changes since December 31, 2009). Through its Sino French Water Development (SFWD) subsidiary, SUEZ ENVIRONNEMENT participated in the formation of a new joint venture for the supply of water in Tianjin, China. Tianjin Sino French Jieyuan Water Co. is a joint-venture in which SFWD and Tianjin Water Works Group hold 52% and 48% stakes, respectively. This company will be responsible for operating the Jieyuan water station, which supplies 1 million inhabitants, i.e., one-third of the urban population of Tianjin.

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In the second quarter of 2009, SUEZ ENVIRONNEMENT, via its Launch of the fi rst SUEZ ENVIRONNEMENT COMPANY SITA Sverige (Sweden) subsidiary, acquired the shares of Allren i stock option and performance share plans Sverige AB. Allren i Sverige AB is active in the collection, sorting On December 17, 2009, the Board of Directors decided to award and recycling of waste (sales of €11.3 million in 2009). 3,464,440 stock options and 173,852 performance shares to SUEZ ENVIRONNEMENT Group employees. See Note 23 of this 2.1.4 Disposals document. The Group sold its entire stake in the Wasteman Group, which specializes in the collection and treatment of waste in Moving of the head offi ces of SUEZ ENVIRONNEMENT and of its French subsidiaries South Africa. The SUEZ ENVIRONNEMENT Group decided to bring together in During the year, SUEZ ENVIRONNEMENT sold its entire stake in one place the teams of the head offi ce of SUEZ ENVIRONNEMENT, Gas Natural on the stock market. as well as those of its subsidiaries Lyonnaise des Eaux, SITA In December 2009, SUEZ ENVIRONNEMENT, via its SITA UK France, Degrémont and OIS. The moving of these teams to a subsidiary, sold its stake in LondonWaste, a company specializing single site in the La Défense area (Paris region) is expected to be in incineration. fi nalized by the end of 2010.

2.1.5 Agreement for unwinding cross holdings 2.2 SIGNIFICANT EVENTS IN 2008 in joint subsidiaries with Veolia Environnement 2.2.1 Major consequences for the Group following On December 19, 2008, a memorandum of understanding was the merger between SUEZ and Gaz de France signed with Veolia Eau – Cie Générale des Eaux, a subsidiary of Veolia Environnement and Lyonnaise des Eaux, a subsidiary The merger between SUEZ and Gaz de France, announced of SUEZ ENVIRONNEMENT, in order to unwind their direct and publicly in February 2006, materialized through decisions made indirect joint stakes in certain drinking water and wastewater on July 16, 2008 at the respective Combined Ordinary and companies in France. This decision by the two groups followed Extraordinary Shareholders’ Meetings of Gaz de France and the decision taken by the French Competition Commission SUEZ. The merger became effective on July 22, 2008. The major (Conseil de la Concurrence) on July 11, 2002. consequences for SUEZ ENVIRONNEMENT COMPANY are as follows: On 31 December 2009, the unwinding process was underway (see Notes 26.1 and 27 of this chapter). Initial stock market listing of SUEZ ENVIRONNEMENT COMPANY 2.1.6 Other major events As part of the merger between SUEZ and Gaz de France, SUEZ decided to complete the combination of all its Bond issuances environment-related activities within a new company, As part of its policy covering the funding, diversifi cation SUEZ ENVIRONNEMENT COMPANY. SUEZ contributed all of and lengthening of the maturity of its debt, its shares of SUEZ ENVIRONNEMENT to the new company SUEZ ENVIRONNEMENT COMPANY came out with a series of and distributed 65% of the capital of the Company to the bond issues as part of the Euro Medium Term Notes (EMTN) shareholders of SUEZ before the merger. program set up in March 2009. Some €3 billion in bonds have been issued since March 2009. The breakdown of these After this distribution, the merged entity GDF SUEZ held 35.41% transactions is shown in Note 13.3 of this chapter. of SUEZ ENVIRONNEMENT COMPANY and maintained exclusive control of it through a shareholders’ agreement grouping Launch of the fi rst SUEZ ENVIRONNEMENT COMPANY GDF SUEZ and the key shareholders of the former SUEZ Group employee bonus share allocation plan (GBL, Areva, CNP Assurances, Sofi na, Caisse des Dépôts et Pursuant to the resolution approved at the Shareholders’ Consignations), together representing 47.16% of the capital of Meeting of SUEZ ENVIRONNEMENT COMPANY on May 26, SUEZ ENVIRONNEMENT COMPANY as of July 22, 2008. 2009, the Board of Directors decided to award 30 On the effective date of the merger of SUEZ and Gaz de France, SUEZ ENVIRONNEMENT COMPANY shares to each of the Group’s July 22, 2008, the shares of SUEZ ENVIRONNEMENT COMPANY 68,000 employees, i.e., more than 2 million existing shares. were admitted for trading on the Euronext Paris and Euronext Brussels stock markets.

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Two months after its initial listing, on September 22, 2008, companies. The shares of these two companies could not be SUEZ ENVIRONNEMENT COMPANY joined the CAC 40 stock reclassifi ed given their particular situations and the litigation in market index, which groups the 40 most important stocks in the progress (see Section 26.2 of this document). French economy. The economic transfer of the rights and obligations was part of the reclassifi cation under SUEZ ENVIRONNEMENT of all of SUEZ’s Reclassifi cation of environmental branch interests under SUEZ ENVIRONNEMENT COMPANY or some environment-related assets prior to the GDF SUEZ merger and of its subsidiaries the spin-off distribution of SUEZ ENVIRONNEMENT COMPANY shares. During 2008, the Group acquired the following shares from SUEZ SA or some of its subsidiaries: The main provisions of this agreement set out the following:

● 100% of the shares of the Moroccan company Eaux de l’Oum ● SUEZ will bear all costs of any type resulting from the Er Rbia for a price of €8.2 million. This company operates a ownership of the shares of these two companies up to the water production activity on behalf of Lydec. The company residual amount of the provision for risks and contingencies Eaux de l’Oum Er Rbia is now fully consolidated in the appearing in SUEZ’s consolidated fi nancial statements as of consolidated fi nancial statements; December 31, 2007;

● 44.42% of the shares of Calédonienne des Eaux (water ● SUEZ ENVIRONNEMENT would bear the excess of these distribution operations) for a price of €12.3 million. The Group costs over this amount; now holds 100% of this company, which is fully consolidated ● in the consolidated fi nancial statements; if all of these costs should prove to be less than the amount set aside in the provision, then SUEZ would repay ● 53% of the New Caledonian company Sadet (water an amount equal to the unused balance of this provision to distribution operations) for a price of €5.3 million. The Group SUEZ ENVIRONNEMENT; now holds 100% of this company, which is fully consolidated ● in the consolidated fi nancial statements; SUEZ will repay to SUEZ ENVIRONNEMENT any sum that it might collect in connection with ongoing or future ● 51% of the shares of Consortium Intesa Aretina, a holding proceedings. company owning 46% of the company operating the water distribution concession for the city of Arezzo, Italy, for a price Withdrawal of SUEZ ENVIRONNEMENT and two of €14 million. of its subsidiaries (Lyonnaise des Eaux France and SITA France) from GIE SUEZ Alliance 20 ● 100% of the capital of the Australian holding company The companies SUEZ ENVIRONNEMENT, Lyonnaise des Eaux Lyonnaise Prospect (holding 51% of the rights of Prospect France, and SITA France were members of the economic interest Water Partnership, the entity operating a drinking water group (GIE) SUEZ Alliance at 6% each, which grouped SUEZ with concession contract in Sydney) for a price of €22.4 million; its main subsidiaries. GIE SUEZ Alliance has obtained several ● the entirety of the shares still held in the Argentine company bank and bond borrowings and has also served as guarantor Aguas Cordobesas (drinking water distribution concession in for certain bond borrowings, loan agreements and derivatives the province of Cordoba), representing 5% of the capital. contracts.

As indicated in the basis of presentation (Note 1.1), these As part of the spin-off distribution, SUEZ ENVIRONNEMENT, combinations were analyzed as asset exchange transactions Lyonnaise des Eaux France, and SITA France were expected to between entities under common control and have thus been withdraw from GIE SUEZ Alliance. This withdrawal took place in recorded at their historical book value in SUEZ’s consolidated October 2008. fi nancial statements. The articles of incorporation of GIE SUEZ Alliance stipulate that any member may withdraw, on request, provided that it has Synthetic Argentinean contract fulfi lled all its obligations and repaid all its debts to GIE SUEZ On June 5, 2008, SUEZ and SUEZ ENVIRONNEMENT signed a Alliance and its members, and no longer benefi ts from any 20-year agreement involving the economic transfer in favor of guarantees provided by GIE SUEZ Alliance. SUEZ ENVIRONNEMENT of the rights and obligations associated with SUEZ’s equity interests in the Argentine companies Aguas In accordance with the provisions of the articles of incorporation Argentinas and Aguas Provinciales de Santa Fe. Despite this, of the GIE SUEZ Alliance, an outgoing member of GIE SUEZ according to this agreement, GDF SUEZ SA remains the only Alliance remains jointly liable for the commitments made company in the GDF SUEZ Group to own shares of these two by GIE SUEZ Alliance prior to the date of withdrawal, except

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with respect to the creditors of GIE SUEZ Alliance who have ● SUEZ ENVIRONNEMENT and SUEZ ENVIRONNEMENT España waived this joint liability. Accordingly, and with the exception (fully consolidated companies): 12.02%; of commercial paper issued by SUEZ Finance and guaranteed ● Criteria CaixaCorp. (non-Group): 11.55%. by GIE SUEZ Alliance (guaranteed by SUEZ in favor of outgoing members), a waiver of the outgoing members’ unlimited joint Shortly thereafter the bidders reduced their holding in Agbar to and several liability was requested and obtained from GIE 90.00%. SUEZ Alliance’s creditors for debts and commitments assumed in connection with borrowings and contracts entered into or We remind the reader that the Group had recognized a guarantees provided by GIE SUEZ Alliance, as well as for any €918 million fi nancial liability in its 2007 consolidated fi nancial action against them. statements representing the Group’s share (51%) of the tender offer for all of the Agbar shares. The impact on earnings of the withdrawal from GIE SUEZ Alliance was an expense of €4.5 million. Considering the success rate achieved in January 2008, in the end the investment represented €708 million, generating a Tax consequences €210 million reduction in the fi nancial liability, a €109 million From a tax perspective, the spin-off distribution of the reduction in goodwill, and an increase in minority interest of SUEZ ENVIRONNEMENT shares led to two types of consequences. €101 million.

First, starting from January 1, 2008, a tax consolidation group was 2.2.3 Disposal by Agbar of shares held in SUEZ SA created in France between SUEZ ENVIRONNEMENT COMPANY and all its French subsidiaries that were included in the scope In May 2008, Agbar sold the balance of the SUEZ SA shares of the former SUEZ tax consolidation. The creation of this tax that it held. The impact of the capital gain from the sale was group led SUEZ ENVIRONNEMENT COMPANY to enter into tax €42 million on the Group’s consolidated income from operating consolidation agreements with each of the member companies activities and €25.5 million on its net income Group share. in the scope of the tax consolidation. 2.2.4 Disposal by SUEZ ENVIRONNEMENT of its equity Secondly, on the basis of article 233 I 7 of the French General interest in Indaver Tax Code, an approval decision was granted involving the transfer to SUEZ ENVIRONNEMENT of a maximum of On November 25, 2008, SUEZ ENVIRONNEMENT sold its entire €464 million in tax losses to which the subsidiaries joining the stake (14.9%) in Indaver NV, a Belgian waste treatment company, scope of SUEZ ENVIRONNEMENT COMPANY’s tax consolidation to the majority shareholder, Delta NV. contributed. 2.2.5 Acquisitions However, on December 31, 2008, this amount was updated in order to take into account any reassessments and proposed On August 1, 2008, SUEZ ENVIRONNEMENT acquired reassessments relating to the consolidation period in SUEZ Utility Service Company Inc. (USC) through its subsidiary tax group. This fraction of the losses was thus reduced to SUEZ ENVIRONNEMENT North America. USC, a company based €432 million due to reassessments and proposed reassessments in the US State of Georgia and present throughout the United affecting members companies of the SUEZ tax group. States, is the national leader in the management of maintenance services for water storage tanks for local authorities. Utility Lastly, as a result of the above, a deferred tax asset of Services Group’s consolidated revenues for the period from €148.8 million was recognized through a double entry to tax August 1 through December 31, 2008 amounted to €34.2 million. income recognized in the consolidated income statement as of December 31, 2008. SITA France acquired the company Boone Comenor Metalimpex in September 2008.This company specializes in the recycling 2.2.2 Public tender offer for the minority interests and recovery of ferrous and non-ferrous metals in France in Sociedad General de Aguas de Barcelona and abroad. Consolidated revenues corresponding to the last (Agbar) quarter of 2008 totaled €39 million.

The joint tender offer from Hisusa, SUEZ ENVIRONNEMENT, SITA France acquired the Val Horizon Group (the environmental SUEZ ENVIRONNEMENT España, and Criteria CaixaCorp for all of division of the Fayolle Group) in July 2008. Val Horizon’s business the Agbar shares not yet held by them was successfully closed focuses on waste collection and treatment for local authorities on January 16, 2008. Following this transaction, the bidders mainly in France’s Val d’Oise region (Paris area). Consolidated owned 90.01% of the share capital, divided as follows: revenues corresponding to the last quarter of 2008 amounted ● Hisusa (proportionately consolidated company): 66.44%; to €19 million.

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In July 2008, the Group, via its SUEZ ENVIRONNEMENT Hong SUEZ ENVIRONNEMENT acquired from EON, a German group, Kong subsidiary, acquired 50% of the shares of Suyu, a company 25% of the shares of SITA Sverige (Sweden). The Group holds all that owns 15% of Chongqing Water Group (CWG). CWG is the of the company’s shares since June 30, 2008. leader in water and wastewater services in the province of The Agbar Group, 51% held by SUEZ ENVIRONNEMENT, acquired Chongqing, China. 53.5% of the shares of Essal (Empresa de Servicios Sanitarios de SITA Deutschland GmbH acquired 68.4% of BellandVision in Los Lagos, SA) in July 2008, for € 55.3 million (Group share). Essal January 2008. BellandVision is a major player on the packaging specializes in wastewater treatment and in the distribution of recycling market in Germany. BellandVision’s 2008 consolidated drinking water in the regions of Los Lagos and Los Rios in Chile. revenues totaled €30.3 million.

NOTE 3 Operating segment information

In accordance with the provisions of IFRS 8 – Operating Segments, 3.1 OPERATING SEGMENTS the segments used below to present segment information have SUEZ ENVIRONNEMENT COMPANY’s subsidiaries are divided been identifi ed based on internal reporting, in particular those into the following operating segments: segments monitored by the Group Management Committee, comprised of the Group’s key operational decision-makers. ● Water Europe: water distribution and treatment services, particularly under concession contracts (water management). The Group uses four operating segments: These services are rendered to individuals, local authorities ● water Europe; and industrial clients;

● waste Europe; ● Waste Europe: waste collection and treatment services for local authorities and industrial clients. These services include ● international; collection, sorting, recycling, composting, energy recovery ● others. and landfi lling for both non-hazardous and hazardous waste; 20

A distinction is made between the water distribution and ● International: the Group is expanding in these business water treatment services and the waste collection and waste segments, depending on the opportunities that may arise, treatment services in Europe. in the areas of water, waste and engineering services, with a special focus on risk-management resulting from specifi c The activities conducted internationally are grouped together local environments by setting up partnerships, entering into and separated from those conducted in the Europe region. This hedges, and limiting invested capital or other investments in specifi c segmentation refl ects the difference in development highly regulated environments. strategy implemented internationally compared to the strategy pursued in Europe and is consistent with the Group’s internal The “Others” segment is made up of holding companies, organizational systems and management structure. including SUEZ ENVIRONNEMENT COMPANY.

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3.2 KEY INDICATORS BY OPERATING SEGMENT

REVENUES

December 31, 2009 December 31, 2008

(in millions of euros) Non-group Group Total Non-group Group Total

Water Europe 3,993.3 13.4 4,006.7 3,853.1 12.1 3,865.2 Waste Europe 5,319.0 39.6 5,358.6 5,727.9 42.3 5,770.2 International 2,968.6 23.3 2,991.9 2,765.4 32.4 2,797.8 Other 15.5 42.8 58.3 17.3 32.9 50.2 Intercompany eliminations (119.1) (119.1) (119.7) (119.7) TOTAL REVENUE 12,296.4 0.0 12,296.4 12,363.7 0.0 12,363.7

EBITDA

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Water Europe 865.5 811.6 Waste Europe 797.7 924.0 International 468.3 418.8 Other (71.6) (52.5) TOTAL EBITDA 2,059.9 2,101.9

CURRENT OPERATING INCOME

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Water Europe 432.7 415.4 Waste Europe 314.1 468.9 International 309.1 282.3 Other (129.9) (107.5) TOTAL CURRENT OPERATING INCOME 926.0 1,059.1

DEPRECIATION AND AMORTIZATION

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Water Europe (242.1) (232.6) Waste Europe (456.5) (433.3) International (137.4) (124.5) Other (2.1) (2.0) TOTAL DEPRECIATION AND AMORTIZATION (838.1) (792.4)

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CAPITAL EMPLOYED

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Water Europe 3,423.8 3,208.5 Waste Europe 4,370.6 4,118.4 International 2,788.3 2,639.1 Other (51.1) 160.4 TOTAL CAPITAL EMPLOYED 10,531.6 10,126.4

IMPAIRMENT POSTED TO INCOME

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Water Europe (1.6) 0.5 Waste Europe (55.9) (8.7) International (24.4) 1.0 Other (3.4) 5.5 TOTAL IMPAIRMENT RECOGNIZED IN INCOME (85.3) (1.7)

INVESTMENTS IN PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND FINANCIAL ASSETS

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Water Europe (394.4) (719.8) 20 Waste Europe (495.4) (889.8) International (256.6) (555.1) Other (267.2) (434.7) TOTAL INVESTMENTS (1,413.6) (2,599.4)

3.3 KEY INDICATORS BY GEOGRAPHICAL AREA The following indicators are analyzed by:

● destination of products and services sold for revenue;

● geographical location of consolidated companies for capital employed.

Revenues Capital employed

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2009 Dec. 31, 2008

France 5,485.0 5,522.0 2,381.2 2,509.8 Europe 4,699.4 4,972.6 5,552.3 5,378.6 International 2,112.0 1,869.1 2,598.1 2,238.0 TOTAL 12,296.4 12,363.7 10,531.6 10,126.4

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3.4 RECONCILIATION OF EBITDA WITH CURRENT OPERATING INCOME

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Current operating income 926.0 1,059.1 (-) Depreciation, amortization and provisions 851.4 776.0 (-) Share-based payments (IFRS 2) 55.9 53.4 (-) Disbursements under concession contracts 226.6 213.4 EBITDA 2,059.9 2,101.9

3.5 RECONCILIATION OF CAPITAL EMPLOYED

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

(+) Tangible and intangible assets 8,723.7 8,073.0 (+) Goodwill (net) 3,069.6 2,897.5 (+) Available-for-sale securities (excluding marketable securities) 445.2 682.5 (+) Investments in associates 322.9 265.6 (+) Trade and related receivables 3,701.4 3,588.4 (+) Inventories 270.4 245.9 (+) Loans and advances to associates 605.0 671.6 (+) Other current and non-current assets 944.8 992.6 (-) Provisions and actuarial gains/losses on pension plans (1,297.6) (1,237.5) (-) Trade and related payables (3,741.4) (3,863.7) (-) Other current and non-current liabilities (2,512.3) (2,170.6) (-) Other fi nancial liabilities 0.0 (18.9) CAPITAL EMPLOYED 10,531.6 10,126.4

NOTE 4 Current operating income

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Revenues 12,296.4 12,363.7 Purchases (2,886.4) (2,677.2) Personnel costs (3,145.7) (3,062.2) Depreciation, amortization and provisions (851.4) (776.0) Other operating income and expenses (4,486.9) (4,789.2) CURRENT OPERATING INCOME 926.0 1,059.1

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4.1 REVENUES The Group revenues per category (see Note 3.2) are as follows:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Sale, transport and distribution of electricicty 431.2 415.4 Water and waste 10,589.3 10,715.1 Engineering, construction contracts and services 1,275.9 1,233.2 TOTAL 12,296.4 12,363.7

The 2009 decline in “Water and Waste Services” revenue is The 2009 increase in “Engineering contracts, construction primarily due to the Waste Europe segment. contracts and provision of services” revenue is related to the implementation of the Melbourne contract at Degrémont.

4.2 PERSONNEL COSTS Net costs relating to pension plans (defi ned contributions and defi ned benefi ts) are shown in Note 17.

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Salaries and expenses/retirement expenses (3,089.1) (3,009.3) Share-based payments (56.6) (52.9) TOTAL (3,145.7) (3,062.2)

Share-based payments are broken down in Note 23. 20 4.3 DEPRECIATION, AMORTIZATION AND PROVISIONS The amounts shown below are net of reversals.

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Depreciation and amortization (838.1) (792.4) Depreciation of inventories and trade receivables (16.0) (24.0) Provisions 2.7 40.4 TOTAL (851.4) (776.0)

Depreciation is distributed as follows: €660.5 million for property, plant and equipment, and €177.6 million for intangible assets. The breakdown by type of asset is described in Notes 10 and 11.

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4.4 OTHER OPERATING INCOME AND EXPENSES Other operating income and expenses include the following:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Other operating income 63.1 59.6 Other operating expenses (4,550.0) (4,848.8) Sub-contracting (1,489.6) (1,516.2) Other expenses (3,060.4) (3,332.6) TOTAL (4,486.9) (4,789.2)

“Other expenses” primarily include the following types of costs: Although the methods of calculating the Territorial Economic leasing expenses, external personnel, professional fees and Contribution differ from the methods of calculating the previous compensation of intermediaries, and duties and taxes excluding tax, the Group believes that its intrinsic characteristics are income tax. consistent. Thus, the Territorial Economic Contribution will be recognized under Current Operating Income, consistent with The 2010 French fi nance law introduced the Territorial Economic the Business Tax. Contribution to replace the Business Tax (Taxe Professionnelle).

NOTE 5 Income from operating activities

(in millions of euros) December 31, 2009 December 31, 2008

Current operating income 926.0 1,059.1 Mark-to-market on operating fi nancial instruments 2.2 3.2 Impairment on property, plant and equipment, intangible and fi nancial assets (85.3) (1.7) Restructuring costs (60.0) (20.9) Expenses linked to initial public offering and change of logo 0.0 (50.8) Disposal of assets 84.2 46.9 INCOME FROM OPERATING ACTIVITIES 867.1 1,035.8

5.1 MARKED-TO-MARKET ON OPERATING FINANCIAL fl uctuations. However, to the extent that these strategies INSTRUMENTS hedge net exposure to the price risk of the entities in question, these strategies are not eligible for the recognition The mark to market on operating fi nancial instruments of hedging in accordance with the provisions of IAS 39 – amounted to a total of €2.2 million at December 31, 2009, “Financial Instruments – recognition and measurement.” resulting primarily from the following factors: Consequently, all changes in fair value of forward contracts ● to optimize their margins, certain Group entities implement must be recognized on the income statement; economic hedging strategies through forward contracts ● gains and losses are recognized under income for the traded on the wholesale markets, aimed at reducing the ineffective portion of strategies to hedge future cash fl ows sensitivity of the Group’s margins to commodity price on non-fi nancial assets (cash-fl ow hedges).

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5.2 IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND FINANCIAL ASSETS

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Impairments: Goodwill (10.5) (4.6) Property, plant and equipment and other intangible assets (61.3) (12.0) Financial assets (32.7) (9.6) TOTAL (104.5) (26.2) Write-back of impairments: 19.2 24.5 TOTAL (85.3) (1.7)

5.2.1 Impairment of goodwill 5.3 RESTRUCTURING Non signifi cant impairments were recognized related to the In 2009, this amount corresponded, on the one hand, to goodwill on the statement of fi nancial position in accordance adjustment costs related to the slowdown of activity, largely in with the procedure described in Note 9. the waste sector, and on the other hand, to expenses related to the moving of SITA France, OIS, Degrémont, Lyonnaise des Eaux 5.2.2 Impairment on property, plant and equipment and SUEZ ENVIRONNEMENT to a single location at La Défense, and intangible assets excluding goodwill Paris. These costs represented the impact of temporary double Impairment on inventory and trade receivables is shown in leases as well as the expense of renovating the premises. Note 4 “depreciation, amortization and provisions”. The amount of restructuring expenses in 2008 included costs In 2009, impairment on property, plant and equipment and related to restructuring and site closings. intangible assets corresponded primarily to Degrémont, as well as to the Waste Europe sector. 5.4 EXPENSES RELATED TO THE INITIAL PUBLIC OFFERING AND CHANGE OF LOGO Regarding Degrémont, impairment corresponds to the Jumeirah 20 Golf Estates contract in Dubai. Due to the fi nancial crisis and In 2008, external service providers worked on the project to the late-November 2009 bankruptcy of Dubai World and its list SUEZ ENVIRONNEMENT COMPANY on the stock market. subsidiaries, which are Degrémont clients, and given the Professional fees associated with this work and the costs impossibility of fi nding alternate fi nancing, the Group booked related to changing the Group’s brand and visual identity totaled an expense of €20 million. This expense corresponds to the loss €50.8 million at December 31, 2008. to which the Group is exposed and to the neutralization of the This accounting treatment resulted from the technicalities 2008 income. of the share contribution transaction from SUEZ to For the Waste Europe sector, asset impairment is related to the SUEZ ENVIRONNEMENT: slowdown of activity the Group has experienced during the year. ● as this was an internal transaction within the SUEZ Group, it In 2008, impairment on property, plant and equipment and was conducted at book value (outside the scope of IFRS 3) on intangible assets derived primarily from the Waste Europe insofar as there was no cash contribution from the new sector (SE Deutschland and SITA Wallonie). shareholders;

● it was treated accordingly using the pooling-of-interests 5.2.3 Impairment on fi nancial assets method. In 2009, impairment on fi nancial assets primarily corresponded Consequently, costs relating to this transaction were recognized to the assets of companies of the Waste Europe sector active in in expenses over the fi scal year. the recycling business lines. As these items were unusual expenses of signifi cant size, they were presented on a specifi c income statement line item between current operating income and income from operating activities.

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5.5 DISPOSALS OF ASSETS

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Disposals of property, plant and equipment and intangible assets (9.4) 3.2 Disposals of shares 93.6 43.7 TOTAL 84.2 46.9

2009 transactions 2008 transactions The main transactions during the year were, on the one hand, Gains from the disposal of assets is primarily due to the sale by the disposal by SUEZ ENVIRONNEMENT Holding BE, a wholly- Agbar of its SUEZ SA shares in the 1st half of 2008. owned subsidiary of SUEZ ENVIRONNEMENT, of its 2.55% stake in Gas Natural; and on the other hand, the disposal by SITA UK, a wholly-owned subsidiary of SUEZ ENVIRONNEMENT, of its 50% stake in LondonWaste to the other shareholder: The North LondonWaste Authority. LondonWaste operates an incinerator in North London.

NOTE 6 Financial income/(loss)

December 31, 2009 December 31, 2008

(in millions of euros) Expenses Income Total Expenses Income Total

Cost of net debt (327.6) 41.7 (285.9) (373.0) 42.9 (330.1) Interest expense on gross borrowings (323.5) - (323.5) (352.9) - (352.9) Exchange gain/(loss) on borrowings and hedges (4.1) - (4.1) (5.1) - (5.1) Income/(expense) from hedges on borrowings - 12.4 12.4 (15.0) - (15.0) Income/(expense) on cash and cash equivalents and on fi nancial assets at fair value through income - 29.3 29.3 - 42.9 42.9 Other fi nancial income and expenses (31.2) 57.1 25.9 (47.8) 48.1 0.3 FINANCIAL INCOME/(LOSS) (358.8) 98.8 (260.0) (420.8) 91.0 (329.8)

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6.1 NET FINANCE COSTS

This item primarily includes interest expenses related to rate hedging transactions on gross borrowings, together with gross borrowings (calculated using the effective interest rate), interest income on cash investments, and changes in the fair exchange differences arising from foreign currency borrowings, value of fi nancial assets at fair value through income. gains and losses arising from foreign currency and interest

Total (in millions of euros) Expenses Income Dec. 31, 2009 Dec. 31, 2008

Interest expense on gross borrowings (323.5) - (323.5) (352.9) Exchange gain/(loss) on borrowings and hedges (4.1) - (4.1) (5.1) Income/(expense) from hedges on borrowings - 12.4 12.4 (15.0) Income/(expense) on cash and cash equivalents and on fi nancial assets at fair value through income - 29.3 29.3 42.9 COST OF NET DEBT (327.6) 41.7 (285.9) (330.1)

In 2009, the general decline in interest rates on borrowings In 2008, interest expense on gross borrowings was mainly due resulted in a decrease in interest expense on gross debt, even to the cost of fi nancing the Agbar shares acquired as part of the though the Group engaged in several bond issuances during public offering fi nalized in January 2008. the period. Interest received on cash investments declined by 13.6 million, due primarily to the 2009 decline in interest rates on investments. 20 6.2 OTHER FINANCIAL INCOME AND EXPENSES

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

OTHER FINANCIAL EXPENSES Reversal of discounting adjustment to provisions (25.1) (42.9) Interest expense on trade and other payables (7.0) (8.2) Losses on currency exchange 0.2 3.3 Other fi nancial expenses 0.7 0.0 TOTAL (31.2) (47.8)

OTHER FINANCIAL INCOME Income from available-for-sale securities 39.8 33.0 Interest income on trade and other receivables 8.4 13.0 Interest income on loans and receivables carried at amortized cost 6.1 5.2 Gains on currency exchange 0.0 0.0 Other fi nancial income 2.8 (3.1) TOTAL 57.1 48.1 TOTAL OTHER FINANCIAL INCOME AND EXPENSES 25.9 0.3

The decline in expenses from the reversal of discounting discount rate) entering into the calculation of provisions for site adjustments to provisions compared to 2008 was primarily due restoration. to changes in macroeconomic assumptions (infl ation rate and

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NOTE 7 Income tax expense

Following the contribution SUEZ made in 2008 to applied to companies that were members of the former SUEZ SUEZ ENVIRONNEMENT COMPANY, the latter resolved to form Group, and during the fi scal years for which these companies a tax consolidation group comprising all the companies in the were effectively members of that former Group. environment business sector that had previously been members At December 31, 2008, this amount was adjusted to take of the tax group that included SUEZ, retroactive to January 1, 2008. into account the reassessment and proposed reassessments Approval was granted in 2008 by the French Finance authorities, applying to the period of inclusion in the SUEZ tax consolidation to transfer to SUEZ ENVIRONNEMENT COMPANY a maximum Group. The revised amount totaled €432 million, which resulted tax loss of €464 million to which the subsidiaries joining the in the recognition of a deferred tax asset of €148.8 million SUEZ ENVIRONNEMENT COMPANY tax consolidation group through income, given the prospects of allocating these tax contributed. savings on future tax income to the future tax group.

However, any tax assessment or proposed assessment, present At December 31, 2009, the updating of tax losses to take the or future, might partially affect the initial value of the loss reassessments into account resulted in a deferred tax asset of transferred to SUEZ ENVIRONNEMENT COMPANY when both €1.1 million, through income.

7.1 MAIN IMPACTS

7.1.1 Breakdown of income tax expense The income tax expense for the fi scal year amounted to €128.8 millions (compared to €92.7 million in 2008), and breaks down as follows:

(in millions of euros) 2009 2008

Current income tax (232.2) (143.6) Deferred taxes 103.4 50.9 Total income tax expense recognized in income (128.8) (92.7)

7.1.2 Change in deferred taxes Movements in deferred taxes recorded in the consolidated statement of fi nancial 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 balance

At December 31, 2008 500.2 (332.7) 167.5 Impact on income for the period 113.1 (9.7) 103.4 Impact of net breakdown by tax entity (68.5) 68.5 - Other 8.1 (13.1) (5.0) At December 31, 2009 552.9 (287.0) 265.9

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7.2 RECONCILIATION BETWEEN THEORETICAL INCOME TAX EXPENSE AND ACTUAL INCOME TAX EXPENSE The reconciliation between theoretical income tax expense and actual income tax expense is shown in the following table:

(in millions of euros) 2009 2008

Consolidated net income 515.9 647.3

● Share in net income of associates 37.6 34.0

● Income tax (128.8) (92.7) Income before income tax and share in net income of associates (a) 607.1 706.0 Of which French companies (63.9) 146.0 Of which companies outside France 671.0 560.0 Statutory income tax rate in France (b) 34.43% 34.43% Theoretical income tax expense (c) = (a) x (b) (209.0) (243.1)

ACTUAL INCOME TAX EXPENSE: Difference between the normal tax rate applicable in France and the normal tax rate applicable in jurisdictions outside France 45.6 43.2 Permanent differences (5.2) (18.5) Income taxed at a reduced rate or tax-exempt 49.8 (a) 22.7 Additional tax expense (75.8) (b) (49.0) Effect of unrecognized deferred tax assets on tax-loss carry-forwards and on other tax-deductible temporary differences (27.4) (c) (14.4) Recognition or utilization of tax income on previously unrecognized tax loss carry-forwards and other tax-deductible temporary differences 3.0 0.9 Impact of changes in tax rates (2.0) 0.7 Tax credits 19.9 (d) 10.3 20 Other 72.3 (e) 154.5 Actual income tax expense (128.8) (92.7) Effective tax rate (actual income tax expense divided by income before income tax and share in net income of associates) 21.2% 13.1%

(a) Specifi cally includes capital gains from the disposal of securities tax-exempt in the United Kingdom and Belgium. (b) Specifi cally includes the impact of a tax reassessment in Morocco, the posting of provisions for €39.5 million in tax risk, and the tax on the shares of expenses and charges on dividends. (c) Corresponds to the Group’s foreign subsidiaries. (d) Specifi cally includes the impact of the deduction for risk capital in Belgium, the tax system applicable in the French Overseas Départements, and tax credits. (e) Includes the recognition is €52.7 million in deferred taxes not recognized at December 31, 2008 by Group companies subject to French tax consolidation (see below), as well as a €3.6 million amount for the recognition of deferred asset taxes in Belgium pursuant to an order from the European Community Court of Justice dated February 12, 2009 (Cobelfret Order).

The low effective tax rate in 2008 was due to the recognition of However, at December 31, 2009, all net deferred tax assets €148.8 million in deferred tax assets on the transfer of tax losses subject to French tax consolidation were recognized, given carried forward from the former SUEZ tax consolidation group. the medium-term prospects of tax benefi ts;

The effective tax rate in 2009 may largely be explained by the ● the exemption of the capital gain on the disposal of following: LondonWaste by SITA in the United Kingdom (tax savings of €19.8 million in the consolidated fi nancial statements). ● the effects of SUEZ ENVIRONNEMENT COMPANY’s French tax consolidation group. The Group posted a deferred tax asset Further, as shown in Note 4 – Current operating income, the of €52.7 million as recognition of all temporary differences Group has resolved to book, the French Territorial Economic not yet recognized at December 31, 2008. Moreover, the Contribution in current operating income. This new tax, deferred tax assets on tax losses carried forward continued therefore, has no effect on the change in the effective income to be recognized in the same way as on December 31, 2008. tax rate during the period.

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7.3 DEFERRED TAXES BY TYPE

7.3.1 Analysis of the net deferred tax position recognized on the statement of fi nancial position (before netting off deferred tax assets and liabilities by tax entity), by type of temporary difference

Statement of fi nancial position at

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

DEFERRED TAX ASSETS: Net operating loss carry-forwards 208.6 186.1 Pension obligations 153.9 163.0 Concessions 104.5 97.9 Non-deductible provisions 127.9 93.8 Differences between the carrying amount of PPE and their tax bases* 9.0 10.2 Measurement of fi nancial assets and liabilities at fair value (IAS 32/39) 21.5 (4.8) Other 207.4 165.4 TOTAL 832.8 711.6

DEFERRED TAX LIABILITIES: Fair value adjustments to PPE and intangible assets (88.3) (93.9) Other differences between the carrying amount of PPE and their tax bases* (332.4) (311.1) Concessions (24.1) (23.4) Tax-driven provisions (17.3) (17.3) Measurement of fi nancial assets and liabilities at fair value (IAS 32/39) (4.4) (4.6) Other (100.4) (93.8) TOTAL (566.9) (544.1) Net deferred tax assets 265.9 167.5

* PPE: Property, plant and equipment.

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7.3.2 Analysis by type of temporary difference in deferred tax income/expenses on the income statement

Impacts in the income statement

(in millions of euros) (in millions of euros) Dec. 31, 2009 Dec. 31, 2008

DEFERRED TAX ASSETS: Net operating loss carry-forwards 56.4 103.6 Pension obligations 3.4 8.0 Concessions 5.4 (5.2) Non-deductible provisions 34.5 (4.3) Differences between the carrying amount of PPE and their tax bases 0.3 (1.1) Measurement of fi nancial assets and liabilities at fair value (IAS 32/39) 3.5 (0.1) Other 9.6 (32.1) TOTAL 113.1 68.8

DEFERRED TAX LIABILITIES: Fair value adjustments to PPE and intangible assets 18.6 3.0 Other differences between the carrying amount of PPE and their tax bases (17.1) (28.1) Concessions 0.3 0.2 Tax-driven provisions (0.1) (1.8) Measurement of fi nancial assets and liabilities at fair value (IAS 32/39) (1.7) (0.8) Other (9.7) 9.6 TOTAL (9.7) (17.9) Net deferred taxes 103.4 50.9 20 7.3.3 Analysis by type of deferred tax income/expense in other global income items

(in millions of euros) December 31, 2009 Change December 31, 2008

Available-for-sale securities 0.1 4.0 (3.9) Actuarial gains and losses 26.0 - 26.0 Net investment hedges (0.3) 24.5 (24.8) Cash-fl ow hedges 20.3 0.6 19.7 TOTAL 46.1 29.1 (a) 17.0

(a) €29.1 million, of which €25.3 million on companies subject to full or proportionate consolidation and €3.8 million on companies consolidated by the equity method.

7.4 UNRECOGNIZED DEFERRED TAX the criteria for recognition as a deferred tax asset) amounted to €417.5 million for ordinary tax loss carry-forwards (unrecognized 7.4.1 Deductible temporary differences deferred tax asset impact of €136.2 million), compared to not recognized €332.0 million at December 31, 2008. The Group companies under the SUEZ ENVIRONNEMENT COMPANY French tax consolidation Temporary differences on losses carried forward recognize all deferred taxes on losses carried forward. At December 31, 2009, unused tax losses carried forward and not recorded on the balance sheet (because they did not meet

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The expiry dates for using unrecognized tax loss carry-forwards are presented below:

Ordinary tax-loss (in millions of euros) carry-forwards

2010 32.9 2011 10.2 2012 2.5 2013 43.4 2014 17.5 2015 and beyond 311.0 TOTAL 417.5

Other temporary differences not recognized reversal and it is probable that the temporary difference will not The amount of deferred tax assets on other unrecognized reverse in the foreseeable future. Furthermore, no deferred tax temporary differences amounted to €41.5 million at December 31, liabilities have been recognized for temporary differences which 2009, compared to €116.6 million at December 31, 2008. do not result in tax payments upon their reversal (in particular as regards the exemption of capital gains on sales of securities 7.4.2 Unrecognized deferred tax liabilities on taxable in Belgium and the elimination of the capital gains tax in France temporary differences relating to investments on sales of securities with effect from January 1, 2007). in subsidiaries, joint ventures and associates No deferred tax liabilities have been recognized on temporary differences when the Group is able to control the timing of their

NOTE 8 Earnings per share

Dec. 31, 2009 Dec. 31, 2008

Numerator: Net income Group share (in millions of euros) 403.0 533.2 Denominator: Average number of shares outstanding (in millions) 488.7 489.4 Income per share (in euros) Net income Group share, per share 0.82 1.09

The Company has not issued any fi nancial instrument likely to The various share-based plans implemented in fi scal year 2009 result in the dilution in net income, Group share, e.g., convertible and reserved for Group employees are based on existing shares bonds, etc. (share-based payments are described in Note 23 of this chapter).

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NOTE 9 Goodwill

9.1 MOVEMENTS IN THE CARRYING AMOUNT OF GOODWILL

(in millions of euros)

A. GROSS AMOUNT At December 31, 2007 2875.5 Acquisitions 327.2 Impairment losses 0,0 Disposals 0.0 Translation adjustments (130.4) Other (12.2) At December 31, 2008 3060.1 Acquisitions 188.7 Impairment losses 0,0 Disposals (24.3) Translation adjustments 29.9 Other 7.2 At December 31, 2009 3261.6

B. IMPAIRMENT At December 31, 2007 (155.3) Acquisitions (22.6) Impairment losses (4.6) 20 Disposals 0.0 Translation adjustments 19.9 Other 0.0 At December 31, 2008 (162.6) Acquisitions 0.0 Impairment losses (10.5) Disposals 1.0 Translation adjustments (20.0) Other 0.0 At December 31, 2009 (192.1)

C. CARRYING AMOUNT = A + B at December 31, 2008 2897.5 At December 31, 2009 3069.5

In 2009, the €188.7 million increase in the gross value of goodwill fi nancial position will be completed in 2010. The fi nal amount of was due to new acquisitions realized during the year as well as goodwill may therefore change. the completion of the process of recognizing individual assets Regarding acquisitions made in 2008, the change in goodwill and liabilities at fair value on acquisitions realized in 2008. related to completion of the purchase price allocation process Regarding acquisitions made during this fi scal year, new concerns the following companies: goodwill was posted, specifi cally €168.6 million on Swire SITA ● SUEZ ENVIRONNEMENT North America for -€16.3 million on related to the acquisition of the 50% not yet held by the Group. the acquisition of Utility Services Company (USC); The process of allocation of the purchase price to individual assets and liabilities at fair value on this entity’s statement of

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● SITA France for the following acquisitions: Val Horizon conditions estimated by the Management Committee, for +€12.7 million, and Boone Comenor Metalimpex for specifi cally the duration of contracts carried by entities of -€11.7 million. the CGU in question, changes in rate regulation, and future market prospects; Moreover, €24 million of the total €24.3 million decline in goodwill was due to the sale of LondonWaste at SITA UK. ● a terminal value for the period after the MTP, calculated by applying the long-term growth rate to the standard EBITDA in Translation gains and losses are primarily due to fl uctuations in the fi nal year of the projections; the pound sterling exchange rate. ● a discount rate corresponding to the CGU as a function of In 2008, the Group recognized additional goodwill on the business-unit, country and currency risks related to each following Business Units: CGU. The after-tax discount rates applied in 2009 range from ● SITA France; €163.5 million on the following acquisitions: Val 5.2% to 8.5%. In 2008, discount rates applied ranged from Horizon, Boone Comenor Metalimpex; 5.0% to 8.6%.

● SE Deutschland (€50.8 million) mainly for the purchase of When this method is used, the measurement of the recoverable BellandVision; value of CGU goodwill is based on three scenarios (low, medium and high), distinguished by changes in key assumptions. The ● SUEZ ENVIRONNEMENT North America €113 million for the medium scenario is preferred. purchase of 100% of Utility Services Company (USC). Valuations thus obtained are systematically broken down by 9.2 IMPAIRMENT TEST a comparison with the market multiples method or the stock exchange capitalization method, when applicable. All goodwill cash-generating units (CGUs) are tested for impairment. Impairment tests were carried out by reference to Based on events reasonably foreseeable at this time, the Group the database as at the end of June and to a review of events believes there is no reason to fi nd impairment on the goodwill occurring in the second half of the year. posted to the statement of fi nancial position, and that any changes affecting the key assumptions described below should The recoverable value of CGUs is calculated by applying various not result in excess book value over recoverable amounts. methods, including discounted cash fl ow. The method of discounting cash fl ow is based on the following: Main assumptions used for material goodwill ● cash fl ow projections prepared over the duration of With the exception of the United Water, SITA UK, Agbar and SITA the medium-term plan (MTP) approved by the Group France CGUs, the individual various goodwill amounts do not Management Committee. These are linked to operating represent more than 10% of the Group’s total goodwill amount.

The following table describes the method and discount rate used in examining the recoverable amount of the main Cash Generating Units:

Cash-generating units Valuation methods Discount rate

United Water multiples + DCF 5.23% Sita UK multiples + DCF 6.02% Agbar multiples + DCF + valuation applied for the delisting tender offer* 6.50% Sita France multiples + DCF 5.80% * See note 2 of this chapter.

A change of 50 basis points upwards or downwards in the discount rate does not affect the recoverable amounts of the various CGUs, which remain higher than their book values.

218 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

Impact as a % on excess recoverable value Cash-generating units versus book value

-50 bp +50 bp

United Water 119% -76% Sita UK 78% -61% Agbar 64% -51% Sita France 33% -26%

Main other CGUs For SITA Nederland BV and SE Deutschland GmbH, the discount rates applied in the discounted cash fl ow method are 6.08% and 5.95%, respectively.

9.3 GOODWILL SEGMENT INFORMATION The carrying amount of goodwill can be analyzed by operating segments as follows:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Water Europe 725.1 726.8 Waste Europe 1,468.1 1,440.7 International 876.3 730.0 Other 0.0 0.0 TOTAL 3,069.5 2,897.5

20 The segment breakdown set out above is based on the (CGUs): Agbar (€631 million), SITA France (€515 million), United operating segments of the acquired entity (and not on those of Water (€368 million), SITA UK (€354 million), SITA Nederland the acquirer). BV (€227 million), Swire SITA (€209 million), SE Deutschland (€189 million), and Utility Service Company (€93 million). At December 31, 2009, goodwill amounted to €3,069.5 million; this corresponded mainly to the following cash-generating units

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NOTE 10 Intangible assets

10.1 MOVEMENTS IN CARRYING AMOUNT OF INTANGIBLE ASSETS

Intangible rights arising on (in millions of euros) Softwares concession contracts Other Total

A. GROSS AMOUNT At December 31, 2007* 322.0 2,582.0 588.5 3,492.5 Acquisitions 28.0 148.6 10.4 187.0 Disposals (10.0) (13.8) (8.8) (32.6) Translation adjustments (0.5) 20.6 (4.3) 15.8 Changes in scope of consolidation** 1.6 59.2 (a) 80.0 (b) 140.8 Other 4.3 (0.2) 7.6 11.7 At December 31, 2008 345.4 2,796.4 673.4 3,815.2 Acquisitions 21.0 243.4 21.4 285.8 Disposals (17.5) (28.3) (6.0) (51.8) Translation adjustments 0.7 (0.6) (0.6) (0.5) Changes in scope of consolidation 6.6 72.8 (c) 77.2 (d) 156.6 Other (0.5) 100.8 45.4 (e) 145.7 At December 31, 2009 355.7 3,184.5 810.8 4,351.0

B. ACCUMULATED AMORTIZATION AND IMPAIRMENT At December 31, 2007 (258.0) (1,292.7) (228.9) (1,779.6) Amortization (22.8) (131.0) (21.0) (174.8) Impairment losses 0.0 0.0 (0.2) (0.2) Disposals 10.9 13.6 5.4 29.9 Translation adjustments 0.3 (7.4) 1.8 (5.3) Changes in scope of consolidation (1.2) (19.3) (1.3) (21.8) Other 0.1 (3.1) 6.8 3.8 At December 31, 2008 (270.7) (1,439.9) (237.4) (1,948.0) Amortization (20.0) (113.8) (43.8) (177.6) Impairment losses 0.0 (0.4) (0.5) (0.9) Disposals 17.4 27.3 3.6 48.3 Translation adjustments (0.5) 4.9 0.1 4.5 Changes in scope of consolidation (4.0) (19.8) (28.2) (52.0) Other 3.1 (0.4) 7.8 10.5 At December 31, 2009 (274.7) (1,542.0) (298.5) (2,115.2)

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Intangible rights arising on (in millions of euros) Softwares concession contracts Other Total

C. CARRYING AMOUNT At December 31, 2007 64.0 1,289.4 359.5 1,712.9 At December 31, 2008 74.7 1,356.6 435.9 1,867.2 At December 31, 2009 81.0 1,642.5 512.3 2,235.8

* Intangible rights linked to Chilean water contracts at Agbar were reclassifi ed from Intangible rights on concession contracts to Other on December 31, 2007. ** This reclassifi cation was also applied to USC in 2008. (a) The recognition at fair value of the existing contract portfolio at the date Sadet was acquired resulted in an increase of €55 million in “Intangible Rights Arising on Concession Contracts” in the consolidated statement of fi nancial position. (b) The change in the scope of consolidation for the “Other” intangible assets category is mainly related to the entry of USC into the scope of consolidation within the context of the application of the accounting treatment of Business Combinations. It also includes the entry of BellandVision into the scope of consolidation, resulting in an increase of €28.0 million. (c) Entry into the scope of consolidation of intangible assets linked to the concessions operated by Nuove Acque, totaling €47 million. (d) Impact related to the entry into the scope of consolidation of the depreciable intangible assets of Nuove Acque totaling €53 million, as well as the impact of the move of Swire SITA from proportionate consolidation to full consolidation. (e) The recognition at fair value of the existing contract portfolio of Boone Comenor within the context of the accounting treatment of Business Combinations (allocation of the purchase price). (f) Impairment totaled €0.9 million in 2009, compared to €0.2 million in 2008.

10.1.1 Intangible rights arising on concession 10.2 INFORMATION ON RESEARCH contracts AND DEVELOPMENT EXPENSES The Group manages a large number of concession contracts as Research and development activities relate to various studies defi ned by SIC 29 (see Note 21) in the drinking water distribution, regarding technological innovation, improvements in plant wastewater treatment, and waste segments. Infrastructure effi ciency, safety, environmental protection and service quality. rights granted to the Group as concession operator, falling As in 2008, research and development expenses were posted to 20 within the scope of application of IFRIC 12, and corresponding expenses, in the amount of €65 million. to the intangible model, are recognized under intangible assets. Expenses related to in-house projects in the development phase 10.1.2 Non-amortizable intangible assets that meet the criteria for recognition as an intangible asset are Non-amortizable intangible assets amounted to €65 million at not material. December 31, 2009 versus €50.6 million at December 31, 2008 and are presented within the “Other” category.

No impairment was posted in this category of assets.

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NOTE 11 Property, plant and equipment

11.1 MOVEMENTS IN THE CARRYING AMOUNT OF PROPERTY, PLANT AND EQUIPMENT

Capitalized Construc- Total proper- Plant and rehabilitation tion in ty, plant and (in millions of euros) Land Buildings equipment Vehicles costs progress Other equipment

A. GROSS AMOUNT At December 31, 2007 1,262.6 1,977.3 4,863.3 1,259.2 509.8 540.4 1,661.4 12,074.0 Acquisitions 53.1 55.8 313.9 122.4 1.5 389.3 26.9 962.9 Disposals (44.3) (39.3) (148.6) (75.6) (3.1) 0.0 (21.7) (332.6) Translation adjustments (139.3) (37.7) (146.0) (58.1) (30.5) (3.5) (1.2) (416.3) Changes in scope of consolidation 80.4 143.3 62.9 35.1 2.3 2.1 12.8 338.9 Other 45.6 (41.6) 1,348.1 39.0 5.5 (341.7) (1,164.3) (109.4) At December 31, 2008 1,258.1 2,057.8 6,293.6 1,322.0 485.5 586.6 513.9 12,517.5 Acquisitions 95.0 40.6 194.1 71.6 0.0 351.8 24.1 777.2 Disposals (49.8) (39.8) (141.5) (91.2) (1.5) 0.0 (26.2) (350.0) Translation adjustments 56.6 12.4 57.2 24.0 12.4 2.5 (0.4) 164.7 Changes in scope of consolidation (2.7) 208.2 16.6 10.8 0.0 (1.6) 0.1 231.4 Other 17.6 (17.5) 222.2 35.5 (7.4) (337.0) (57.2) (143.8) At December 31, 2009 1,374.8 2,261.7 6,642.2 1,372.7 489.0 602.3 454.3 13,197.0

B. ACCUMULATED AMORTIZATIONAND IMPAIRMENT At December 31, 2007 (603.4) (858.7) (2,759.2) (814.7) (501.7) (24.2) (593.5) (6,155.4) Amortization (64.6) (79.1) (318.4) (118.7) (2.1) 0.0 (34.7) (617.6) Impairment losses (3.8) (0.3) (3.5) 0.0 0.0 (0.2) (4.0) (11.8) Disposals 32.4 40.4 146.6 71.3 2.7 0.0 19.7 313.1 Translation adjustments 81.1 19.4 55.7 34.4 30.5 0.4 2.5 224.0 Changes in scope of consolidation (4.4) (41.2) (14.8) (21.2) (2.4) 0.0 (7.7) (91.7) Other (4.5) 4.1 (281.6) 1.0 (5.5) 20.2 294.0 27.7 At December 31, 2008 (567.2) (915.4) (3,175.2) (847.9) (478.5) (3.8) (323.7) (6,311.7) Amortization (69.7) (88.0) (356.2) (118.3) (0.2) 0.0 (28.1) (660.5) Impairment losses (12.4) (11.0) (15.0) 0.0 0.0 (0.9) (1.4) (40.7) Disposals 46.9 45.6 134.2 85.4 1.5 2.4 25.2 341.2 Translation adjustments (34.7) (6.2) (31.9) (14.2) (12.4) 0.0 (0.3) (99.7) Changes in scope of consolidation 2.9 10.2 42.1 (7.8) 0.0 0.0 (0.1) 47.3 Other (15.1) 10.7 (5.4) 4.6 4.8 0.0 15.4 15.0 At December 31, 2009 (649.3) (954.1) (3,407.4) (898.2) (484.8) (2.3) (313.0) (6,709.1)

C. CARRYING AMOUNT At December 31, 2008 690.9 1,142.4 3,118.4 474.1 7.0 582.8 190.2 6,205.8 At December 31, 2009 725.5 1,307.6 3,234.8 474.5 4.2 600.0 141.3 6,487.9

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In 2009, net changes in the scope of consolidation had an impact 11.3 CONTRACTUAL COMMITMENTS TO PURCHASE on property, plant and equipment totaling €278.7 million. They PROPERTY, PLANT AND EQUIPMENT resulted from the entry into the scope of consolidation of EVI at In the ordinary course of their operations, certain Group SITA Nederland (€187.3 million), the disposal of LondonWaste companies have also entered into commitments to purchase, by SITA UK (-€57.3 million) and various entries into the scope of and related third parties to deliver, property, plant and consolidation at Agbar (€89.8 million). equipment. In 2008, net changes in the scope of consolidation were chiefl y The Group’s fi rm commitments to purchase property, plant and related to the addition of Boone Comenor Metalimpex and of Val equipment amounted to €222.4 million at December 31, 2009 Horizon (environmental activity of the Fayolle Group) within SITA versus €240.4 million at December 31, 2008. France as well as that of Essal within Agbar. Moreover, an operating lease contract for Agbar’s head offi ce 11.2 PLEDGED AND MORTGAGED ASSETS in Barcelona was signed in November 2004 between the owner, the La Caixa bank, and Agbar. That contract provides, in Property, plant and equipment given in guarantee to pledge particular, for an option to sell the building, at the sole initiative fi nancial debts totaled €135.4 million at December 31, 2009, of the vendor, for a period stretching from November 15, 2009 to versus €148.3 million at December 31, 2008. November 15, 2014. This sale option had a value of €169.3 million at December 31, 2009. In this way, Agbar is subject to a potential purchase commitment in respect of the building for an amount equal to the value of the sale option.

NOTE 12 Interests in joint ventures

The summary fi nancial statements of the principal associates are presented below:

Percent Current Non-current Current Non-current (in millions of euros) consolidated assets assets liabilities liabilities 20

At December 31, 2009 Hisusa Group (a) (b) 51.0 951.2 2,873.9 942.3 1,026.3 TOTAL 951.2 2,873.9 942.3 1,026.3 At December 31, 2008 Hisusa Group (a) 51.0 1,173.6 2,611.9 1,155.9 733.3 TOTAL 1,173.6 2,611.9 1,155.9 733.3

(a) Including Agbar, which is fully consolidated by Hisusa, in turn proportionately consolidated by SUEZ ENVIRONNEMENT COMPANY for 51%. (b) Changes in current assets are mainly the result of the distribution by Agbar of a special dividend, following Agbar’s disposal in 2007 of Applus, a Group specializing in inspection and certifi cation activities.

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NOTE 13 Financial instruments

13.1 FINANCIAL ASSETS The Group’s fi nancial assets are broken down into the following categories:

December 31, 2009 December 31, 2008

(in millions of euros) Non-current Current Total Non-current Current Total

Available-for-sale securities 447.8 - 447.8 729.2 - 729.2 Loans and receivables carried at amortized cost 521.6 4,729.5 5,251.1 577.4 4,612.8 5,190.2

● Loans and receivables carried at amortized cost (excluding trade and other receivables) 400.3 204.6 604.9 457.4 151.8 609.2

● Trade and other receivables - 3,701.4 3,701.4 - 3,588.4 3,588.4

● Other assets 121.3 823.5 944.8 120.0 872.6 992.6 Financial assets at fair value through income 44.8 1,152.8 1,197.6 89.6 51.3 140.9

● Derivative fi nancial instruments (Incl. Commodity derivatives) 44.8 11.7 56.5 89.6 0.3 89.9

● Financial assets at fair value through income excluding derivatives - 1,141.1 1,141.1 - 51.0 51.0 Cash and cash equivalents - 2,711.7 2,711.7 - 1,668.5 1,668.5 TOTAL 1,014.2 8,594.0 9,608.2 1,396.2 6,332.6 7,728.8

13.1.1 Available-for-sale securities

(in millions of euros)

At December 31, 2007 1,143.6

Acquisitions 36.1 Net book value of disposals (117.5) (a) Impairment (2.2) Changes in fair value recorded in shareholders’ equity (341.1) (b) Changes in scope of consolidation, exchange rates and other 10.3 At December 31, 2008 729.20 Acquisitions 124.4 (c) Net book value of disposals (307.3) (d) Impairment (0.1) Changes in fair value recorded in shareholders’ equity (45.3) (e) Changes in scope of consolidation, exchange rates and other (53.1) (f) At December 31, 2009 447.8

(a) Notably disposals of Indaver, SUEZ and Sakab shares. (b) Impact of change in fair value of Available-for-Sale securities relating to Gas Natural and Acea. (c) Essentially subscription to the Gas Natural capital increase. (d) Disposal of all shares held in Gas Natural. (e) Basically corresponds to the change in fair value of the Acea and Acque Toscane shares, as well as the impact of the sale of Gas Natural shares. (f) Corresponds primarily to the entry into the scope of consolidation of Nuove Acque and Acque Toscane (Italy).

224 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

Available-for-sale securities held by the Group totaled context into consideration, to determine whether it is necessary €447.8 million at December 31, 2009, consisting of €92.9 million to recognize depreciations. in listed securities and €354.9 million in unlisted securities. For listed securities, the Group believes that a decline in the Acquisitions during the period primarily corresponded to trading price of over 50% from historic cost, or a decline in the subscription to the Gas Natural capital increase totaling the trading price below historic cost for over 12 months, are €89.0 million, at a price of €7.82 per share. objective indications of depreciation.

Disposals during the period corresponded primarily to the For listed securities, a decline of 10% in the stock market price sale of Gas Natural shares in the last quarter of 2009, totaling would generate a €9.3 million decline in equity. €324.9 million, generating a capital gain of €24.8 million. The main line of unlisted securities is Aguas de Valencia, the The Group examines the value of the various available-for- value of which is determined based on a multi-criteria analysis sale securities on a case-by-case basis and taking the market (DCF, multiples). A decline of 10% in the total value of Aguas de Valencia share would result in a -€13.5 million decline in equity.

Gains and losses posted to equity and income from available-for-sale securities are as follows:

Gain/(loss) Dividends Remeasurement on disposals

Impact of Change in fair exchange (in millions of euros) value rates Impairment

Shareholders’ equity (45.3) (0.0) Income 33.9 - (0.1) 34.2 Total at December 31, 2009 33.9 (45.3) (0.0) (0.1) 34.2 Shareholders’ equity (341.1) (0.0) Income 33.0 (2.2) 54.8 20 Total at December 31, 2008 33.0 (341.1) (0.0) (2.2) 54.8

13.1.2 Loans and receivables carried at amortized cost

Dec. 31, 2009 Dec. 31, 2008

(in millions of euros) Non-current Current Total Non-current Current Total

Loans and receivables carried at amortized cost (excluding trade and other receivables) 400.3 204.6 604.9 457.4 151.8 609.2

● Loans granted to affi liated companies 198.1 85.6 283.7 144.4 129.8 274.2

● Concession receivables 191.6 115.8 307.4 298.4 19.5 317.9

● Finance lease receivables 10.6 3.2 13.8 14.6 2.5 17.1 Trade and other receivables 3,701.4 3,701.4 3,588.4 3,588.4 Other assets 121.3 823.5 944.8 120.0 872.6 992.6

● Rights to repayment 0.6 0.0 0.6 0.6 0.0 0.6

● Tax receivables 363.0 363.0 439.0 439.0

● Other receivables 120.7 460.5 581.2 119.4 433.6 553.0 TOTAL 521.6 4,729.5 5,251.1 577.4 4,612.8 5,190.2

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Depreciation and impairment on loans and receivables carried at amortized cost are shown below:

Dec. 31, 2009 Dec. 31, 2008

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) 819.5 (214.6) 604.9 776.0 (166.8) 609.2 Trade and other receivables 3 902.7 (201.3) 3,701.4 3 772.7 (184.3) 3,588.4 Other assets 982.0 (37.2) 944.8 1 028.5 (35.8) 992.6 TOTAL 5,704.2 (453.1) 5,251.1 5 577.2 (386.9) 5,190.2

Net income and expenses on loans and receivables carried at amortized cost recognized in the income statement break down as follows (including trade receivables and other assets):

Interest Post-acquisition valuation

(in millions of euros) Exchange-rate effect Impairment

At December 31, 2009 39.5 0.2 (48.5) At December 31, 2008 53.7 3.3 (29.0)

Loans granted to affi liated companies Trade and other receivables “Loans granted to affi liated companies” primarily includes loans On initial recognition, trade receivables are recorded at fair to associates accounted for by the equity method and to non- value, which generally corresponds to their nominal value. consolidated companies, and amounted to €184.7 million at Impairment losses are recorded according to the estimated December 31, 2009, versus €193.4 million at December 31, 2008. risk of non-recovery. This item includes amounts due from customers under construction contracts. The fair value of loans granted to affi liated companies amounted to €301.0 million at December 31, 2009, versus €297.3 million in The carrying amount value posted to the statement of fi nancial 2008. The net carrying amount of these loans was €283.7 million position represents a good measurement of fair value. at December 31, 2009 versus €274.2 million in 2008.

226 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

13.1.3 Financial assets measured at fair value through income This item comprises derivative fi nancial instruments as well as fi nancial assets carried at fair value through income, and can be analyzed as follows:

Dec. 31, 2009 Dec. 31, 2008

(in millions of euros) Non-current Current Total Non-current Current Total

Derivative fi nancial instruments 44.8 11.7 56.5 89.6 0.3 89.9

● Derivatives hedging borrowings 31.0 0.0 31.0 73.7 0.0 73.7

● Derivatives hedging commodities 0.0 4.1 4.1 0.0 0.0 0.0

● Derivatives hedging other items 13.8 7.6 21.4 15.9 0.3 16.2

Financial assets at fair value through income excluding derivatives 0.0 1,141.1 1,141.1 0.0 51.0 51.0

● Financial assets qualifi ed for fair value through income 1,141.1 1,141.1 51.0 51.0

● Financial assets designated at fair value through income 0.0 0.0 0.0 0.0 TOTAL 44.8 1,152.8 1,197.6 89.6 51.3 140.9

Commodity derivatives and derivatives hedging borrowings and Income recognized on all fi nancial assets measured at fair value other items are set up as part of the Group’s risk management through income at December 31, 2009 was €6.8 million. policy and are analyzed in Note 14. 13.1.4 Cash and cash equivalents Financial assets valued at fair value through income are mainly UCITS held for trading purposes and are included in the The Group’s fi nancial risk management policy is described in calculation of the Group’s net debt (see Note 13.3). Note 14. 20 In the context of its liquidity-strengthening policy, the Group “Cash and cash equivalents” amounted to €2,711.7 million at issued €3 billion in bonds in 2009 (see Section 13.3.2). A portion December 31, 2009 versus €1,668.5 million at December 31, 2008. of the funds thus collected was invested in money market This item includes restricted cash amounting to €41.7 million at UCITS, and another portion in short-term deposits with fi rst- December 31, 2009 versus €181.1 million at December 31, 2008. tier banks. These assets are intended to be used to cover the Group’s refi nancing needs in coming years. Income recognized in respect of “cash and cash equivalents” at December 31, 2009 amounted to €22.4 million versus €41.6 million at December 31, 2008.

13.1.5 Pledged and mortgaged assets

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Pledged and mortgaged fi nancial assets 12.1 11.5

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13.2 FINANCIAL LIABILITIES liabilities carried at amortized cost”, together with derivative instruments reported on the “Financial liabilities at fair value Financial liabilities include borrowings and debt, trade and other through income” line. payables and other fi nancial liabilities classifi ed under “Other

The Group’s fi nancial liabilities are classifi ed under the following categories at December 31, 2009:

Dec. 31, 2009 Dec. 31, 2008

(in millions of euros) Non-current Current Total Non-current Current Total

Borrowings 6,400.0 3,680.2 10,080.2 5,100.5 2,620.8 7,721.3 Derivative fi nancial instruments 62.5 57.1 119.6 22.5 83.3 105.8 Trade and other payables - 3,741.4 3 741.4 - 3,863.7 3,863.7 Other fi nancial liabilities 0.0 - 0.0 18.9 - 18.9 TOTAL 6,462.5 7,478.7 13,941.2 5,141.9 6,567.8 11,709.7

13.2.1 Borrowings and debt

Dec. 31, 2009 Dec. 31, 2008

(in millions of euros) Non-current Current Total Non-current Current Total

Bond issues 3,763.0 31.0 3,794.0 681.0 263.4 944.4 Draw-downs on credit facilities 121.0 633.0 754.0 416.7 87.4 504.1 Borrowings under fi nance leases 409.2 55.3 464.5 434.0 58.3 492.3 Other bank borrowings 1,176.4 920.6 2,097.0 1,660.2 233.5 1,893.7 Other borrowings 953.7 979.7 1,933.4 1,921.0 134.1 2,055.1 Borrowings 6,423.3 2,619.6 9,042.9 5,112.9 776.7 5,889.6 Bank overdrafts and current cash accounts 936.6 936.6 1 823.2 1,823.2 Outstanding borrowings 6,423.3 3,556.2 9,979.5 5,112.9 2,599.9 7,712.8 Impact of measurement at amortized cost (23.3) 121.7 98.4 (22.4) 21.2 (1.2) Impact of fair-value hedge 0.0 2.3 2.3 10.0 (0.3) 9.7 Borrowings 6,400.0 3,680.2 10,080.2 5,100.5 2,620.8 7,721.3

Gains and losses on borrowings and debt recognized in the income statement mainly comprise interest and are detailed in Note 6.

Borrowings are analyzed in paragraph 13.3 “Net debt”.

228 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

13.2.2 Derivative instruments (Inc. Commodity derivatives) Derivative instruments recorded in liabilities are measured at fair value and may be analyzed as follows:

Dec. 31, 2009 Dec. 31, 2008

(in millions of euros) Non-current Current Total Non-current Current Total

Derivatives hedging borrowings 49.5 35.6 85.1 11.9 31.2 43.1 Derivatives hedging commodities 0.0 16.7 16.7 - 51.4 51.4 Derivatives hedging other items 13.0 4.8 17.8 10.6 0.7 11.3 TOTAL 62.5 57.1 119.6 22.5 83.3 105.8

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) Dec. 31, 2009 Dec. 31, 2008 Trade payables 2,018.5 2,080.8 Amounts payable under construction contracts 200.5 173.5 Advances and down-payments received 341.0 397.1 Payable on fi xed assets 849.2 844.3 Concession liabilities 11.9 22.7 Capital renewal and replacement liabilities 320.3 345.3 TOTAL 3,741.4 3,863.7

The carrying amount recorded in the statement of fi nancial liabilities are determined by estimating the cost of renewing or 20 position represents a good measurement of fair value. replacing equipment and restoring the sites under concession (according to IFRIC 12), discounted each year at rates linked Capital renewal and replacement liabilities to infl ation. Expenses are calculated contract by contract, by This item includes the obligation of the concession operators distributing the likely restoration and repair expenses over the to repair and restore facilities to their original condition. The duration of the contract.

13.2.4 Other fi nancial liabilities Other fi nancial liabilities are analyzed as follows:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Liabilities on share purchases 0.0 18.9 Other 0.0 0.0 TOTAL 0.0 18.9

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 229 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

13.3 NET DEBT

Dec. 31, 2009 Dec. 31, 2008

(in millions of euros) Non-current Current Total Non-current Current Total

Outstanding borrowings 6,423.3 3,556.2 9,979.5 5,112.9 2,599.9 7,712.8 Impact of measurement at amortized cost (23.3) 121.7 98.4 (22.4) 21.2 (1.2) Impact of fair value hedge (a) 0.0 2.3 2.3 10.0 (0.3) 9.7 Borrowings and debt 6,400.0 3,680.2 10,080.2 5,100.5 2,620.8 7,721.3 Derivative hedging borrowings under liabilities (b) see Note 13.2.2 49.5 35.6 85.1 11.9 31.2 43.1 Gross debt 6,449.5 3,715.8 10,165.3 5,112.4 2,652.0 7,764.4 Financial assets valued at fair value through income, see Note 13.1.3 0.0 (1,141.1) (1,141.1) 0.0 (51.0) (51.0) Cash and cash equivalents 0.0 (2,711.7) (2,711.7) 0.0 (1,668.5) (1,668.5) Derivative hedging borrowings under assets (b) see Note 13.1.3 (31.0) 0.0 (31.0) (73.7) 0.0 (73.7) Net cash (31.0) (3,852.8) (3,883.8) (73.7) (1,719.5) (1,793.2) NET DEBT 6,418.5 (137.0) 6,281.5 5,038.7 932.5 5,971.2

Outstanding borrowings 6,423.3 3,556.2 9,979.5 5,112.9 2,599.9 7,712.8 Financial assets valued at fair value through income 0.0 (1,141.1) (1,141.1) 0.0 (51.0) (51.0) Cash and cash equivalents 0.0 (2,711.7) (2,711.7) 0.0 (1,668.5) (1,668.5) NET DEBT EXCLUDING AMORTIZED COST AND IMPACT OF DERIVATIVE FINANCIAL INSTRUMENTS 6,423.3 (296.6) 6,126.7 5,112.9 880.4 5,993.3

(a) This item corresponds to the revaluation of the interest rate component of debt in a designated fair value hedging relationship. (b) This item represents the fair value of debt-related derivatives irrespective of whether or not they are designated as hedges. It also includes instruments designated as net investment hedges.

13.3.1 Change in net debt 13.3.2 Bond issuances Net debt increased by €310.3 million during 2009, primarily for During 2009, SUEZ ENVIRONNEMENT COMPANY undertook the following reasons: a number of bond issuances as part of an EMTN program set up at the start of the year. The amount issued in 2009 totaled ● the dividend payment made to SUEZ ENVIRONNEMENT €3 billion, including: COMPANY shareholders resulted in a €317.6 million increase in net debt; ● an issuance of €1.3 billion at 5 years, bearing a coupon of 4.875%, maturing April 8, 2014; ● entities entering the scope of consolidation increased net debt by €182.1 million (primarily EVI); ● an issuance of €800 million at 10 years, bearing a coupon of 6.25%, maturing April 8, 2019; ● moreover, the increase in net debt is also explained by the acquisitions made in 2009, in particular those involving Swire ● an issuance of €250 million at 8 years, bearing a coupon of SITA (acquisition of 50% of the securities not yet held), Allren 5.20%, maturing June 8, 2017; et Tianjin; ● an issuance of €500 million at 15 years, bearing a coupon of ● conversely, disposals of assets, particularly the Gas Natural 5.50%, maturing July 22, 2024; shares held by SUEZ ENVIRONNEMENT Holding BE (see ● an issuance of €150 million at 8 years, bearing a coupon of Note 2), resulted in a decline of €201.8 million in net debt. 4.50%, maturing October 12, 2017.

230 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

13.3.3 Debt/equity ratio

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Net debt 6,281.5 5,971.2 Total equity 4,418.1 4,170.0 DEBT/EQUITY RATIO 142.2% 143.2%

NOTE 14 Management of risks arising from financial instruments

The Group mainly uses derivative instruments to manage its exposure to credit, liquidity and market risks.

14.1 MANAGEMENT OF RISKS ARISING FROM FINANCIAL INSTRUMENTS EXCLUDING COMMODITIES

14.1.1 Fair value of fi nancial instruments excluding commodities

14.1.1.1 Financial assets Financial instruments excluding commodities posted to assets are distributed as follows among the various levels of fair value (fair value levels are defi ned in Note 1.2.1):

December 31, 2009

(in millions of euros) Total Level 1 Level 2 Level 3

Available-for-sale securities 447.8 92.9 354.9 Loans and receivables carried 20 at amortized cost 604.9 604.9 Loans and receivables carried at amortized cost (excluding trade and other receivables) 604.9 604.9 Derivative fi nancial instruments 56.5 56.5 Derivatives hedging borrowings 31.0 31.0 Derivatives hedging commodities 4.1 4.1 Derivatives hedging other items 21.4 21.4 Financial assets at fair value through income 1,141.1 1,141.1 Financial assets at fair value through income excluding derivatives 1,141.1 1,141.1 TOTAL 2,250.3 92.9 1,802.5 354.9

AVAILABLE-FOR-SALE SECURITIES to a fair value hedging relationship. These loans and receivables, Listed securities – valued at the stock market price on the for which fair value is determined based on observable interest closing date – are considered Level 1. and exchange rate data, are considered Level 2.

Unlisted securities – measured using valuation models based DERIVATIVE FINANCIAL INSTRUMENTS primarily on the most recent transactions, discounted dividends The portfolio of derivative fi nancial instruments used by the or cash fl ow and net asset value, are considered Level 3. Group within the context of its risk management consists primarily of interest rate and exchange rate swaps, rate LOANS AND RECEIVABLES CARRIED AT AMORTIZED COST(EXCLUDING TRADE AND OTHER RECEIVABLES) options, and currency swaps. The fair value of virtually all these Loans and receivables carried at amortized cost (excluding contracts is determined using internal valuation models based trade and other receivables) contain elements that contribute on observable data, and may be considered Level 2.

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FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH 14.1.1.2 Financial liabilities INCOME Financial instruments excluding commodities posted to Financial assets measured at fair value, calculated based on liabilities are distributed as follows among the various levels of observable data, are considered Level 2. fair value (fair value levels are defi ned in Note 1.2.1):

December 31, 2009

(in millions of euros) Total Level 1 Level 2 Level 3

Borrowings 10,080.2 10,080.2 Derivative fi nancial instruments 119.6 119.6 Derivatives hedging borrowings 85.1 85.1 Derivatives hedging commodities 16.7 16.7 Derivatives hedging other items 17.8 17.8 Other fi nancial liabilities - - TOTAL 10,199.8 - 10,199.8 -

BORROWINGS 14.1.2 Counterparty risk Borrowings include bond issuances contributing to a fair value The Group is exposed to counterparty risk through its operating hedging relationship. These bond issuances, the fair value activities on the one hand, and through its fi nancial activities of which is calculated based on observable interest rate and on the other. exchange rate data, are considered Level 2. Operating activities DERIVATIVE FINANCIAL INSTRUMENTS See 14.1.1.1. COUNTERPARTY RISK ARISING FROM TRADE AND OTHER RECEIVABLES The maturity of past-due trade and other receivables is broken down below:

Assets not Impaired impaired or (in millions of euros) Non-impaired assets past due at the closing date assets past due

Trade and other receivables 0-6 months 6-12 months Over one year Total Total Total Total

At December 31, 2009 149.7 22.2 44.1 216.0 201.2 3 485.5 3 902.7 At December 31, 2008 367.5 77.0 105.6 550.1 183.0 3 039.6 3 772.7

The age of receivables that are past due but not impaired may COUNTERPARTY RISK ARISING FROM OTHER ASSETS vary signifi cantly depending on the type of customer with Other assets, which include tax receivables and other which the Group companies do business (private companies, receivables, are neither past-due nor impaired. 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 to risk on those assets. 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.

232 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

Financial activities fair value of derivatives posted to assets on the statement of The Group’s maximum exposure to counterparty risk in its fi nancial position (i.e., €8,215.5 million at December 31, 2009, fi nancial activities may be measured in terms of the book value and €6,007.1 million at December 31, 2008). of fi nancial assets excluding available-for-sale securities and the

COUNTERPARTY RISK ARISING FROM PAST-DUE LOANS AND RECEIVABLES CARRIED AT AMORTIZED COST (EXCLUDING TRADE AND OTHER RECEIVABLES) The maturity of past-due loans and receivables carried at amortized cost (excluding trade and other receivables) is analyzed below:

Assets not Impaired impaired or (in millions of euros) Non-impaired assets past due at the closing date assets past due

Loans and receivables carried at amortized cost (excluding trade and other receivables) 0-6 months 6-12 months Over one year Total Total Total Total

At December 31, 2009 8.6 0.1 0.1 8.8 214.6 597.4 820.8 At December 31, 2008 5.8 18.4 83.9 108.1 104.1 564.2 776.4

Loans and receivables carried at amortized cost (excluding in emerging countries where cash cannot be centralized and trade and other receivables) do not include items relating is therefore invested locally. Unrated counterparties also often to impairment, change in fair value or amortized cost. The correspond to local subsidiaries of rated groups. change in these items is presented in Note 13.1.2 “Loans and Moreover, at December 31, 2009, no counterparty outside the receivables at amortized cost”. GDF SUEZ Group represented more than 17.5% of cash and COUNTERPARTY RISK ARISING FROM INVESTING ACTIVITIES cash equivalents (estimated risk-weightings of each investment The Group is exposed to counterparty risk on the investment of depending upon type, currency and maturity). its excess cash and cash equivalents, fi nancial assets recognized at fair value through income (excluding derivatives) and through 14.1.3 Liquidity risk 20 the use of derivative fi nancial instruments. Counterparty risk 14.1.3.1 Available cash corresponds to the loss which the Group might incur in the event The Group’s fi nancing policy is based on the following principles: of counterparties failing to meet their contractual obligations. In the case of derivative instruments, that risk corresponds to ● Framework Financing Agreement with GDF SUEZ implemented positive fair value. in June 2008;

The Group invests the majority of its cash surpluses and ● diversifi cation of fi nancing sources between the banking and negotiates its fi nancial hedging instruments with leading capital markets; counterparties. As part of its counterparty risk management ● balanced repayment profi le of fi nancial debt. policy, the Group has put in place procedures for the management and control of counterparty risk based on the At December 31, 2009, the Group had available cash of accreditation of counterparties according to their credit ratings, €3,883.8 million (including €1,141.1 million in UCITS held for fi nancial exposure and objective market factors (Credit Default trading purposes and €31.0 million in fi nancial derivatives). Swaps, stock market capitalization, etc.) on the one hand, and Almost all surplus cash was invested in short-term banking the defi nition of risk limits on the other. deposits and regular cash UCITs.

At December 31, 2009, total cash and cash equivalents exposed In addition, at December 31, 2009, the Group specifi cally to counterparty risk was €3,883.8 million. Investment-grade had €1,807.7 million in confi rmed credit facilities, including counterparties (counterparties with minimum Standard & Poors’ €754.0 million already drawn; unused credit facilities therefore rating of BBB- or Moody’s rating of Baa3) represented 88.7% of totaled €1,053.7 million, €285.8 million of which will be maturing cash and cash equivalents (risk-weighted for each investment, in 2010. depending upon type, currency and maturity). The remainder of the Group’s exposure was with unrated counterparties (11.1%) Bank loans represented 30% of the Group’s gross fi nancial debt or counterparties rated non-investment grade (0.2%). Most (excluding bank overdrafts, and the amortized cost and impact of the two latter types of exposure consisted of consolidated of derivatives). Financing on the markets (use of securitization companies with minority interests or Group companies operating for 3%; use of bond borrowings for 40%) represented 43% of this total.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 233 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

The Group predicts that its fi nancing needs for the main In addition, the Group does not rule out refi nancing part of its investments that it is considering will be met by its available debt in 2010 by tapping the short and/or long-term debt capital cash, the sale of UCITS held for trading purposes, future cash markets, or bank borrowings if market conditions are favorable. fl ows arising from operating activities and the potential use As in 2009, any market refi nancings will be carried out by of the credit facilities at its disposal (including those arising SUEZ ENVIRONNEMENT COMPANY. Finally, if necessary, specifi c from the implementation of the fi nancing contract agreed with fi nancing may be put in place for specifi c projects. GDF SUEZ).

14.1.3.2 Undiscounted contractual payments Undiscounted contractual payments on outstanding borrowings by maturity and type of lenders are as follows:

At December 31, 2009 Beyond (in millions of euros) Total 2010 2011 2012 2013 2014 5 years

Debt with GDF SUEZ 1,939.2 1,299.5 6.0 6.0 462.8 33.0 131.9 Bond or bank borrowings 8,040.3 2,256.7 183.4 688.8 223.8 1,508.2 3,179.4 TOTAL 9,979.5 3,556.2 189.4 694.8 686.6 1,541.2 3,311.3

Moreover, at December 31, 2009, undiscounted contractual payments on outstanding borrowings broke down as follows by maturity and type:

At December 31, 2009 Beyond (in millions of euros) Total 2010 2011 2012 2013 2014 5 years

Bond issues 3,794.0 31.0 1.3 34.6 1.4 1,338.2 2,387.5 Draw-downs on credit facilities 754.0 633.0 0.0 63.2 0.0 0.0 57.8 Borrowings under fi nance leases 464.5 55.3 45.0 46.3 45.3 42.0 230.6 Other bank borrowings 2,097.0 920.6 122.9 283.0 168.1 146.4 456.0 Other borrowings 1,933.4 979.7 20.2 267.7 471.8 14.6 179.4 Bank overdrafts and current cash accounts 936.6 936.6 0.0 0.0 0.0 0.0 0.0 Outstanding borrowings 9,979.5 3,556.2 189.4 694.8 686.6 1,541.2 3,311.3 Financial assets at fair value through income (1,141.1) (1,141.1) 0.0 0.0 0.0 0.0 0.0 Cash and cash equivalents (2,711.7) (2,711.7) 0.0 0.0 0.0 0.0 0.0 NET DEBT EXCLUDING AMORTIZED COST AND IMPACT OF DERIVATIVE FINANCIAL INSTRUMENTS 6,126.7 (296.6) 189.4 694.8 686.6 1,541.2 3,311.3

At December 31, 2008 Beyond (in millions of euros) Total 2009 2010 2011 2012 2013 5 years

Outstanding borrowings 7,712.8 2,599.9 2,218.7 136.9 464.1 738.5 1,554.7 Financial assets at fair value through income and cash and cash equivalents (1,719.5) (1,719.5) 0.0 0.0 0.0 0.0 0.0 NET DEBT EXCLUDING AMORTIZED COST AND IMPACT OF DERIVATIVE FINANCIAL INSTRUMENTS 5,993.3 880.4 2,218.7 136.9 464.1 738.5 1,554.7

234 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATION AND REVENUES Consolidated fi nancial statements

At December 31, 2009, undiscounted contractual cash fl ows interest payments on outstanding debt broke down as follows by maturity:

At December 31, 2009 Beyond (in millions of euros) Total 2010 2011 2012 2013 2014 5 years

Undiscounted contractual cash fl ows interest payments on outstanding borrowings 2,698.2 342.6 301.9 295.9 281.2 240.9 1,235.7

At December 31, 2008 Beyond (in millions of euros) Total 2009 2010 2011 2012 2013 5 years

Undiscounted contractual cash fl ows interest payments on outstanding borrowings 1,504.1 241.0 189.7 142.6 130.9 181.1 618.8

At December 31, 2009, 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, 2009 Beyond (in millions of euros) Total 2010 2011 2012 2013 2014 5 years

Derivatives (excluding commodities) 6.1 (2.7) (2.2) 3.0 2.9 1.9 3.2

At December 31, 2008 Beyond (in millions of euros) Total 2009 2010 2011 2012 2013 5 years

Derivatives (excluding commodities) (50.4) (51.5) 9.8 3.6 (0.1) (1.1) (11.1) 20

In order to best refl ect the current economic circumstances of its operations, cash fl ows related to derivatives posted to liabilities and assets as shown above correspond to net positions. Moreover, the amounts presented above have a positive sign in the case of an asset, and a negative sign in the case of a liability.

Maturities of confi rmed undrawn credit facilities are as follows:

Confi rmed but undrawn credit facilities Beyond (in millions of euros) Total 2010 2011 2012 2013 2014 5 years

At December 31, 2009 1,053.7 285.8 120.4 473.7 80.3 60.0 33.5

Beyond Total 2009 2010 2011 2012 2013 5 years

At December 31, 2008 954.9 200.8 430.7 150.0 61.2 81.7 30.5

At December 31, 2009, no single counterparty accounted for more than 14% of the Group’s confi rmed undrawn credit lines.

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14.1.4 Market risks Contracting a liability in the same currency is the most natural form of hedging, although the Group also enters into foreign 14.1.4.1 Currency risk currency derivatives that allow it to artifi cially recreate foreign The Group is exposed to fi nancial statement translation risk currency debt. due to the geographical spread of its activities: its statement Exposure to currency risks is reviewed on a monthly basis. The of fi nancial position and income statement are impacted by asset cover ratio (corresponding to the ratio between the book changes in exchange rates upon consolidation of the fi nancial value of an asset denominated in a foreign currency outside the statements of its foreign subsidiaries outside the eurozone. eurozone, and the debt assumed for that asset) is periodically Exposure to translation risk arises essentially from net assets reviewed in light of market conditions and whenever assets are held by the Group in the United States and the United Kingdom. acquired or sold. Any signifi cant change in the cover ratio is The Group’s hedging policy with regard to investments in subject to prior approval by the Treasury Committee. non-eurozone currencies consists of contracting liabilities Taking fi nancial instruments into account, 57% of net debt was denominated in the same currency as the cash fl ows expected denominated in euros, 18% in US dollars and 7% in pounds to derive from the hedged assets. sterling at the end of 2009, compared with 59% in euros, 18% in US dollars and 7% in pounds sterling at the end of 2008.

ANALYSIS OF FINANCIAL INSTRUMENTS BY CURRENCY

GROSS DEBT

December 31, 2009 December 31, 2008

Before hedging After hedging Before hedging After hedging

€ Zone 77% 69% 68% 61% US $ Zone 10% 12% 14% 14% £ Zone 3% 5% 4% 7% Other currencies 10% 14% 14% 18% TOTAL 100% 100% 100% 100%

NET DEBT

December 31, 2009 December 31, 2008

Before hedging After hedging Before hedging After hedging

€ Zone 70% 57% 68% 59% US $ Zone 16% 18% 17% 18% £ Zone 3% 7% 4% 7% Other currencies 11% 18% 11% 16% TOTAL 100% 100% 100% 100%

236 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

FOREIGN CURRENCY DERIVATIVES Derivatives used to hedge currency risk are presented below.

December 31, 2009 December 31, 2008

Total Total Total market nominal Total market nominal (in millions of euros) value value value value

Fair value hedges 0.9 273.9 (2.7) 124.6 Cash-fl ow hedges (0.3) 15.2 0.0 20.2 Net investment hedges 11.0 618.0 39.4 203.1 Derivative instruments not qualifying for hedge accounting (8.5) 616.0 29.6 248.5 TOTAL 3.1 1 523.1 66.3 596.4

The market values shown in the table above are positive for an The Group’s aim is to achieve a balanced interest rate structure asset and negative for a liability. for its net debt in the medium term (5 to 15 years) using a mixture of fi xed and fl oating rates. The interest rate mix may The Group defi nes foreign currency derivatives hedging by fi rm change depending on market trends. foreign currency commitments as fair-value hedges. The Group also has access to hedging instruments (specifi cally Cash-fl ow hedges correspond mainly to hedges of future swaps), to protect itself from increases in interest rates in the operating foreign-currency cash fl ows. currencies in which it has assumed debt. Net investment hedging instruments are mainly currency swaps. The Group’s exposure to interest rate risk is managed centrally Derivative instruments not qualifi ed for hedging consist of and reviewed regularly (generally on a monthly basis) during structured instruments, which because of their type and because meetings of the Treasury Committee. Any signifi cant change in they do not meet the effectiveness criteria defi ned in IAS 39, the interest rate mix is subject to prior approval by Management. cannot be qualifi ed as hedges for accounting purposes. These 20 The cost of debt is sensitive to changes in interest rates on all contracts economically cover foreign currency commitments. fl oating-rate debt. The cost of debt is also affected by changes in Further, the effect of foreign currency derivatives is almost market value of derivative instruments not classifi ed as hedges entirely offset by foreign exchange income on the hedged items. under IAS 39.

14.1.4.2 Interest rate risk The Group’s main exposure to interest rate risk arises from loans The Group’s aim is to reduce fi nancing costs by limiting the and borrowings denominated in euros, US dollars and pounds impact of interest rate fl uctuations on its income statement. sterling, which represented 82% of net debt at December 31, 2009.

The breakdown by type of gross debt, net debt and loans to affi liated companies, before and after impact of hedging instruments, is shown in the following tables:

FINANCIAL INSTRUMENTS BY RATE TYPE

GROSS DEBT

December 31, 2009 December 31, 2008

Before hedging After hedging Before hedging After hedging

Floating rate 43% 52% 61% 57% Fixed rate 57% 48% 39% 43% TOTAL 100% 100% 100% 100%

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NET DEBT

December 31, 2009 December 31, 2008

Before hedging After hedging Before hedging After hedging

Floating rate 7% 22% 50% 45% Fixed rate 93% 78% 50% 55% TOTAL 100% 100% 100% 100%

LOANS GRANTED TO AFFILIATED COMPANIES: (GROSS AMOUNTS)

December 31, 2009 December 31, 2008

Before hedging After hedging Before hedging After hedging

Floating rate 82% 82% 36% 36% Fixed rate 18% 18% 64% 64% TOTAL 100% 100% 100% 100%

INTEREST RATE DERIVATIVES Derivatives used to hedge interest rate risk are presented below.

December 31, 2009 December 31, 2008

(in millions of euros) Total market value Total nominal value Total market value Total nominal value

Fair-value hedges 15.1 2 539.9 20.3 769.2 Cash-fl ow hedges (42.2) 1 019.3 (31.8) 893.8 Derivative instruments not qualifying for hedge accounting (16.7) 318.9 (16.2) 207.5 TOTAL (43.8) 3 878.1 (27.7) 1 870.5

The market values shown in the table above are positive for an they do not meet the effectiveness criteria defi ned in IAS 39, asset and negative for a liability. cannot be qualifi ed as hedges for accounting purposes, even though they cover the borrowings economically. Interest rate instruments qualifying as fair value hedges correspond mainly to interest rate swaps transforming fi xed- 14.1.4.3 Specifi c impact of currency and interest rate rate debt into fl oating-rate debt. hedges Cash-fl ow hedges correspond mainly to hedges of fl oating-rate FAIR-VALUE HEDGES debt. At December 31, 2009 the net impact of fair value hedges Instruments not qualifi ed for hedging consist of instruments recognized in the income statement was +€7.3 million. which, because of their type and endorsement, and because

238 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

CASH-FLOW HEDGES The breakdown by maturity of the market value of the foreign currency and interest rate derivatives designated as cash fl ow hedges is as follows:

(in millions of euros) Market value of derivatives by maturity date

Y+1 (24.0) Y+2 (9.9) Y+3 (4.9) Y+4 (1.3) Y+5 (1.1) > 5 years (1.3) TOTAL (42.5)

At December 31, 2009, unrealized gains and losses directly IMPACT ON INCOME: recognized in equity Group share over the period amounted A 1 point increase in short-term interest rates (for all currencies) to a loss of -€19.9 million (including the impacts on companies on the nominal amount of fl oating-rate net debt and the fl oating- consolidated by the equity method). rate component of derivatives, would have a negative impact of -€6.9 million on net interest expense. The ineffective portion of cash-fl ow hedges recognized in income was +€0.4 million. IMPACT ON EQUITY A uniform increase of 1 point in short-term interest rates (for all NET INVESTMENT HEDGES currencies) would have a positive equity impact of €32.3 million The ineffective portion of net investment hedges recognized in due to the change in fair value of qualifi ed cash-fl ow hedging income represented a gain of +€6.9 million. derivatives. 14.1.4.4 Sensitivity analysis: foreign currency and interest rate instruments 14.1.4.5 Market risk on available-for-sale securities 20 At December 31, 2009, available-for-sale securities held by the The sensitivity analysis was based on the debt position as at Group amounted to €447.8 million (see Note 13.1.1). the statement of fi nancial position date (including derivative instruments). A 10% fall in the value of the listed securities would have a negative impact of around €9.3 million on Group shareholders’ As regards the foreign currency risk, the sensitivity calculation equity. The Group’s portfolio of listed and unlisted equity consists in evaluating the impact in the consolidated fi nancial investments is managed in accordance with a specifi c statements of changes in foreign currency rates against the investment policy. Reports on the equity portfolio are submitted euro +/-10% compared to closing rates. to Executive Management on a regular basis. IMPACT ON INCOME Changes in exchange rates against the euro only affect income 14.2 MANAGEMENT OF RISKS ARISING through gains and losses on liabilities denominated in a currency FROM FINANCIAL INSTRUMENTS LINKED other than the reporting currency of the companies carrying the TO COMMODITIES liabilities on their statement of fi nancial position, and to the extent that these liabilities do not qualify as net investment 14.2.1 Hedging operations hedges. A uniform +/-10% change in foreign currencies against The Group sets up cash fl ow hedges on fuel and electricity the euro would yield a gain or loss of €1.2 million. as defi ned by IAS 39, by using the derivative instruments available on over-the-counter markets, whether they are fi rm IMPACT ON EQUITY commitments or options, but always paid net. The Group’s aim For fi nancial liabilities (debt and derivatives) designated as net is to protect itself against adverse changes in market prices investment hedges, a uniform 10% change in foreign currencies which may specifi cally affect its supply costs. against the euro would impact equity by €95.1 million. This impact would be offset by any countereffect on the net investment in the hedged currency.

For interest rate risk, sensitivity corresponds to a 1% rise or fall in the yield curve compared with year-end interest rates.

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14.2.2 Fair value of derivative instruments linked to commodities The fair values of derivative instruments linked to commodities at December 31, 2009 and 2008 are presented in the table below:

December 31, 2009 December 31, 2008

Assets Liabilities Assets Liabilities

(in millions of euros) Current Non-current Current Non-current Current Non-current Current Non-current

Cash-fl ow hedges 4.1 - 16.7 - - - 51.4 - TOTAL 4.1 0.0 16.7 0.0 0.0 0.0 51.4 0.0

The fair value of cash fl ow hedging instruments by type of commodity breaks down as follows:

December 31, 2009 December 31, 2008

Assets Liabilities Assets Liabilities

(in millions of euros) Current Non-current Current Non-current Current Non-current Current Non-current

Electricity 4.1 ------Swaps 4.1------Options------Forwards/futures ------Oil - - 16.7 - - - 51.4 - Swaps - - 16.7 - - - 51.4 - Options------Forwards/futures ------TOTAL 4.1 0.0 16.7 0.0 0.0 0.0 51.4 0.0

NOTE 15 Equity

15.1 SHARE CAPITAL

Number of shares Value (in millions of euros)

Treasury Outstanding Additional Treasury Total shares shares Share capital paid-in capital shares

At December 31, 2007 489,699,060 0 489,699,060 1,958.6 4,198.8 0.0 Share issued 0.2 Purchase and disposals of treasury shares 1,350,000 (1,350,000) 17.1 At December 31, 2008 489,699,060 1,350,000 488,349,060 1,958.8 4,198.8 17.1 Issuance Allocation to legal reserve (195.9) Purchase and disposals of treasury shares (1,049,000) 1,049,000 (12.4) At December 31, 2009 489,699,060 301,000 489,398,060 1,958.8 4,002.9 4.7

240 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

At the date of listing, on July 22, 2008, the share capital of 15.3 OTHER INFORMATION ON PREMIUMS SUEZ ENVIRONNEMENT COMPANY was €1,958.8 million, made AND CONSOLIDATED RESERVES up of 489,699,060 shares (par value of €4.00 and issue premium Consolidated premiums and reserves (including income for the of €8.6 per share). year) (€2,010 million at December 31, 2009) incorporate the legal reserve of SUEZ ENVIRONNEMENT COMPANY. Under French law, 15.2 TREASURY SHARES AND SHARE REPURCHASE 5% of the net income of French companies must be allocated PROGRAM to legal reserves until they total 10% of share capital. By Board A one-year liquidity contract, renewable by tacit agreement, of Directors resolution of March 2009, the legal reserve was in an initial amount of €40 million, was concluded with Crédit fully established by drawing €195.9 million from the issuance Agricole Cheuvreux on July 24, 2008. The aim of this contract is premium. This reserve may be distributed to shareholders only to reduce the volatility of the SUEZ ENVIRONNEMENT COMPANY in the event of the liquidation of the company. share price and it complies with the professional ethics charter drawn up by the Association française des entreprises 15.4 DIVIDEND DISTRIBUTION d’investissement (French association of investment companies). A resolution will be proposed at the SUEZ ENVIRONNEMENT There were 301,000 treasury shares (including 201,000 held COMPANY Shareholders’ Meeting convened to approve the under the liquidity contract and 100,000 under the bonus fi nancial statements for the fi scal year ended December 31, 2009, share allocation plan) at December 31, 2009 with a value of to pay a dividend of €1.30 per share, totaling €636.6 million. An €4.7 million, compared to 1,350,000 shares at December 31, interim payment of €0.65 per share had already been made on 2008 with a value of €17.1 million. June 3, 2009.

Subject to approval by the Shareholders’ Meeting, this dividend, net of the interim already paid, will be paid out during the fi rst half of 2010. This dividend is not recognized under liabilities in the fi nancial statements at December 31, 2009; these fi nancial statements being presented before dividend allocation.

15.5 TOTAL GAINS AND LOSSES RECOGNIZED IN EQUITY (GROUP SHARE) 20 (in millions of euros) Dec. 31, 2007 Change Dec. 31, 2008 Change Dec. 31, 2009

Available-for-sale securities 367.4 (320.7) 46.7 (44.4) 2.3 Net investment hedges 12.5 22.3 34.8 5.7 40.5 Cash-fl ow hedges 7.7 (35.3) (27.6) (7.1) (34.7) Commodity cash-fl ow hedges 3.0 (54.6) (51.6) 35.4 (16.2) Actuarial gains and losses 25.5 (115.7) (90.2) (1.9) (92.1) Deferred taxes (97.0) 113.3 16.3 25.7 42.0 Share of associates, net of tax 0.1 (0.1) 0.0 (9.4) (9.4) Translation adjustments on above items 93.2 72.5 165.7 (17.9) 147.8 Sub-total 412.4 (318.3) 94.1 (13.9) 80.2 Translation adjustments on other items (186.9) (111.8) (298.7) 5.9 (292.8) TOTAL 225.5 (430.1) (204.6) (8.0) (212.6)

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15.6 EQUITY MANAGEMENT fl exibility in order to seize external growth opportunities which will create value. The Group manages its fi nancial structure and SUEZ ENVIRONNEMENT COMPANY strives to optimize its makes adjustments in light of changes in economic conditions. fi nancial structure on a continuous basis by achieving an optimal balance between net debt and equity as shown in the The management aims, policies and procedures have remained consolidated statement of fi nancial position. The main aim of identical for several fi scal years. the Group in terms of managing its fi nancial structure is to maximize value for shareholders, reduce the cost of capital, maintain a strong rating while ensuring the desired fi nancial

NOTE 16 Provisions

Changes Impact of Reversals in scope unwinding Dec. 31, Reversals (surplus of conso- discount Translation Dec. 31, (in millions of euros) 2008 Allowances (utilizations) provisions) lidation adjustments (a) adjustments (b) Other 2009

Pensions and other employee benefi ts 428.9 16.9 (22.6) 0.0 (5.2) 17.1 (3.3) 11.0 442.8 Sector-related risks 102.3 17.0 (24.5) (2.3) 20.4 0.0 0.1 (8.0) 105.0 Warranties 34.5 7.0 (2.6) (1.0) 6.5 0.0 (0.5) (2.5) 41.4 Tax risks, other disputes and claims 125.0 60.9 (48.9) (0.5) 0.1 0.0 0.3 (4.2) 132.7 Site restoration 485.3 32.4 (37.6) (0.6) 0.0 (1.9) 12.9 0.0 490.5 Restructuring costs 19.7 31.2 (15.7) (1.2) 0.1 0.0 0.0 0.5 34.6 Other contingencies 132.3 59.1 (47.3) (1.8) 0.1 0.1 1.7 (2.2) 142.0 TOTAL PROVISIONS 1,328.0 224.5 (199.2) (7.4) 22.0 15.3 11.2 (5.4) 1,389.0

(a) The amount shown in respect of pensions and other employee benefi t obligations relates to the interest cost on pension obligations, net of the expected return on plan assets. (b) The Group reported €11.2 million in translation losses at December 31, 2009 related mainly to the UK and Australian subsidiaries.

The allowances, reversals and changes presented above and resulting from the unwinding of discount adjustments are presented as follows in the income statement for 2009:

(in millions of euros) Net allowances

Income from operating activities (3.7) Other fi nancial income and expenses 15.3 Income tax expense 21.6 TOTAL 33.2

242 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

16.1 PENSIONS AND OTHER EMPLOYEE BENEFITS That choice has a considerable impact on future levels of leachate effl uents and therefore on future costs of treating such See Note 17. effl uents. Calculating the provision requires an evaluation of the cost of rehabilitating the area to be covered. The provision 16.2 SECTOR-RELATED RISKS recorded in the statement of fi nancial position at year-end must This item includes primarily provisions for risks relating to cover the costs of rehabilitating the untreated surface area court proceedings involving the Argentinean contracts and to (difference between the fi ll rate and the percentage of the site’s warranties given in connection with divestments that are likely area that has already been rehabilitated). The amount of the to be called upon. provision is reviewed each year based on work completed or still to be carried out.

16.3 TAX RISKS, OTHER DISPUTES AND CLAIMS The calculation of the provision for long-term monitoring This item includes provisions for ongoing disputes involving depends on the costs linked to the production of leachate and employees or social security agencies (social security biogas effl uents on the one hand, and on the amount of biogas contribution relief, etc.), disputes arising in the ordinary course recycled on the other. Biogas recycling represents a source of of business (customer claims, accounts payable disputes), tax revenue and is deducted from long-term monitoring expenses. adjustments and tax disputes. The main expense items arising from long-term monitoring obligations relate to:

16.4 SITE RESTORATION ● construction of infrastructure (biogas recycling facility, installation of leachate treatment facility) and the demolition The June 1998 European Directive on waste management of installations used while the site was in operation; introduced a number of obligations regarding the closure and long-term monitoring of landfi lls. These obligations lay down the ● upkeep and maintenance of the protective capping and of rules and conditions incumbent on the operator (or owner of the infrastructure (surface water collection); the site where the operator fails to comply with its obligations) ● in terms of the design and scale of storage, the collection and control and monitoring of surface water, underground water treatment of liquid (leachates) and gas (biogas) effl uents. It also and leachates; requires provisions for these facilities to be inspected over a 30 ● replacement and repair of observation wells (piezometer wells); year period after closure. ● leachate treatment costs; 20 These obligations give rise to two types of provisions ● (rehabilitation and long-term monitoring) calculated on a case- biogas collection and processing costs (taking into account by-case basis depending on the site concerned. In accordance any revenues from biogas recycling). with the accrual basis of accounting, the provisions are recorded The provision for long-term monitoring obligations which should over the period that the site is in operation, pro rata to the be recorded at year-end depends on the fi ll rate of the facility at depletion of landfi ll capacity (void-space) (matching of income the end of the period, the estimated aggregate costs per year and expenses). Costs to be incurred at the time of a site’s and per unit (based on standard or specifi c costs), the estimated closure or during the long-term monitoring period (30 years after closure date of the site and the discount rate applied to each a site is shut down within the European Union) are discounted site (depending on its residual life). to present value. An asset is recorded as a counterparty against the provision. It is depreciated in line with the depletion of the 16.5 OTHER CONTINGENCIES landfi ll capacity or the need for coverage, during the period. “Other contingencies” mainly includes provisions for The calculation of rehabilitation provisions (at the time the facility miscellaneous employee-related and environment-related is shut down) depends on whether the capping used is: semi- litigation and for various business risks. permeable, semi-permeable with drainage, or impermeable.

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NOTE 17 Pensions and other employee benefits obligations

17.1 DESCRIPTION OF THE MAIN PENSION PLANS the employees. Outside the United States, other employee benefi t AND RELATED BENEFITS plans and other long-term benefi ts are generally not pre-funded.

Most Group companies grant their employees post-employment Employees of some Group companies are affi liated to multi- benefi ts (pensions and early retirement plans, retirement employer pension plans. This is especially the case in the bonuses, medical coverage, benefi ts in kind, etc.) as well as other Netherlands, where most of the Group’s entities are in business long-term benefi ts, such as jubilee and other long-service awards. activities that make it mandatory to join an industry-wide scheme. These plans spread risks so that fi nancing is assured In France, retirement bonuses are paid to employees, and the through payroll-based contributions, calculated uniformly amount, set by the applicable collective bargaining agreement, across the board. The Group recognizes such multi-employer is defi ned in terms of a number of months’ salary which depends plans as defi ned contribution plans in accordance with IAS 19. on the employee’s length of service at retirement. Certain French subsidiaries also offer supplementary defi ned-benefi t or defi ned-contribution plans. Outside of France, the major 17.2 DEFINED-BENEFIT PLANS plans for retirement and similar benefi ts are for the Group’s Pursuant to IAS 19, the information presented on the statement companies in the US, UK and Spain. of fi nancial position for post-employment and other long-term Defi ned benefi t plans may be fully or partly pre-funded by benefi ts results from the difference between actuarial debt (gross employer contributions to a pension fund (as is the case in commitment), the fair value of plan assets, and the potential the United States and United Kingdom) or to a dedicated fund cost of unrecognized past services. If this difference is positive, managed by an insurance company (France). These funds are fed a provision is posted (net liability). If the difference is negative, by contributions made by the company and, in certain cases, by a net asset is recognized on the statement of fi nancial position.

17.2.1 Reconciliation with provisions carried in the statement of fi nancial position Annual changes in pension liabilities and prepaid costs can be broken down as follows:

(in millions of euros) Asset Liability Total

Balance at December 31, 2007 17.3 (324.8) (307.5) Translation gains and losses (0.1) (3.9) (4.0) Actuarial gains and losses (a) 1.3 (117.1) (115.8) Supplementary provision IFRIC 14 (b) 0.0 (6.3) (6.3) Changes in scope of consolidation and other (15.8) 12.2 (3.6) Expense for the period (c) (0.3) (26.0) (26.3) Contributions 0.1 37.1 37.2 Balance at December 31, 2008 2.5 (428.8) (426.3) Translation gains and losses 1.3 1.3 2.6 Actuarial gains and losses (a) 11.6 (21.6) (10.0) Supplementary provision IFRIC 14 (b) (0.1) 5.2 5.1 Changes in scope of consolidation and other (8.2) 15.1 6.9 Expense for the period (c) (2.0) (44.6) (46.6) Contributions 3.7 30.6 34.3 Balance at December 31, 2009 8.8 (442.8) (434.0) (a) Actuarial gains and losses on other employee benefi ts. (b) Supplementary provision translated at average exchange rate for the period. (c) Including actuarial gains and losses on long-term benefi ts (particularly jubilees).

244 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

17.2.2 Changes in obligations for pensions and other employee benefi ts The Group’s pension and other employee benefi t plan obligations are as follows:

December 31, 2009 December 31, 2008

Pension Other post- Other Pension Other post- Other benefi t employment long-term benefi t employment long-term (in millions of euros) obligations (a) benefi ts (b) benefi ts (c) Total obligations (a) benefi ts (b) benefi ts (c) Total

A - CHANGE IN PROJECTED BENEFIT OBLIGATION Projected benefi t obligation at Jan. 1 (730.9) (170.5) (14.7) (916.1) (756.1) (147.5) (14.5) (918.1) Service cost (22.5) (5.3) (0.9) (28.7) (23.7) (5.2) (0.9) (29.8) Interest cost (39.8) (8.6) (0.8) (49.2) (40.6) (8.8) (0.7) (50.1) Contributions paid (2.4) 0.0 0.0 (2.4) (1.8) 0.0 0.0 (1.8) Amendments (2.8) (1.8) (0.1) (4.7) (4.5) 0.0 (0.2) (4.7) Acquisitions/disposals of subsidiaries (d) 18.6 0.0 0.0 18.6 (2.0) 0.0 0.0 (2.0) Curtailments/settlements 2.9 0.0 0.3 3.2 24.0 0.1 0.0 24.1 Special terminations (0.3) 0.0 (0.5) (0.8) (0.5) (0.1) 0.0 (0.6) Actuarial gains and losses (43.9) 12.0 (0.3) (32.2) 8.9 (8.3) 0.4 1.0 Benefi ts paid 34.0 6.1 1.2 41.3 36.0 5.6 1.2 42.8 Other 7.2 2.5 0.0 9.7 29.4 (6.3) 0.0 23.1 Projected benefi t obligation at 12/31 A (779.9) (165.6) (15.8) (961.3) (730.9) (170.5) (14.7) (916.1)

B - CHANGE IN FAIR VALUE OF PLAN ASSETS 20 Fair value of plan assets at January 1 470.5 31.0 0.0 501.5 583.8 38.1 0.0 621.9 Expected return on plan assets 29.8 2.4 0.0 32.2 35.2 2.8 0.0 38.0 Contributions received 29.1 6.4 1.2 36.7 32.5 5.7 1.2 39.4 Acquisitions/disposals of subsidiaries (d) (12.6) 0.0 0.0 (12.6) 0.1 0.0 0.0 0.1 Curtailments/settlements (2.3) 0.0 0.0 (2.3) (9.1) (0.0) 0.0 (9.1) Actuarial gains and losses 19.5 2.4 0.0 21.9 (104.9) (11.5) 0.0 (116.4) Benefi ts paid (34.0) (6.2) (1.2) (41.4) (36.0) (5.6) (1.2) (42.8) Other (4.6) (1.1) 0.0 (5.7) (31.1) 1.5 0.0 (29.6) Fair value of plan assets at Dec. 31 B 495.4 34.9 0.0 530.3 470.5 31.0 0.0 501.5 (a) Pensions and retirement bonuses. (b) Healthcare, gratuities and other post-employment benefi ts. (c) Long-service awards and other long-term benefi ts. (d) Disposals in 2009 corresponded primarily to LondonWaste, a subsidiary of SITA UK.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 245 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

December 31, 2009 December 31, 2008

Pension Other post- Other Pension Other post- Other benefi t employment long-term benefi t employment long-term (in millions of euros) obligations (a) benefi ts (b) benefi ts (c) Total obligations (a) benefi ts (b) benefi ts (c) Total

C - FUNDED STATUS A+B (284.5) (130.7) (15.8) (431.0) (260.4) (139.5) (14.7) (414.6) Unrecognized past service cost 9.1 (11.0) 0.0 (1.9) 7.7 (14.1) 0.0 (6.4) Limit on defi ned benefi t assets (IAS 19 sec. 58B) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Supplementary provision (IFRIC 14) (1.1) 0.0 0.0 (1.1) (5.3) 0.0 0.0 (5.3) NET BENEFIT OBLIGATION (276.5) (141.7) (15.8) (434.0) (258.0) (153.6) (14.7) (426.3) TOTAL LIABILITIES (285.3) (141.7) (15.8) (442.8) (260.5) (153.6) (14.7) (428.8) TOTAL ASSETS 8.8 0.0 0.0 8.8 2.5 0.0 0.0 2.5 (a) Pensions and retirement bonuses. (b) Healthcare, gratuities and other post-employment benefi ts. (c) Long-service awards and other long-term benefi ts. (d) Disposals in 2009 corresponded primarily to LondonWaste, a subsidiary of SITA UK.

17.2.3 Balance of actuarial gains and losses recognized in equity Actuarial loss recognized in equity amounted to a loss of €91.4 million at December 31, 2009 compared with a loss of €90.5 million at December 31, 2008.

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Opening balance (90.5) 29.5 Actuarial gains (losses) generated during the year (a) (4.8) (120.0) Effects of changes in the scope of consolidation 3.9 0.0 Closing balance (91.4) (90.5) (a) Including supplementary IFRIC 14 provision.

Actuarial gains and losses are shown excluding translation adjustments, as the latter are shown separately in the total income statement.

17.2.4 Components of net periodic pension costs The net periodic cost recognized in respect of pensions and other employee benefi t obligations for the fi scal year breaks down as follows:

(in millions of euros) Fiscal year 2009 Fiscal year 2008

Current service cost (28.7) (29.8) Interest cost (49.2) (50.1) Expected return on plan assets 32.2 38.0 Actuarial gains or losses (0.3) 0.4 Past service cost (0.2) 0.3 Gains or losses on pension plan curtailments, terminations and settlements 0.7 15.0 (a) Special terminations (1.1) (0.1) TOTAL (46.6) (26.3) Of which recognized in Current Operating Income (29.6) (14.2) Of which recognized in fi nancial income/(loss) (17.0) (12.1) (a) The abnormally low charge for fi scal year 2008 was due to a reversal of provisions resulting from the outsourcing of one of the Group’s retirement plans in France.

246 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

17.2.5 Funding policy and strategy When plan assets are invested through pension funds, investment decisions and the allocation of plan assets are When defi ned benefi t 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 specifi c 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 defi ned benefi t plans are aimed at striking the right on the related assets. Such diversifi ed funds are characterized balance between an optimum return on investments and an by active management benchmarked to composite indices, acceptable level of risk. adapted to the long-term horizon of the liabilities and taking into These strategies have a twofold objective: account the government’s eurozone obligations and the shares of the largest companies in and outside the eurozone. In the ● to maintain suffi cient income streams and liquidity to cover case of euro funds, the insurer’s sole obligation is to ensure a pensions and other benefi t payments; and fi xed minimum return on plan assets. ● 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 by plan participants.

The funding of these obligations breaks down as follows:

Limit on defi ned benefi t Cost of assets and Fair value of unrecognized supplementary Total net (in millions of euros) Actuarial debt plan assets past services provision obligation

Underfunded plans (638.9) 335.6 3.1 (1.1) (301.3) Overfunded plans (186.3) 194.7 0.0 0.0 8.4 20 Unfunded plans (136.1) 0.0 (5.0) 0.0 (141.1) TOTAL AS OF DECEMBER 31, 2009 (961.3) 530.3 (1.9) (1.1) (434.0) Underfunded plans (827.3) 483.8 (6.9) (5.3) (355.7) Overfunded plans (15.5) 17.7 0.2 0.0 2.4 Unfunded plans (73.3) 0.0 0.3 0.0 (73.0) TOTAL AS OF DECEMBER 31, 2008 (916.1) 501.5 (6.4) (5.3) (426.3)

The allocation of plan assets by main asset category breaks down as follows:

2009 2008

Equities 38% 33% Bonds 54% 41% Real estate 1% 1% Other (including money-market securities) 7% 25% TOTAL 100% 100%

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17.2.6 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 benefi ts Long-term benefi ts Total benefi t obligation

2009 2008 2009 2008 2009 2008 2009 2008

Discount rate 5.2% 5.7% 4.9% 5.6% 4.8% 5.3% 5.1% 5.7% Estimated increase in salaries 3.6% 3.6% 3.9% 3.9% 3.5% 4.2% 3.6% 3.7% Expected return on plan assets 6.5% 7.0% 7.8% 7.9% - - 6.6% 7.0% Average remaining working lives of participating employees (years) 14 12 15 13 13 15 14 12

Discount and salary increase rates are shown including infl ation. composition of the benchmark index and on the amounts in each of the funds as at December 31 of the preceding year. An 17.2.6.1 Discount rates expected yield for the fi scal year, published by a third party, is The discount rate selected is determined by reference to the yield, applied to each sub-group; a global absolute performance is then at the measurement date, on high-quality corporate bonds with established from that starting point and applied to the value of a maturity which corresponds to the likely maturity of the plan. the portfolio at the beginning of the year. The expected rates of return on assets have been calculated according to prevailing The rates used for the euro and US dollar are the 10, 15 and market conditions and are based on a risk premium, defi ned 20-year rates on AA composite indices sourced from Bloomberg. in accordance with the risk-free rate of return of Government For the United Kingdom, the rates used are based on the 15-year bonds, by major asset class and geographic region. iBoox rate on AA composites. 17.2.6.3 Other assumptions 17.2.6.2 Expected return on plan assets The assumptions used for healthcare cost trend rates (including To calculate the expected return on plan assets, the asset infl ation) are 4.6% for 2010, 4.3% for 2011 and 4.0% for 2012. portfolio is broken down into homogeneous sub-groups, by These assumptions are used for the valuation of other post- broad asset categories and geographical areas, based on the employment benefi ts.

A one percentage point change in the assumed increase in healthcare costs would have the following impact:

(in millions of euros) One-point increase One-point decrease

Impact on expenses 2.4 (1.9) Impact on other post-employment benefi ts 23.7 (20.4)

248 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

17.2.6.4 Experience adjustments Experience adjustments represent the impact of the difference between actuarial assumptions previously used, and the actual situation. Their share in actuarial gains and losses is presented below:

December 31, 2009 December 31, 2008 December 31, 2007 December 31, 2006

Other benefi t Other benefi t Other benefi t Other benefi t (in millions of euros) Pensions obligations Pensions obligations Pensions obligations Pensions obligations

Projected benefi t obligation (a) (779.9) (181.4) (730.9) (185.2) (756.1) (162.0) (818.0) (176.5) Fair value of plan assets 495.4 34.9 470.5 31.0 583.8 38.1 587.5 37.8 Surplus/defi cit (284.5) (146.5) (260.4) (154.2) (172.3) (123.9) (230.5) (138.7) Experience adjustments to projected benefi t obligations (b) (14.4) (3.1) (0.5) (1.4) 10.2 8.7 0.1 3.0 Experience adjustments to fair value of plan assets (b) 19.5 2.4 (104.9) (11.5) 2.8 1.3 7.5 0.6 As a % of projected benefi t obligation (b/a) -1% 0% 14% 7% -2% -6% -1% -2%

17.2.7 Geographical breakdown of obligations In 2009, the geographical breakdown of the main obligations and the related actuarial assumptions (including infl ation) were as follows:

Eurozone United Kingdom United States Rest of the world

Other benefi t Other benefi t Other benefi t Other benefi t 20 (in millions of euros) Pensions obligations Pensions obligations Pensions obligations Pensions obligations

Net benefi t obligations (a) (169.1) (71.6) (15.6) - (65.7) (39.2) (34.1) (35.7) Discount rate 4.9% 4.6% 5.7% - 6.1% 6.2% 3.2% 2.8% Estimated future increase in salaries 3.6% 4.3% 4.6% - 3.1% 3.1% 3.0% 4.9% Expected return on plan assets 5.6% 6.6% 6.6% - 8.5% 8.5% 6.8% 3.7% Average remaining working lives of participating employees (years) 14 12 10 - 13 15 12 14

(a) Net obligations correspond to the difference between actuarial debt and the fair value of plan assets.

17.2.8 Payments due in 2010 17.3 DEFINED CONTRIBUTION PLANS The Group expects to contribute approximately €34.2 million to During the course of 2009, the Group recorded an €47.0 million its defi ned benefi t plans in 2010. expense in respect of contributions to Group defi ned contribution plans. These contributions are recorded under “Personnel costs” in the income statement.

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NOTE 18 Construction contracts

“Amounts due from customers under construction contracts” “Trade and other receivables” and “Trade and other payables”, and “Amounts due to customers under construction contracts” respectively. are presented in the statement of fi nancial position under

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Amounts due from customers under construction contracts 113.8 128.4 Amounts due to customers under construction contracts 200.4 173.5 NET POSITION (86.6) (45.1)

For contracts in progress the closing date:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Cumulated cost incurred and margins recognized 3,422.5 2,951.3 Advances received 96.2 168.0

Contingent liabilities arising from construction contracts are not material.

NOTE 19 Finance leases

The net amount of Property, plant and equipment assets owned The main fi nance lease agreements entered into by the Group under fi nance leases are broken down into various asset concern Novergie’s incineration plants. categories, depending on their type.

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 at December 31, 2009 at December 31, 2008

(in millions of euros) Undiscounted value Present value Undiscounted value Present value

During year 1 60.7 59.2 66.4 63.6 During years 2 to 5 inclusive 218.2 199.6 210.6 181.5 Beyond year 5 259.8 185.5 301.1 190.2 TOTAL FUTURE MINIMUM LEASE PAYMENTS 538.7 444.3 578.1 435.3

250 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

NOTE 20 Operating leases

Operating lease income and expense recognized for the 2009 and 2008 fi scal years breaks down as follows:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Minimum lease payments (238.5) (261.4) Contingent lease payments (26.2) (26.6) Sub-letting income 0.0 4.2 Sub-letting expense (2.9) (3.9) Other operating lease expenses (7.6) (9.3) TOTAL (275.2) (297.0)

Future minimum lease payments due under non-cancelable operating leases can be analyzed as follows:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

During year 1 115.5 120.2 During years 2 to 5 inclusive 258.1 196.1 Beyond year 5 225.9 130.3 TOTAL 599.5 446.6

The increase over 2008 was due to the lease of the CB21 tower. By end-2010, this tower, located at La Défense (Paris), will be the headquarters for SUEZ ENVIRONNEMENT, Lyonnaise des Eaux, SITA France, Degrémont and OIS. 20

NOTE 21 Service concession arrangements

SIC 29, Disclosure - Concession Arrangements was published in in exchange for the commitment made by the concession- May 2001 and deals with the information regarding concession holder: contracts which should be disclosed in the Notes to the (c) to offer services in accordance with certain terms and Financial Statements. conditions during the length of the concession; and The IFRIC 12 disclosure, published in November 2006 deals (d) if the need arises, to return the rights received at the with the recognition of certain concession contracts which beginning of the concession and/or acquired during the meet certain criteria according to which it is estimated that the concession. concession-grantor controls the facilities (see Note 1.5.6). The common characteristic of all the service concession As specifi ed in SIC 29, a service concession agreement generally agreements is the fact that the concession holder is both involves a transfer by the concession-grantor to the concession- granted a right and becomes bound by an obligation to offer holder for the entire duration of the concession: public services. (a) of the right to offer services enabling the public to access The Group manages a large number of concession contracts major economic and social services; as defi ned by SIC 29 in drinking water distribution, wastewater (b) of the right, in certain cases, to use tangible and intangible treatment, and waste management. assets or specifi ed fi nancial assets; These concession contracts includes terms and conditions on rights and obligations with regard to the infrastructure

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 251 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

and to the obligations relating to public service, in particular not provide for the return to the concession grantor at the end the obligation to allow users to access the public service, an of the contract of the infrastructure, which remains the property obligation, which, in certain contracts, may be subject to a of the Group. timeframe. The terms of the concessions vary between 12 and A general obligation also exists to return the concession 50 years, depending mainly on the level of investments to be infrastructure in good working condition at the end of the made by the concession operator. contract. Where appropriate (see Note 1.5.6), this obligation In exchange for these obligations, the Group is entitled to results in the recognition of a capital renewal and replacement bill either the local authority granting the concession (mainly liability (see Note 13.2.3). incineration activities and BOT water treatment contracts) or Services are generally billed at a fi xed price which is index-linked the users for the services provided. That right gives rise either for the duration of the contract. However, contracts may contain to an intangible asset, or to a receivable, or a tangible asset, clauses providing for periodic price adjustments (usually at the depending on the accounting model applicable (see Note 1.5.6). end of a fi ve-year period) if there is a change in the economic The tangible asset model is used when the concession-grantor conditions which were initially expected when the contracts does not control the infrastructure, like for example, water were signed. distribution concession contracts in the United States which do

NOTE 22 Cash flows

22.1 RECONCILIATION WITH INCOME TAX EXPENSE IN THE INCOME STATEMENT

Tax cash fl ows (income tax expense)

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Impact on income statement (128.8) (92.7)

Non cash items:

● provisions for income tax 21.6 13.8

● deferred tax (103.4) (50.9)

● change in taxes payable (a) 94.2 (74.5)

● other 1.5 (0.5) Impact on cash-fl ow statement (114.9) (204.8)

(a) This mainly concerns the repayment in February 2009 by the French tax authorities of tax prepayments made by the subsidiaries in 2008 within the framework of the former SUEZ French tax consolidation group.

22.2 RECONCILIATION WITH FINANCIAL INCOME/(LOSS) IN THE INCOME STATEMENT

Financial cash fl ows (fi nancial income/loss)

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Impact on income statement (260.0) (329.8)

Changes in amortized cost 105.1 0.0 Impact of exchange rate and changes in fair value (8.5) 16.8 Unwinding of discounting adjustment to provisions 25.2 43.0 Other (7.3) (4.2) Impact on cash-fl ow statement (145.6) (274.2)

252 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

NOTE 23 Share-based payments

Expenses recognized in respect of share-based payment are as follows:

(Expense) for the period

(in millions of euros) Note Dec. 31, 2009 Dec. 31, 2008

Stock-option plans 23.1 (14.0) (14.8) Employee share issues 23.3 - - Share Appreciation Rights (a) 23.3 (1.3) (2.0) Bonus/performance share award plans 23.2 (38.0) (32.9) Exceptional bonus (b) 23.4 (3.3) (3.2) TOTAL (56.6) (52.9)

(a) Share appreciation rights issued in the context of capital increases reserved for employees, in certain countries, excluding warrants. (b) The exceptional bonus is included in EBITDA.

23.1 STOCK OPTION PLANS ● 35% of the options are additionally contingent on the Group’s cumulative recurring net income between 2009 23.1.1 2009 plans and 2012, inclusive;

Pursuant to a decision of the Shareholders’ Meeting of May 26, ● for other recipients, the exercise of 50% of these options is 2009, the SUEZ ENVIRONNEMENT COMPANY Board of Directors contingent solely on the stock price described above. resolved to implement its fi rst-ever stock purchase option plan, the main objective of which is to give management level The Chief Executive Offi cer has waived allocation of employees and senior management, as well as high-potential SUEZ ENVIRONNEMENT COMPANY stock options for 2009. employees, a stake in the company’s future development and Moreover, to extend the plans described below and in 20 creation of shareholder value. This plan will also contribute to view of the shareholder relationships between GDF SUEZ increasing the loyalty of the management teams. and SUEZ ENVIRONNEMENT COMPANY, on November 10, At its meeting of December 17, 2009, the Board of Directors also 2009 the GDF SUEZ Board of Directors resolved to resolved to allocate 3,464,440 stock options to 984 benefi ciaries allocate 399,784 stock purchase options to employees of at an exercise price of €15.49. The exercise of these options SUEZ ENVIRONNEMENT COMPANY at an exercise price of is subject to performance criteria, according to the following €29.44. Approximately one third of these options are subject to conditions: the following performance condition: they may be exercised if, after expiration of the lock-in period, the GDF SUEZ stock price ● for members of the Management Committee and Executive is greater than or equal to the strike price, which is adjusted to Committee: refl ect changes in the Eurostoxx Utilities index over the period from Monday, November 9, 2009 to Friday, November 8, 2013, ● 35% of allocated options are contingent on SUEZ ENVIRONNEMENT COMPANY’s stock market inclusive. performance against the average performance of the The Chief Executive Offi cer also waived his GDF SUEZ stock CAC 40 and Eurostoxx Utilities indices for the period options for 2009. December 17, 2009 to December 16, 2013,

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23.1.2 Description of current plans

SUEZ ENVIRONNEMENT COMPANY plans

Date of the Balance Balance authorizing Starting to be to be Share- point for Adjusted exercised Canceled exercised holders’ exercise of exercise on or on Expiration Residual Plan Meeting the options price 12/31/2008 Exercised** Granted expired 12/31/2009 date life

12/17/2009 05/26/2009 12/17/2013 15.49 0 0 3,464,440 0 3,464,440 12/16/2017 8.0 TOTAL 0 0 3,464,440 0 3,464,440

** In specifi c circumstances such as retirement or death, the anticipated exercise of options is authorized.

The average stock price for SUEZ ENVIRONNEMENT COMPANY in 2009 was €13.30.

SUEZ and GDF SUEZ plans

Date of the Balance Balance authorizing Starting to be to be Share- point for Adjusted exercised Canceled exercised holders’ exercise of exercise on or on Expiration Residual Plan Meeting the options price 12/31/2008 Exercised** Granted expired 12/31/2009 date life

11/19/2003* 05/04/2001 11/19/2007 12.39 888,524 121,609 0 3,659 763,256 11/18/2011 1.9 11/17/2004* 04/27/2004 11/17/2008 16.84 2,556,656 286,490 0 4,854 2,265,312 11/16/2012 2.9 12/09/2005* 04/27/2004 12/09/2009 22.79 1,984,500 65,949 0 20,784 1,897,767 12/09/2013 3.9 01/17/2007 04/27/2004 01/16/2011 36.62 1,676,335 0 0 23,526 1,652,809 01/16/2015 5.0 11/14/2007 05/04/2007 11/13/2011 41.78 1,325,249 0 0 18,529 1,306,720 11/13/2015 5.9 11/12/2008 07/16/2008 11/12/2012 32.74 1,081,720 0 0 15,120 1,066,600 11/11/2016 6.9 11/10/2009 05/04/2009 11/10/2013 29.44 0 0 399,784 0 399,784 11/09/2017 7.9 TOTAL 9,512,984 474,048 399,784 86,472 9,352,248

* Exercisable plans. ** In specifi c circumstances such as retirement or death, the anticipated exercise of options is authorized.

The provisions corresponding to the various plans prior 23.1.3 Fair value of allocated options to 2009 are described in previous SUEZ, GDF SUEZ and The fair value of non performance-contingent options allocated SUEZ ENVIRONNEMENT COMPANY Reference Documents. in 2009 was based on a binomial model. The following In accordance with the initial rules of the plans and with the assumptions were used: SUEZ’s Board of Directors’ decision of October 18, 2006, the ● for GDF SUEZ: objectives featured in the performance conditions linked to stock option plans granted by SUEZ before the merger with ● volatility of 32.41%, Gaz de France have been reduced via the application of a 0.80 ● a risk-free rate of 3.13%, coeffi cient in 2008. ● a statutory annual dividend of €1.6; The average price of GDF SUEZ shares in 2009 was €28.09.

254 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

● for SUEZ ENVIRONNEMENT COMPANY: ● for GDF SUEZ:

● volatility of 29.20%, ● correlation between GDF SUEZ stock and the Eurostoxx Utilities index: 77.3%, ● a risk-free rate of 2.93%, ● volatility of the Eurostoxx Utilities index: 18.7%; ● a statutory annual dividend of €0.65. ● for SUEZ ENVIRONNEMENT COMPANY: The volatility of SUEZ ENVIRONNEMENT COMPANY stock was determined on the basis of the historical volatility of comparable ● correlation between SUEZ ENVIRONNEMENT COMPANY entities over a comparable period, in accordance with IFRS 2. stock and the Eurostoxx Utilities index: 52.9%, The volatility of GDF SUEZ stock was specifi ed as the moving ● correlation between SUEZ ENVIRONNEMENT COMPANY average volatility over the duration of the plan’s existence. stock and the CAC 40 index: 51.6%, The fair value of non performance-contingent options thus ● correlation between the CAC 40 index and the Eurostoxx calculated was: Utilities index: 83.4%, ● €6.27 for GDF SUEZ options; ● volatility of the Eurostoxx Utilities index: 18.7%, ● €3.74 for SUEZ ENVIRONNEMENT COMPANY options. ● volatility of the CAC 40 index: 21.4%. The fair value of performance contingent options allocated in The fair value of performance contingent options was thus: 2009 was based on the Monte Carlo model. In addition to the above assumptions, the following specifi c market-condition ● €5.41 for the GDF SUEZ options; assumptions were used: ● €2.81 for the SUEZ ENVIRONNEMENT COMPANY options.

23.1.4 Accounting impact Based on assumed employee turnover of 5%, the expense recorded during the period in relation to stock option plans was as follows:

(Expense) for the period

(in millions of euros) Grant date Dec. 31, 2009 Dec. 31, 2008 20

SUEZ plan 11/17/2004 0.0 (2.6) SUEZ plan 12/09/2005 (3.0) (3.2) SUEZ plan 01/17/2007 (4.5) (4.5) SUEZ plan 11/14/2007 (4.2) (4.2) GDF SUEZ plan 11/12/2008 (2.1) (0.3) GDF SUEZ plan 11/10/2009 (0.1) 0.0 SUEZ ENVIRONNEMENT COMPANY plan 12/17/2009 (0.1) 0.0 TOTAL (14.0) (14.8)

Adjustments in benefi ciary rights resulting from the merger 23.2 ALLOCATIONS OF BONUS SHARES between SUEZ and Gaz de France had no impact on expenses Terms and conditions relating to various plans prior to during the period. 2009 are described in previous SUEZ, GDF SUEZ and SUEZ ENVIRONNEMENT COMPANY Reference Documents. 23.1.5 Share Appreciation Rights (SAR) plans As part of the SUEZ delisting procedure in the United States, 23.2.1 Allocations in 2009 the allocation of stock options to employees of the Group’s US companies were replaced by a Share Appreciation Rights 23.2.1.1 Worldwide fi nancial incentive scheme (SAR) plan in 2007, which entitles benefi ciaries to a cash A worldwide fi nancial incentive scheme was implemented in payment equal to the profi t they would make on exercising 2007 within the former SUEZ Group, to involve all employees their options and immediately selling the underlying shares. SAR more closely in the Group’s performance. Subject to the allocations to US employees have no material impact on the fulfi llment of certain conditions, this saw every employee SUEZ ENVIRONNEMENT COMPANY Group’s fi nancial statements. allocated bonus shares in 2007 and 2008. The arrangement

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 255 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

having been entered into for a period of three years, on July 8, ● a performance condition based on the EBITDA of the 2009 the GDF SUEZ Board of Directors resolved to allocate SUEZ ENVIRONNEMENT COMPANY Group. conditional bonus shares for 2009. For that year, employees of The Board of Directors meeting on December 17, 2009 also the SUEZ ENVIRONNEMENT COMPANY Group received specifi c allocated 28,800 performance shares to the CEO. They are benefi ts. In accordance with the 2007 plan, they were allocated subject to conditions of the same nature as those applying to 30 SUEZ ENVIRONNEMENT COMPANY bonus shares by the the stock options allocated to the Management Committee (see SUEZ ENVIRONNEMENT COMPANY Board of Directors at its 23.1.1). meeting of June 25, 2009, and 8 GDF SUEZ shares by GDF SUEZ Board of Directors’ meeting of July 8, 2009. Approximately 68,000 Moreover, in extending past plans and in view of the employees of the SUEZ ENVIRONNEMENT COMPANY Group were shareholder relationships between GDF SUEZ and involved. SUEZ ENVIRONNEMENT COMPANY, on November 10, 2009 the GDF SUEZ Board of Directors granted 146,656 performance The members of the Management Committee waived their own shares to employees of the SUEZ ENVIRONNEMENT COMPANY allocations. Group, with a vesting period of two or four years, depending upon the country. The allocation of these performance plans 23.2.1.2 Performance shares was subject to: On December 17, 2009, the SUEZ ENVIRONNEMENT COMPANY Board of Directors granted 145,052 performance shares to ● being in service at the time (except in case of retirement, 1,070 benefi ciaries, with a vesting period of two or four years, death or disability); depending upon country. Allocation of these performance ● a performance condition based on the EBITDA of the shares was subject to: GDF SUEZ Group. ● being in service at the time (except in case of retirement, death or disability);

23.2.2 Description of current plans

Number SUEZ ENVIRONNEMENT COMPANY plans of shares granted Fair value per share

June 2009 2,040,810 9.6* December 2009 173,852** 12.3*

* Weighted average value. ** Including 28,800 allocated to the CEO.

Number SUEZ and GDF SUEZ plans of shares granted Fair value per share

February 2007 334,156 36.0 July 2007 838,684 37.8* August 2007 46,056 32.1 November 2007 396,042 42.4 June 2008 928,725 39.0* June 2008 24,740 37.8 November 2008 357,034 28.5* July 2009 544,216 19.7* November 2009 146,656 24.8*

* Weighted average fair value.

256 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

23.2.3 Description of the valuation model lock-in period for the employee is measured using a replication strategy in which the employee would sell the share upon expiry Pursuant to IFRS 2, the Group has calculated the fair value of of the lock-in and borrow the amount needed to purchase a free goods or services received during the period based on the fair share immediately, fi nancing the borrowing by a forward sale value of the shareholder instruments thus awarded. and any dividends paid during the lock-in period. The valuation is carried out at the award date, which That expense is recorded under personnel costs, on a linear corresponds to the date of the Board meeting in which the plan basis, between the date of the grant and the date on which the was approved. The fair value of a share awarded corresponds award conditions are lifted, with a direct counterpart in equity. to the market value of the share at the date of award, adjusted It will be adjusted depending on potential reviews relating for the loss of dividend expected during the two- or four-year to the assumptions regarding effective staff turnover rates vesting period on the one hand and for the lock-in period arising during the period and to the respect of the performance attached to the shares on the other. conditions. It will be irrevocably fi xed based on the number of Pursuant to the recommendations of the French National shares effectively distributed at the end of the period. Accounting Council (Conseil National de la Comptabilité), the

23.2.4 Impact on income during the year The expense recognized on current plans during the period is as follows:

(Expense) for the period

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

SUEZ plan - February 2006 0.0 (0.6) SUEZ plan - February 2007 (1.1) (5.5) SUEZ plan -July 2007 (7.8) (11.6) SUEZ plan - August 2007 (0.3) (0.3) SUEZ plan - November 2007 (6.8) (6.8) 20 SUEZ plan - June 2008 (12.8) (7.5) SUEZ plan -June 2008 (0.3) (0.1) GDF SUEZ plan - November 2008 (3.5) (0.5) SUEZ ENVIRONNEMENT COMPANY plan - June 2009 (3.4) 0.0 GDF SUEZ plan - July 2009 (1.8) 0.0 GDF SUEZ plan - November 2009 (0.2) 0.0 SUEZ ENVIRONNEMENT COMPANY plan - December 2009 0.0 0.0 TOTAL (38.0) (32.9)

23.3 EMPLOYEE SHARE ISSUES ● Spring Multiple: This plan allows employees to subscribe to SUEZ shares, either directly or via an employee mutual There were no employee share issues in 2009. investment fund. The plan also entitles them to benefi t from In 2004, 2005 and 2007 employees were entitled to subscribe the positive performance of SUEZ shares (leverage effect) at to share issues under Group corporate savings plans. These the end of the mandatory holding period). subscriptions could be made through the following plans: In addition, Share Appreciation Rights (SAR) were allocated ● Spring Classique: this plan allows employees to subscribe to within the SUEZ Group’s 2004, 2005 and 2007 plans. This SUEZ shares either directly or via an employee investment leveraged plan enables the acquisition of a security benefi ting fund at lower than current market prices; from a performance multiplier which will result in a cash payment to the employee after a period of fi ve years. The resulting employee liability is covered by warrants.

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The accounting impact of the cash-settled Share Appreciation loyalty and involving employees more closely in the Group’s Rights (SAR) consists in recognizing a debt against the success. This scheme provides for the payment of an exceptional employee payable over the vesting period of the rights, with the bonus equal to the value of four SUEZ shares in 2010 as well as corresponding adjustment recorded in income. At December 31, the amount of gross dividends for the period between 2005 and 2009, the fair value of the debt relative to the 2005 and 2009 (including any potential extraordinary dividends). Since 2007 allocations was €5.0 million. The 2004 plan matured on the merger between SUEZ and Gaz de France, the calculation December 23, 2009. The warrants were exercised for a value is based on a basket made up of one GDF SUEZ share and one of €6.7 million. SUEZ ENVIRONNEMENT COMPANY share.

The fair value of the debt is calculated based on the Black & Around 71,200 SUEZ ENVIRONNEMENT COMPANY employees Scholes options-pricing model. were eligible for this bonus at December 31, 2009.

The impact of the SARs on 2009 income was an expense of The accounting impact of this cash-settled instrument consists €1.3 million (excluding warrants). of recognizing an employee payable over the vesting period of the rights, with the corresponding adjustment recorded in 23.4 SUEZ EXCEPTIONAL BONUS income. In 2009 the expense corresponding to this premium totaled €3.3 million. The fair value of the debt upon expiration of In November 2006, the SUEZ Group introduced a temporary the plan is estimated at €11.2 million. exceptional bonus award scheme aimed at rewarding employee

NOTE 24 Related party transactions

The aim of this note is to describe material transactions exercises joint control or signifi cant infl uence (joint ventures between (i) the Group and its shareholders (or representatives), and associates). and (ii) the Group and the companies over which the Group Only material transactions are described below.

24.1 TRANSACTIONS BETWEEN THE PARENT COMPANY AND RELATED ENTITIES

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

TRANSACTIONS WITH THE PARENT COMPANY GDF SUEZ: Purchases/sales of goods and services (19.9) (30.7) Financial income 1.4 Non-fi nancial payables 15.2 13.3 Borrowings Non-fi nancial receivables 1.3 1.2 Receivables carried at amortized cost (a) 30.3 36.6

TRANSACTIONS WITH COMPANIES LINKED TO THE PARENT COMPANY GDF SUEZ: Purchases/sales of goods and services (36.2) (5.4) Financial income 16.4 14.8 Financial expenses (75.4) (128.4) Non-fi nancial receivables 30.8 36.1 Financial receivables 10.9 43.5 Non-fi nancial payables 5.1 2.2 Borrowings excluding fi nancial instruments 1,939.2 2,935.3 Commodity derivatives (liabilities) 16.7 51.4 Interest accrued not yet paid (21.6) 8.6 Net cash 661.5 319.2

(a) See Note 2.2 - Synthetic Argentinean contract.

258 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

In 2009, the reduction in fi nancial debt to companies Degrémont, totaling €11.7 million, compared to €12 million at linked to the GDF SUEZ parent company was due to the December 31, 2008. SUEZ ENVIRONNEMENT Group’s commitment to repay these The Group also granted a loan of €121.5 million to SFWD (of short-term borrowings from GDF SUEZ Finance, a subsidiary which €12 million in 2009). SFWD is a company proportionately of GDF SUEZ, within two years. Moreover, the creation of a consolidated, at 50%. The “non-Group” share of €60.7 million centralized cash management at SUEZ ENVIRONNEMENT level was recognized under assets on the Group’s consolidated for Lyonnaise des Eaux and OIS entities contributed to reducing statement of fi nancial position. the amount of fi nancial debt in question (until 2008, cash management was conducted by GDF SUEZ Finance). At December 31, 2008, transactions with joint ventures and associates consisted primarily of exchanges of technical 24.2 TRANSACTIONS WITH JOINT VENTURES services with Hungariavitz, SFWD and Swire SITA totaling AND ASSOCIATES €8.2 million. At December 31, 2009, Swire SITA was wholly acquired by the Group (see Note 2). This company is therefore In 2009, transactions with joint ventures and associates no longer a joint venture. essentially comprised exchanges of technical services within

NOTE 25 Executive compensation

The Group’s key executives were the eight members of the Management Committee at December 31, 2009 (6 acting members at December 31, 2008, see Section 14.1.3. of this reference document).

Their compensation is as follows:

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008 20 Short-term benefi ts 4.6 3.0 Post-employment benefi ts* 0.4 0.1 Share-based payments 2.7 2.0 Severance payments -- TOTAL 7.7 5.1

* Post-employment benefi ts only relate to the SUEZ ENVIRONNEMENT COMPANY Group plans.

The growth in this expense in 2009 was due to the expansion of the Management Committee to include two additional members. They were both already Group employees in 2008.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 259 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

NOTE 26 Legal and arbitration proceedings

The litigation and arbitration presented below is recognized can be estimated in a suffi ciently reliable manner. Provisions under liabilities or presented for information purposes. Beyond recorded in respect of the above amounted to €132.7 million at the litigation presented below for information purposes, the December 31, 2009 (excluding litigations in Argentina). Group has not identifi ed any other material liabilities, and the likelihood of an expenditure within the context of its 26.2.1 Litigations in Argentina commitments is considered low. In Argentina, public services contract tariffs were frozen by the Public Emergency and Exchange Regime Reform Law 26.1 COMPETITION AND INDUSTRY CONCENTRATION (Emergency Act) in January 2002, thus preventing the application In its decision of July 11, 2002, the French Anti-Trust Council of contractual price indexation that would apply in the event ruled that the existence of equal stakes in water distribution that the Argentine peso depreciated against the US dollar. companies held by Veolia Eau (a subsidiary of Veolia En 2003, SUEZ—now GDF SUEZ—and its co-shareholders holding Environnement) and Lyonnaise des Eaux France (a subsidiary of the water concessions for Buenos Aires and Santa Fe, fi led SUEZ ENVIRONNEMENT) created a collective dominant position arbitration proceedings against the Argentine government in its between the two groups. Although the French Anti-Trust capacity as grantor, to enforce the contractual clauses of the Council did not impose sanctions against the two companies, concession agreements before the International Center for the it requested the Minister of the Economy to order the two Settlement of Investment Disputes (ICSID), in accordance with companies to modify or terminate the agreements that combine the bilateral Franco-Argentine investment protection treaties. their resources within joint subsidiaries to lift the barrier to competition. Veolia Eau has appealed the decision of the Anti- These ICSID arbitration proceedings, currently underway, aim at Trust Council several times. obtaining indemnities to compensate for the loss of value of the investments made since the start of the concession, due to As part of the investigation conducted by the Minister of the the measures adopted by the Argentine government following Economy, the two companies were asked to unwind their cross- the adoption of the abovementioned Emergency Act. The ICSID shareholdings in these joint subsidiaries. affi rmed its competency to rule on the two cases in 2006. In December 2008, Lyonnaise des Eaux France and Veolia signed Hearings were held in 2007 for the two arbitration cases, with an agreement to proceed with this unwinding. On July 30, 2009, the rulings to be handed down in the fi rst quarter of 2010. At the European Commission authorized the plan for Veolia Eau the same time as the ICSID proceedings, the concession holders to purchase Lyonnaise des Eaux’ holdings in three subsidiaries Aguas Argentinas and Aguas Provinciales de Santa Fe were which it held jointly with Lyonnaise des Eaux. For its part, forced to fi le proceedings to cancel their concession agreement Lyonnaise des Eaux’s purchase of six other joint subsidiaries with local governments. was authorized by the European Commission on August 5, 2009. However, with the fi nancial situation of the concession-holding The agreement of December 2008 produced an addendum companies having deteriorated since the Emergency Act, Aguas dated February 3, 2010 aimed at the repurchase by Lyonnaise Provinciales de Santa Fe announced it was fi ling for judicial des Eaux of the stake held by Veolia Eau in two of the three liquidation at its shareholders’ meeting of January 13, 2006. jointly owned subsidiaries originally acquired by Veolia Eau. A At the same time, Aguas Argentinas applied to fi le a “Concurso new application for authorization relecting the terms of the Preventivo” (similar to a French bankruptcy procedure). As addendum was communicated to the European Commission. part of these receivership proceedings, a settlement proposal The process should complete in the fi rst half of 2010. involving the deferral of admissible liabilities of Aguas Argentinas was approved by creditors and ratifi ed by the 26.2 LITIGATION AND ARBITRATION bankruptcy court on April 11, 2008. The settlement of liabilities is now underway. The proposal provides for an initial payment of In the normal course of its business, the Group is involved in 20% (about $40 million) upon approval, and a second payment a certain amount of litigation and arbitration with third parties of 20% in event of compensation by the Argentine government. or with the tax administrations of certain countries. Provisions As controlling shareholders, SUEZ and Agbar have resolved are recorded for this litigation and arbitration when (i) a legal, to fi nancially support Aguas Argentinas in making this fi rst contractual, or constructive obligation exists at the closing date payment, and have paid €6.1 and €3.8 million respectively, since with respect to a third party; (ii) it is probable that an outfl ow of the approval. resources without economic benefi ts will be necessary to settle the obligation; and (iii) the amount of that outfl ow of resources

260 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

We note that SUEZ and SUEZ ENVIRONNEMENT—prior to SUEZ’ claim for a total amount of US$66 million (subsequently raised merger with Gaz de France and the stock market listing of to US$130 million) with the New York Supreme Court against SUEZ ENVIRONNEMENT COMPANY—entered into an agreement United Water (New York) following fl ooding in the aftermath of providing for the economic transfer to SUEZ ENVIRONNEMENT heavy rains. of the rights and obligations related to interests held by SUEZ in Those residents are claiming faulty maintenance of the Aguas Argentinas and Aguas Provinciales de Santa Fe. reservoir and of the DeForest Lake dam adjoining DeForest The Group believes that the provisions recorded in the fi nancial Lake, which allegedly did not operate properly in the aftermath statements relating to this litigation are appropriate. of the heavy rains in question and did not enable the gradual overfl ow of water into the Hackensack River on which it is built, 26.2.2 Novergie thus causing fl ooding in the homes of the said residents. As the rain water drainage network operated by United Water fl ows Novergie Centre Est, a wholly-owned subsidiary of into the river upstream from the dam, the residents, although SUEZ ENVIRONNEMENT, used to operate an incineration plant in living in a fl ood zone, are claiming compensatory damages and Gilly-sur-Isère near Albertville (in the Savoie region), which was interest from United Water in the amount of US$65 million, as built in 1984 and owned by SIMIGEDA (a public-private waste well as punitive damages and interest in the same amount for management company in the Albertville district). In 2001, high alleged negligence in the maintenance of the DeForest Lake levels of dioxin were found near the incineration plant and the reservoir and dam. Préfet of the Savoie region ordered the closing of the plant in October 2001. United Water, which is not responsible for the maintenance of the dam and the reservoir, is of the opinion that the claims are Criminal complaints and action for damages parallel to unlikely to succeed. A motion to dismiss these claims was fi led by prosecution were fi led in March 2002 against, among others, United Water in July 2009. This motion was denied on August 28, the president of SIMIGEDA, the Préfet of the Savoie region 2009, and United Water has appealed against this decision. and Novergie Centre Est for poisoning, endangering the life of others, and non intentional assault and battery, with respect to The claim for punitive damages and interest was denied on dioxin pollution allegedly caused by the incineration plant. In the December 21, 2009, and confi rmed on February 11, 2010 fi rst half of 2009, the French Cour de Cassation confi rmed the following the appeal by the residents against this decision. decision of the investigating chamber of the Lyon Appeals Court rejecting the action. The claim has been declared to the insurance companies. 20 Novergie Centre Est had been indicted on December 22, 2005 26.2.4 SITA Australia on counts of endangering the lives of others and violating In November 2008, residents of Brookland Greens Estate, administrative regulations. located in the suburbs of the city of Casey, State of Victoria, In the context of this procedure, investigations ordered by the Australia, fi led a class action before the State Supreme Court of court showed that there had been no increase of the number of Victoria against the city of Casey. cases of cancer in neighboring populations. Biogas (a mixture of methane and carbon dioxide) produced On October 26, 2007, the judge in charge of investigating the by the Stevensons Road landfi ll—which belongs to the city— case dismissed the charges against physical persons indicted had allegedly migrated through the soil and was threatening for endangering the life of others. However, the judge ordered residences built in the vicinity. A molded barrier was constructed that SIMIGEDA and Novergie Centre Est be sent for trial before around the landfi ll to contain the migration. the Albertville criminal court for having operated the incinerator The plaintiffs have not specifi ed fi gures but are claiming a loss of “without prior authorization, due to the expiry of the initial value of their homes, requesting that the competent jurisdiction authorization as a result of signifi cant changes in operating determine the amount of damages. conditions at the plant”. On September 9, 2009, the investigation chamber of the Chambéry Appeals Court upheld the dismissal In April 2009 the city of Casey called on SITA Australia to of charges of endangering the lives of others for the Novergie guarantee the services it provided between 2003 and 2006 in employees. relation to the closing and capping of the landfi ll. SITA Australia was also sued by the plaintiffs on November 15, 2009 along with The date of referral to the Correctional Court is not known, to date. other participants.

26.2.3 United Water (New York) SITA Australia does not believe it is liable in any way for the In March 2008, certain persons residing on the banks of the alleged damage. Hackensack River in Rockland County (New York state) fi led a This claim has been reported to the insurance companies.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 261 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

26.3 TAX LITIGATION against that judgment in July 2008: the part of the reassessment that was upheld is currently being examined. 26.3.1 Sociedad General de Aguas de Barcelona Finally, in June 2009, Agbar fi led suit with the administrative Agbar was subject to a number of tax audits, mainly relating to court for fi scal years 2002 to 2004. corporate tax. 26.3.2 Lydec With respect to corporate tax, Agbar received a reassessment notice from the Spanish tax authorities for the 1995 to 1998 LYDEC, a 51% owned subsidiary of the Group, was subject to a fi scal years, mentioning a reassessment of tax payable of tax audit relating to the 2002 to 2005 fi scal years concerning corporate tax, Value Added Tax, and general income tax. €28 million in addition to penalties of €12 million. Agbar also received a reassessment notice relating to the 1999 to 2001 An agreement was signed on September 28, 2009 between fi scal years, mentioning a reassessment of tax payable of LYDEC and the Moroccan tax authorities, concluding the case. €41 million in addition to penalties of €25 million. In addition, in This agreement confi rmed LYDEC’s risk analysis, that the May 2009, Agbar was notifi ed of an assessment of €60.5 million amounts of the reassessments communicated by the authorities for fi scal years 2002 to 2004, without additional penalties. were excessive. The company challenged these notices in court, which were for each period in question justifi ed with similar arguments by 26.3.3 Lyonnaise des Eaux and its subsidiaries the tax authorities. Agbar considers that the tax authorities’ With respect to the calculation of business tax (“taxe arguments are groundless. professionnelle”), Lyonnaise des Eaux France and its subsidiaries are in discussions with the French tax authorities. In May 2007, with regard to the 1995 to 1998 fi scal years, These discussions relate to the valuation method used for real the administrative court reduced the amount of the claim estate assets as well as for equipment and other assets relating to €21 million and cancelled the penalties. However, Agbar to the delegations of public services fi nanced by the relevant appealed against this judgment on the remaining part of the delegated entity and/or by local public entities. reassessment, which is now being currently examined. In this context, notices of claims for reassessment have been Moreover, in May 2008, the Administrative Court cancelled the received by Lyonnaise des Eaux, Eau du Sud Parisien, Eau & penalties relating to the 1999 to 2001 fi scal years, but upheld Force, Société des Eaux du Nord, SERAM, Société des Eaux de almost all of the reassessment. As a result, Agbar appealed Marseille and Stéphanoise des Eaux.

NOTE 27 Subsequent events

ACQUISITION OF AGBAR The Group and Criteria also agreed a shareholders’ agreement establishing the principles for managing Agbar and Hisusa and On January 12, 2010, an Extraordinary Shareholders’ Meeting governing their future relationship as shareholders of Agbar of Aguas de Barcelona (Agbar), approved by majority vote the and Hisusa. resolutions relating to the public delisting offer of the company, followed by the cancellation of the shares acquired thereby, This new agreement will take effect when Agbar and Hisusa as well as the resolution relating to Agbar’s sale of its Adeslas shares are acquired by the Group and will supersede the stake to Criteria Caixa Corp. shareholders’ agreement currently in place. The new agreement will provide specifi cally for: On January 14, 2010, the Group signed an agreement with Criteria to buy the shares of Agbar and Hisusa in order to hold ● the Group’s exclusive control of Agbar and consequently the directly and indirectly 75.01% of Agbar shares. The same day, full consolidation of Agbar within the Group’s consolidated Agbar and Criteria signed an agreement to sell all Adeslas shares fi nancial statements; held by Agbar. The realization of these transactions remains ● new governance of Agbar and Hisusa. subject to the completion of Agbar’s public delisting offer (itself subject to approval by the Spanish market authorities – CNMV) On February 11, 2010 Agbar fi led the prospectus for the public and the authorization of the Antitrust authorities. delisting offer with the CNMV.

262 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

UNWINDING OF JOINTLY-OWNED SUBSIDIARIES A new application for authorization was made to the European WITH VEOLIA ENVIRONNEMENT Commission to refl ect the terms of the addendum.

The agreement of December 2008 produced an addendum The process should complete during the fi rst half of 2010. dated February 3, 2010, aimed at the repurchase by Lyonnaise de Eaux of the stake held by Veolia Eau in two of the three jointly owned subsidiaries originally acquired by Veolia.

NOTE 28 List of the main companies consolidated at december 31, 2009 and 2008

Consolidation % interest % control method

Names Headquarters address Dec. 2009 Dec. 2008 Dec. 2009 Dec. 2008 Dec. 2009 Dec. 2008

SUEZ 1, rue d’Astorg 75008 PARIS - France 100.0 100.0 100.0 100.0 FC FC ENVIRONNEMENT COMPANY

WATER EUROPE Lyonnaise des 11, place Edouard VII 75009 PARIS - France 100.0 100.0 100.0 100.0 FC FC eaux France Eau et Force 30, rue Paul Vaillant Couturier - BP 712 100.0 100.0 100.0 100.0 FC FC 92007 Nanterre - France Eaux de Marseille 25, rue Edouard-Delanglade 13006 Marseille - 48.8 48.8 48.8 48.8 PC PC France Eaux du Nord 217, boulevard de la Liberté BP 329 59020 49.6 49.6 49.6 49.6 PC PC Lille - France 20 S.C.M. (SDEI) 988, chemin Pierre Drevet 69140 Rillieux 100.0 100.0 100.0 100.0 FC FC la Pape - France Stephanoise 28, rue Eugène Beaune 42043 Saint-Etienne - 50.0 50.0 50.0 50.0 PC PC des eaux France Hisusa Torre Agbar - Av. Diagonal, 211 08018 51.0 51.0 51.0 51.0 PC PC Barcelona - Espagne Agbar (a) Torre Agbar - Av. Diagonal, 211 08018 45.9 45.9 51.0 51.0 PC PC Barcelona - Espagne Aguas Andinas (b) Avenida Presidente Balmaceda 1398, Piso – 13.2 13.2 51.0 51.0 PC PC 4, Santiago - Chili Eurawasser Carl-Hopp-Strasse 1, D-18069 Rostock - 100.0 100.0 100.0 100.0 FC FC Allemagne Ondeo Industrial 23, rue du Professeur Pauchet 100.0 100.0 100.0 100.0 FC FC Solutions 92420 Vaucresson - France

(a) Agbar is fully consolidated in the accounts of Hisusa, which is itself proportionately consolidated by SUEZ ENVIRONNEMENT COMPANY. See also Note 2. (b) Aguas Andinas is fully consolidated in the accounts of Agbar since January 1, 2006. Aguas Andinas is a subsidiary of IAM. FC = Full consolidation PC = Proportional consolidation (joint-venture) EM = Equity method (associates)

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 263 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

Consolidation % interest % control method

Names Headquarters address Dec. 2009 Dec. 2008 Dec. 2009 Dec. 2008 Dec. 2009 Dec. 2008

WASTE EUROPE SITA Holdings UK Grenfell road, Maidenhead, Berkshire SL6 100.0 100.0 100.0 100.0 FC FC LTD 1ES, Royaume-Uni SE Deutschland Industriestrasse 161 D-50999, Köln, 100.0 100.0 100.0 100.0 FC FC GmbH Allemagne SITA Nederland Mr. E.N. van Kleffensstraat 6, Postbus 7009, 100.0 100.0 100.0 100.0 FC FC BV NL - 6801 HA Arnhem, Pays-Bas SITA France Tour CB21, 16 Place de l’Iris, 92040 Paris 99.9 99.9 99.9 99.9 FC FC La Défense Cedex - France SITA Île-de-France 2 à 6, rue Albert de Vatimesnil 92532 99.9 99.9 99.9 99.9 FC FC Levallois Perret - France TERIS 54, rue Pierre Curie - ZI des Gâtines - 99.9 99.9 99.9 99.9 FC FC BP 131 - 78373 Plaisir - France SITA Belgium Rue Gatti de Gamond 254 - 1180 Bruxelles - 100.0 100.0 100.0 100.0 FC FC Belgique SOCALUX Lamesch SA - ZI Wolser Nord BP 75 - L-3201 100.0 100.0 100.0 100.0 FC FC Bettembourg - Luxembourg Novergie holding Tour CB21, 16 Place de l’Iris, 92040 Paris 99.9 99.9 99.9 99.9 FC FC La Défense Cedex - France SITA Sverige AB. Kungsgardsleden - 26271 Angelholm - Suède 100.0 100.0 100.0 100.0 FC FC SITA Finland OY Sahaajankatu 49 - 00880 Helsinki - Finlande 100.0 100.0 100.0 100.0 FC FC AB

INTERNATIONAL Swire SITA 2801 Island Place Tower - 510 King’s Road - 100.0 50.0 100.0 50.0 FC PC North Point - Hong-Kong SITA Australia PO Box 160, Kemps Creek NSW 2171 - 60.0 60.0 60.0 60.0 FC FC Australie SITA CZ Konevova, 1107/54 - 130 00 Praha 3 - 100.0 100.0 100.0 100.0 FC FC République Tchèque BVK Hybelota 16 65733 Brno - 46.3 46.2 46.3 46.2 EM EM République Tchèque United Water 200 Old Hook Road, Harrington Park 100.0 100.0 100.0 100.0 FC FC New Jersey - Etats-Unis Macao Water 718 avenida do Conselheiro Borja Macao Via - 42.5 42.5 Consolidated Consolidated PC PC Macao - Chine by SFH by SFH Degremont 183, avenue du 18 juin 1940 92500 Rueil 100.0 100.0 100.0 100.0 FC FC Malmaison - France LYDEC 20, boulevard Rachidi, Casablanca – Maroc 51.0 51.0 51.0 51.0 FC FC Sino French New World Tower 29/f 16-18 Queensroad 50.0 50.0 50.0 50.0 PC PC Holding (SFH) Central - Hong Kong PT PAM Lyonnaise Central Senayan 1, 7th fl oor JI. Asia Afrika 51.0 51.0 51.0 51.0 FC FC Jaya n°8 - 10270 Jakarta - Indonésie SE Polska UI. Kopernika, 17 - 02359 Warszawa - 100.0 100.0 100.0 100.0 FC FC Pologne

OTHER SUEZ ENVIRONNEMENT 1, rue d’Astorg 75008 PARIS - France 100.0 100.0 100.0 100.0 FC FC

(a) Agbar is fully consolidated in the accounts of Hisusa, which is itself proportionately consolidated by SUEZ ENVIRONNEMENT COMPANY. See also Note 2. (b) Aguas Andinas is fully consolidated in the accounts of Agbar since January 1, 2006. Aguas Andinas is a subsidiary of IAM. FC = Full consolidation PC = Proportional consolidation (joint-venture) EM = Equity method (associates)

264 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

NOTE 29 Fees of the statutory auditors and members of their networks

The accounting fi rms Ernst & Young and Mazars act as Statutory Information on fees paid to the statutory auditors and members of Auditors for the SUEZ ENVIRONNEMENT COMPANY Group. their networks is provided in accordance with Decree 2008-1487.

29.1 FEES OF THE STATUTORY AUDITORS AND MEMBERS OF THEIR NETWORKS ASSUMED BY THE GROUP FOR FISCAL YEAR 2009

Ernst & Young Mazars

(in thousands of euros) Amount % Amount %

AUDIT Statutory auditors, attest engagements, review of individual and consolidated accounts (a)

● SUEZ ENVIRONNEMENT COMPANY SA 800 9.5% 647 21.2%

● Fully and proportionally consolidated subsidiaries 6,458 76.7% 2,227 73.1% Other audit procedures and incidental assignements in relation to Auditor’s engagement to the Statutory Auditor’s mission

● SUEZ ENVIRONNEMENT COMPANY SA 269 3.2% 146 4.8%

● Fully and proportionally consolidated subsidiaries 588 7.0% 25 0.8% Sub-total 8,115 96.4% 3,045 100.0%

OTHER SERVICES

● Tax 305 3.6% 0.0% ● Other 0 0.0% 0 0.0% 20 Sub-total 305 3.6% 0 0.0% TOTAL (b) 8,420 100% 3,045 100%

(a) The amounts relating to the Group’s internal control audit totaled 785,000 euros. (b) The amounts relating to the entities consolidated proportionally, which largely involved tasks assigned to the Statutory Auditors, totaled 353,000 euros.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 265 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATON AND REVENUES Consolidated fi nancial statements

29.2 FEES OF THE STATUTORY AUDITORS AND MEMBERS OF THEIR NETWORKS ASSUMED BY THE GROUP FOR FISCAL YEAR 2008

Ernst & Young Mazars

(in thousands of euros) Amount % Amount %

AUDIT Statutory auditors, attest engagements, review of individual and consolidated accounts (a) (b)

● SUEZ ENVIRONNEMENT COMPANY SA 711 8.3% 470 19.0%

● Fully and proportionally consolidated subsidiaries 7,260 85.2% 1,914 77.3% Other audit procedures and incidental assignements in relation to Auditor’s engagement to the Statutory Auditor’s mission

● SUEZ ENVIRONNEMENT COMPANY SA 70 0.8% 0.0%

● Fully and proportionally consolidated subsidiaries 347 4.1% 60 2.4% SUB-TOTAL 8,388 98.5% 2,444 98.7%

OTHER SERVICES

● Tax 111 1.3% 0 0.0%

● Other 18 0.2% 31 1.3% Sub-total 129 1.5% 31 1.3% TOTAL (c) 8,517 100% 2,475 100%

(a) The amounts relating to the Group’s internal control audit totaled 850,000 euros. (b) The amounts relating to IPO expenses totaled 1,180,000 euros (Ernst & Young only). (c) The amounts relating to the entities consolidated proportionally, which largely involved tasks assigned to the Statutory Auditors, totaled 207,000 euros.

266 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Statutory auditors’ report on the consolidated fi nancial statements

20.2 STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED Z FINANCIAL STATEMENTS

To the Shareholders, II. JUSTIFICATION OF OUR ASSESSMENTS In compliance with the assignment entrusted to us by your shareholders’ annual meetings, we hereby report to you, for the In accordance with the requirements of article L. 823-9 of the year ended December 31, 2009, on: French commercial code (Code de Commerce) relating to the justifi cation of our assessments, we bring to your attention the ● the audit of the accompanying consolidated fi nancial following matters: statements of SUEZ ENVIRONNEMENT COMPANY; ● as disclosed in note 1 to the consolidated fi nancial statements, ● the justifi cation of our assessments; SUEZ ENVIRONNEMENT COMPANY group is required to ● the specifi c verifi cation required by French law. make estimates and assumptions in order to prepare its fi nancial statements taking into account the context of These consolidated fi nancial statements have been approved economic and fi nancial crisis which already existed at the by the board of directors. Our role is to express an opinion on December 31, 2008 closing. This note also specifi es that the these consolidated fi nancial statements based on our audit. future results of the operations in question could be different from these estimates according to different assumptions or situations. These signifi cant accounting estimates relate to the measurement of the recoverable amount of goodwill, I. OPINION ON THE CONSOLIDATED property, plant and equipment and intangible assets, FINANCIAL STATEMENTS provisions, capital renewal and replacement liabilities, revenues generated but not metered (as in “meters not We conducted our audit in accordance with professional read”) and the assessment of the tax loss carry-forwards standards applicable in France; those standards require that recognized as deferred tax assets; we plan and perform the audit to obtain reasonable assurance ● with respect to the aforementioned assets, we have 20 about whether the consolidated fi nancial statements are examined the methods adopted to perform impairment tests, free of material misstatement. An audit involves performing as well as the data and assumptions used. We have reviewed procedures, using sampling techniques or other methods of the calculations made by the group and verifi ed that notes 1, selection, to obtain audit evidence about the amounts and 5, 9 and 10 to the consolidated fi nancial statements provide disclosures in the consolidated fi nancial statements. An audit appropriate information; also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates ● as regards provisions, and particularly provisions for site made, as well as the overall presentation of the consolidated rehabilitation, litigation, retirement and other employee fi nancial statements. We believe that the audit evidence we benefi ts, we have assessed the bases on which these have obtained is suffi cient and appropriate to provide a basis provisions have been established and verifi ed that notes 16, for our audit opinion. 17 and 26 to the consolidated fi nancial statements provide appropriate information; In our opinion, the consolidated fi nancial statements give a true and fair view of the assets and liabilities of the statement of ● in respect of capital renewal and replacement liabilities, we fi nancial position of the group and of the results of its operations have assessed the bases on which these capital renewal and as at December 31, 2009 in accordance with International replacement liabilities have been established and verifi ed Financial Reporting Standards as adopted by the European Union. that note 13 to the consolidated fi nancial statements provides appropriate information; Without qualifying our opinion, we draw your attention to the matters set out in the following notes to the consolidated ● in respect of sales of water metered during the accounting fi nancial statements: period, the group prepares an estimate of the revenues based on historical data of consumption as well as the ● Note 1.1, “Basis of presentation”, which specifi es that the estimated selling price. Our work consisted in examining the consolidated fi nancial statements have been presented data and assumptions used to calculate these estimates and according to the “pooling of interest” accounting method, verifying that note 1 to the consolidated fi nancial statements including for the comparative fi nancial year ended provides appropriate information; December 31, 2008;

● Note 1.2.1, which outlines the impact of new standards, amendments and interpretations whose adoption is mandatory.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 267 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATON AND REVENUES Statutory auditors’ report on the consolidated fi nancial statements

● as regards the tax loss carry-forwards recognized as III. SPECIFIC VERIFICATION deferred tax assets, our work consisted in verifying that the recognition criteria were satisfi ed and in assessing the As required by law we have also verifi ed, in accordance with assumptions underlying the forecasts of taxable profi ts and professional standards applicable in France, the information the relating use of tax loss carry-forwards. We have also presented in the group’s management report. verifi ed that note 7 to the consolidated fi nancial statements provides appropriate information. We have no matters to report regarding its fair presentation and its consistency with the consolidated fi nancial statements. These assessments were made as part of our audit of the consolidated fi nancial statements taken as a whole and, therefore, contributed to the opinion we formed which is expressed in the fi rst part of this report.

Courbevoie and Neuilly-sur-Seine, February 25, 2010

The statutory auditors

French original signed by

MAZARS ERNST & YOUNG et Autres Thierry Blanchetier Philippe Castagnac Charles-Emmanuel Chosson Pascal Macioce

268 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Parent company fi nancial statements

Z 20.3 PARENT COMPANY FINANCIAL STATEMENTS

20.3.1 BALANCE SHEET-ASSETS

Dec. 31, 2009 Dec. 31, 2008

Depreciation, amortization and (in thousands of euros) Note Gross provisions Net Net

INTANGIBLE ASSETS Start-up costs Concessions, patents, licenses, trademarks, processes Business goodwill Other (usage rights) Intangible assets in progress 60.2 60.2 Intangible assets 60.2 60.2

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment Property, plant and equipment in progress Property, plant and equipment

FINANCIAL FIXED ASSETS Equity investments 6,157,390.3 6,157,390.3 6,157,390.3 20 Receivables from equity investments Other long-term investments Loans 351,678.0 351,678.0 Other fi nancial fi xed assets 38,009.5 38,009.5 20,095.3 Financial fi xed assets 6,547,077.8 6,547,077.8 6,177,485.6 TOTAL NON-CURRENT ASSETS 3.2 6,547,138.0 6,547,138.0 6,177,485.6

ADVANCES AND DOWNPAYMENTS ON ORDERS 3.4 3.4 Receivables Trade receivables 122.7 122.7 275.1 Other receivables 1,505,409.6 1,505,409.6 104,000.9 Accrued income on cash instruments 51,272.7 51,272.7 Financial accounts Cash and cash equivalents 25.9 25.9 501.6 Bank investments 676,490.7 676,490.7 Treasury shares 4,686.9 3.2 4,683.7 16,446.9 Marketable securities 950,026.0 950,026.0 Prepaid expenses 3.6 5,556.9 5,556.9 87.1 TOTAL CURRENT ASSETS 3,193,594.8 3.2 3,193,591.6 121,311.7 Amortizable expenses 3.6 8,070.3 954.6 7,115.7 Bond redemption premiums 3.6 11,075.1 11,075.1 Unrealized foreign exchange losses TOTAL ASSETS 9,759,878.2 957.8 9,758,920.4 6,298,797.2

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20.3.2 BALANCE SHEET – EQUITY AND LIABILITIES

(in thousands of euros) Note Dec. 31, 2009 Dec. 31, 2008

SHAREHOLDERS’ EQUITY Share capital 1,958,796.2 1,958,796.2 Additional paid-in capital 4,002,949.5 4,198,829.1 Legal reserve 195,879.6 Other reserves Retained earnings 64,610.9 (12.0) Net income for the period 611,780.2 64,622.9 Interim dividends (317,621.9) Accelerated tax depreciation/amortization TOTAL SHAREHOLDERS’ EQUITY 3.1 6,516,394.5 6,222,236.2

PROVISIONS FOR CONTINGENCIES AND LOSSES Provisions for contingencies Provisions for losses 7,305.3 TOTAL PROVISIONS FOR CONTINGENCIES AND LOSSES 3.3 7,305.3

PAYABLES Borrowings and debt Other bond issues 3,103,399.7 Bank borrowings and debt (a) 100,037.1 Miscellaneous borrowings and debt 4,675.2 50,017.4 Operating payables Advances and downpayments on orders Trade payables 7,030.4 26,279.5 Tax and employee-related liabilities 371.9 64.1 Payables on non-current assets 60.2 Miscellaneous payables 485.1 200.0 Accrued expenses on cash instruments 12,976.5 Prepaid income 3.6 6,184.5 TOTAL PAYABLES 3,235,220.6 76,561.0 Unrealized foreign exchange gains TOTAL EQUITY AND LIABILITIES 9,758,920.4 6,298,797.2

(a) Including bank credit balances. 11.7

270 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Parent company fi nancial statements

20.3.3 INCOME STATEMENT

(in thousands of euros) Note Dec. 31, 2009 Dec. 31, 2008

OPERATING INCOME Ancillary revenues 3,988.4 230.0 Net revenues 2.1 3,988.4 230.0 Production taken to inventory Operating subsidies Reversals of depreciation, amortization, provisions, and expense transfers 8,902.5 7,414.8 Other income TOTAL OPERATING INCOME 12,890.9 7,644.8

OPERATING EXPENSES Other purchases and external charges 28,713.3 13,867.4 Taxes other than on income 143.9 0.1 Wages, salaries and payroll taxes 1,220.0 469.4 Additions to provisions for stock purchase options and bonus share grants 6,007.8 Depreciation and amortization of non-current assets Additions to provisions for current assets Additions to provisions for contingencies and losses 2,253.1 Other operating expenses 384.7 200.0 TOTAL OPERATING EXPENSES 38,722.8 14,536.9 Net operating loss (25,831.9) (6,892.1) 20 Share in income of joint ventures Net income allocated or loss transferred

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(in thousands of euros) Note Dec. 31, 2009 Dec. 31, 2008

FINANCIAL INCOME Investment income 608,657.6 Other fi nancial income 3,044.7 Other interest income 74,798.4 5.1 Reversals of provisions and expense transfers 687.8 Exchange gains 0.5 Net proceeds from sales of marketable securities 6,235.5 TOTAL FINANCIAL INCOME 693,424.5 5.1

FINANCIAL EXPENSES Additions to depreciation, amortization and provisions 833.4 691.0 Interest expenses 144,942.1 711.3 Exchange losses 1.9 TOTAL FINANCIAL EXPENSES 145,777.4 1,402.3 Net fi nancial income (expense) 2.2 547,647.1 (1,397.1) Net recurring income (expense) before tax 521,815.2 (8,289.2)

NON-RECURRING INCOME On operating transactions On capital transactions 5,124.2 539.8 Reversals of provisions and expense transfers TOTAL NON-RECURRING INCOME 5,124.2 539.8

NON-RECURRING EXPENSES On operating transactions On capital transactions 1,831.0 26,091.6 Additions to depreciation, amortization and provisions TOTAL NON-RECURRING EXPENSES 1,831.0 26,091.6 Non-recurring income (loss) 2.3 3,293.2 (25,551.8) Employee profi t-sharing Income tax expense 2.4 86,671.7 98,463.9 TOTAL INCOME 711,439.6 8,189.8 TOTAL EXPENSES 99,659.5 (56,433.1) Net income 611,780.1 64,622.9

272 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Parent company fi nancial statements

20.3.4 CASH FLOW STATEMENT

(in thousands of euros) Dec. 31, 2009 Dec. 31, 2008

Net income 611,780.1 64,622.9 Net additions to depreciation, amortization and provisions 7,305.3 Capital gains and losses 0.1 Gross cash fl ow 619,085.4 64,622.9 Change in working capital requirements 52,360.4 (77,821.4) Net cash fl ow from (used in) operating activities 671,445.8 (13,198.4) Purchases of non-current assets (0.0) Disposals of non-current assets 0.0 Change in fi nancial receivables (a) (1,865,186.3) (36,502.5) Net cash fl ow used in investing activities (1,865,186.3) (36,502.5) Dividends paid (317,621.9) Capital increase 185.0 Change in borrowings and debt (b) 2,085,875.0 50,017.4 Net cash fl ow from fi nancing activities 1,768,253.1 50,202.4 Change in cash and cash equivalents 574,512.6 501.4 Cash and cash equivalents at beginning of period 501.6 0.2 Cash and cash equivalents at end of period 575,014.2 501.6 Change in cash and cash equivalents (c) 574,512.6 501.4

(a) Including the net change in the current account with SUEZ ENVIRONNEMENT SAS. (b) Including bond issues in a total amount of €3 billion and investments in mutual funds (OPCVM) for €950 million. 20 (c) Net cash and cash equivalents, including €675 million in term deposits.

20.3.5 SIGNIFICANT FACTS REGARDING THE FISCAL YEAR

20.3.5.1 BONDS ISSUES 20.3.5.3 BONUS SHARE PLAN As part of the policy to diversify its sources of funding and extend Launch of the fi rst SUEZ ENVIRONNEMENT COMPANY the maturity of its debt, SUEZ ENVIRONNEMENT COMPANY bonus share plan for employees carried out a series of bond issues during the year for a total amount of €3 billion, within the scope of the Euro Medium Term Pursuant to the resolution approved by the Shareholders’ Notes (EMTN) program set up in March 2009. Meeting of May 26, 2009, the Board of Directors decided to grant 30 SUEZ ENVIRONNEMENT COMPANY shares to each of 20.3.5.2 PAYMENT OF AN INTERIM DIVIDEND the Group’s 68,000 employees, representing more than 2 million existing shares. Pursuant to the Board of Directors’ decision of May 26, 2009, on June 3, 2009 SUEZ ENVIRONNEMENT COMPANY paid an Launch of the fi rst SUEZ ENVIRONNEMENT COMPANY interim dividend of €0.65 per share, representing a total payout stock option and performance share plans of €317,621,889. On December 17, 2009, the Board of Directors decided to grant 3,464,440 stock options and 173,852 performance shares to employees of the SUEZ ENVIRONNEMENT Group.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 273 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATON AND REVENUES Parent company fi nancial statements

20.3.6 FINANCIAL HIGHLIGHTS

Net income reported by SUEZ ENVIRONNEMENT COMPANY in Net income for the year mainly refl ects the dividend received 2009 came in at €611.8 million. from SUEZ ENVIRONNEMENT SAS in an amount of €608.7 million and savings resulting from tax consolidation for €86.7 million, Net non-recurring income amounted to €3.3 million. partly offset by net fi nance costs totaling €85.6 million related to bond issues launched during the period.

20.3.7 APPENDICES TO THE ACCOUNTS

NOTE 1 Principles and accounting policies

Total assets prior to the appropriation of earnings amounted Investments which SUEZ ENVIRONNEMENT COMPANY intends to €9,758,920,483.59 at December 31, 2009. The income to hold on a long-term basis are written down if value in use falls statement, presented in list format, shows total income of below cost. Value in use is assessed by reference to the intrinsic €711,439,637.71 and net income of €611,780,177.28. value, yield value, or stock market price.

The fi scal year spans a 12-month period from January 1, 2009 to Investments which SUEZ ENVIRONNEMENT COMPANY has December 31, 2009. decided to sell are written down if their book value is lower than their market price. If sale negotiations are ongoing, the The fi nancial statements of SUEZ ENVIRONNEMENT COMPANY best estimate is used to determine the sale price. are fully consolidated within the consolidated fi nancial statements of the GDF SUEZ Group (based at 22, rue du docteur Related receivables are carried on the balance sheet at their Lancereaux 75392, Paris Cedex 08, France). face amount.

The 2009 parent company fi nancial statements are drawn up In line with the treatment adopted for equity investments, the in euros in accordance with the general accounting standards related amounts receivable are written down if the associated set out in the French Chart of Accounts and the measurement risk is higher than the value of the shares. methods described below. Provisions for contingencies may be booked if the Company By way of an exception to the above, in order to refl ect the considers that its commitment represents an amount in excess recurring nature of net fi nancial income or expense and to of the value of the assets held. permit meaningful comparisons between fi nancial periods, all fi nancial transactions relating to equity investments and 1.1.2 Current assets and liabilities related receivables have been included under non-recurring Receivables reported within current assets are carried on the items. These include mainly movements in provisions for balance sheet at their face amount, with non-payment risk equity investments and the related receivables, along with any analyzed on a case-by-case basis. A provision is set aside for associated losses. bad debts in an amount refl ecting the risk incurred.

1.1 MEASUREMENT METHODS Dividends are recognized on a net basis, in the period in which the decision to pay dividends is made. 1.1.1 Equity investments Equity investments represent long-term investments providing the Company with control or signifi cant infl uence over the issuer, or helping it to establish business relations with the issuer.

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1.1.3 Treasury shares the vesting period and ultimately covers the loss on disposal corresponding to the acquisition value of the shares less the SUEZ ENVIRONNEMENT COMPANY shares held by the Company strike price paid by employees. as part of the liquidity agreement are recorded under treasury shares in balance sheet assets insofar as the purpose of holding 1.1.7 Bond issue costs these shares is to stabilize the share price. Bond issue costs are amortized on a straight-line basis over SUEZ ENVIRONNEMENT COMPANY shares purchased within the the life of the bonds, in accordance with the recommendation scope of the bonus share plan are also recognized in assets. issued by the French National Accounting Board. Treasury shares are measured using the average stock market Issue premiums paid are recognized under liabilities and are price for the fi nal month of the reporting period. amortized on a straight-line basis over the life of the bonds. Issue premiums received are deducted from the issue costs. 1.1.4 Provisions for contingencies and losses Any difference outstanding is recorded under prepaid income Pursuant to standard CRC 2000-06 on liabilities issued by and is taken to income over the life of the bond. the French Accounting Standards Committee, provisions are recognized when (i) the Company has a present legal or 1.1.8 Foreign currency transactions constructive obligation as a result of a past event; (ii) it is probable Income and expenses denominated in foreign currencies are that an outfl ow of resources embodying future economic recorded at their equivalent value in euros at the transaction date. benefi ts will be required to settle the obligation; and (iii) a reliable estimate can be made of the amount of the obligation. Foreign currency receivables, payables and cash and cash equivalents are converted at the exchange rate prevailing at The amount recognized as a provision should be the best year-end. Translation differences are taken to income when estimate of the expenditure required to settle the present they arise on cash and cash equivalents, or to the balance obligation at the end of the reporting period. sheet under “Unrealized foreign exchange gains/losses” when they arise on receivables and payables. A provision is set aside 1.1.5 Pensions and other employee benefi t for any unrealized losses on foreign currency receivables and obligations payables that are not hedged. In accordance with the benchmark treatment prescribed by the French National Accounting Board (Conseil National de 1.1.9 Income tax expense la Comptabilité – CNC), a provision is set aside in the parent 20 With effect from January 1, 2008, a consolidated tax group was company fi nancial statements for pensions and other employee formed in France by SUEZ ENVIRONNEMENT COMPANY between benefi t obligations under defi ned benefi t plans. SUEZ ENVIRONNEMENT COMPANY and all of its subsidiaries that The Company’s obligations for pensions, early retirement were previously included in the SUEZ tax group. The creation payments, retirement bonuses and other plans are assessed of this tax group resulted in SUEZ ENVIRONNEMENT COMPANY on an actuarial basis using mortality and employee turnover entering into tax consolidation agreements with each of the assumptions, salary projections, and a discount rate based members of its tax group. on the yield on investment grade corporate bonds at the SUEZ ENVIRONNEMENT COMPANY pays income tax to the measurement date. French tax authorities corresponding to the taxable income of all members of the tax group, after netting of taxable profi ts and 1.1.6 Stock option, bonus and performance share losses. The expense or benefi t resulting from tax consolidation grants and defi nitively acquired by SUEZ ENVIRONNEMENT COMPANY Pursuant to rule CRC 2008-15 of December 4, 2008, issued by is recorded in income. the French Accounting Standards Committee, a provision is In accordance with the principle of neutrality, the tax set aside for bonus share grants on a straight-line basis over consolidation agreement provides that income tax savings the vesting period and ultimately covers the loss on disposal resulting from the utilization of tax loss carryforwards must be corresponding to the carrying amount of the treasury shares paid over by SUEZ ENVIRONNEMENT COMPANY to the subsidiary awarded without consideration to employees. Additions to and concerned when the latter swings back into profi t. However, as reversals from provisions, as well as any expenses relating to the Company considers that it is unlikely to have to pay over bonus share grants, are recorded under personnel costs. A any amounts under this principle, no provision was set aside in provision is set aside for stock option plans when at the end respect of this commitment at December 31, 2009. of the reporting period, the share price exceeds the strike price. The provision is recorded on a straight-line basis over

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 275 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, 20 FINANCIAL SITUATON AND REVENUES Parent company fi nancial statements

NOTE 2 Notes on the Income Statement

2.1 REVENUES Revenues of €3,988,429.42 correspond to the compensation paid to SUEZ ENVIRONNEMENT COMPANY as Chairman of SUEZ ENVIRONNEMENT SAS.

2.2 NET FINANCIAL INCOME (LOSS) Net fi nancial items can be analyzed as follows:

(in thousands of euros) Dec. 31, 2009 Dec. 31, 2008

Investment income 608,657.6 Other interest income and expense (67,099.0) (706.2) Net additions to provisions and expense transfers (145.6) (691.0) Net exchange losses (1.4) Net income from sales of marketable securities 6,235.5 Net fi nancial income (loss) 547,647.1 (1,397.2)

2.3 NON-RECURRING ITEMS

(in thousands of euros) Dec. 31, 2009 Dec. 31, 2008

On operating transactions On capital transactions 3,293.2 (25,551.8) Net additions to provisions and expense transfers Net non-recurring income (loss) 3,293.2 (25,551.8)

Net income of €3.3 million is attributable to transactions carried out within the scope of the liquidity agreement. In 2008, these transactions generated a loss of €2.3 million. Expenses incurred during the stock market listing and included in this item in 2008 amounted to €23.2 million.

2.4 BREAKDOWN OF INCOME TAX EXPENSE SUEZ ENVIRONNEMENT COMPANY is the parent company of a consolidated tax group set up for 112 subsidiaries on December 31, 2009.

Income Income (in thousands of euros) before tax Income tax after tax

Net recurring income after employee profi t-sharing 521,815.2 521,815.2 Net non-recurring income 3,293.2 3,293.2 Impact of tax consolidation on income tax expense for the year 86,671.7 86,671.7 Net income 525,108.4 86,671.7 611,780.1

As in 2008, due to the tax losses of entities within the tax group, SUEZ ENVIRONNEMENT COMPANY did not pay any income tax in 2009. The €86.7 million saving acquired by SUEZ ENVIRONNEMENT COMPANY as a result of tax consolidation is recorded in income.

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NOTE 3 Notes on the balance sheet

3.1 SHARE CAPITAL At December 31, 2009, the Company’s share capital comprised 489,699,060 fully paid-up shares.

Number of shares Issued during Repaid during at year-end the period the period Par value

Ordinary shares 489,699,060 4.0 TOTAL 489,699,060

SUEZ ENVIRONNEMENT COMPANY held 201,000 shares within the scope of the liquidity agreement, representing an amount of €3,067,359.24.

SUEZ ENVIRONNEMENT COMPANY also held 100,000 shares as part of the bonus share plan, representing an amount of €1,619,494.

Changes in shareholders’ equity in 2009 can be analyzed as follows:

(in thousands of euros)

Shareholders’ equity at Dec. 31, 2008 6,222,236.2 Changes during the period Minus Plus Changes in capital Changes in contribution premium 195,879.6 Changes in retained earnings 64,622.9 Changes in net income 382,244.8 611,780.2 Changes in reserves 195,879.6 20 Shareholders’ equity at Dec. 31, 2009 6,516,394.5

On March 3, 2009, the Board of Directors decided to increase the legal reserve to the statutory maximum by deduction from the contribution premium.

3.2 NON-CURRENT ASSETS

Gross value at Acquisitions Disposals Gross value (in thousands of euros) Dec. 31, 2008 Increases Decreases Dec. 31, 2009

INTANGIBLE ASSETS Software and other Intangible assets in progress 60.2 60.2 Total intangible assets 60.2 60.2 TOTAL 60.2 60.2

FINANCIAL FIXED ASSETS Equity investments 6,157,390.3 6,157,390.3 Receivables from equity investments Other long-term investments Loans 351,678.0 351,678.0 Other fi nancial fi xed assets 20,095.3 58,180.8 (40,266.6) 38,009.5 TOTAL FINANCIAL FIXED ASSETS 6,177,485.6 409,858.8 (40,266.6) 6,547,077.8 TOTAL 6,177,485.6 409,919.0 (40,266.6) 6,547,138.0

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3.3 PROVISIONS

Value at Value at (in thousands of euros) Dec. 31, 2008 Additions Reversals Dec. 31, 2009

PROVISIONS FOR CONTINGENCIES AND LOSSES 7,306.3 (1.0) 7,305.3 Tax-driven provisions Provisions for non-current assets Provisions for fi nancial fi xed assets Provisions for current accounts Provisions for treasury shares 691.0 (687.8) 3.2 Provisions for other assets Provisions for impairment 691.0 (687.8) 3.2 TOTAL 691.0 7,306.3 (688.8) 7,308.5 Movements in provisions for operating items 7,306.3 (1.0) Movements in provisions for fi nancial items (687.8)

At December 31, 2009, provisions recorded under “Provisions for contingencies and losses” in respect of the worldwide bonus share plan, the performance share plan and the stock option plan, amounted to €6 million.

3.4 RELATED COMPANY DATA

(in thousands of euros) Related companies Associates

Equity investments 6,157,390.3 Loans 351,678.0 Trade receivables 122.7 Other receivables (including current accounts with subsidiaries showing a debit balance) 1,505,892.0 Current accounts with subsidiaries showing a credit balance Amounts payable to equity investments Trade payables 2,202.4 Other payables Interest on amounts receivable from equity investments 1,255.5 Interest on loans 1,789.1 Interest on amounts payable to equity investments Interest on current accounts with subsidiaries showing a credit balance (232.3) Interest on current accounts with subsidiaries showing a debit balance 11,563.1

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3.5 MATURITY OF RECEIVABLES AND PAYABLES

Between (in thousands of euros) Gross value 2010 2011 and 2014

MATURITY OF RECEIVABLES Non-current assets Loans (a) 351,678.0 351,678.0 Other fi nancial fi xed assets 38,009.5 38,009.5 Current assets Advances and downpayments on orders 3.4 3.4 Trade receivables 122.7 122.7 Other receivables (b) 1,505,409.6 1,505,409.6 Cash instruments 51,272.7 51,272.7 TOTAL 1,946,495.9 1,946,495.9

(a) Investment with GDF SUEZ Finance. (b) Of which €1,505.9 million relating to the current account with SUEZ ENVIRONNEMENT SAS.

Between Beyond (in thousands of euros) Gross value 2010 2011 and 2014 2014

MATURITY OF PAYABLES Borrowings and debt Other bond issues 3,103,399.7 103,399.7 1,300,000.0 1,700,000.0 Bank borrowings and debt 100,037.1 100,037.1 20 Miscellaneous borrowings and debt 4,675.2 4,675.2 Operating payables Advances and downpayments on orders Trade payables 7,030.4 7,030.4 Tax and employee-related liabilities 371.9 371.9 Payables on non-current assets 60.2 60.2 Miscellaneous payables 485.1 485.1 Cash instruments 12,976.5 12,976.5 TOTAL 3,229,036.1 229,036.1 1,300,000.0 1,700,000.0

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BREAKDOWN OF BORROWINGS (EXCLUDING INTEREST) BY TYPE OF INVESTMENT

Amount of credit facility at Dec. 31, 2009 Subscription date Maturity Interest rate

In thousands of euros 1,300,000 4/8/2009 4/8/2014 4.88% In thousands of euros 800,000 4/8/2009 4/8/2019 6.25% In thousands of euros 500,000 7/22/2009 7/22/2024 5.50% Public placements 2,600,000

In thousands of euros 250,000 6/8/2009 6/8/2017 5.20% In thousands of euros 150,000 10/12/2009 10/12/2017 4.50% Private placements 400,000

3.6 OTHER CAPTIONS Accrual accounts can be analyzed as follows:

(in thousands of euros) Dec. 31, 2009 Dec. 31, 2008

PREPAID EXPENSES Other external services 81.6 87.1 Financial expenses 5,475.3 TOTAL PREPAID EXPENSES 5,556.9 87.1

AMORTIZABLE EXPENSES Commissions paid on setting up credit facilities 513.6 Bond issue costs 6,602.1 TOTAL AMORTIZABLE EXPENSES (a) 7,115.7 BOND REDEMPTION PREMIUMS (a) 11,075.1

PREPAID INCOME Other services Financial income (b) 6,184.5 TOTAL PREPAID INCOME 6,184.5

(a) Amortizable expenses taken to income during the period amounted to €954 thousand for operating items in respect of bond issue costs, and €833 thousand for fi nancial items in respect of bond redemption premiums. (b) Including issue premiums received in the amount of €5 million.

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Accrued expenses and accrued income associated with receivables and payables can be analyzed as follows:

(in thousands of euros) Dec. 31, 2009 Dec. 31, 2008

TOTAL ACCRUED EXPENSES Interest on bond issues 103,399.7 Trade payables 4,776.1 140.2 Tax and employee-related liabilities 371.9 64.1 Payables on non-current assets 60.2 Other payables 485.1 200.0 Cash instruments 12,976.5 Total accrued expenses 122,069.5 404.3

ACCRUED INCOME Loans 1,678.0 Other receivables 3,633.1 Cash instruments 51,272.7 Total accrued income 56,583.8

NOTE 4 Other information

4.1 EXECUTIVE COMPENSATION Attendance fees paid to directors and the various committees totaled €384,201.53 for 2009. Jean-Louis Chaussade, as corporate offi cer, received compensation amounting to €958,911.18 from SUEZ ENVIRONNEMENT COMPANY. 20

4.2 PENSIONS AND OTHER EMPLOYEE BENEFIT OBLIGATIONS

Overview of benefi t obligations

(in millions of euros) Dec. 31, 2009 Dec. 31, 2008

Pensions (a) 2.6 0 Other post-employment benefi ts (b) 00 Other long-term benefi ts (c) 00 TOTAL 2.6 0

(a) Pensions and retirement bonuses. (b) Personal risk, gratuities and other post-employment benefi ts. (c) Long-service awards and other long-term benefi ts.

Calculation of pensions and other employee benefi t The main assumptions used to calculate pensions and other obligations employee benefi t obligations are described below.

In accordance with recommendation CNC 2003-R.01 of ● discount rate: 4.60%. The discount rate used is determined April 1, 2003, SUEZ ENVIRONNEMENT COMPANY’s obligations by reference to the yield at the measurement date on are calculated on an actuarial basis using the projected unit investment grade corporate bonds with similar maturities to credit method. This method is based on expected end-of-career the obligation. The rates used correspond to the yield on 10- salaries, retirement age and changes in the retiree population, year AA composite bonds tracked by Bloomberg; estimated using the INSEE’s mortality tables.

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● infl ation rate: 2.0%; fair value of plan assets, actuarial gains and losses not yet recognized and any unrecognized past service cost. A provision ● mortality tables: generational tables. is recognized if this difference is positive, and a plan asset when At December 31, 2009, the estimated value of the Company’s the difference is negative. pension obligations using these assumptions totaled Provisions for pensions amounted to €0.8 million at €2.6 million. December 31, 2009. At that date, benefi t obligations covered by provisions totaled €0.8 million. Change in net benefi t obligation covered by provisions Pensions and other employee benefi t obligations result from the difference between the projected benefi t obligation, the

4.3 COMMITMENTS RECEIVED

Between Beyond (in thousands of euros) Dec. 31, 2009 2010 and 2014 2014

Financing commitments received 650,000.0 530,000.0 120,000.0

At December 31, 2009, SUEZ ENVIRONNEMENT COMPANY had received fi nancing commitments in the amount of €650 million, compared with €350 million at end-December 2008.

4.4 COMMITMENTS GIVEN

Between Beyond (in thousands of euros) Dec. 31, 2009 2010 and 2014 2014

Financial instruments Interest rate instruments 2,050,000.0 1,300,000.0 750,000.0 Currency instruments TOTAL OFF-BALANCE SHEET COMMITMENTS RELATING TO FINANCIAL ITEMS 2,050,000.0 1,300,000.0 750,000.0

These instruments were subscribed to hedge the Marked-to-market on bond issues. The fair value of these instruments at December 31, 2009 was €3,268 thousand .

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4.5 FIVE-YEAR FINANCIAL SUMMARY

(in euros) Dec. 31, 2009 Dec. 31, 2008 Dec. 31, 2007 Dec. 31, 2006 Dec. 31, 2005

Duration of fi scal year (months) 12 12 12 12 12

CAPITAL AT YEAR-END a) Share capital 1,958,796,240 1,958,796,240 40,000 40,000 40,000 b) Number of ordinary shares 489,699,060 489,699,060 10,000 2,500 2,500

RESULTS OF OPERATIONS a) Revenues excluding VAT 3,988,429 230,000 b) Income before tax, profi t-sharing, and movements in depreciation, amortization and provisions 533,513,868 (33,150,056) (1,487) (1,466) (1,972) c) Profi t-sharing d) Income tax 86,671,700 98,463,894 e) Movements in depreciation, amortization and provisions (8,405,468) (690,970) f) Net income 611,780,177 64,622,868 (1,487) (1,466) (1,972) g) Dividends paid (a) 317,621,889

EARNINGS PER SHARE a) Based on earnings after tax and profi t- sharing, but before depreciation, amortization and provisions 1.27 0.27 (0.24) (0.59) (0.79) b) Based on earnings after tax, profi t-sharing, depreciation, amortization and provisions 1.25 0.26 (0.24) (0.59) (0.79) 20 c) Dividend per share 0.65

HEADCOUNT a) Average number of employees 0 0 b) Total payroll 958,911 312,960 c) Total employee benefi t obligations paid (social security taxes, welfare schemes, etc.) 261,124 156,480

(a) SUEZ ENVIRONNEMENT COMPANY paid an interim dividend in respect of 2009 in the fi rst half of that year, in the total amount of €317.6 million, representing €0.65 per share.

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4.6 SUBSIDIARIES AND INVESTMENTS

Net book value of shares (a) held Sureties Revenues Net income (loss) Reserves Loans and and and advances endorse- retained % capital granted and ments Year Year Year Year (in millions of euros) Capital earnings* held Gross Net not repaid (a) given (a) Y-1 Y Y-1 Y Currency

A – DETAILED INFORMATION ON SUBSIDIARIES AND INVESTMENTS WHOSE GROSS VALUE EXCEEDS 1% OF THE SUEZ ENVIRONNEMENT COMPANY’S CAPITAL I. Subsidiaries (More than 50%-owned by SUEZ ENVIRONNEMENT COMPANY) SUEZ ENVIRONNEMENT SAS 3,323 102 100.00 6,157 6,157 171 162 364 379 EUR II. Equity investments (10% to 50%-owned by SUEZ ENVIRONNEMENT COMPANY)

B – INFORMATION CONCERNING OTHER SUBSIDIARIES AND INVESTMENTS I. Subsidiaries not included in section A a) French subsidiaries – total b) Foreign subsidiaries – total II. Equity investments not included in section A a) In French companies – total b) In foreign companies – total

* Before appropriation of net income for the period, including investment subsidies, premiums and tax-driven provisions. (a) In millions of euros, even for foreign subsidiaries.

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4.7 REALIZABLE AND AVAILABLE ASSETS AND CURRENT LIABILITIES

(in thousands of euros) Dec. 31, 2009 Dec. 31, 2008

REALIZABLE ASSETS Non-current assets 389,687.5 20,095.3 Loans 351,678.0 Other fi nancial fi xed assets 38,009.5 20,095.3 Current assets 1,556,808.4 104,276.0 Trade receivables 122.7 275.1 Advances and downpayments on orders 3.4 Other receivables (including cash instruments) 1,556,682.3 104,000.9 Cash and cash equivalents 1,631,226.3 16,948.6 TOTAL REALIZABLE ASSETS 3,577,722.2 141,319.9

CURRENT LIABILITIES Borrowings and debt 208,112.0 50,017.4 Other bond issues 103,399.7 Bank borrowings and debt (a) 100,037.1 Miscellaneous borrowings and debt 4,675.2 50,017.4 Operating payables 20,924.2 26,543.6 Advances and downpayments on orders Trade payables 7,030.4 26,279.5 Tax and employee-related liabilities 371.9 64.1 Payables on non-current assets 60.2 20 Miscellaneous payables (including cash instruments) 13,461.7 200.0 TOTAL CURRENT LIABILITIES 229,036.2 76,561.0 REALIZABLE ASSETS – CURRENT LIABILITIES 3,348,686.0 64,759.0

(a) Including bank credit balances. 11.7

4.8 FEES PAID TO STATUTORY AUDITORS Fees paid to Ernst & Young amounted to €800 thousand with respect to the statutory audit and €269 thousand with respect to audit- related engagements. Fees paid to Mazars amounted to €647 thousand and €146 thousand, respectively.

4.9 PAYMENT PERIODS Pursuant to the law on the modernization of the economy (“LME”) of August 4, 2008, information related to the payment of suppliers is provided below:

Due

(in thousands of euros) Total Not yet due less than 3 months more than 3 months

Trade payables 1,334.6 1,242.9 85.8 5.9

4.10 SUBSEQUENT EVENTS None.

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20.4 STATUTORY AUDITORS’ REPORT ON THE PARENT Z COMPANY ANNUAL FINANCIAL STATEMENTS

To the Shareholders, In our opinion, the fi nancial statements give a true and fair view of the assets and liabilities and of the fi nancial position of In compliance with the assignment entrusted to us by your the company as at December 31, 2009 and of the results of its shareholders’ annual general meetings, we hereby report to operations for the year then ended in accordance with French you, for the year ended December 31, 2009, on: accounting principles. ● the audit of the accompanying fi nancial statements of SUEZ ENVIRONNEMENT COMPANY;

● the justifi cation of our assessments; II. JUSTIFICATION OF OUR ASSESSMENTS ● the specifi c verifi cations and information required by law.

These fi nancial statements have been approved by the board In accordance with the requirements of article L. 823-9 of the of directors. Our role is to express an opinion on these fi nancial French commercial code (Code de Commerce) relating to the statements based on our audit. justifi cation of our assessments, we bring to your attention the following matter:

As stated in note 1.1.1 to the fi nancial statements “Principles and accounting policies – Valuation Methods – Equity I. OPINION ON THE FINANCIAL STATEMENTS investments”, the carrying amount of investments which your company intends to hold on a long-term basis is reduced to the We conducted our audit in accordance with professional value in use of the investments, if this amount is lower. Our work standards applicable in France; those standards require that included evaluating the data and hypothesis supporting the we plan and perform the audit to obtain reasonable assurance estimates made, to verify the calculations and to examine the about whether the fi nancial statements are free of material approbation procedures of these estimates by the management. misstatement. An audit involves performing procedures, We assessed, on this basis, the reasonableness of the estimates using sampling techniques or other methods of selection, to made by the group. obtain audit evidence about the amounts and disclosures in These assessments were made as part of our audit of the the fi nancial statements. An audit also includes evaluating fi nancial statements taken as a whole, and therefore contributed the appropriateness of accounting policies used and the to the opinion we formed which is expressed in the fi rst part of reasonableness of accounting estimates made, as well as the this report. overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

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III. SPECIFIC VERIFICATIONS Concerning the information given in accordance with the AND INFORMATION requirements of article L. 225-102-1 of the French commercial code (Code de Commerce) relating to remunerations and benefi ts received by the directors and any other commitments We have also performed, in accordance with professional made in their favour, we have verifi ed its consistency with the standards applicable in France, the specifi c verifi cations fi nancial statements, or with the underlying information used to required by law. prepare these fi nancial statements and, where applicable, with We have no matters to report as to the fair presentation and the information obtained by your company from companies the consistency with the fi nancial statements of the information controlling your company or controlled by it. Based on this work, given in the management report of the board of directors and in we attest the accuracy and fair presentation of this information. the documents addressed to the shareholders with respect to In accordance with French law, we have verifi ed that the the fi nancial position and the fi nancial statements. required information concerning the identity of the shareholders has been properly disclosed in the management report.

Courbevoie and Neuilly-sur-Seine, March 19, 2010

The statutory auditors

French original signed by

MAZARS ERNST & YOUNG et Autres Thierry Blanchetier Philippe Castagnac Pascal Macioce Charles-Emmanuel Chosson

20

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Z 20.5 DIVIDEND POLICY

A dividend of €1.30 per share, for a total of €636.6 million, Subject to approval by the Shareholders’ Meeting, this dividend, will be proposed to the SUEZ ENVIRONNEMENT COMPANY net of the interim dividend paid earlier, will be paid during the Shareholders’ Meeting convened to approve the fi nancial fi rst half of 2010. statements for the fi scal year ending December 31, 2009. An interim payment of €0.65 per share had already been made on June 3, 2009.

Z 20.6 LEGAL AND ARBITRATION PROCEEDINGS

20.6.1 COMPETITION AND CONCENTRATION 20.6.2 LITIGATION AND ARBITRATION

In its decision of July 11, 2002, the French Anti-Trust Council In the normal course of its business, the Group is involved in ruled that the existence of equal stakes in water distribution a certain amount of litigation and arbitration with third parties companies held by Veolia Eau (a subsidiary of Veolia or with the tax administrations of certain countries. Provisions ENVIRONNEMENT) and Lyonnaise des Eaux France (a subsidiary are recorded for this litigation and arbitration when a (i) legal, of SUEZ ENVIRONNEMENT) created a collective dominant contractual, or constructive obligation exists at the closing date position between the two groups. Although the French Anti- with respect to a third party; (ii) it is probable that an outfl ow of Trust Council did not impose sanctions against the two resources without economic benefi ts will be necessary to settle companies, it requested the Minister of the Economy to order the obligation, and; (iii) the amount of that outfl ow of resources the two companies to modify or terminate the agreements can be estimated in a suffi ciently reliable manner. Provisions that combine their resources within joint subsidiaries to lift the recorded in respect of the above amounted to €132.7 million at barrier to competition. Veolia Eau has appealed the decision of December 31, 2009 (excluding litigation in Argentina). the Anti-Trust Council several times. To the Company’s best knowledge, there is no other litigation or As part of the investigation conducted by the Minister of the governmental, judicial or arbitration proceedings (including any Economy, the two companies were asked to unwind their cross- proceeding of which the Company is aware that is suspended shareholdings in these joint subsidiaries. or for which suspension is threatened) likely to have or that has already had, in the past 12 months, a material impact on the In December 2008, Lyonnaise des Eaux France and Veolia signed fi nancial situation, results, activity and assets of the Company an agreement to proceed with this unwinding. On July 30, 2009, and Group other than those described above. the European Commission authorized the plan for Veolia Eau to purchase Lyonnaise des Eaux’ holdings in three subsidiaries which it held jointly with Lyonnaise des Eaux. For its part, LITIGATION IN ARGENTINA Lyonnaise des Eaux’ purchase of six other joint subsidiaries was In Argentina, public works contract tariffs were frozen by authorized by the European Commission on August 5, 2009. The the Public Emergency and Exchange Regime Reform Law agreement of December 2008 produced an addendum dated (Emergency Act) in January 2002, thus preventing the application February 3, 2010 aimed at the repurchase by Lyonnaise des Eaux of contractual price indexation that would apply in the event of the stake held by Veolia Eau in two of the three jointly-owned that the Argentine peso depreciated against the US dollar. subsidiaries initially acquired by Veolia Eau. A new application for authorization was made to the European Commission to In 2003, SUEZ—now GDF SUEZ—and its co-shareholders holding refl ect the terms of the addendum. the water concessions for Buenos Aires and Santa Fe fi led arbitration proceedings against the Argentine government in its The process should be completed during the fi rst half of 2010. capacity as grantor, to enforce the contractual clauses of the

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concession agreements before the International Center for the Criminal complaints and action for damages parallel to Settlement of Investment Disputes (ICSID), in accordance with prosecution were fi led in March 2002 against, among others, the bilateral Franco-Argentine investment protection treaties. the president of SIMIGEDA, the Préfet of the Savoie region and Novergie Centre Est for poisoning, endangering the life of These ICSID arbitration proceedings, currently pending, seek others, and non intentional assault and battery, with respect to to obtain indemnities to compensate for the loss of value of dioxin pollution allegedly caused by the incineration plant. In the the investments made since the start of the concession, due to fi rst half of 2009, the French Cour de Cassation confi rmed the the measures adopted by the Argentine government following decision of the investigating chamber of the Lyon Appeals Court the adoption of the abovementioned Emergency Act. The ICSID rejecting the action. affi rmed its company to rule on the two cases in 2006. The hearings took place in 2007 for both arbitration proceedings, Novergie Centre Est had been indicted on December 22, 2005 and the decisions are scheduled to be handed down in the fi rst on counts of endangering the lives of others and violating quarter of 2010. At the same time as the ICSID proceedings, the administrative regulations. concession holders Aguas Argentinas and Aguas Provinciales In the context of this procedure, investigations ordered by the de Santa Fe were forced to fi le proceedings to cancel their court showed that there had been no increase in the number of concession agreement with local governments. cases of cancer in neighboring populations. However, because the fi nancial situation of the concession- On October 26, 2007, the judge in charge of investigating the holding companies has deteriorated since the Emergency Act, case dismissed the charges against physical persons indicted Aguas Provinciales de Santa Fe announced at its shareholders’ for endangering the life of others. However, the judge ordered meeting of January 13, 2006 that it was fi ling for judicial that SIMIGEDA and Novergie Centre Est be sent for trial before liquidation. the Albertville criminal court for having operated the incinerator At the same time, Aguas Argentinas applied to fi le a “Concurso “without prior authorization, due to the expiry of the initial Preventivo” (similar to a French bankruptcy procedure). As authorization as a result of signifi cant changes in operating part of these receivership proceedings, a settlement proposal conditions at the plant”. On September 9, 2009, the investigation involving the deferral of admissible liabilities of Aguas Argentinas chamber of the Chambéry Appeals Court upheld the dismissal was approved by creditors and ratifi ed by the bankruptcy Court of charges of endangering the lives of Novergie employees. on April 11, 2008. Settlement of this liability is in progress. The The date of referral to the Correctional Court is not known, to date. proposal provides for an initial payment of 20% (about $40 million) upon approval, and a second payment of 20% in the event of 20 compensation by the Argentine government. As controlling UNITED WATER (NEW YORK) shareholders, SUEZ and Agbar have decided to fi nancially In March 2008, certain persons residing on the banks of the support Aguas Argentinas in making this fi rst payment, and upon Hackensack River in Rockland County (New York state) fi led a approval, paid €6.1 and €3.8 million, respectively. claim for a total amount of US$66 million (subsequently raised For the record, SUEZ and SUEZ ENVIRONNEMENT – prior to US$130 million) with the New York Supreme Court against to both the SUEZ-Gaz de France merger and the listing of United Water (New York) following fl ooding in the aftermath of SUEZ ENVIRONNEMENT COMPANY on the stock exchange – heavy rains. agreed to the economic transfer, to SUEZ ENVIRONNEMENT, of Those residents are claiming faulty maintenance of the the rights and obligations associated with the interests held by reservoir and of the DeForest Lake dam adjoining DeForest SUEZ in Aguas Argentinas and Aguas Provinciales de Santa Fe. Lake, which allegedly did not operate properly in the aftermath The Group believes that the provisions recorded in the fi nancial of the heavy rains in question and did not enable the gradual statements relating to this litigation are appropriate. overfl ow of water into the Hackensack River on which it is built, thus causing fl ooding in the homes of those residents. As the rain water drainage network operated by United Water fl ows NOVERGIE into the river upstream from the dam, the residents, although Novergie Centre Est, a wholly-owned subsidiary of living in a fl ood zone, are claiming compensatory damages and SUEZ ENVIRONNEMENT, used to operate an incineration plant in interest from United Water in the amount of US$65 million, as Gilly-sur-Isére near Albertville (in the Savoie region), which was well as punitive damages and interest in the same amount for built in 1984 and owned by SIMIGEDA (a public-private waste alleged negligence in the maintenance of the DeForest Lake management company in the Albertville district). In 2001, high reservoir and dam. levels of dioxin were found near the incineration plant and the United Water believes it is not responsible for the maintenance Préfet of the Savoie region ordered the closing of the plant in of the dam and the reservoir, and that the claims are unlikely to October 2001. succeed. United Water fi led a motion to dismiss these claims

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in July 2009. This motion was denied on August 28, 2009, and tax reassessment of €41 million in addition to penalties of United Water has appealed against this decision. €25 million. In addition, in May 2009, Agbar was notifi ed of a reassessment of €60.5 million for fi scal years 2002 to 2004, The claim for punitive damages and interest was dismissed without additional penalties. on December 21, 2009, and confi rmed on February 11, 2010 following an appeal fi led by the residents. The company challenged these notices in court, each of which was issued for the same reason by the tax authorities for each This claim has been reported to the insurance companies. period in question. Agbar considers that the tax authorities’ arguments are groundless. SITA AUSTRALIA In May 2007, with regard to fi scal years 1995 to 1998, the In November 2008, residents of Brookland Greens Estate, Administrative Court reduced the amount of the claim to located in the suburbs of the city of Casey, State of Victoria, €21 million and cancelled the penalties. However, Agbar Australia, fi led a class action before the State Supreme Court of appealed against this decision for the remaining portion of the Victoria against the city of Casey. reassessment; the case is currently under examination.

Biogas (a mixture of methane and carbon dioxide) produced Moreover, in May 2008, the Administrative Court cancelled by the Stevensons Road landfi ll—and belonging to the city— the penalties relating to fi scal years 1999 to 2001, but upheld had allegedly migrated through the soil and was threatening almost all of the reassessment. As a result, Agbar appealed residences built in the vicinity. A molded barrier was constructed against that judgment in July 2008: the remaining portion of the around the landfi ll to contain the migration. reassessment is currently under examination.

The plaintiffs in the claim did not set fi gures, claiming a loss Finally, in June 2009, Agbar fi led suit with the Administrative of value in their homes, and requested that the competent Court for fi scal years 2002 to 2004. jurisdiction determine the amount of damages. In April 2009 the city of Casey called on SITA Australia to LYDEC guarantee the services it provided between 2003 and 2006 Lydec, a 51% owned subsidiary of the Group, was subject to in relation to the closing and capping of the landfi ll. SITA a tax audit relating to fi scal years 2002 to 2005 concerning Australia was sued by the plaintiffs along with other parties, on corporate tax, value added tax. November 15, 2009. An agreement was signed on September 28, 2009 between SITA Australia does not believe it is liable in any way for the Lydec and the Moroccan tax authorities, concluding the case. alleged damage. This agreement confi rmed Lydec’s risk analysis, that the amounts This claim has been reported to the insurance companies. of the reassessments communicated by the authorities were excessive.

20.6.3 TAX LITIGATION LYONNAISE DES EAUX AND ITS SUBSIDIARIES With respect to the calculation of business tax (“taxe professionnelle”), Lyonnaise des Eaux France and its SOCIEDAD GENERAL DE AGUAS DE BARCELONA subsidiaries are in discussions with the French tax authorities. These discussions relate to the valuation method used for real Agbar was subject to a number of tax audits, mainly relating to estate assets as well as for equipment and other assets relating corporate tax. to delegations of public services fi nanced by the relevant With respect to corporate tax, Agbar received a reassessment delegated entity and/or by local public entities. notice from the Spanish tax authorities for fi scal years 1995 to In this context, notices of claims for reassessment have been 1998, mentioning a tax reassessment of €28 million in addition received by Lyonnaise des Eaux, Eau du Sud Parisien, Eau & to penalties of €12 million. Agbar also received a reassessment Force, Société des Eaux du Nord, SERAM, Société des Eaux de notice relating to fi scal years 1999 to 2001, mentioning a Marseille and Stéphanoise des Eaux.

290 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 FINANCIAL INFORMATION RELATING TO THE COMPANY’S ASSETS, FINANCIAL SITUATON AND REVENUES Signifi cant change in the fi nancial or business situation

20.7 SIGNIFICANT CHANGE IN THE FINANCIAL Z OR BUSINESS SITUATION

Please see sections 10.5.2, “Expected sources of fi nancing,” and 20.1, note 27, “Subsequent events,” of this Reference Document.

20

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Page

21.1 GENERAL INFORMATION ON THE SHARE CAPITAL 294 21.1.1 Total share capital as of December 31, 2009 294 21.1.2 Non-equity instruments 294 21.1.3 Shares held by the Company or on its behalf 294 CONTENTS 21.1.4 Other equity instruments 295 21.1.5 Authorizations and delegations of authority by the Company’s Shareholders’ Meeting 296 21.1.6 Options or agreements concerning the Company’s share capital 297 21.1.7 History of the share capital 298

21.2 MEMORANDUM OF ASSOCIATION AND BYLAWS 298 21.2.1 Purpose of the Company 298 21.2.2 Provisions relating to administrative and management bodies 299 21.2.3 Rights, privileges and restrictions attached to shares 301 21.2.4 Terms and conditions for amending shareholders’ rights 302 21.2.5 Shareholders’ meetings 302 21.2.6 Provisions to delay, postpone or prevent a change of control of the Company 302 21.2.7 Bylaws thresholds 302 21 21.2.8 Specifi c provisions governing changes to the share capital 303

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 293 21 ADDITIONAL INFORMATION General information on the Share Capital

Z 21.1 GENERAL INFORMATION ON THE SHARE CAPITAL

21.1.1 TOTAL SHARE CAPITAL under the conditions and in accordance with applicable AS OF DECEMBER 31, 2009 regulations, in particular in the context of stock option plans, allotment of existing bonus shares, or company or intercompany savings plans; As of December 31, 2009, total share capital was equal to €1,958,796,240. It was divided into 489,699,060 ordinary shares ● retention of shares and subsequent tender (for exchange, with a nominal value of €4 per share. payment or other) within the framework of external growth transactions; The Company shares are fully subscribed and paid in, and all belong to the same class. ● coverage of marketable securities that give right to the allotment of Company shares by remitting them after the exercise of rights attached to marketable securities that give right to the Company’s shares through redemption, 21.1.2 NON-EQUITY INSTRUMENTS conversion, exchange, presentation of warrant or any other means;

None. ● implementation of all accepted market practices or practices that may be accepted in the future by the market authorities; and

21.1.3 SHARES HELD BY THE COMPANY ● any other authorized aim, or aim that may be authorized OR ON ITS BEHALF in the future by applicable law or regulations, subject to information provided to the Company’s shareholders by offi cial statement. Resolution 8 of the combined Ordinary and Extraordinary Annual Shareholders’ Meeting, held on May 26, 2009, (i) terminated The liquidity contract was renewed under identical terms the unused portion of the authorization granted to the Board between the Company and Crédit Agricole Chevreux on July 24, of Directors by Resolution 17 of the combined Ordinary and 2008 for a term of one year and for a maximum of €40 million. The Extraordinary Annual Shareholders’ Meeting held on July 15, aim of this contract is to promote the liquidity of transactions, 2008, and (ii) authorized the Company to trade in its own shares regularize the share price, and prevent price shifts not justifi ed and delegated full powers to the Board of Directors to implement by market trends. this authorization, including the option to sub-delegate, under This contract is in line with the Ethics Charter drawn up by the the following conditions: Association Française des entreprises d’investissement (French

● maximum authorized purchase price: €25; Association of Investment Firms).

● maximum holding: 10% of the share capital; On June 25, 2009, the Board of Directors resolved to implement the delegation awarded by the Shareholders’ Meeting on ● instruments in question: shares listed on the Euronext Paris May 26, 2009, in accordance with the objectives authorized by market. Resolution 8 of the Combined Shareholders’ Meeting of May 26, 2009. Pursuant to Article L. 225-211 of the French Commercial Objectives: Code and Article 241-2 of the AMF General Regulation, resulting ● ensure liquidity and support the secondary market for the from the Order of January 30, 2009, the Company specifi es that Company’s share by means of an investment fi rm acting it has engaged in the following stock market transactions from independently, in the framework of a liquidity contract the start of the program to December 31, 2009: concluded in accordance with the ethics charter accepted by the AMF; The Company acquired 1,814,856 of its own shares for a total value of €25.2 million (i.e., an average price per share of €13.9), ● subsequent cancellation, either in whole or in part, of shares 1,714,856 of which were under the liquidity contract and purchased in accordance with Article L. 225-209 of the 100,000 of which were part of the hedge for the stock purchase French Commercial Code; options and bonus share allocation plans.

● allotment or sale of shares to current or former employees, or Over the same period, the Company sold 2,557,828 of its own to current or former corporate offi cers of the Company and/ shares for a total of €36.4 million (i.e., an average price per or affi liated companies or potentially affi liated companies, share of €14.2).

294 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 ADDITIONAL INFORMATION General information on the Share Capital

As of December 31, 2009, the Company was holding 301,000 the French Commercial Code, in the context of a capital shares (of which 100,000 were part of the hedge for the stock reduction approved or authorized by the combined Ordinary options and bonus share allocation plans), at a value calculated and Extraordinary Shareholder’s Meeting; as of the closing price of €4,846,100. ● allotment or sale of the shares to current or former Between January 1, 2010 and February 22, 2010, the Company employees, or to current or former corporate offi cers of the acquired 2,061,433 of its own shares for a total of €34.1 million Company and/or affi liated companies or potentially affi liated (i.e., an average price per share of €16.54) under the sole companies, under the conditions and in accordance with liquidity contract. applicable regulations, in particular in the context of stock option plans, allotment of existing bonus shares or company Over the same period, the Company sold 1,034,433 of its own or intercompany savings plans; shares for a total value of €17 million (i.e., an average price per share of €16.47). ● retention of shares and subsequent tender (for exchange, payment or other) within the framework of an external On February 22, 2010, the Company held 0.27% of its share growth transaction, provided that the maximum number of capital, i.e., 1,328,000 shares, 1,228,000 of which were held shares acquired for retention and subsequently tendered under the liquidity contract at €16.14 each, and 100,000 shares for compensation or exchange during a merger, spin-off or were held as part of the hedge of stock purchase options and contribution not exceed 5% of the share capital; bonus shares, at a value of €16.19 per share. ● coverage of marketable securities that give right to the No share has been cancelled, and no reallocation has occurred allotment of Company shares by remitting them following the to date. exercise of rights attached to marketable securities that give right to the Company’s shares through redemption, conversion, Description of the share buyback program submitted to the Combined Ordinary and Extraordinary exchange, presentation of warrant or any other means; Shareholders’ Meeting to be held May 20, 2010 ● implementation of all accepted market practices or practices Pursuant to Articles 241-1 to 241-6 of the General Regulations that may be accepted in the future by the market authorities; of the French Financial Markets Authority (AMF), the purpose and of this program description is to outline the purposes and ● any other authorized aim, or aim that may be authorized in conditions of the SUEZ ENVIRONNEMENT COMPANY share the future by applicable law or regulations in force, subject buyback program to be submitted to the combined Ordinary to information provided to the Company’s shareholders by and Extraordinary Shareholders’ Meeting on May 20, 2010. offi cial statement.

21.1.3.1 MAIN CHARACTERISTICS OF THE PROGRAM 21.1.3.3 CONDITIONS The potential main characteristics of this program are described 21 below: (a) Maximum share of capital that may be acquired and held and maximum amount payable ● securities in question: shares traded on the Euronext Paris by the Company stock exchange; The maximum share of capital acquired and held by the ● maximum capital buyback percentage authorized by the Company may not exceed 10% of the share capital, up Shareholders’ Meeting: 10%; to a total maximum nominal amount of €196 million. SUEZ ENVIRONNEMENT COMPANY reserves the right to utilize ● maximum authorized purchase price per share: €25. the entire authorized program.

21.1.3.2 OBJECTIVES OF THE SHARE BUYBACK (b) Duration of the share buyback program PROGRAM Pursuant to the resolution to be proposed to the Shareholders’ The objectives pursued by SUEZ ENVIRONNEMENT COMPANY Meeting of May 20, 2010, the share buyback program may be within the framework of this share buyback program are as set implemented for 18 months from the date of the Shareholders’ forth below: Meeting, i.e., until November 21, 2011.

● ensure liquidity and support of the Company’s share on the secondary market by an investment fi rm acting independently, in the framework of a liquidity contract concluded in accordance with the ethics charter accepted 21.1.4 OTHER EQUITY INSTRUMENTS by the AMF; None. ● subsequent cancellation, either in whole or in part, of shares purchased in accordance with Article L. 225-209 of

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 295 21 ADDITIONAL INFORMATION General information on the Share Capital

21.1.5 AUTHORIZATIONS AND DELEGATIONS OF AUTHORITY BY THE COMPANY’S SHAREHOLDERS’ MEETING

The delegations and authorizations to issue shares and other securities approved by the Company’s combined Ordinary and Extraordinary Shareholders’ Meeting of July 15, 2008 and May 26, 2009 are the following:

AUTHORIZATIONS AND DELEGATIONS OF AUTHORITY GRANTED BY THE COMBINED ORDINARY AND EXTRAORDINARY GENERAL SHAREHOLDERS’ MEETINGS OF JULY 15, 2008 AND MAY 26, 2009

Validity Authorized Authorizations/Delegations of authority period ceiling Amount used Balance

1. Capital increase by issuing ordinary shares and/or marketable 26 months €220 million (1) Not used securities conferring entitlement, immediately or in the future, as of to Company shares, while retaining preferential subscription 07/15/2008 rights (“PSR”) 2. Capital increase by issuing ordinary shares and/or marketable 26 months €220 million Not used securities conferring entitlement, immediately or in the as of future, to Company shares, with suppression of preferential 07/15/2008 subscription rights (“PSR”) 3. Increase in the amount of the issues, with retention or 26 months up to a Not used suppression of shareholders’ preferential subscription rights as of maximum of 07/15/2008 15% of the initial issue 4. Increase in the case of issue of ordinary shares and/or 26 months €196 million Not used marketable securities conferring entitlement, immediately as of or in the future, to shares, with suppression of shareholders’ 07/15/2008 preferential subscription rights, with a view to setting the issue price within the limit of 10% of the Company’s capital 5. Capital increase with a view to payment of contributions in 26 months €196 million (up Not used kind consisting of equity securities or marketable securities as of to 10% of the conferring entitlement to the share capital 07/15/2008 share capital) 6. Capital increase by incorporating additional paid-in capital, 26 months €220 million Not used reserves, profi ts or any other amount for which capitalization as of is authorized 07/15/2008 7. Capital increase for payment of contributions of securities 26 months €220 million Not used performed in the context of a public exchange offer as of 07/15/2008 8. Issue of bonus warrants in the event of a public takeover bid 18 months €2 billion Not used for the Company’s shares as of 07/15/2008 9. Issue of mixed securities representing debt 26 months €3 billion Not used as of 07/15/2008 10. During the period of a public offering on the Company’s shares, 18 months N/A Not used authorization to use the fi nancial authorizations and delegations as of granted by the combined Ordinary and Extraordinary 05/26/2009 Shareholders’ Meetings of July 15, 2008 and May 26, 2009 11. Authorization to trade in its own shares on the stock exchange 18 months up to a 0.06% 9.94% as of maximum at December 31, 05/26/2009 holding of 10% of 2009 the share capital 12. Authorization to reduce share capital by cancelling treasury 18 months 10% of the Not used shares as of share capital by 05/26/2009 24-month period

296 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 ADDITIONAL INFORMATION General information on the Share Capital

Validity Authorized Authorizations/Delegations of authority period ceiling Amount used Balance 13. Authorization to be given to the Board of Directors to award 38 months Maximum Allocation on 0.79% of the stock subscription or purchase options to employees of the as of holding of 1.5% December 17, share capital Company and/or Group companies, as well as to corporate 05/26/2009 of the share 2009 of 3,464,440 offi cers capital on the options, i.e., 0.71% date of allocation of the share capital by the Board of Directors 14. Authorization to allocate bonus shares to employees of the 38 months Maximum Allocation on 0.05% of the Company or Group companies, as well as to corporate offi cers as of holding of 0.5% June 25, 2009 of share capital 05/26/2009 of the share 2,040,810 shares, capital i.e., 0.42% of the share capital Allocation on December 17, 2009 of 173,852 performance shares, i.e., 0.03% of the share capital 15. Increase in the share capital reserved for members of a savings 26 months Not used plan, with suppression of preferential subscription rights in favor as of of the latter 05/26/2009 16. Increase in the share capital, with suppression of 18 months Nominal amount Not used preferential subscription rights in favor of any entity whose as of of €12 million sole purpose is to promote access to the share capital of 05/26/2009 SUEZ ENVIRONNEMENT COMPANY by foreign employees of the Group

(1) Ceiling of €392 million of par value, to which capital increases carried out by virtue of authorizations 2., 3., 4., 5., 6. and 7. shall be charged.

The General Shareholders’ Meeting of May 20, 2010 will be 21.1.6 OPTIONS OR AGREEMENTS called to renew under similar terms, the resolutions voted on CONCERNING THE COMPANY’S by the General Meeting of July 15, 2008 for 26 months, spelling SHARE CAPITAL out that with regard to the delegation concerning the increase 21 of capital with waiver of pre-emptive subscription rights, and GDF SUEZ, Groupe Bruxelles Lambert, Sofi na, Caisse des for the purposes of complying with the AMF recommendation, Dépôts et Consignations, Areva, CNP Assurances and a resolution will be proposed at the meeting concerning the SUEZ ENVIRONNEMENT COMPANY entered into a shareholders’ increase of capital with waiver of pre-emptive subscription agreement dated June 5, 2008 with regard to their shareholding rights, earmarked for the public, and a resolution on the increase in SUEZ ENVIRONNEMENT COMPANY, described in section 18.3 of capital with waiver of pre-emptive subscription rights for of this Reference Document. institutional investors. Details of the renewals proposed to the General Meeting of May 20, 2010 are provided in the report of the Chairman of the Board of Directors attached to this Reference Documents (Appendix A).

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21.1.7 HISTORY OF THE SHARE CAPITAL

Capital prior to Issue/ Cumulative Capital after Type of transaction contribution Shares Par value number of transaction Date transaction (in euros) premium created (in euros) shares (in euros)

2006 N/A 40,000 N/A N/A 16 2,500 40,000 2007 Split by 4 40,000 N/A 7,500 4 10,000 40,000 Capital 40,000 N/A 46,250 4 56,250 225,000 increase (1) 2008 Capital 225,000 4,198,819,093 489,642,810 4 489,699,060 1,958,796,240 increase (2)

(1) Signing of the subscription form on December 28, 2007; capital increase on January 4, 2008. (2) Remuneration of the contribution in kind of SUEZ ENVIRONNEMENT shares by SUEZ to SUEZ ENVIRONNEMENT COMPANY.

In 2009 there were no transactions involving share capital.

Z 21.2 MEMORANDUM OF ASSOCIATION AND BYLAWS

21.2.1 PURPOSE OF THE COMPANY ● generally, all services on behalf of local public authorities, private entities and private individuals connected with the above; The purposes of the Company are as follows, in all countries and by all means: 2. in addition, the production, distribution, transportation, utilization, management and development of energy in all its 1. the provision, in any form whatsoever, of all services forms; connected to the environment, and in particular: 3. the study, setup and completion of all projects, services, ● all services for the production, transportation and and public or private works on behalf of any local public distribution of water, for all domestic, industrial, authorities, private entities or private individuals; the agricultural or other needs and uses, on behalf of local preparation and awarding of all contracts of any type public authorities or private individuals, whatsoever relating to those projects and works; ● all wastewater treatment services, including the disposal 4. the acquisition of any interest in the form of subscription, of sewage of domestic, industrial or other origin, purchase, contribution, exchange or by any other means ● all services that may directly or indirectly concern the of shares, interests, bonds and other corporate securities, collection, sorting, treatment, recycling, incineration, or existing or to be created in the future, and the capacity to recovery of all types of waste, by-products and residues, divest such interests; and generally any activity or venture related to waste 5. the acquisition, purchase, divestment and operation of any management, patent, brand name, model, or licensed patent and any ● the creation, acquisition, operation or divestment of all process; transport and road haulage services, 6. the granting of any guarantee, fi rst-call guarantee and other ● the creation, purchase, sale, leasing, rental, management, surety for the benefi t of any Group company or entity, in installation and operation of any facility relating to waste the course of their business, as well as the fi nancing or management, and refi nancing of their activities;

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7. the subscription of any borrowing or, more generally, the (c) Chairman of the Board of Directors use of any type of fi nancing, particularly through the issue (Article 11 of the Bylaws) or, as the case may be, the subscription of debt securities The Board of Directors appoints a Chairman from among or fi nancial instruments, in order to fi nance or refi nance the its members. The Board of Directors may grant the title of Company’s business activity; Vice-Chairman to one or more members, on the Chairman’s 8. and more generally, all industrial, fi nancial, commercial, suggestion. tangible asset, or real estate transactions that may be Irrespective of the term of offi ce, the Chairman’s term shall connected directly or indirectly to one of the purposes expire at the latest at the close of the Shareholders’ Meeting specifi ed above or any other similar or connected purpose that approved the fi nancial statements for the preceding fi scal or a purpose that would tend to benefi t and develop the year, held during the year the Chairman reaches the age of Company’s businesses. 65. Nevertheless, at its next meeting after that Shareholders’ Meeting, the Board of Directors may extend this limit one or more times for a total duration not to exceed three years. 21.2.2 PROVISIONS RELATING The Board is chaired by the Chairman, or in his absence, a TO ADMINISTRATIVE Director chosen by the Board of Directors at the opening of the AND MANAGEMENT BODIES meeting. The Chairman of the Board organizes and manages its work and reports on it to the Shareholders’ Meeting. The Chairman ensures 21.2.2.1 BOARD OF DIRECTORS that the Company’s governing bodies function correctly and, in particular, that the Directors are fi t to carry out their duties. (a) Internal Regulations of the Board of Directors The Board of Directors has adopted a set of Internal Regulations to (d) Functioning of the Board of Directors lay out the conditions for the functioning of the Company’s Board. (Article 1 of the Internal Regulations of the Board of Directors) (b) Composition of the Board of Directors (Article 10 of The Board of Directors meets as often as the interests of the the Bylaws) Company and the legal and regulatory provisions require, and at The company is administered by a Board of Directors consisting least once a quarter. of no less than three and no more than 18 members, subject to Notices of meetings may be circulated by the Board Secretary legal revocation in the event of a merger. or the Company Secretary, and are sent by letter, telegram, fax, Directors are appointed, renewed, and dismissed in compliance electronic mail, or communicated verbally. with applicable legal and regulatory provisions. The Board is chaired by the Chairman, or in the latter’s absence, 21 They are appointed for a four-year term. Nevertheless, a by a Director chosen by the Board at the opening of the meeting. Director who is appointed to replace another whose term has The Chairman of the Board organizes and manages his work and not expired shall only remain on the Board for the remainder of reports on it to the Shareholders’ Meeting. The Chairman ensures his predecessor’s term. that the Company’s governing bodies function correctly and, in Each Director must hold at least 2,000 shares. particular, that the Directors are fi t to carry out their duties.

The number of Directors who have reached the age of 70 If so provided in the meeting notice, Board meetings may be held cannot, at any time, exceed a third of the total number of active by videoconference, electronic means of telecommunication or Directors. If the number of Directors is not exactly divisible by other remote transmission means, subject to and in accordance three, then the resulting fi gure is rounded up. with the conditions laid down by the applicable laws and regulations. Except in the case of termination of the contract of employment for an Executive Director, or resignation, dismissal or An attendance register is kept at the Company’s headquarters death, a Director’s term ceases at the close of the Ordinary and signed by the members of the Board of Directors attending Shareholders’ Meeting that approved the fi nancial statements the meeting, in their own name or on behalf of other members for the preceding fi scal year, held during the year that Director’s of the Board they represent. In accordance with the provisions appointment expires. of applicable laws and regulations, any proxies granted by letter or, if need be, faxed, sent by telegram or e-mail, are attached to the attendance register. A Director may only represent one colleague in the course of the same meeting.

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Meetings are held at the Company’s headquarters located 21.2.2.2 GENERAL MANAGEMENT at 1, rue d’Astorg, 75008, Paris, or in any other location indicated in the meeting notice. (a) Chief Executive Offi cer (Article 17 of the Bylaws) General management of the Company, under the responsibility (e) Meeting of the Board of Directors and proceedings of the Chairman of the Board of Directors, is entrusted either (Article 12 of the Bylaws) to the latter or to another person appointed by the Board of Directors are convened to meetings of the Board of Directors Directors from among its members, and holding the title of Chief by the Chairman, at the headquarters or at any other location Executive. The decision of the Board of Directors concerning the indicated by the author of the meeting notice. If the Board has choice between these two methods for the exercise of general not met for at least two months, then at least one third of the management is made in accordance with these Bylaws by a Board members may ask the Chairman to call a meeting on a majority of Directors present or represented, after consultation specifi c agenda. The Chief Executive Offi cer may also request with the Chairman of the Board and the Chief Executive Offi cer. that the Chairman call a Board meeting on a specifi c agenda. Shareholders and third parties are informed of this choice Notices of meetings are issued by any means, including verbally. in accordance with the conditions of an Order of the French Conseil d’Etat. Decisions are passed in compliance with the legal conditions for the quorum and majority. In the event of a tied vote, the meeting The Chief Executive Offi cer holds the most extensive powers to Chairman has the deciding vote. act, under any circumstances, on behalf of the Company. The Chief Executive Offi cer exercises these powers within the limit The Board appoints a person to act as Secretary, who need not of the Company’s purpose and subject to the powers expressly be a member of the Board. granted by law to the Shareholder’s Meetings and the Board of At the Chairman’s request, senior executives may attend Board Directors. meetings in an advisory capacity. Irrespective of the period of the appointment, the term of offi ce of the Chief Executive Offi cer expires no later than the (f) Powers of the Board of Directors (Article 14 of the Bylaws) close of the Shareholders’ Meeting that approved the fi nancial statements for the preceding fi scal year, held during the year The Board of Directors determines the key Company strategies the Chairman reaches the age of 65. Nevertheless, at the next and supervises their implementation. Subject to the powers meeting after the Shareholders’ Meeting, the Board of Directors expressly attributed to the Shareholders’ Meetings and within may extend the period of this appointment for a total term not the limits of the Company’s purpose, the Board deals with all to exceed three years. issues concerning the running of the Company and rules on relevant matters through its decisions. In the event the Chief Executive Offi cer ceases to be a Director during his term of offi ce, he shall continue to hold the post of The Board of Directors monitors and supervises activities as it CEO until the end of the period of the appointment by the Board deems appropriate. The Company Chairman or Chief Executive of Directors. Offi cer must circulate all documents and information required to carry out their duties to each Director. When general management of the Company is conducted by the Chairman of the Board of Directors, the provisions of the (g) Compensation of Directors Bylaws and of the law relating to the Chief Executive Offi cer (Article 16 of the Bylaws) apply.

The Shareholders’ Meeting may award attendance fees to the (b) Exercise of power by the Chief Executive Offi cer Board of Directors in the form of a fi xed annual amount, which (Article 3 of the Internal Regulations of the Board shall remain in force until further notice. of Directors) Members of the Board of Directors may also be awarded other 1. The following decisions of the Chief Executive Offi cer are compensation from time to time, in the circumstances and submitted for prior approval by the Board of Directors: under the conditions set forth by law. ● signifi cant decisions to set up a foreign facility by creating an establishment, a direct or indirect subsidiary or an acquisition of interest, including any decision to withdraw such facilities,

● signifi cant transactions likely to affect Group strategy or modify its fi nancial structure or the scope of its activity.

300 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 ADDITIONAL INFORMATION Memorandum of association and bylaws

The Chief Executive Offi cer, under his responsibility, undertakes statements for the preceding fi scal year, held during the year an assessment of signifi cant items. the Operating Offi cer reaches the age of 65. Nevertheless, the Board of Directors, at the proposal of the Chief Executive Offi cer, 2. The Chief Executive Offi cer must obtain prior authorization may extend the period of this appointment on one or more from the Board of Directors to acquire or divest any company occasions for a total term not to exceed three years. valued at over €350 million, acquire or divest any interest in any existing company or company created in the future, By approval of the Chief Executive Offi cer, the Board of Directors joint ventures, groups and bodies, or subscribe any issue of shall determine the scope and term of authority granted to Chief shares or bonds, if the value of such transactions exceeds Operating Offi cers, who nonetheless have the same authority as €350 million. the Chief Executive Offi cer with regard to third parties.

3. The Chief Executive Offi cer shall obtain prior authorization The Chief Operating Offi cers have the authority to delegate their from the Board of Directors to carry out the following powers and to appoint as many authorized agents as they wish, transactions if their amount exceeds €1 billion: with the authority to sub-delegate.

a. with the exception of the cases listed in Item 2 above, agree to any contribution or exchange, with or without an offsetting payment, relating to assets, securities or other 21.2.3 RIGHTS, PRIVILEGES AND RESTRICTIONS fi nancial instruments; ATTACHED TO SHARES b. acquire or divest any buildings, business goodwill or fi nancial instruments; (d) Rights attached to shares (Article 8 of the Bylaws) c. in the event of a dispute, conclude any agreement or transaction, and accept any settlement; Each share of any class confers the right to a share in the ownership of corporate assets and the liquidating dividend, in d. grant or enter into any loan, borrowing, credit or advance; proportion to the share capital it represents, if need be taking e. consent to liens on company assets; and into account whether capital is amortized or not, paid up or not.

f. acquire or divest any receivables by any method. All shares, irrespective of class, comprising the share capital either now or in the future, shall always be fully equal as regards Before any appointment to the Group’s general management taxation. Consequently, any taxes and duties that may be owed or proposal for the appointment of a Chairman to the ultimate for any reason as a result of total or partial repayment of the controlling company of one of the Group’s business branches, par value of those shares, either during the life of the Company the Board of Directors shall be consulted on a timely basis by the or at the time of liquidation, shall be spread among all shares Chief Executive Offi cer. However, the Board may delegate this making up the share capital at the time of these repayments, consultative function to the Nominations and Compensation so that all current or future shares grant their owners the same 21 Committee, which shall then report back on it to the Board of actual benefi ts and give them the right to receive the same net Directors. sum, after taking the non-amortized par value of the shares and rights to those shares into account, where applicable. (c) Chief Operating Offi cers (Article 18 of the Bylaws) Subject to the provisions of the laws relative to the right to At the recommendation of the Chief Executive Offi cer, the Board vote at Shareholders’ Meetings and shareholders’ right to of Directors may appoint one or more persons to assist the information, shares are indivisible with regard to the Company. Chief Executive Offi cer, with the title of Chief Operating Offi cer. Co-owners shall be represented at the Shareholders’ Meeting The maximum number of Chief Operating Offi cers is fi ve. by only one among them, or by a single proxy, to be appointed If a Chief Operating Offi cer is also a Director, the term of offi ce by the courts in the event of a dispute. may not exceed that of the Director. Whenever it is necessary to hold several securities of a particular Irrespective of the period of the appointment, the term of offi ce type or class to exercise any right whatsoever, the holders shall of the Chief Operating Offi cer shall expire no later than the be personally responsible for the consolidation, purchase or close of the Shareholders’ Meeting that approved the fi nancial sale of the number of securities required.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 301 21 ADDITIONAL INFORMATION Memorandum of association and bylaws

21.2.4 TERMS AND CONDITIONS FOR Any shareholder may vote by correspondence in accordance AMENDING SHAREHOLDERS’ RIGHTS with the conditions and in the manner set by current legal and regulatory provisions. In accordance with legal and regulatory conditions, shareholders may send in their proxy and ballot None by mail, either in paper form or, by approval of the Board of Directors published in the meeting notice, electronically.

21.2.5 SHAREHOLDERS’ MEETINGS 21.2.6 PROVISIONS TO DELAY, POSTPONE (e) Participation in General Meetings (Articles 20, 21 OR PREVENT A CHANGE OF CONTROL and 22 of the Bylaws) OF THE COMPANY All shareholders may attend meetings in person or through a proxy, irrespective of the number of shares held. Attendance is The Bylaws contain no provisions likely to delay, postpone or subject to proof of identity and registration of the shares in their prevent a change of control of the Company. name or in the name of a proxy, by midnight Paris time on the third business day prior to the meeting, either in the register of shares held by the Company or in the register of bearer shares held by an authorized intermediary. 21.2.7 BYLAWS THRESHOLDS

If permitted by the Board of Directors or its Chairman when convening a Shareholders’ Meeting, shareholders may Form of securities participate in that meeting by videoconference or by other Fully paid-in shares are in the form of registered or bearer means of electronic telecommunication or remote transmission. shares, at the discretion of the shareholder. Shareholders may also be represented by spouses or another shareholder. Registration of shares Shareholders’ Meetings are convened and decisions adopted in Shares and all other securities issued by the Company are accordance with the conditions set by law. posted to their owners’ accounts, in accordance with the Meetings are held at the Company’s headquarters or any other applicable legal and regulatory provisions. location within the same département (French administrative In cases where securities are in certifi cate form, the Board of area) as the headquarters or in a neighboring département. Directors may grant authority to any person, even a person Shareholders’ Meetings are chaired by the Chairman of the outside the Company, to sign such certifi cates. Board of Directors or, in the Chairman’s absence, by a Director specially appointed for this purpose by the Board of Directors. Identifi cation of securities Failing that, the meeting shall elect its own chair. In accordance with current legal and regulatory provisions, the Company may require, at any time, that the clearing agent The function of observer shall be carried out by two shareholders furnish the name, and if a corporation, the corporate name, present and willing, and who hold, either themselves or by nationality, and address of holders of securities conferring proxy, the highest number of voting rights. This committee shall entitlement, immediately or in the future, to a right to vote at appoint a Secretary, who need not be a shareholder. Company Shareholders’ Meetings, as well as the number of (b) Voting rights (Article 23 of the Bylaws) shares held by each and, where applicable, any restrictions to which they may be subject. The voting rights attached to shares are equal to the proportion of the share capital they represent and each share confers the Notifi cations to be made to the Company right to at least one vote. Any individual or legal entity, either alone or in concert, who The voting rights attached to a share belong to the usufructuary comes to hold or ceases to hold a fraction of the share capital owner in combined Ordinary and Extraordinary Shareholders’ or voting rights equal to or exceeding 1%, and then, after this Meetings. threshold, any multiple of 1% up to a threshold of 33% of the

302 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 ADDITIONAL INFORMATION Memorandum of association and bylaws

share capital or voting rights, is obligated to notify the Company, entity intends to pursue over the next twelve months, pursuant by registered letter with acknowledgement of receipt, within fi ve to Article 233-7 of the French Commercial Code. business days of crossing one of these thresholds, stating the As permitted by law, failure to comply with the above provisions total number of shares they hold directly, indirectly or jointly. To is sanctioned by the withdrawal of voting rights for shares determine these thresholds, account will also be taken of shares that exceed the fraction not declared for any Shareholders’ held indirectly and of quasi-shares as defi ned in the provisions of Meeting held from the time of crossing the threshold for which Articles L. 233-7 et seq. of the French Commercial Code. the information was not given, until expiration of a period If one of these thresholds is crossed within fi ve business days of two years from the date of the notice provided for above. before the date of a Company Shareholders’ Meeting, the Nevertheless, this sanction will only apply if one or more abovementioned notifi cation shall be made at the latest before shareholders holding at least 5% of the Company’s share capital the meeting’s executive committee certifi es the accuracy of the so request. attendance register, in a manner that ensures effective receipt by the Company before certifi cation of attendance.

Any individual or legal entity, acting alone or in concert, who 21.2.8 SPECIFIC PROVISIONS GOVERNING comes to hold or ceases to hold a fraction of the share capital or CHANGES TO THE SHARE CAPITAL voting rights equal to or exceeding 10% and 20%, is required to notify the Company by registered letter with acknowledgement of receipt within ten business days of crossing one of these There are no specifi c provisions governing changes to the share thresholds, stating the objectives that the individual or legal capital stricter than the law.

21

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 303 21 ADDITIONAL INFORMATION Memorandum of association and bylaws

304 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 22 SIGNIFICANT CONTRACTS

The most signifi cant contracts, other than contracts concluded ● the shareholders’ agreement entered into by in the normal course of business, are described in sections 6 SUEZ ENVIRONNEMENT, Cofely (the successor of Elyo), Fipar and 19 of this Reference Document. These include in particular Holding and Al Wataniya in December 2004 in respect of the following contracts: Lydec (see section 6.5.4.2(d)(i));

● the shareholders’ agreement entered into by SUEZ, ● the shareholders’ agreement relating to the Company SUEZ ENVIRONNEMENT, SUEZ ENVIRONNEMENT España, entered into by SUEZ (all of whose rights and duties under Criteria CaixaCorp and Caja de Ahorros y Pensiones the shareholders’ agreement were assumed by GDF SUEZ de Barcelona on July 18, 2006 in respect of Agbar (see following the merger), Groupe Bruxelles Lambert, Sofi na, section 6.5.2.2(a)). Subject to the lifting of various conditions Caisse des Dépôts et Consignations, Areva, CNP Assurances precedent, a new agreement must enter into force between and SUEZ ENVIRONNEMENT COMPANY (see section 18.3); and SUEZ ENVIRONNEMENT COMPANY, SUEZ ENVIRONNEMENT ● agreements entered into by the Group and GDF SUEZ, España, Criteria CaixaCorp and Hisusa and replace the particularly the cooperation and shared services agreement, existing agreement with regard to the reorganization of the brand-name licensing agreement, the framework Agbar (see section 6.5.2.2. (a)); fi nancing agreement. The option to purchase Gas Natural ● the shareholders’ agreement entered into by the Group and shares granted to GDF SUEZ was not exercised (see Beauty Ocean Limited/New World Infrastructure Limited, in section 19). respect of Sino-French Holdings (see section 6.5.4.2(b)(i));

22

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 305 22 SIGNIFICANT CONTRACTS

306 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 23 INFORMATION FROM THIRD PARTIES, STATEMENTS OF EXPERTS, AND DECLARATIONS OF INTEREST

None.

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SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 307 23 INFORMATION FROM THIRD PARTIES, STATEMENTS OF EXPERTS, AND DECLARATIONS OF INTEREST

308 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 24 DOCUMENTS AVAILABLE TO THE PUBLIC

Z 24.1 CONSULTATION OF DOCUMENTS

Corporate documents relating to the Company are made available Moreover, regulatory information relating to the Company as to shareholders in accordance with current legislation and may set out in Article 222-7 of the AMF Regulations including the be consulted on the Company’s website at the following address: annual document summarizing certain information made www.suez-environnement.com, as well as at the Company’s public by the Company as provided for in Articles L. 451-1-1 corporate headquarters, at 1 rue d’Astorg, 75008 Paris, under of the French Monetary and Financial Code can be consulted applicable legal and regulatory conditions. on the company’s website at the following address: www.suez-environnement.com/finance/regulatory Reference Documents fi led with the AMF for 2008 and 2009, information. the semi-annual fi nancial reports, and quarterly fi nancial information may be consulted on the Company’s website at Person responsible for information: www.suez-env.com, under “fi nance-regulatory information”. Mr. Jean-Marc Boursier

Chief Financial Offi cer

1 rue d’Astorg, 75008 Paris - France

+33 (0)1.58.18.50.00

24

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 309 24 DOCUMENTS AVAILABLE TO THE PUBLIC Schedule of fi nancial information

Z 24.2 SCHEDULE OF FINANCIAL INFORMATION

Jean-Marc Boursier, Chief Financial Offi cer

Eléonore de Larboust, Head of Financial Communications

Telephone: +33 (0)1 58 18 50 00

Address: 1, rue d’Astorg 75008 Paris - France

Website www.suez-environnement.com

Schedule of fi nancial communication

Presentation of annual results: February 25, 2010

Shareholders’ meeting: May 20, 2010

First-half 2010 results: August 4, 2010

310 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 25 INFORMATION ON EQUITY INTERESTS

Information concerning companies in which the Company holds provided in sections 6 and 7, as well as in note 28, section 20.1 a part of the share capital, which could have a signifi cant impact of this Reference Document. on the assessment of its assets, fi nancial position, or earnings is

25

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 311 25 INFORMATION ON EQUITY INTERESTS

312 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 26 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010

Page

26.1 AGENDA 314 Resolutions of the Ordinary Shareholders’ Meeting 314 Resolutions of the Extraordinary Shareholders’ Meeting 314

CONTENTS 26.2 REPORT OF THE BOARD OF DIRECTORS 315

26.3 REPORT OF THE STATUTORY AUDITORS ON RELATED PARTY AGREEMENTS AND COMMITMENTS 323 No agreements or commitments 323 Agreements and commitments authorized in prior years and which remained current during the year 323

26.4 REPORT OF THE STATUTORY AUDITORS TO THE COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDERS’ MEETING OF MAY 20, 2010 326 26.4.1 Statutory auditors’ report on the reduction in capital by repurchase of shares to be cancelled (Fourteenth resolution) 326 26.4.2 Statutory auditors’ report on the issue of shares or several equity securities with or without cancellation of preferential subscription rights (Fifteenth, sixteenth, seventieth, eighteenth, nineteenth, twentieth and twenty-second resolutions) 327 26.4.3 Statutory auditors’ report on the issue of mixed equity securities representing debt securities (Twenty-third resolution) 329 26.4.4 Statutory auditors’ report on the issue of shares or other equity securities reserved to members of the company savings plan with cancellation of preferential subscription rights (Twenty-fourth resolution) 330 26.4.5 Statutory auditors’ report on the increase in capital with cancellation of preferential subscription rights (Twenty-fi fth resolution) 331 26.4.6 Statutory auditors’ report on free grants of new or existing shares to employees and directors of the company (Twenty-sixth resolution) 332

26.5 RESOLUTIONS 333

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SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 313 26 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Agenda

Z 26.1 AGENDA

RESOLUTIONS OF THE ORDINARY 17. Authorization to be granted to the Board of Directors, SHAREHOLDERS’ MEETING pursuant to an offer as set forth in Article L. 411-2 II of the French Monetary and Financial Code, to issue shares and securities conferring entitlement to share capital with 1. Approval of the fi nancial statements for the fi scal year 2009 waiver of preferential subscription rights 2. Approval of the consolidated fi nancial statements for the 18. Authorization to be granted to the Board of Directors to fi scal year 2009 increase the value of share issues with retention or waiver of 3. Allocation of result for the fi scal year 2009 preferential subscription rights of up to 15% of the initial issue

4. Approval of regulated agreements and commitments 19. Authorization to be granted to the Board of Directors to set which remain in force during the fi scal year pursuant issue prices at of up to 10% of the share capital, in the event to Articles L. 225-38 and seq. and L. 225-42-1 of the French equity and/or securities are issued that confer entitlement Commercial Code to the share capital, either immediately or in the future, with waiver of preferential subscription rights 5. Approval of the amount of Directors’ fees 20. Authorization to be granted to the Board of Directors to 6. Ratifi cation of Mr. Patrick Ouart’s co-option as director increase the share capital in payment of contributions in- 7. Appointment of Mr. Jérôme Tolot as director kind made up of equity securities or securities conferring entitlement to the share capital 8. Appointment of Mr. Dirk Beeuwsaert as director 21. Authorization to be granted to the Board of Directors to 9. Appointment of Mr. Alain Chaigneau as director increase the share capital by incorporating premiums, 10. Appointment of Mr. Guillaume Pepy as director reserves, profi ts or any other amounts that can be capitalized

11. Appointment of Mr. Gilles Benoist as director 22. Authorization to be granted to the Board of Directors to increase the share capital in payment of security 12. Appointment of Mr. Gérald Arbola as director contributions as part of an exchange offer initiated by the 13. Authorization to be granted to the Board of Directors to Company trade in the shares of the Company 23. Authorization to be granted to the Board of Directors to issue mixed securities representing debt

24. Authorization to be granted to the Board of Directors to RESOLUTIONS OF THE EXTRAORDINARY increase the share capital by issuing shares reserved to SHAREHOLDERS’ MEETING employees who are members of company saving plans with waiver of preferential subscription rights in favor of employees 14. Authorization to be granted to the Board of Directors to reduce the share capital through the cancellation of shares 25. Authorization to be granted to the Board of Directors to increase the share capital, with waiver of preferential 15. Authorization to be granted to the Board of Directors to subscription rights, in favor of all entities whose sole increase the share capital with retention of preferential purpose is to subscribe, hold and sell shares of the Company subscription rights, by issuing equity securities and/or any or any other fi nancial securities within the context of securities conferring an immediate or future right to the the implementation of one of the multiple forms of the share capital of the company SUEZ ENVIRONNEMENT Group’s international employee 16. Authorization to be granted to the Board of Directors shareholding plan to increase the share capital with waiver of preferential 26. Authorization to be granted to the Board of Directors to subscription rights, by issuing equity securities and/or any allocate bonus shares securities conferring an immediate or future right to the share capital of the company 27. Delegation of powers for formalities

314 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Board of Directors

Z 26.2 REPORT OF THE BOARD OF DIRECTORS

You are asked to approve 27 resolutions, the fi rst 13 resolutions APPROVAL OF THE CONSOLIDATED FINANCIAL are from the Ordinary Shareholders’ General Meeting and STATEMENTS FOR THE FISCAL YEAR ENDING resolutions 14 to 27 pertain to the Extraordinary Shareholders’ DECEMBER 31, 2009 General Meeting. 2ND RESOLUTION You are asked to approve the consolidated fi nancial statements for the fi scal year ending December 31, 2009, which show a net income Group share of €403 million REPORT OF THE BOARD OF DIRECTORS ON THE RESOLUTIONS APPROPRIATION OF EARNINGS TO THE ORDINARY SHAREHOLDERS’ MEETING 3RD RESOLUTION You are asked to approve the proposal to allocate the profi t APPROVAL OF TRANSACTIONS AND THE STATUTORY for the fi scal year ending December 31, 2009, amounting to FINANCIAL STATEMENTS FOR THE FISCAL YEAR €611,780,177.28, to which the amount of €64,610,916.55 ENDING DECEMBER 31, 2009 of previous retained earnings is added, amounting to 1ST RESOLUTION €676,391,093.83 in distributable profi t as follows: You are asked to approve the fi nancial statements for the fi scal year ending December 31, 2009, which show a net profi t of €611,780,177.28

Interim dividend paid on June 3, 2009 to be applied against the dividend payment for fi scal year 2009 €317,621,889.00 Balance of dividend distributed for fiscal year 2009 €318,304,389.00 Dividend distributed for fiscal year 2009 €635,926,278.00 Appropriation to the balance of retained earnings €40,464,815.83 Total €676,391,093.83

The dividend will be paid as from May 27, 2010. SETTING THE TOTAL ALLOWANCE FOR DIRECTORS’ FEES 5TH RESOLUTION The amount of €318,304,389.00 is calculated on the number of SUEZ ENVIRONNEMENT COMPANY shares existing at You are asked to raise the annual amount of the directors’ fee December 31, 2009, i.e., 489,699,060 shares, and the fi nal allowance to the Board of Directors to 450,000 euros, as of the amount paid will take into account the number of shares held Shareholders’ Meeting’s decision and until otherwise decided by the Company at the time the dividend is paid. by a Shareholders’ Meeting.

As a result, when the dividend is paid, the dividend corresponding The General Meeting of July 15, 2008 set the annual allowance to shares held by the Company will be allocated under “Other for directors’ fees paid to the Board of Directors at €400,000. Reserves” This amount appears markedly lower than the average of other CAC 40 companies. Therefore, in 2009, the average amount paid APPROVAL TO CONTINUE REGULATED AGREEMENTS to SUEZ ENVIRONNEMENT directors was nearly 20% lower than AND COMMITMENTS SET FORTH IN ARTICLES L. 225- 38 the average amount allocated to directors of CAC 40 companies AND SEQ. AND L. 225-42-1 OF THE FRENCH in 2008. COMMERCIAL CODE The sum of €450,000 takes into consideration the fact that if 4TH RESOLUTION you approve the 6th resolution, 10 directors, rather than 9, will In 2009, no new agreement was made. You are therefore henceforth be compensated. only requested to approve the continuation of the regulated agreements and commitments set forth in Articles L. 225-38 RATIFICATION OF MR. PATRICK OUART CO-OPTION and seq., and L. 225-42-1 of the French Commercial code, 6TH RESOLUTION previously entered into or authorized and approved by the You are hereby asked to ratify the co-option of Mr. Patrick Ouart Shareholders’ Meetings of July 15, 2008 and May 26, 2009, and to replace Mr. Angel Simon as director, resolved by the Board which were continued over the course of the last fi scal year. 26 of Directors’ meeting of January 14, 2010, for the term still remaining of his predecessor’s appointment, i.e., up to the end

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 315 26 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Board of Directors

of the meeting called to approve the fi nancial statements for to approve the fi nancial statements for the fi scal year ending the fi scal year ended December 31, 2011. December 31, 2014.

The staggered renewal of director terms will then be fi nalized, DIRECTOR APPOINTMENTS the four-year terms of the six remaining directors, Gérard TH TH 7 TO 12 RESOLUTIONS Mestrallet, Jean-Louis Chaussade, Patrick Ouart, Ezra Suleiman, We remind you that at the time of SUEZ ENVIRONNEMENT Amaury de Seze and Harold Boel will expire at their original COMPANY’s IPO, all members of the Board of Directors were term, i.e., at the conclusion of the Ordinary General Meeting appointed for four years, and as a result, all directors’ terms called in 2012 to approve the fi nancial statements for the fi scal are to expire simultaneously at the end of the General Meeting year ended December 31, 2011. called to approve the fi nancial statements of the fi scal year ended December 31, 2011. AUTHORIZATION TO BE GRANTED TO THE BOARD OF DIRECTORS TO TRADE COMPANY SHARES In an effort to improve governance and in order to comply 13TH RESOLUTION with “AFEP-MEDEF” recommendations, the Board of Directors of February 24, 2010, having requested the advice of the The General Meeting of May 26, 2009 authorized the Company, Committee of Appointments and Compensations, decided to pursuant to the Eighth resolution, to trade in its own shares for implement a staggered renewal of directors, a third at a time, in a term of 18 months. order to avoid having their terms expire all at once. This delegation of authority is used by the Board of Directors To put this idea into action as simply as possible starting this with regard to share liquidity, stimulating the secondary year, in agreement with all directors concerned: market and hedging stock option and bonus share allocation programs. Details of the use of this delegation are set forth in ● Gérald Arbola, Dirk Beeuswaert, Gilles Benoist, Alain Chaigneau, paragraph 21.1.3 of the 2009 Reference Document. Guillaume Pepy and Jérôme Tolot, i.e., a third of the directors, have submitted their resignations effective at the conclusion of With the authorization expiring in December 2010, you are this Ordinary General Meeting; asked to end the unused portion of the authorization granted by the May 26, 2009 General Meeting and to authorize the ● Valérie Bernis, Nicolas Bazire, Jean-François Cirelli, Lorenz Company to trade in its own shares for a term of 18 months as d’Este, Gérard Lamarche and Olivier Pirotte, i.e., another third from this meeting. of the directors, have submitted their resignations effective at the conclusion of the Ordinary General Shareholders’ The terms and conditions of this new authorization are identical Meeting called in 2011 to approve the fi nancial statements to those previously authorized, as follows: for the fi scal year ended December 31, 2010; ● maximum purchase price: €25; ● Gérard Mestrallet, Jean-Louis Chaussade, Patrick Ouart, ● maximum holding: 10% of the share capital; Ezra Suleiman, Amaury de Seze and Harold Boel, i.e., the fi nal third, will continue to fulfi ll their appointment up to the ● maximum amount of purchases: €1,224,247,650. expiration of the initial term, i.e., at the conclusion of the This new delegation will let your Board of Directors buy Ordinary General Shareholders’ Meeting called in 2012 to Company shares to: approve the fi nancial statements for the fi scal year ended December 31, 2011; ● ensure liquidity and stimulate the secondary market for the Company’s share using the services of an investment broker ● All departing directors will have their appointment proposed pursuant to a liquidity contract that complies with the ethics at the Ordinary General Meeting at the end of which their charter recognized by the Financial Market Authority; or resignation will take effect. ● subsequently cancel all or some of the shares purchased Pursuant to the above, you are asked in the framework of subject to your adoption of the 14th resolution submitted resolutions 7 to 12 to appoint Gérald Arbola, Dirk Beeuswaert, to your vote; or Gilles Benoist, Alain Chaigneau, Guillaume Pepy and Jérôme Tolot, as directors for a term of four years to expire at the ● allocate or sell shares to employees or former employees conclusion of the Ordinary General Meeting called in 2014 to and/or to corporate offi cers or former corporate offi cers of approve the fi nancial statements for the fi scal year ending the Company and/or companies affi liated with it, or which December 31, 2013. will be affi liated with it under the conditions and pursuant to the terms set forth in the applicable regulations, specifi cally Likewise, you will be asked at the 2011 General Meeting called the existing stock option and bonus-share allocation to approve the fi nancial statements for the fi scal year ended programs or company/intercompany savings plans; or December 31, 2010, to appoint Valérie Bernis, Nicolas Bazire, Jean-François Cirelli, Lorenz d’Este, Gérard Lamarche and ● keep and subsequently deliver shares (to exchange or Olivier Pirotte as directors for a term of four years to expire at make payments, etc.) as part of external growth operations the conclusion of the Ordinary General Meeting called in 2015 provided the maximum amount of shares purchased in view

316 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Board of Directors

of keeping them or subsequently issuing them for payment DELEGATION OF AUTHORITY TO BE GIVEN or exchange as part of a merger, split-up, or contribution plan TO THE BOARD OF DIRECTORS TO INCREASE SHARE does not exceed 5% of the share capital; or CAPITAL BY ISSUING EQUITY SECURITIES AND/OR ANY SECURITIES THAT GRANT IMMEDIATE ● hedge securities that confer entitlement to Company OR FUTURE RIGHTS TO COMPANY SHARES, shares by issuing shares when rights attached to securities WITH RETENTION OF PREFERENTIAL SUBSCRIPTION are exercised, conferring entitlement to Company shares RIGHTS through redemption, conversion, exchange, presentation of 15TH RESOLUTION a warrant or by any other means; or The Ordinary General Meeting of July 15, 2008, in its fi fth ● implement any market practice, either accepted, or that may resolution, had granted a delegation of authority to the Board in the future be accepted, by market authorities; or of Directors for a period of 26 months to issue equity securities and/or securities that grant rights to the share capital of the ● act in view of any other authorized goal, or which will be Company, with retention of preferential subscription rights. authorized, by law or by regulations in effect, subject to communicating these to Company shareholders by We ask you to end the authorization in effect, as it has not memorandum. been used, and to authorize a new delegation of authority to the Board of Directors for a term of 26 months to issue equity securities and/or any security granting immediate or future rights to Company shares, with retention of preferential REPORT OF THE BOARD subscription rights and by an offer to the public. OF DIRECTORS ON THE RESOLUTIONS OF THE EXTRAORDINARY SHAREHOLDERS’ You are asked to set the maximum amount of share capital MEETING increases performed under this delegation at an amount identical to that resolved by the General Meeting of July 15, 2008, i.e. €220 million, which, on December 31, 2009, represents 11.23% of the share capital, this ceiling being the same as that AUTHORIZATION TO BE GRANTED TO THE BOARD set forth in resolution 21. OF DIRECTORS TO REDUCE THE SHARE CAPITAL BY CANCELLING THE COMPANY’S TREASURY SHARES You are asked to set the maximum amount of securities TH 14 RESOLUTION representing debt or similar securities at an amount identical The authorization granted by the May 26, 2009 General meeting to that resolved by the General Meeting of July 15, 2008, i.e. pursuant to its ninth resolution to reduce the share capital by €3 billion, and to note that this amount will be applied to the cancelling shares expires in December 2010. This authorization par value of securities representing debt that would be issued has not been used to date. pursuant to resolutions 15 to 20 and resolutions 22 to 24.

You are therefore asked to end the authorization granted by The cumulative par value of increases in share capital performed the General Meeting of May 26, 2009 and to grant the Board of pursuant to resolutions 15 to 22 and resolutions 24 to 26 May Directors a new authorization, for a term of 18 months, to reduce not exceed the overall ceiling of €392 million, which represented the share capital by cancelling all or a portion of the shares 20% of the share capital on December 31, 2009. purchased by the Company itself, pursuant to Article L. 225-209 of the French Commercial Code, up to a maximum of 10% of the DELEGATION OF AUTHORITY TO BE GRANTED share capital per 24-month period. TO THE BOARD OF DIRECTORS TO INCREASE THE SHARE CAPITAL BY ISSUING EQUITY SECURITIES AND/OR ANY SECURITIES THAT GIVE IMMEDIATE FINANCIAL DELEGATIONS AND AUTHORIZATIONS OR FUTURE RIGHTS TO COMPANY SHARES, TO BE GRANTED TO THE BOARD OF DIRECTORS WITH WAIVER OF PREFERENTIAL SUBSCRIPTION 15TH TO 23RD RESOLUTIONS RIGHTS The General Meeting of July 15, 2008 had granted the Board of 16TH RESOLUTION Directors ordinary authorizations in fi nancial matters, with the The Ordinary General Meeting of July 15, 2008, in its sixth goal of allowing the Company to carry out relevant operations resolution, had granted a delegation of authority to the Board with the rapidity this requires. These authorizations have not of Directors for a period of 26 months to issue equity securities been used to date and have reached their term. As a result, we and/or securities that grant rights to the share capital of the request that you renew them. Company, with waiver of preferential subscription rights. As required by law, the Auditors’ reports have been made We ask you to end the authorization in effect, as it has not been available to you within the legally prescribed time-frame. used, and to authorize a new delegation of authority to the Board of Directors for a term of 26 months to issue equity securities and/or any security granting immediate or future rights to Company shares, with waiver of preferential subscription rights, 26 and by an offer to the public.

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 317 26 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Board of Directors

You are asked to set the maximum amount of share capital The par value of securities representing debt or similar securities increases performed under this delegation at an amount granting rights to share capital that may be issued pursuant to identical to that resolved by the General Meeting of July 15, this resolution, will be applied to the €3 billion ceiling defi ned in 2008, i.e., €220 million, which represented 11.23% of the share resolution 15. capital on December 31, 2009, this ceiling being the same as The share issue price will be at least equal to the minimum price that set forth in resolutions 17 and 22. set forth in the applicable regulatory and legal provisions on the The cumulative par value of increases in share capital performed day of the issue (i.e., as of this date, the average weighted price pursuant to this resolution will be applied to the overall ceiling of the last three market sessions preceding the date on which of €392 million, as defi ned in resolution 15. the subscription price of the share capital increase is set, less 5%) after any relevant correction of this average in the event of The maximum par value of securities representing debt or a difference in the dates of dividend entitlement. similar securities will be applied to the ceiling of €3 billion, as defi ned in resolution 15. The issue price of securities granting rights to share capital and the number of shares to which the conversion, redemption, or The share issue price will be at least equal to the minimum price in general, the transformation of each security granting access set forth in the applicable regulatory and legal provisions on the to share capital may provide rights, will be such that the amount day of the issue (i.e., on this date, the average weighted price immediately collected by the Company, plus any that may of the three trading sessions preceding the date on which the ultimately be collected by it, is at least equal to the minimum subscription price of the share capital increase is set, less 5%) subscription price in the above paragraph for each share issued after any relevant correction of this average in the event of a as a result of these securities. difference in the dates of dividend entitlement.

The issue price of securities granting rights to share capital and DELEGATION OF AUTHORITY TO BE GRANTED the number of shares to which the conversion, redemption, or TO THE BOARD OF DIRECTORS TO INCREASE in general, the transformation of each security granting access ISSUANCES OF EQUITY SECURITY AND/OR ISSUANCE to share capital may provide rights, will be such that the amount OF ANY SECURITIES PERFORMED WITH RETENTION immediately collected by the Company, plus any that may OR WAIVER OF PREFERENTIAL SUBSCRIPTION RIGHTS ultimately be collected by it, is at least equal to the minimum UP TO A MAXIMUM OF 15% OF THE INITIAL ISSUANCE TH subscription price in the above paragraph, for each share issued 18 RESOLUTION in connection with these securities. The Ordinary General Meeting of July 15, 2008, in its seventh resolution, had granted a delegation of authority to the Board DELEGATION OF AUTHORITY TO BE GRANTED of Directors for a period of 26 months to increase the amount TO THE BOARD OF DIRECTORS TO ISSUE SHARES of issuances performed, with retention or waiver of preferential AND SECURITIES GRANTING RIGHTS TO COMPANY subscription rights up to the maximum of 15% of the initial SHARE CAPITAL THROUGH AN OFFER SET issuance. FORTH IN ARTICLE L. 411-2 II OF THE FRENCH MONETARY AND FINANCIAL CODE, WITH WAIVER We ask that you end the authorization in effect, as it has not OF PREFERENTIAL SUBSCRIPTION RIGHTS been used, and grant the Board of Directors a delegation of 17TH RESOLUTION authority for a term of 26 months as from this meeting, to increase the number of securities to be issued in the event of a You are asked to delegate authority to the Board of Directors share capital increase, with retention or waiver of preferential for a term of 26 months as from this meeting, to increase the subscription rights pursuant to resolutions 15, 16 and 17, at the share capital by issuing ordinary shares and any securities same price as the initial issuance, up to the maximum of 15% of granting rights to new or existing Company shares, with waiver the initial issuance. of preferential subscription rights of shareholders, through one or several offers set forth in Article L. 411-2 II of the French The maximum par value of share capital increases performed Monetary and Financial Code. pursuant to this resolution would be allocated to the overall ceiling of €392 million defi ned in resolution 15. The total amount of share capital increases performed pursuant to this resolution will be applied to the €220 million ceiling The maximum par value of securities representing debt or defi ned in resolution 16, and securities issuances will be limited similar securities will be applied to the €3 billion ceiling defi ned in accordance with the regulations applicable on the issue in resolution 15. date, and will be applied to the €392 million ceiling defi ned in resolution 15.

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DELEGATION OF AUTHORITY TO BE GRANTED DELEGATION OF POWERS TO BE GRANTED TO THE BOARD OF DIRECTORS IN THE EVENT EQUITY TO THE BOARD OF DIRECTORS TO INCREASE SECURITIES AND/OR ANY SECURITIES ARE ISSUED THE COMPANY SHARE CAPITAL BY PAYING THAT GIVE RIGHTS TO COMPANY SHARE CAPITAL, CONTRIBUTIONS IN-KIND MADE UP OF EQUITY IMMEDIATELY OR IN THE FUTURE, WITH WAIVER SECURITIES OR SECURITIES CONFERRING OF PREFERENTIAL SUBSCRIPTION RIGHTS, IN ORDER ENTITLEMENT TO SHARE CAPITAL TO SET THE ISSUE PRICE UP TO A MAXIMUM 20TH RESOLUTION OF 10% OF THE COMPANY’S SHARE CAPITAL PURSUANT TO THE TERMS AND CONDITIONS DECIDED The Ordinary General Meeting of July 15, 2008, in its ninth BY THE GENERAL MEETING resolution, had granted a delegation of powers to the Board 19TH RESOLUTION of Directors for a term of 26 months to increase the Company share capital by paying contributions in-kind made up of equity The Ordinary General Meeting of July 15, 2008, in its eighth securities or securities conferring entitlement to share capital. resolution, had granted a delegation of authority to the Board of Directors for a term of 26 months to set the issue price of equity We ask you to end the authorization in effect, as it has not been securities and/or securities, with no preferential subscription used, and to authorize a new delegation of authority to the Board rights, up to a maximum of 10% of the Company’s share capital of Directors for a term of 26 months, as from this General Meeting. and pursuant to the terms and conditions decided by the The share capital increase performed as part of this delegation General Meeting. shall not exceed 10% of the Company share capital.

We ask you to end the authorization in effect, as it has not been The maximum par value of share capital increases pursuant used, and to authorize a new delegation of authority to the to this resolution shall not exceed the €196 million ceiling and Board of Directors for a term of 26 months as from this meeting. would be allocated to the amount of €392 million defi ned in The maximum par value of share capital increases pursuant resolution 15. to this resolution shall not exceed the €196 million ceiling and The maximum amount of securities representing debt or similar would be allocated to the amount of €392 million defi ned in securities would be allocated to the €3 billion ceiling defi ned in resolution 15. resolution 15. The maximum amount of securities representing debt or similar securities would be allocated to the €3 billion ceiling defi ned in DELEGATION OF AUTHORITY TO BE GRANTED resolution 15. TO THE BOARD OF DIRECTORS TO INCREASE THE SHARE CAPITAL BY INCORPORATING PREMIUMS, The issue price of common stock will be at least equal to the RESERVES, PROFITS OR ANY OTHER AMOUNTS weighted average share price on Euronext Paris for the three THAT CAN BE CAPITALIZED trading sessions preceding the decision to set the price, less any 21ST RESOLUTION potential discount of a maximum of 10%. The Ordinary General Meeting of July 15, 2008, in its The issue price of securities other than common stock will be 10th resolution, had granted a delegation of powers to the Board such that the sum immediately collected by the Company, plus of Directors for a term of 26 months to increase the Company any amount that may be ultimately collected by the Company, share capital by incorporating premiums, reserves, profi ts or will be at least equal to the amount set forth in the preceding any other amounts that can be capitalized. paragraph for each share of common stock issued in connection We ask you to end the authorization in effect, as it has not been with the security issue. used, and to authorize a new delegation of authority to the Board of Directors for a term of 26 months, as from this General Meeting.

The maximum par value of share capital increases pursuant to this resolution would be allocated (i) to the €220 million ceiling defi ned in resolution 15 and (ii) to the amount of €392 million also defi ned in resolution 15.

26

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DELEGATION OF AUTHORITY TO BE GRANTED AUTHORIZATION TO BE GRANTED TO THE BOARD TO THE BOARD OF DIRECTORS TO INCREASE OF DIRECTORS TO INCREASE THE SHARE CAPITAL THE SHARE CAPITAL BY PAYING SECURITY BY ISSUING SHARES RESERVED FOR MEMBERS CONTRIBUTIONS AS PART OF AN EXCHANGE OFFER OF A SAVINGS PLAN WITH WAIVER OF PREFERENTIAL INITIATED BY THE COMPANY SUBSCRIPTION RIGHTS TO THE BENEFIT OF THESE 22ND RESOLUTION EMPLOYEES 24TH RESOLUTION The Ordinary General Meeting of July 15, 2008, in its 11th resolution, had granted a delegation of powers to the The Ordinary General Meeting of May 26, 2009, in its Board of Directors for a term of 26 months to increase the 12th resolution, had granted a delegation of powers to the Company share capital by paying security contributions as part Board of Directors for a term of 26 months to increase the share of an exchange offer initiated by the Company. capital, with waiver of preferential subscription rights, reserved for members of one or several company savings plans (or other We ask you to end the authorization in effect, as it has not been plan whereby Articles L. 3332-18 and seq. of the French Labor used, and to authorize a new delegation of authority to the Board Code would allocate share capital increase to its members under of Directors for a term of 26 months, as from this General Meeting. equal conditions) that would be created within a group made up You are asked to set the maximum amount of share capital of your company and French or foreign companies within the increases performed pursuant to this delegation at an amount accounting scope of consolidation, pursuant to Article L. 3344-1 identical to that resolved by the General meeting of July 15, 2008, of the French Labor Code. i.e. €220 million, 11.23% of the share capital on December 31, We ask you to end the authorization in effect, as it has not been 2009; this amount would be allocated to the €220 million ceiling used, and to authorize a new delegation of authority to the defi ned in resolution 16. Board of Directors for a term of 26 months, as from this General The maximum par value of share capital increases pursuant Meeting, under identical terms. to this resolution would also be allocated to the amount of The maximum amount would be €28 million. €392 million defi ned in resolution 15. The maximum par value of share capital increases eligible The maximum amount of securities representing debt or similar immediately or in the future pursuant to this delegation will be securities would be allocated to the €3 billion ceiling defi ned in applied to the total €392 million ceiling defi ned in resolution 15. resolution 15. We ask you to delegate to the Board of Directors the authority DELEGATION OF AUTHORITY TO BE GRANTED to set the defi nitive amount of the share capital increase thus TO THE BOARD OF DIRECTORS TO ISSUE MIXED decided. SECURITIES REPRESENTING COMPANY DEBT The issue price of new shares or securities conferring 23RD RESOLUTION entitlement to share capital will be at least equal to 80% of the The Ordinary General Meeting of July 15, 2008, in its average share price posted on Euronext Paris of the 20 trading 15th resolution, had granted a delegation of powers to the Board sessions preceding the day on which the decision is made to of Directors for a term of 26 months to issue mixed securities set the opening date of the subscription period increase of the representing Company debt. share capital reserved for members of a company savings plan (the “Reference Price”). We ask you to end the authorization in effect, as it has not been used, and to authorize a new delegation of authority to the Board You are also asked to expressly authorize the Board of of Directors for a term of 26 months, as from this General Meeting. Directors, if it considers it appropriate, to reduce or eliminate the aforementioned discount, within the legal and regulatory The maximum par value of issuances performed pursuant limitations, in order to comply with locally applicable legal, to this resolution would be allocated to the €3 billion ceiling accounting, tax and corporate systems. defi ned in resolution 15.

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Pursuant to this delegation, the Board of Directors will be The maximum par value of share capital increases eligible authorized to freely allocate to benefi ciaries, in addition to immediately or in the future pursuant to this delegation will be shares or securities conferring entitlement to share capital applied to the total €392 million ceiling defi ned in resolution 15. subscribable in cash, shares or securities granting rights to We ask you to delegate to the Board of Directors the authority to share capital to be issued or already issued, as a substitution set the fi nal amount of the share capital increase thus decided. for all or part of the Reference-Price-based discount and/or as a company contribution, with the understanding that the Furthermore, the amount of each employee’s subscriptions benefi t created by this allocation shall not exceed the legal or may not exceed the limitations that will be provided for by the regulatory limitations pursuant to Articles L. 3332-18 and seq. Board of Directors and, in the event of excessive employee and L. 3332-11 and seq. of the French Labor Code. subscriptions, these will be reduced pursuant to the rules defi ned by the Board of Directors. This delegation waives shareholders preferential subscription right in favor of benefi ciaries, and the said shareholders waive Additionally and pursuant to Article L. 225-138 of the French all rights to bonus shares or securities conferring entitlement Labor Code, it is appropriate to adjudicate on the waiver of to share capital that may be issued pursuant to this resolution. preferential subscription rights and to reserve the subscription of all shares to be issued to any French or foreign company, Finally, you are asked to grant the Board of Directors adequate whether a legal entity or not, and whose sole purpose is to powers to implement this delegation, with the power to subscribe, hold and sell shares of the Company or any other subdelegate as provided by law. fi nancial instrument within the context of the implementation of one of the multiple formulas of the international employee DELEGATION OF AUTHORITY TO BE GRANTED shareholding plan of the SUEZ ENVIRONNEMENT COMPANY TO THE BOARD OF DIRECTORS TO INCREASE Group . To this end, we ask you to grant the Board of Directors a THE SHARE CAPITAL, WITH WAIVER delegation of Authority to choose said companies. OF PREFERENTIAL SUBSCRIPTION RIGHTS, IN FAVOR OF ANY ENTITIES WHOSE SOLE PURPOSE The issue price of new shares will be equal to the price of IS TO SUBSCRIBE, HOLD AND SELL SHARES OF THE shares issued as part of the next share capital increase in favor SUEZ ENVIRONNEMENT COMPANY OR ANY OTHER of employees who are members of a company savings plan, FINANCIAL INSTRUMENT WITHIN THE CONTEXT pursuant to resolution 24 of this General Meeting. The Board of OF THE IMPLEMENTATION OF ONE OF THE MULTIPLE Directors may, if it considers it appropriate, reduce or eliminate FORMS OF THE SUEZ ENVIRONNEMENT GROUP’S the aforementioned discount applied to the subscription price INTERNATIONAL EMPLOYEE SHAREHOLDING PLAN of shares thus issued, up to the legal and regulatory limitations, 25TH RESOLUTION in order to comply with locally applicable legal, accounting, tax The General Meeting of May 26, 2009, in its 13th resolution, and corporate systems. had granted the Board of Directors a delegation of authority You are asked to authorize the Board of Directors to determine for a period of 18 months to increase the share capital, with the subscription forms that will be presented to employees in waiver of preferential subscription rights, in favor of all entities each of the relevant countries, in accordance with restrictions whose sole purpose is to subscribe, hold and sell shares of of applicable local laws; to choose the countries among those in the SUEZ ENVIRONNEMENT COMPANY or any other fi nancial which the Group has subsidiaries within the accounting scope of instrument within the context of the implementation of one of consolidation pursuant to Article L. 3344-1 of the French Labor the multiple formulas of the SUEZ ENVIRONNEMENT Group’s Code as well as those of said subsidiaries whose employees international employee shareholding plan. are eligible to participate in the operation, and to limit the share We ask you to end the authorization in effect, as it has not been capital increases or each share capital increase to the amount used, and to authorize a new delegation of authority to the of each subscription received by the Company, while adhering Board of Directors under identical terms. The maximum amount to applicable legal and regulatory provisions. would be €12 million. Finally, you are asked to grant the Board of Directors all powers to implement this delegation, with the power to subdelegate as provided by law.

26

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AUTHORIZATION TO BE GRANTED TO THE BOARD subject to benefi ciaries staying with the Group according to the OF DIRECTORS TO ALLOCATE BONUS SHARES terms and conditions established by the Board of Directors. 26TH RESOLUTION The mandatory retention period of Company shares by The General Meeting of May 26, 2009, in its 11th resolution, benefi ciaries will be set at a minimum of two years, starting had granted the Board of Directors a delegation of authority from the date of the defi nitive allocation of shares, and for to perform one or several allocations of existing bonus shares allocated shares for which the acquisition period is set at four or those to be issued by your Company, to the benefi t of years, the mandatory minimum retention period of shares may Company employees, and corporate offi cers of the Company be eliminated such that said shares can be freely transferrable and of companies or organizations affi liated with it under the from the date of their defi nitive allocation. conditions set forth in Article L. 225-197-2 of said Code, up to 0.5% of the share capital. If existing shares are allocated under this authorization, they must be acquired by your Company, either pursuant The Board of Directors of June 25, 2009 decided to implement to Article L. 225-208 of the French Commercial Code, or if an initial bonus share allocation plan to all 67,980 employees of applicable, as part of a share buy-back program pursuant to the Group, at 30 shares per employee. Article L. 225-209 of the French Commercial Code or any other share purchase program applicable in the future. This delegation was used up to 0.43% of the share capital. As the allocation of said shares is gradually fi nalized, the We ask you to end this delegation, for its unused portion, and allocation of new bonus shares will imply share capital increases to grant the Board of Directors a new delegation for a term of by incorporating reserves, profi ts or share premiums for the 24 months as from this meeting. benefi ciaries of said shares, and the corresponding waiver of The total number of shares eligible to be freely allocated under preferential subscription rights by shareholders to the said this authorization shall not exceed 1% of the share capital, as shares, in favor of the benefi ciaries of said shares. recorded on the day the Board of Directors makes the decision Finally, you are asked to grant the Board of Directors all powers to allocate, and the allocation of bonus shares to corporate to implement this delegation, with the power to subdelegate as offi cers shall not exceed 5% of the total amount granted. provided by law. The maximum par value of share capital increases eligible will be applied to the overall ceiling of share capital increases of FORMAL DELEGATION OF POWERS €392 million defi ned in resolution 15. 27TH RESOLUTION The allocation of bonus shares to benefi ciaries will be fi nal You are asked to authorize the Board of Directors to undertake pursuant to an acquisition period of a minimum duration of all formalities for this meeting. two years for all or a portion of the shares allocated, and with regard to corporate offi cers and managers, must be subject to The Board of Directors the Group’s performance over the entire acquisition period and

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26.3 REPORT OF THE STATUTORY AUDITORS ON RELATED Z PARTY AGREEMENTS AND COMMITMENTS

To the Shareholders, wholly-owned subsidiary of SUEZ ENVIRONNEMENT COMPANY, had to remain identical at all times pending a possible merger As statutory auditors of your company, we hereby report on of both companies. certain related party agreements and commitments. The board of directors thus authorized the removal of the We are not required to ascertain the existence of any other obligation that the boards of SUEZ ENVIRONNEMENT COMPANY agreements and commitments, but to inform you, on the and SUEZ ENVIRONNEMENT be identical, the corollary being that basis of the information provided to us, of the terms and conditions of those agreements and commitments indicated to it is necessary to amend Article 7 of the shareholders’ agreement. us. We are not required to comment as to whether they are benefi cial or appropriate. It is your responsibility, in accordance 2. WITH MR. JEAN-LOUIS CHAUSSADE, with Article R. 225-31 of the French commercial code (Code CHIEF EXECUTIVE OFFICER AND DIRECTOR de Commerce), to evaluate the benefi ts resulting from these OF SUEZ ENVIRONNEMENT COMPANY agreements and commitments prior to their approval. a. Nature, purpose and conditions At their October 28, 2008 and December 18, 2008 meetings, the board of directors of your company has authorized severance NO AGREEMENTS OR COMMITMENTS payments in the event of dismissal as chief executive offi cer, for the benefi t of Mr. Jean-Louis Chaussade, for a maximal amount We hereby inform you that we have not been advised of any equivalent to fi fteen months of the total gross compensation. agreements or commitments concluded in the course of the Three performance criteria were decided upon: year which are covered by Article L. 225-38 of the French commercial code (Code de Commerce). ● the average growth in revenues as provided for in the medium-term plan and measured over the period from 2008 to the year of cessation of functions (under similar economic conditions to those prevailing when the medium-term plan AGREEMENTS AND COMMITMENTS AUTHORIZED was prepared); IN PRIOR YEARS AND WHICH REMAINED CURRENT DURING THE YEAR ● the growth of the share price of SUEZ ENVIRONNEMENT COMPANY, which must be equal to or greater than the average growth of the CAC 40 stock market index over the In addition, in accordance with the French commercial code period starting from July 22, 2008 to the date of cessation (Code de Commerce), we have been advised that the following of functions; agreements and commitments approved in prior years, remained current during the year. ● the ROCE (Return On Capital Employed), which must be greater than the average WACC (Weighted Average Cost of 1. WITH GDF SUEZ Capital) over this same period of time. If two of these criteria are fulfi lled, 100% of the severance Nature and purpose payment will be due. If only one of these criteria is fulfi lled, only Amendment to the shareholders’ agreement of 50% of the payment will be due. SUEZ ENVIRONNEMENT COMPANY. With regard to the variable part of the total gross compensation Terms and conditions which serves as basis for calculating the dismissal payment, the board of directors decided that this part would be equal to the The following agreement was authorized by your board of average of the variable parts for the two years preceding the directors at their October 28, 2008 meeting: year in which the dismissal decision is taken. In the event that Pursuant to Article 7 of the shareholders’ agreement signed this decision is taken before two reference years have elapsed, on June 5, 2008, the composition of the boards of directors of the board of directors decided that the variable part to be used SUEZ ENVIRONNEMENT COMPANY and SUEZ ENVIRONNEMENT, a as a reference should amount to € 799,208. 26

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b. Nature, purpose and conditions agreement on June 5, 2008 for a term of fi ve years from the date of approval of the Spin-off/Distribution, renewable at the At their October 28, 2008 and December 18, 2008 meetings, end of that period. the board of directors of your company entitled Mr. Jean- Louis Chaussade to benefi t from the supplementary The shareholders’ agreement will constitute a joint control as retirement plans applicable to the employees of defi ned by Article L. 233-10 of the French commercial code SUEZ ENVIRONNEMENT COMPANY. (Code de Commerce), within GDF SUEZ will play a leading role. The agreement will have the effect of giving GDF SUEZ the In the fi rst instance, this refers to a mandatory group plan based control of SUEZ ENVIRONNEMENT COMPANY. on defi ned contributions in accordance with Article L. 441-1 of the French insurance code (Code des Assurances). In the The agreement shall be terminated before the end of its second instance, it refers to a supplementary group retirement term in the event that (i) all of shares held by the parties to plan based on arbitrarily defi ned benefi ts. In the event of leaving the agreement should come to represent less than 20% of the company prior to retirement, and apart from exceptions SUEZ ENVIRONNEMENT COMPANY’s share capital, or (ii) GDF laid down by law, potential benefi ciaries of these plans will only SUEZ is no longer the leading shareholder in the joint control retain the rights acquired from the defi ned contribution plan group. Furthermore, in the event that a party should come to and will lose all rights acquired from the defi ned benefi t plan. hold less than a third of its initial stake, then the agreement will be terminated as far as it is concerned but will remain in force c. Nature, purpose and conditions and effect for the other parties. At their October 28, 2008 meeting, the board of directors of your company entitled Mr. Jean-Louis Chaussade to benefi t from the b. Nature and purpose special insurance for entrepreneurs and company owners on Cooperation and shared services agreement between SUEZ and the one hand and insurance benefi ts and healthcare cover on SUEZ ENVIRONNEMENT COMPANY. the other hand.

The special unemployment insurance for company directors Terms and conditions (GSC – Garantie Sociale des Chefs et dirigeants d’entreprise) At their June 4, 2008 meeting, the board of directors taken out on behalf of Mr. Jean-Louis Chaussade amounts of your company authorized a cooperation and shared to € 5,340 in 2009. services framework agreement between SUEZ and SUEZ ENVIRONNEMENT COMPANY, on the conditions precedent 3. WITH GDF SUEZ AND SUEZ ENVIRONNEMENT of the distribution of 65% of SUEZ ENVIRONNEMENT COMPANY’s share capital by SUEZ to its shareholders and the merger of Nature, purpose and conditions SUEZ and Gaz de France.

At their October 28, 2008 meeting, the board of directors of This agreement defi nes the detailed arrangements for the your company authorized an agreement between GDF SUEZ cooperation between SUEZ (the rights and liabilities of which and SUEZ ENVIRONNEMENT, granting GDF SUEZ an option to will be transferred to GDF SUEZ following the merger) and purchase the Gas Natural shares up until November 20, 2009. SUEZ ENVIRONNEMENT COMPANY, mainly in the areas of This option has not been exercised by GDF Suez. strategy, accounting, internal control, audit, risk, fi nance, tax policy, IT services, and communications.

4. WITH SUEZ Furthermore, SUEZ ENVIRONNEMENT COMPANY and SUEZ have reaffi rmed their attachment to the SUEZ group «Social Pact» and a. Nature and purpose to the continued application of the charters and agreements Shareholders’ agreement of SUEZ ENVIRONNEMENT COMPANY. signed within the group. Subject to applicable laws, rules and regulations, the employees of SUEZ ENVIRONNEMENT COMPANY Terms and conditions and its subsidiaries will be eligible for future GDF SUEZ stock option and bonus share allocations, as well as future employee The following agreement was authorized by your board of shareholder plans of GDF Suez. directors at their June 4, 2008 meeting: Lastly, SUEZ ENVIRONNEMENT COMPANY and SUEZ mutually As part of the spin-off/distribution of all the Water and Waste agreed that SUEZ ENVIRONNEMENT COMPANY will continue to activities of SUEZ (the «Spin-off/Distribution»), followed by the benefi t from the centralized services provided by GDF Suez, and listing of your company’s shares for trading on the Euronext especially from the GDF SUEZ centers of expertise. Paris and Euronext Brussels exchanges, SUEZ (the rights of which will be transferred to GDF SUEZ following the merger), Services provided under the cooperation and shared Groupe Bruxelles Lambert, Sofi na, the Caisse des Dépôts services agreement will be invoiced between et Consignations, Areva and CNP Assurances as well as SUEZ ENVIRONNEMENT COMPANY and GDF SUEZ at market SUEZ ENVIRONNEMENT COMPANY concluded a shareholders’ conditions.

324 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Statutory Auditors on related party agreements and commitments

The cooperation and shared services agreement will be group’s fi nancing needs as agreed annually between SUEZ and automatically terminated early in the event that GDF SUEZ loses SUEZ ENVIRONNEMENT COMPANY. control over SUEZ ENVIRONNEMENT COMPANY, subject, as Loans will be made at market conditions depending on the necessary, to transition periods to be determined between the duration of the loan. parties on a case-by-case basis. SUEZ ENVIRONNEMENT COMPANY and SUEZ ENVIRONNEMENT 5. WITH SUEZ AND SUEZ ENVIRONNEMENT undertake, for the whole term of the contract and subject to certain exceptions, not to transfer all or part of their assets Nature and purpose without the prior agreement of SUEZ group, nor to grant any lien on their assets for the purpose of obtaining fi nancing. Financing framework agreement of SUEZ ENVIRONNEMENT and SUEZ ENVIRONNEMENT COMPANY. The fi nancing commitment of SUEZ group will cease and SUEZ group can demand the repayment of any fi nancing granted Terms and conditions should a change of control of SUEZ ENVIRONNEMENT COMPANY As part of the spin-off/distribution of all the Water and Waste occur, evidenced by (i) the loss of control by SUEZ over activities of SUEZ (the «Spin-off/Distribution»), followed by SUEZ ENVIRONNEMENT COMPANY, (ii) the loss of control by the listing of SUEZ ENVIRONNEMENT COMPANY’s shares for SUEZ ENVIRONNEMENT COMPANY of SUEZ ENVIRONNEMENT trading on the Euronext Paris and Euronext Brussels exchanges, within the meaning of the provisions of Article L. 233-3 of the the board of directors of your company authorized, at their French commercial code (Code de Commerce), or (iii) the June 4, 2008 meeting, a fi nancing framework agreement termination of full consolidation (within the meaning of IFRS) of setting the main arrangements for the fi nancing of the group SUEZ ENVIRONNEMENT COMPANY and SUEZ ENVIRONNEMENT by for the period 2008-2010 between Suez, SUEZ Finance, Suez. SUEZ ENVIRONNEMENT COMPANY and SUEZ ENVIRONNEMENT. On December 31, 2009, SUEZ ENVIRONNEMENT COMPANY group Financing will be provided by SUEZ Finance or by any disposed of loans from GDF SUEZ Finance S.A., amounting to other entity of the SUEZ group and may be granted to any € 884.1 million in total, and of cash overdraft for € 386.5 million. SUEZ ENVIRONNEMENT COMPANY group entity, your company Net fi nancial expenses relating to these loans amounted to or SUEZ ENVIRONNEMENT being required to guarantee € 46.4 million on December 31, 2009. repayment if fi nancing is granted to one of their subsidiaries. We performed those procedures which we considered The overall amount of fi nancing granted will be limited to necessary to comply with professional guidance issued by the total amount of the SUEZ ENVIRONNEMENT COMPANY the French national auditing body (Compagnie Nationale des Commissaires aux Comptes) relating to this type of engagement.

These procedures consisted in verifying that the information provided to us is consistent with the documentation from which it has been extracted.

Courbevoie and Neuilly-sur-Seine, March 19, 2010

The statutory auditors

French original signed by

MAZARS ERNST & YOUNG et Autres Thierry Blanchetier Philippe Castagnac Charles-Emmanuel Chosson Pascal Macioce

26

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 325 26 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Statutory Auditors to the Combined Ordinary and Extraordinary Shareholders’ Meeting of May 20, 2010

26.4 REPORT OF THE STATUTORY AUDITORS Z TO THE COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDERS’ MEETING OF MAY 20, 2010

26.4.1 STATUTORY AUDITORS’ REPORT ON THE REDUCTION IN CAPITAL BY REPURCHASE OF SHARES TO BE CANCELLED (FOURTEENTH RESOLUTION)

To the Shareholders, total capital, in accordance with Article L. 225-209 of the French commercial code (Code de Commerce). Moreover, this purchase In our capacity as statutory auditors of your company and in authorization is proposed to your shareholders’ meeting for compliance with Article L. 225-209, paragraph 7 of the French approval and would be given for a period of eighteen months. commercial code (Code de Commerce) in respect of the cancellation of a reduction in capital by repurchase of shares to Your board of directors requests that it be empowered for a be cancelled, we hereby report on our assessment of the terms period of eighteen months to proceed with the cancellation and conditions of the proposed reduction in capital. of own shares the company was authorized to repurchase, We conducted our work in accordance with French professional representing an amount not exceeding 10% of its total capital standards. These standards require that we perform the every twenty-four months. necessary procedures to examine whether the terms and We have nothing to report on the terms and conditions of the conditions for the proposed reduction in capital are fair. proposed reduction in capital, which can be performed only This operation involves the repurchase by your company of its after your shareholders’ meeting has already approved the own shares, representing an amount not in excess of 10% of its repurchase by your company of its own shares.

Courbevoie and Neuilly-sur-Seine, March 19, 2010

The statutory auditors

French original signed by

MAZARS ERNST & YOUNG et Autres Thierry Blanchetier Philippe Castagnac Charles-Emmanuel Chosson Pascal Macioce

326 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Statutory Auditors to the Combined Ordinary and Extraordinary Shareholders’ Meeting of May 20, 2010

26.4.2 STATUTORY AUDITORS’ REPORT ON THE ISSUE OF SHARES OR SEVERAL EQUITY SECURITIES WITH OR WITHOUT CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS (FIFTEENTH, SIXTEENTH, SEVENTIETH, EIGHTEENTH, NINETEENTH, TWENTIETH AND TWENTY-SECOND RESOLUTIONS)

To the Shareholders, up of capital shares or marketable securities giving access to the capital (twentieth resolution), within the limit of 10% In our capacity as statutory auditors of your company and in of the total capital. compliance with articles L. 225-135, L. 225-136, L. 225-138 and L. 228-92 of the French commercial code (Code de Commerce), Under resolutions 15 and 21, as well as under sixteenth, we hereby report on the proposed authorizations allowing your eighteenth and twenty-second resolutions, the overall nominal board of directors to decide on whether to proceed with the amount of increases in capital that can be implemented issues of shares or marketable securities, operations upon immediately or at a later date may not be in excess of which you are called to vote. € 220,000,000. The overall nominal amount of increases in capital that may be implemented immediately or at a later date Your board of directors proposes, on the basis of its report that: may not excess € 196,000,000 as provided in the nineteenth ● it be authorized, for a period of twenty-six months, to decide and twentieth resolutions. on whether to proceed with the following operations and to The overall nominal amount of increases in capital that can be determine the fi nal conditions of these issues and proposes, implemented immediately or at a later date may not exceed if applicable, to cancel your preferential subscription rights: € 392,000,000 as provided in fi fteenth to twenty-second and ● the issue of ordinary shares and marketable securities twenty-fourth to twenty-sixth resolutions. The overall nominal giving access to ordinary shares in the company, without amount of the marketable securities that may be issued will not cancellation of the preferential subscription right exceed € 3,000,000,000 as provided in fi fteenth to twentieth (fi fteenth resolution), and twenty-second to twenty-fourth resolutions.

● the issue of ordinary shares and marketable securities These ceilings take into account the additional number giving access to ordinary shares in the company, with of marketable securities made available through the cancellation of the preferential subscription right by implementation of the delegations presented in the fi fteenth and public offering (sixteenth resolution), sixteenth resolutions, in accordance with Article L. 225-135-1 of the French commercial code (Code de Commerce), if you adopt ● the issue of ordinary shares and marketable securities the seventieth resolution. giving access to the capital in the company, with cancellation of the preferential subscription right by It is the responsibility of the board of directors to prepare a offers provided by II of Article L. 411-2 paragraph 2 of the report in accordance with Articles R. 225-113, R. 225-114 and French monetary and fi nancial code (Code monétaire et R. 225-117 of the French commercial code (Code de Commerce). fi nancier), representing an amount not exceeding 11.23% Our role is to report on the fairness of the fi nancial information of its total capital (eighteenth resolution), taken from the accounts, on the proposed cancellation of preferential subscription rights and on the other information ● the issue of ordinary shares and marketable securities relating to these operations provided in the report. giving access to ordinary shares in case of public offering We have performed those procedures which we considered initiated by your company (twenty-second resolution); necessary to comply with the professional guidance issued ● that it be authorized, under the nineteenth resolution and by the national auditing body (Compagnie Nationale des within the implementation of the delegations provided by Commissaires aux Comptes) for this type of engagement. These the sixteenth and the eighteenth resolutions, to determine procedures consisted in verifying the information provided in the issue price within the legal annual limit of 10% of the the board of directors’ report relating to these operations and total capital; the methods used to determine the issue price of the capital securities. ● that it be delegated, for a period of twenty-six months, to determine the conditions of the issue of ordinary shares and Subject to a subsequent examination of the conditions for the marketable securities giving access to ordinary shares, in issues that would be decided, we have no matters to report as order to pay capital investment in the company and made to the methods used to determine the issue price of the capital

26

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 327 26 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Statutory Auditors to the Combined Ordinary and Extraordinary Shareholders’ Meeting of May 20, 2010

securities provided in the board of directors’ report with respect the issues would be performed and, consequently, on the to the sixteenth, eighteenth and nineteenth resolutions. cancellation of preferential subscription rights proposed in sixteenth, eighteenth and nineteenth resolutions. Moreover, as the methods used to determine the issue price of the capital securities in accordance with the fi fteenth, twentieth In accordance with Article R. 225-116 of the French commercial and twenty-second resolutions are not specifi ed in that report, code (Code de Commerce), we will issue a supplementary we cannot report on the choice of constituent elements used to report, if necessary, when your board of directors has exercised determine the issue price. this authorization for the issues with cancellation of preferential As the issue price of the capital securities has not yet been subscription rights and for the issues of marketable securities determined, we cannot report on the fi nal conditions in which giving access to the capital.

Courbevoie and Neuilly-sur-Seine, March 19, 2010

The statutory auditors

French original signed by

MAZARS ERNST & YOUNG et Autres Thierry Blanchetier Philippe Castagnac Charles-Emmanuel Chosson Pascal Macioce

328 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Statutory Auditors to the Combined Ordinary and Extraordinary Shareholders’ Meeting of May 20, 2010

26.4.3 STATUTORY AUDITORS’ REPORT ON THE ISSUE OF MIXED EQUITY SECURITIES REPRESENTING DEBT SECURITIES (TWENTY-THIRD RESOLUTION)

To the Shareholders, R. 225-117 of the French commercial code (Code de Commerce). Our role is to report to you on the fairness of the fi nancial In our capacity as statutory auditors of your company and in information taken from the accounts and on other information compliance with Article L. 228-92 of the French commercial code (Code de Commerce), we hereby report on the proposed relating to the issue provided in the report. delegation of authority to the board of directors to decide on the We performed those procedures which we considered necessary issue of mixed equity securities representing debt securities, to comply with the professional guidance issued by the French an operation upon which you are called to vote. The maximum national auditing body (Compagnie Nationale des Commissaires nominal amount of the issue will not exceed €3 billion, taking aux Comptes) for this type of engagement. These procedures into account that this amount will be put on the nominal amount consisted in verifying the information provided in the board of of the equity securities representing debt securities that will be directors’ report. issued in accordance with fi fteenth to twentieth resolutions, twenty-second, and twenty-fourth resolutions. As the issue price of the capital securities has not yet been Your board of directors proposes that, on the basis of its report, determined, we cannot report on the fi nal conditions in which it be authorized, for a period of twenty-six months, to decide the issue would be performed. on whether to proceed with this operation. If applicable, it shall In accordance with Article R. 225-116 of the French commercial determine the fi nal conditions of this operation. code (Code de Commerce), we will issue a supplementary It is the responsibility of the board of directors to prepare a report, if necessary, when your board of directors has exercices report in accordance with Articles R. 225-113, R. 225-114 and this authorization.

Courbevoie and Neuilly-sur-Seine, March 19, 2010

The statutory auditors

French original signed by

MAZARS ERNST & YOUNG et Autres Thierry Blanchetier Philippe Castagnac Charles-Emmanuel Chosson Pascal Macioce

26

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 329 26 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Statutory Auditors to the Combined Ordinary and Extraordinary Shareholders’ Meeting of May 20, 2010

26.4.4 STATUTORY AUDITORS’ REPORT ON THE ISSUE OF SHARES OR OTHER EQUITY SECURITIES RESERVED TO MEMBERS OF THE COMPANY SAVINGS PLAN WITH CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS (TWENTY-FOURTH RESOLUTION)

To the Shareholders, It is the responsibility of the board of directors to prepare a report in accordance with Articles R. 225-113, R. 225-114 and R. In our capacity as statutory auditors of your company and in 225-117 of the French commercial code (Code de Commerce). compliance with Articles L. 225-135, L. 225-138 and L. 228-92 of Our role is to report on the fairness of the fi nancial information the French commercial code (Code de Commerce), we hereby taken from the accounts, on the proposed cancellation of report on the proposal to authorize your board of directors to preferential subscription rights and on other information decide whether to proceed with the issue of shares or other relating to the share issue provided in the report. equity securities, with cancellation of preferential subscription rights, reserved to members of one or several company savings We have performed those procedures which we considered plans (or to members of any other plan whose members would necessary to comply with the professional guidance issued by be entitled to a reserved share capital increase under equivalent the French national auditing body (Compagnie Nationale des conditions in accordance with Articles L. 3332-18 etc. of the Commissaires aux Comptes) for this type of engagement. These French labour code) which could be implemented within the procedures consisted in verifying the information provided in group comprised of your company and the French and foreign the board of directors’ report relating to this operation and entities included in the scope of consolidation of its consolidated the methods used to determine the issue price of the equity fi nancial statements, in application of Article L. 3344-1 of the securities. French labour code (Code du Travail), for a maximum nominal amount of M€28, an operation upon which you are called to vote. Subject to a subsequent examination of the conditions for the increase of capital that would be decided, we have no matters This issue of shares or other marketable securities is submitted to report as to the methods used to determine the issue price for your approval in accordance with Articles L. 225-129-6 provided in the board of directors’ report. of the French commercial code (Code de Commerce) and Articles L. 3332-18 to L. 3332-24 of the French labour code As the issue price of these capital securities has not yet been (Code du Travail). determined, we cannot report on the fi nal conditions in which the issues would be performed and, consequently, on the Your board of directors proposes that, on the basis of its report, proposed cancellation of preferential subscription rights. it be authorized, for a period of twenty-six months, to decide on whether to proceed with one or several issues and proposes In accordance with Article R. 225-116 of the French commercial to cancel your preferential subscription rights to the equity code (Code de Commerce), we will issue a supplementary instruments to be issued. If applicable, it shall determine the report, if necessary, when your board of directors has exercised fi nal conditions of this operation. this authorization.

Courbevoie and Neuilly-sur-Seine, March 19, 2010

The statutory auditors

French original signed by

MAZARS ERNST & YOUNG et Autres Thierry Blanchetier Philippe Castagnac Charles-Emmanuel Chosson Pascal Macioce

330 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Statutory Auditors to the Combined Ordinary and Extraordinary Shareholders’ Meeting of May 20, 2010

26.4.5 STATUTORY AUDITORS’ REPORT ON THE INCREASE IN CAPITAL WITH CANCELLATION OF PREFERENTIAL SUBSCRIPTION RIGHTS (TWENTY-FIFTH RESOLUTION)

To the Shareholders, R. 225 117 of the French commercial code (Code de Commerce). Our role is to report on the fairness of the fi nancial information In our capacity as statutory auditors of your company and taken from the accounts, on the proposed cancellation of in compliance with Articles L. 225-135 etc. of the French preferential subscription rights and on other information commercial code (Code de Commerce), we hereby report relating to the share issue provided in the report. on the proposal to authorize your board of directors to decide whether to proceed with an increase in capital by the We have performed those procedures which we considered issuing of ordinary shares with cancellation of preferential necessary to comply with the professional guidance issued by subscription rights in favour of all entities whose sole purpose the French national auditing body (Compagnie Nationale des is to subscribe to, to hold and to sell the company’s shares or Commissaires aux Comptes) for this type of engagement. These other fi nancial instruments in order to implement one of the procedures consisted in verifying the information provided in SUEZ ENVIRONNEMENT group’s many international employee the board of directors’ report relating to this operation and the share ownership plans for a maximal nominal amount of M€ 12, methods used to determine the issue price. an operation upon which you are called to vote. The maximal Subject to a subsequent examination of the conditions for the nominal amount of the capital increases that may be achieved increase(s) in capital that would be decided, we have no matter will be put on the global maximal amount of M€ 392 set in the to report as to the methods used to determine the issue price fi fteenth resolution. provided in the board of directors’ report.

Your board of directors proposes that, on the basis of its report, As the issue price has not yet been determined, we cannot it be authorized for a period of eighteen months to decide on report on the fi nal conditions in which the issue(s) would be whether to proceed with one (or several) increase(s) in capital performed and, consequently, on the proposed cancellation of and proposes to cancel your preferential subscription rights. preferential subscription rights. If applicable, it shall determine the fi nal conditions of this In accordance with Article R. 225-116 of the French commercial operation. code (Code de Commerce), we will issue a supplementary It is the responsibility of the board of directors to prepare a report, if necessary, when your board of directors has exercised report in accordance with Articles R. 225-113, R. 225-114 and this authorization.

Courbevoie and Neuilly-sur-Seine, March 19, 2010

The statutory auditors

French original signed by

MAZARS ERNST & YOUNG et Autres Thierry Blanchetier Philippe Castagnac Charles-Emmanuel Chosson Pascal Macioce

26

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 331 26 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Report of the Statutory Auditors to the Combined Ordinary and Extraordinary Shareholders’ Meeting of May 20, 2010

26.4.6 STATUTORY AUDITORS’ REPORT ON FREE GRANTS OF NEW OR EXISTING SHARES TO EMPLOYEES AND DIRECTORS OF THE COMPANY (TWENTY-SIXTH RESOLUTION)

To the Shareholders, which it wishes to proceed. Our role is to inform you on any matters we may have to report on the information provided to In our capacity as statutory auditors of your company and in you in respect of the considered operation. compliance with Article L. 225-197-1 of the French commercial code (Code de Commerce), we hereby report on the proposed We have performed those procedures which we considered issue to make free grants of new or existing shares to employees necessary to comply with the professional guidance issued by and directors of SUEZ ENVIRONNEMENT COMPANY or of the French national auditing body (Compagnie Nationale des companies or groups which are related to it with the meaning Commissaires aux Comptes) for this type of engagement. These of Article L. 225-197-2 of the French commercial code (Code de procedures consisted in verifying that the information provided in Commerce). the board of directors’ report was in accordance with French law.

Your board of directors proposes that it be authorized to make We have no matters to report on the information provided in free grants of new or existing shares. It is the responsibility of the board of directors’ report concerning the considered free the board of directors to prepare a report on the operation with grants of shares.

Courbevoie and Neuilly-sur-Seine, March 19, 2010

The statutory auditors

French original signed by

MAZARS ERNST & YOUNG et Autres Thierry Blanchetier Philippe Castagnac Charles-Emmanuel Chosson Pascal Macioce

332 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Resolutions

Z 26.5 RESOLUTIONS

A. RESOLUTIONS PRESENTED TO THE ORDINARY GENERAL MEETING

First resolution having reviewed the management report of the Board of Directors and the General Report of the Statutory Auditors (The purpose of this resolution is to approve the fi nancial with regard to the consolidated fi nancial statements for the statements for the fi scal year ended December 31, 2009) fi scal year ended December 31, 2009, approves the Company’s The General Meeting, acting in accordance with the rules as to consolidated fi nancial statements, as presented, together with quorum and majority applicable to ordinary general meetings, the transactions refl ected in those fi nancial statements or having reviewed the management report of the Board of summarized in those reports. Directors and the General Report of the Statutory Auditors with regard to the fi nancial statements for the fi scal year ended Third resolution December 31, 2009, approves all of the Company fi nancial (The purpose of this resolution is to rule on the appropriation of statements, as presented, together with the transactions earnings for the fi scal year ended December 31, 2009) refl ected in those fi nancial statements or summarized in such reports, which show a net profi t of €611,780,177.28. The General Meeting, acting in accordance with the rules as to quorum and majority applicable to ordinary general meetings, Second resolution having reviewed the management report of the Board of Directors and the General Report of the Statutory Auditors (The purpose of this resolution is to approve the Company’s with regard to the annual fi nancial statements for the fi scal consolidated fi nancial statements for the fi scal year ended year ended December 31, 2009, decides to allocate all of the December 31, 2009) net profi t from the fi scal year, or €611,780,177.28, plus the The General Meeting, acting in accordance with the rules as to prior balance brought forward of €64,610,916.55 making a quorum and majority applicable to ordinary general meetings, distributable income of €676,391,093.83, as follows:

Dividend distributed for fi scal year 2009 €635,926,278.00 Interim dividend paid on June 3, 2009 to be applied against the dividend payment for fi scal year 2009 €317,621,889.00 Balance of dividend distributed for fi scal year 2009 (That is a net balance of €0.65) €318,304,389.00 Appropriation of the balance of retained earnings. €40,464,815.83

The dividend will be paid as of May 27, 2010.

The amount of €318,304,389.00 is based on the number ended December 31, 2009 and paid June 3, 2009, no dividends of SUEZ ENVIRONNEMENT COMPANY shares existing at have been distributed in the previous three fi scal years. December 31, 2009, i.e., 489,699,060 shares, and the fi nal The full distribution of dividends resolved on May 26, 2009 amount paid will take into account the number of shares held and paid on June 3, 2009, as well as that resolved in this by the Company at the time the dividend is paid. General Meeting are eligible for a 40% allowance to the benefi t As a result, when the dividend is paid, the dividend corresponding individuals resident in France for tax purposes, as provided to treasury shares held by the Company will be allocated under by Article 158.3-2 of the French General Tax Code. However, “Other Reserves”. it should be noted that, pursuant to Article 117-quater of the French General Tax Code, these persons could have opted, or Pursuant to Article 243 Bis of the French General Tax Code, the will be able to opt, for the withholding tax at source. General Meeting will formally note that, with the exception of the payment on account of the dividend as resolved by the Board This option must be expressed at the time revenues are of Directors of May 26, 2009 for the income for the fi scal year collected at the latest.

26

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 333 26 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Resolutions

Fourth resolution Eighth resolution (The purpose of this resolution, pursuant to Articles L. 225-38 (The purpose of this resolution is to appoint Mr. Dirk Beeuwsaert and seq. and L. 225-42-1 of the French Commercial Code, is as director) to approve the regulatory agreements and the commitments The General Meeting, acting in accordance with the rules as to continued during the fi scal year) quorum and majority applicable to ordinary general meetings, The General Meeting, acting in accordance with the rules as to having reviewed the Report of the Board of Directors, decides quorum and majority applicable to ordinary general meetings, to appoint Mr. Dirk BEEUWSAERT for a term of four (4) years, having reviewed the Special Report of the Statutory Auditors with to expire at the conclusion of the General Meeting called to regard to the agreements set forth in Articles L. 225-38 and seq. approve the fi nancial statements for the fi scal year ended and L. 225-42-1 of the French Commercial Code, approves the December 31, 2013. said report, which presents the regulatory agreements and commitments previously entered into or approved, and which Ninth resolution continued during the fi scal year. (The purpose of this resolution is to appoint Mr. Alain Chaigneau as director) Fifth resolution The General Meeting, acting in accordance with the rules as to (The purpose of this resolution is to set the annual allowance quorum and majority applicable to ordinary general meetings, for directors’ fees) having reviewed the Report of the Board of Directors, decides The General Meeting, acting in accordance with the rules as to to appoint Mr. Alain CHAIGNEAU for a term of four (4) years, quorum and majority applicable to ordinary general meetings, to expire at the conclusion of the General Meeting called to having reviewed the Report of the Board of Directors, decides approve the fi nancial statements for the fi scal year ended to set the annual amount of directors’ fees at €450,000, as of December 31, 2013. today, and until otherwise resolved by a general meeting. Tenth resolution Sixth resolution (The purpose of this resolution is to appoint Mr. Guillaume Pepy (The purpose of this resolution is to ratify the co-option of as director) Mr. Patrick Ouart as director) The General Meeting, acting in accordance with the rules as to The General Meeting, acting in accordance with the rules as to quorum and majority applicable to ordinary general meetings, quorum and majority applicable to ordinary general meetings, having reviewed the Report of the Board of Directors, decides having reviewed the Report of the Board of Directors decides to to appoint Mr. Guillaume PEPY for a term of four (4) years, to ratify the co-option of Mr. Patrick OUART as director, as resolved expire at the conclusion of the General Meeting called to by the Board of Directors of January 14, 2010, for the remaining approve the fi nancial statements for the fi scal year ended term of his predecessor, i.e. until the General Meeting called December 31, 2013. to approve the fi nancial statements for the fi scal year ended December 31, 2011. Eleventh resolution (The purpose of this resolution is to appoint Mr. Gilles Benoist Seventh resolution as director) (The purpose of this resolution is to appoint Mr. Jérôme Tolot as The General Meeting, acting in accordance with the rules as to director) quorum and majority applicable to ordinary general meetings, The General Meeting, acting in accordance with the rules as to having reviewed the Report of the Board of Directors, decides to quorum and majority applicable to ordinary general meetings, appoint Mr. Gilles BENOIST for a term of four (4) years, to expire having reviewed the Report of the Board of Directors, decides to at the conclusion of the General Meeting called to approve the appoint Mr. Jérôme TOLOT for a term of four (4) years, to expire fi nancial statements for the fi scal year ended December 31, 2013. at the conclusion of the General Meeting called to approve the fi nancial statements for the fi scal year ended December 31, 2013.

334 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Resolutions

Twelfth resolution ● covering of marketable securities that confer entitlement to Company shares by remitting them when rights attached (The purpose of this resolution is to appoint Mr. Gérald Arbola to securities conferring entitlement to Company shares as director) through redemption, conversion, exchange, presentation of The General Meeting, acting in accordance with the rules as to a coupon or by any other means are exercised; or quorum and majority applicable to ordinary general meetings, ● implement any market practice, either accepted, or which having reviewed the Report of the Board of Directors, decides to will be accepted, by market authorities; or appoint Mr. Gérald ARBOLA for a term of four (4) years, to expire at the conclusion of the General Meeting called to approve the ● act in view of any other authorized goal, or which will be fi nancial statements for the fi scal year ended December 31, 2013. authorized, by law or by regulations in force, subject to informing Company shareholders by offi cial statement.

Thirteenth resolution Share purchases may involve numbers of shares within the (The purpose of this resolution is to authorize the Company to following limits: trade its own shares) ● the number of shares acquired during the buyback program The General Meeting, acting in accordance with the rules as to does not at any time exceed 10% of the shares that make up quorum and majority applicable to ordinary general meetings, the Company’s share capital, with this percentage applying having reviewed the Report of the Board of Directors, and in to share capital adjusted in accordance with transactions impacting it subsequent to this General Meeting, and, with compliance with the provisions of the French Commercial Code, regard to the particular case of shares that are bought specifi cally Articles L. 225-209 and seq., the direct applicable under a liquidity contract, the number of shares used to provisions of Regulation No. 2273/2003 of the European calculate the 10% limit corresponds to the number of shares Commission of December 22, 2003, and with market practices purchased, less the number of shares resold during the term permitted by the Financial Market Authority (AMF), authorizes of the authorization; the Board of Directors, with the power to subdelegate under conditions approved by law and the Company bylaws, to acquire ● the number of shares that the Company holds at any time will the Company’s shares, or cause them to be acquired, to: not exceed 10% of the shares that make up the Company’s share capital, with this percentage applying to share capital ● ensure liquidity and boost the secondary market of the adjusted in accordance with transactions impacting it Company’s share using the services of an investment fi rm subsequent to this General Meeting. acting independently pursuant to a liquidity contract that complies with the ethics charter recognized by the Financial The General Meeting decides that the maximum purchase price Market Authority (AMF); or per share will be set at €25 per share, and that in the event of share capital transactions, specifi cally the splitting of the ● subsequently cancel all or some of the shares thus purchased par value or consolidation of shares, this price will be adjusted under the conditions set forth in Article L. 225-209 of the accordingly. French Commercial Code, subject to the adoption of the 14th As a result, pursuant to Article R. 225-151 of the French resolution put to the vote of this meeting; or Commercial Code, the General Meeting set the maximum ● allocate or grant shares to employees or former employees total amount allocated to the above-authorized share buyback and/or to corporate offi cers or former corporate offi cers of program at €1,224,247,650, calculated on the basis of the share the Company and/or companies affi liated with it, or which capital at December 31, 2009, comprising 489,699,060 shares. will be affi liated with it under the conditions and pursuant to Shares may be purchased, sold or transferred on one or several the terms set forth in the applicable regulations, specifi cally occasions, by any means, on a regulated market, using a the existing stock option and bonus-share allocation multilateral trading system, with a systematic internalizer or by programs or company/intercompany savings plans; or mutual agreement, including by public offer or transactions for blocks of shares (which may concern the entire buyback program). ● retain and subsequently remit shares (to exchange or make payments, etc.) as part of external growth operations, These means include the use of any fi nancial derivatives, traded provided that the maximum amount of shares purchased on a regulated market using a multilateral trading system, with to retain and subsequently remit for payment or exchange a systematic internalizer or by mutual agreement, and the use as part of a merger, split-up, or contribution plan does not of optional transactions such as purchase and sale of put and exceed 5% of the share capital; or call options, under the conditions provided for by the market

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authorities. These transactions may be made at any time, with (as adjusted, if relevant, to account for transactions made the exception of a public tender offer period on the Company’s on the Company’s share capital subsequent to the date of shares or initiated by the Company in accordance with the legal this meeting) by periods of twenty-four (24) months, keeping provisions in force. in mind that this percentage will be recorded on the day the decision is made by the Board of Directors; The General Meeting grants the Board of Directors, with the power to subdelegate in the event of a change in the par value 2. sets the validity period for this authorization to eighteen of the share, increase in share capital through the incorporation (18) months, from the date of this General Meeting; of reserves, bonus share allocations, splitting or consolidation of 3. terminates with immediate effect, the unused portion of the shares, distribution of reserves or any other assets, share capital authorization previously granted to the Board of Directors amortization, or any other operation involving the treasury by the Combined Ordinary and Extraordinary Shareholders’ capital, the power to adjust the aforementioned maximum General Meeting of May 26, 2009 in its ninth resolution; purchase price to take into account for these operations on the share value. 4. grants all powers to the Board of Directors to:

This authorization is granted for a term of eighteen (18) months, ● decide this or these share capital reductions, from the date of this meeting. It terminates the unused portion ● decide the fi nal amount, specify the terms and conditions of the authorization previously granted to the Board of Directors thereof and record the implementation, by the Combined Ordinary and Extraordinary Shareholders’ Meeting of May 26, 2009, in its eighth resolution. ● apply the difference between the book value of the cancelled shares and their nominal amount to all items The General Meeting gives all powers to the Board of Directors, for reserves and premiums, with the power to subdelegate under the conditions set forth by the law and the Company bylaws, to implement this ● modify bylaws accordingly, and in general, do all that is authorization, to clarify, if necessary, the terms and decide the necessary, and conditions, to carry out the purchase program, and specifi cally ● subdelegate, if necessary, the aforementioned decisions. to submit any market order, allocate or reallocate the shares acquired for the purposes pursued under applicable legal and With regard to the use of this authorization, all of the above shall regulatory conditions, enter into any agreements, undertake any comply with the applicable legal provisions. formalities and make statements to any bodies, and generally, do whatever is necessary. Fifteenth resolution (The purpose of this resolution is the delegation of authority to be granted to the Board of Directors to increase the share capital while retaining preferential subscription rights, by issuing B. RESOLUTIONS PRESENTED equity securities and/or any securities conferring an immediate TO THE EXTRAORDINARY or future right to the share capital of the company) GENERAL MEETING The General Meeting, acting in accordance with the rules as to quorum and majority applicable to extraordinary general Fourteenth resolution meetings, having considered the report of the Board of Directors and the special report of the Statutory Auditors, and (The purpose of this resolution is the authorization to be granted pursuant to the provisions of the French Commercial Code set to the Board of Directors to reduce the share capital through the forth in Articles L. 225-129 and seq. and L. 228-91 and seq. and cancellation of shares) specifi cally Articles L. 225-129-2 and L. 228-92: The General Meeting, acting in accordance with the rules as 1. delegates to the Board of Directors authority, with the to quorum and majority applicable to extraordinary general power to subdelegate under the conditions provided for meetings,having considered the report of the Board of Directors by law and the Company bylaws, to increase the Company and the special report of the Statutory Auditors, in accordance share capital on one or several occasions, in the proportion with Article L. 225-209 of the French Commercial Code: and at the times it decides, in euros, in foreign currency 1. authorizes the Board of Directors to reduce the Company’s or in any other accounting unit established according to share capital, on one or several occasions, in the proportions a set of referenced currencies, by issuing common shares and at the times it decides, by cancelling all or a portion and/or any securities sold or given freely, in France and/or of the shares acquired by the Company itself by virtue abroad, that give rights by any means, immediately and/or of an authorization granted by the General Meeting, up in the future, to new or existing Company common shares to the maximum of 10% of the Company’s share capital while maintaining preferential subscription rights, and these

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shares and other securities may be subscribed either in 4. in the event that this delegation of authority is used by the cash or in exchange for other liquid and current receivables; Board of Directors:

2. sets the validity period for this delegation at twenty-six ● decides that the issuance(s) will be preferentially reserved (26) months, from the date of this General Meeting; to shareholders that can subscribe shares irrevocably,

3. resolves to set the limits for amounts of issuances authorized ● nonetheless gives the Board of Directors the power to in the event the Board of Directors uses this delegation of grant shareholders revocable subscription rights to a authority, as follows: larger number of securities than they are able to subscribe irrevocably, in proportion to the subscription rights they a. the maximum nominal amount of the share capital hold and, in any case, up to the maximum of their request, increases eligible immediately or in the future by virtue of this delegation of authority shall not exceed ● decides that if the irrevocable and, as applicable, the ceiling of €220 million, i.e., at December 31, 2009, revocable subscriptions have not absorbed all of the 11.23% of the share capital, or the equivalent of this share or security issuance as defi ned above, the Board amount, provided that: of Directors may use one and/or more of the following mechanisms as provided by law and in the order it (i) this ceiling is the same in this resolution and determines to: resolution twenty-one, − limit the share capital increase at the time of the (ii) the cumulative nominal amount of the share capital subscriptions under the condition that such increase increase for the shares issued directly or indirectly, includes at least three-fourths of the increase decided, pursuant to this resolution and resolutions sixteen, seventeen, eighteen, nineteen, twenty, twenty-one, − freely distribute all or a portion of the unsubscribed twenty-two, twenty-four, twenty-fi ve and twenty- securities issued, six, provided they are adopted by this meeting, and − offer all or a portion of the unsubscribed shares issued to pursuant to the issuances authorized by resolutions the public, on the French or international market; of the same type that may succeed these resolutions during the validity period for this delegation, shall 5. gives the Board of Directors all powers, with power to not exceed the overall ceiling of €392 million, i.e, at subdelegate under the conditions provided for by law and December 31, 2009, 20% of the share capital, and the Company bylaws, to undertake the aforementioned issuances according to the terms and conditions it decides (iii) added to these ceilings will be the nominal pursuant to the law, specifi cally to: amount of the share capital increases for common shares ultimately issued to preserve the rights of ● determine the dates and terms of the issuances as the security holders and bearers of other rights well as the form and characteristics of the securities conferring entitlement to Company share capital, to be issued, as provided by law and, if relevant, contractual ● determine the number of shares and/or other securities provisions, to be issued, as well as their terms and conditions, and b. the maximum nominal amount of securities representing specifi cally their issue price, if appropriate, the amount of debt or similar securities conferring entitlement to the premium, the conditions of their payment and their Company share capital eligible to be issued by virtue effective date (retroactively, if necessary), of this delegation of authority shall not exceed the ● suspend the exercise of rights attached to these shares ceiling of €3 billion or the equivalent of this amount, if necessary, for a maximum period of three months in and this amount will be applied to the par value of cases and within the limitations provided for by law and securities representing debt that will be issued by virtue applicable regulations, of resolutions sixteen, seventeen, eighteen, nineteen, twenty, twenty-two, twenty-three and twenty-four, ● at its sole initiative, apply the fees of any issuance to subject to their adoption by this meeting, and pursuant the amount of the related premiums and withhold the to the issuances authorized by the resolutions of the necessary sums from this amount to bring the legal same type that may succeed these resolutions during reserve to a tenth of the new share capital after each the validity period of this delegation; increase,

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● generally take any necessary measures, enter into any (i) this ceiling is the same in this resolution, in the agreements, require any authorizations, undertake seventeenth resolution and in the twenty second any formalities and do everything necessary to bring resolution, and the issuances considered to their proper conclusion or (ii) this amount will be applied to the overall ceiling postpone them, and specifi cally record the share capital of €392 million set forth in (3a(ii)) of the fi fteenth increase(s) resulting from any issuance performed by resolution of this meeting or, if necessary, to the virtue of this delegation, modify the bylaws accordingly, amount of the ceiling potentially provided for by request the listing of any securities issued by virtue of a resolution of the same type that may succeed it this delegation; during the validity period of this delegation, 6. terminates, with immediate effect, for the unused portion, b. the maximum nominal amount of securities representing the authorization previously granted to the Board of debt or similar securities conferring entitlement to Directors by the Combined Ordinary and Extraordinary Company share capital eligible to be issued by virtue General Meeting of Shareholders of July 15, 2008 in its of this delegation of authority shall not exceed the 5th resolution. ceiling of €3 billion or the equivalent of this amount, and this amount will be applied to the par value of Sixteenth resolution securities representing debt that will be issued by virtue (The purpose of this resolution is the delegation of authority of resolution fi fteen, seventeen, eighteen, nineteen, to be granted to the Board of Directors to increase the share twenty, twenty-two, twenty-three and twenty-four, capital with waiver of preferential subscription rights, by issuing subject to their adoption by this meeting, and pursuant equity securities and/or any securities conferring an immediate to the issuances authorized by the resolutions of the or future right to the share capital of the company) same type that may succeed these resolutions during the validity period of this delegation; The General Meeting, acting in accordance with the rules as to quorum and majority applicable to extraordinary general 4. resolves to eliminate the preferential subscription rights to meetings, having considered the report of the Board of Directors securities that may be issued pursuant to this delegation; and the special report of the Statutory Auditors and pursuant to the provisions of the French Commercial Code, specifi cally 5. delegates to the Board of Directors the power, pursuant to its Articles L. 225-129-2, L. 225-135, L. 225-136, L. 225-148 and Article L. 225-135 paragraph two of the French Commercial L. 228-92: Code, and in favor of Company shareholders, for a period and according to terms and conditions it will decide and for 1. delegates authority to the Board of Directors, with the all or a portion of the issuance thus performed, to institute power to subdelegate under the conditions set forth by a priority subscription period of no fewer than three trading law and the Company bylaws, to undertake one or several days, without generating any negotiable rights, and which Company share capital increases, in the proportion and may be exercised in proportion to the number of common at the times it decides, in euros, in foreign currency or in shares held by each shareholder and supplemented by any other accounting unit established according to a set of revocable subscription, if the Board of Directors so decides; referenced currencies, by issuing common shares and/or any securities sold or given freely, in France and/or abroad, 6. resolves that if the subscriptions of shareholders and of the that give rights by any means, immediately and/or in the public have not absorbed the entirety of a security issuance future, to new or existing Company common shares with decided pursuant to this resolution, the Board of Directors waiver of preferential subscription rights, and these shares can limit the issuance to the amount of subscriptions and other securities may be subscribed either in cash or in provided this amount is at least three-quarters of the exchange for other liquid and current receivables; issuance decided;

2. sets the validity period for this delegation to twenty-six 7. resolves, subject to the provisions of the nineteenth (26) months, from the date of this General Meeting; resolution, that (i) the share issue price will be at least equal to the minimum price authorized by the legal and regulatory 3. sets the limitations for amounts of issuances authorized provisions applicable on the day of the issuance (on this day, in the event the Board of Directors uses this delegation of the average weighted price of the three trading sessions authority, as follows: preceding the day on which the share capital increase subscription price is set, less 5%) following, if necessary, a. the maximum nominal amount of the share capital the correction of this average in the event of a difference increases eligible immediately or in the future by between the effective dates, and (ii) the issue price of virtue of this delegation of authority, shall not exceed securities conferring entitlement to share capital and the the ceiling of €220 million, i.e., at December 31, 2009, number of shares to which the conversion, redemption, or 11.23% of the share capital, or the equivalent of this generally the transformation of each security giving access amount, provided that:

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to share capital may provide rights, will be such that the The General Meeting, acting in accordance with the rules as amount immediately collected by the Company, plus, if to quorum and majority applicable to extraordinary general applicable, the amount ultimately eligible to be collected by meetings, having considered the report of the Board of Directors it, i.e, for each share issue in the security issuance, is at least and the report of the Statutory Auditors, and pursuant to the equal to the minimum subscription price defi ned in (i) of this provisions of Articles L. 225-129 and seq. and L. 228-91 and seq. paragraph; of the French Commercial Code, specifi cally Articles L. 225-129 2, L. 225-135, L. 225-136 and L. 228-92 of the French Commercial 8. grants all powers to the Board of Directors, with the power Code, and without prejudice to the provisions of the sixteenth to subdelegate under the conditions provided for by law resolution: and the Company bylaws, to undertake the aforementioned issuances pursuant to the terms and conditions it decides 1. delegates authority to the Board of Directors, with the as provided by law, specifi cally to: power to subdelegate under the conditions set forth by law and the Company bylaws, to decide one or several ● determine the dates and terms of the issuances as well Company share capital increases, in the proportion and at as the form and characteristics of the securities to be the times it decides, in euros, by issuing in France and/or issued, abroad, through one or several offers set forth in Section II ● determine the number of shares and/or other securities of Article L. 411-2 of the French Monetary and Financial to be issued, as well as their terms and conditions, and Code (as effective on the date of issue), in euros, in foreign specifi cally their issue price, if appropriate, the amount of currency or in any other accounting unit established the premium, the conditions of their payment and their according to a set of referenced currencies, common shares effective date (retroactively, if necessary), and/or any securities sold or given freely that give rights by any means, immediately and/or in the future, to new or ● suspend the exercise of rights attached to these shares existing Company common shares, and these shares and if necessary, for a maximum period of three months in securities may be subscribed either in cash or in exchange cases and within the limitations provided for by law and for other liquid and current receivables; applicable regulations, 2. resolves to eliminate preferential shareholders’ subscription ● at its sole initiative, apply the fees of any issuance to rights to securities issued by virtue of this resolution; the amount of the related premiums and withhold the necessary sums from this amount to bring the legal 3. resolves that the maximum share capital increase eligible reserve to a tenth of the new share capital after each to be performed shall not exceed the ceiling of €220 million, increase, i.e., at December 31, 2009, 11.23% of the share capital, or the equivalent of this amount will be applied to: ● generally take any necessary measures, enter into any agreements, require any authorizations, undertake (a) the ceiling of €220 million set forth in (3.a) of the any formalities and do everything necessary to bring sixteenth resolution of this meeting or if necessary, the issuances considered to their proper conclusion or to the amount of the ceiling potentially provided for postpone them, and specifi cally record the share capital by a resolution of the same type that may succeed it increase(s) resulting from any issuance performed by during the validity period of this delegation, and in any virtue of this delegation, modify the bylaws accordingly, case, security issuances performed in this context are and request the listing of any securities issued by virtue additionally limited pursuant to the legal provisions of this delegation; applicable on the day of the issuance,

9. terminates the unused portion of the authorization previously (b) the ceiling of €392 million set forth in (3.a(ii)) of the granted to the Board of Directors by the Combined Ordinary fi fteenth resolution or if necessary, to the amount of and Extraordinary Shareholders’ General Meeting of July 15, the ceiling potentially provided for by a resolution of the 2008 in its sixth resolution. same type that may succeed it during the validity period of this delegation; Seventeenth resolution 4. resolves that the nominal amount of bonds, securities (The purpose of this resolution is the delegation of authority representing debt or similar securities conferring granted to the Board of Directors, pursuant to an offer set forth entitlement to Company share capital eligible to be issued in Article L. 411-2 II of the French Monetary and Financial Code, by virtue of this delegation shall not exceed €3 billion, or to issue shares and securities conferring entitlement to share the equivalent of this amount, in the case of securities capital with waiver of preferential subscription rights) issued in foreign currency or in a monetary unit established

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according to a set of referenced currencies, and the nominal Eighteenth resolution amount of such securities issuances that may be performed (The purpose of this resolution is the delegation of authority by virtue of this delegation is allocated to the overall ceiling to be granted to the Board of Directors to increase the value of €3 billion provided for in the fi fteenth resolution, or if of share issues while retaining or eliminating preferential necessary, to the ceiling amount potentially provided for by subscription rights up to 15% of the initial issue) a resolution of the same type that may succeed it during the validity period of this delegation; The General Meeting, acting in accordance with the rules as to quorum and majority applicable to extraordinary general 5. formally notes the fact that if the subscriptions have not meetings, having considered the report of the Board of Directors absorbed all of the issuance, the Board of Directors may and the special report of the Statutory Auditors, and pursuant limit the amount of the operation to the amount of the to the provisions of the French Commercial Code, specifi cally subscriptions received provided that this amount is at least Article L. 225-135-1 thereof: three-quarters of the issuance decided; 1. delegates authority to the Board of Directors, with the 6. resolves that (i) the share issue price will be at least equal power to subdelegate under the conditions set forth by to the minimum price authorized by the legal and regulatory law and the Company bylaws, to decide to increase the provisions applicable on the day of the issuance (on this day, number of securities to be issued, in the case of a security the average weighted price of the three trading sessions issuance preserving or waiving preferential subscription preceding the day on which the share capital increase rights, decided pursuant to resolutions fi fteen, sixteen and subscription price is set, less 5%) following, if necessary, seventeen of this meeting, at the same price as that of the the correction of this average in the event of a difference initial issuance and within the timeframes and limitations between the effective dates, and (ii) the issue price of set forth in the applicable legal and regulatory provision securities conferring entitlement to share capital and the on the issue date (on that day, within thirty days of the number of shares to which the conversion, redemption, or subscription and up to 15% of the initial issuance), subject generally the transformation of each security giving access to the applicable ceiling for the issuance decided; to share capital may confer entitlement, will be such that the amount immediately collected by the Company, plus, if 2. resolves that the nominal amount of the share capital applicable, the amount ultimately eligible to be collected by increases performed pursuant to this resolution, either it, i.e, for each share issue in the security issuance, is at least directly or on presenting securities, will be applied to the equal to the minimum subscription price defi ned in (i) of this overall ceiling of €392 million set forth in (3.a (ii)) of the paragraph; fi fteenth resolution of this meeting, or if necessary, to the amount of the ceiling potentially provided for by a resolution 7. grants all powers to the Board of Directors, with the power of the same type that may succeed it during the validity to subdelegate under the conditions set forth by law and the period of this delegation; bylaws, to implement this delegation, specifi cally to set the conditions of the issuance, the nature and characteristics 3. resolves that the maximum nominal amount of securities of the securities conferring entitlement to share capital, representing Company debt that may be issued pursuant the terms for allocating security capital to which these to this resolution will be applied to the ceiling of €3 billion securities give rights as well as the dates on which these or the equivalent of this amount, set forth in the fi fteenth allocation rights may be exercised, at its sole initiative, resolution of this meeting and resolutions of the same type allocate the fees for share capital increases to resulting that may succeed these resolutions during the validity premiums and withhold the necessary sums from this period of this delegation; amount to fund the legal reserve, make any adjustments 4. sets the validity period of this delegation of authority to to account for transactions on the Company share capital, twenty-six (26) months, from the date of this General enter into any agreement, particularly to bring the issuances Meeting; considered to their proper conclusion, note the completion of share capital increases, modify the bylaws accordingly, 5. terminates the unused portion of the authorization fulfi ll the required formalities and generally do whatever is previously granted to the Board of Directors in the seventh necessary. resolution of the Combined Ordinary and Extraordinary Shareholders’ General Meeting of July 15, 2008; This delegation is granted for a term of twenty-six (26) months from the date of this meeting. 6. resolves that the Board of Directors will have all powers, with the power to subdelegate, to implement this delegation of authority under the conditions set forth by law and the Company bylaws.

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Nineteenth resolution resolution of this meeting and resolutions of the same type that may succeed these resolutions during the validity (The purpose of this resolution is the delegation of authority to period of this delegation, and that the par value of the be granted to the Board of Directors to set issue prices up to a securities representing debt will be applied to this amount; maximum of 10% of the share capital according to the terms and conditions decided by the General Meeting, in the event share 4. formally notes that the Board of Directors must prepare a capital and/or securities are issued conferring an immediate or supplementary report, certifi ed by the Statutory Auditors, future right to the share capital of the Company with waiver of which describes the fi nal conditions of the operation preferential subscription rights) and provides assessments of the actual situation of the shareholder; The General Meeting, acting in accordance with the rules as to quorum and majority applicable to extraordinary general 5. sets the validity period of this delegation to twenty-six meetings, having considered the report of the Board of Directors (26) months, from the date of this General Meeting; and the special report of the Statutory Auditors, and pursuant 6. terminates the unused portion of the authorization to the provisions of the French Commercial Code, specifi cally previously granted to the Board of Directors in the eighth Article L. 225-136 1° thereof: resolution of the Combined Ordinary and Extraordinary 1. authorizes the Board of Directors, with power to Shareholders’ General Meeting of July 15, 2008; subdelegate under the conditions set forth by law and the 7. resolves that the Board of Directors will have all powers, Company bylaws, subject to the adoption of the sixteenth with the power to subdelegate, to implement this delegation and seventeenth resolutions submitted to the vote of this of authority under the conditions set forth by law. meeting, for each of the issuances decided pursuant to these resolutions, to set the issue price according to the Twentieth resolution following terms and conditions, up to a maximum of 10% of the Company’s share capital per year (with this percentage (The purpose of this resolution is the delegation of powers to applied to a share capital adjusted in accordance to be granted to the board of Directors to increase the Company operations that affect it subsequent to this meeting): share capital by paying contributions in-kind made up of equity securities or securities conferring entitlement to share capital) a. the issue price of common shares will be at least equal to the average weighted price of the share on Euronext The General Meeting, acting in accordance with the rules as Paris for the three trading sessions preceding the date to quorum and majority applicable to extraordinary general on which the price is set, potentially discounted at a meetings, having considered the report of the Board of Directors maximum of 10%, and the special report of the Statutory Auditors, and pursuant to the provisions of the French Commercial Code, specifi cally its b. the issue price of securities other than common shares Article L. 225-147: will be such that the amount immediately collected by the Company, plus, if applicable, that eligible to be 1. delegates the necessary powers to the Board of Directors, collected in the future by the Company, is at least equal with the power to subdelegate under the conditions set to the amount set forth in (1.a) above for each common forth by law and the Company bylaws, based on the report share issued as part of the issuance of these securities; of the Statutory Auditors, to increase the share capital up to the maximum of 10% of the share capital (with this 2. resolves that the maximum nominal amount of the percentage applied to a share capital adjusted on the basis Company’s share capital increase resulting from this of operations that affect it subsequent to this meeting), resolution, either directly or on presenting securities, shall by issuing common shares and/or any other securities not exceed the ceiling of €196 million or the equivalent of conferring entitlement immediately or in the future, at this amount, and that this amount will be applied to the any time or on a set date, to Company shares, for the overall ceiling of €392 million set forth in (3.a(ii)) of the purpose of paying contributions in-kind granted to the fi fteenth resolution of this meeting or, if applicable, to the Company and comprising of equity securities or securities amount of the ceiling potentially provided for by a resolution conferring entitlement to share capital, when provisions of of the same type that may succeed it during the validity Article L. 225-148 of the French Commercial Code do not period of this delegation; apply, and decides as necessary to waive the preferential 3. resolves that the maximum par value of securities subscription rights to shares and securities issued, to the representing Company debt that may be issued pursuant benefi t of holders of the equity capital or securities that are to this resolution will be applied to the ceiling of €3 billion the object of the contributions in-kind; or the equivalent of this amount, set forth in the fi fteenth

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2. resolves that the maximum nominal amount of Company’s Twenty-fi rst resolution share capital increase from the shares that may be issued, (The purpose of this resolution is the delegation of authority either directly or on presenting securities, shall not exceed to be granted to the Board of Directors to increase the share the ceiling of €196 million or the equivalent of this amount, capital by incorporating premiums, reserves, profi ts or any other and that this amount will be applied to the overall ceiling of amounts that can be capitalized) €392 million set forth in (3.a(ii)) of the fi fteenth resolution of this meeting, or if applicable, to the amount of the ceiling The General Meeting, acting in accordance with the rules as to potentially provided for by a resolution of the same type that quorum and majority applicable to ordinary general meetings, may succeed it during the validity period of this delegation; having considered the report of the Board of Directors, and pursuant to the provisions of the French Commercial Code, 3. resolves that the maximum nominal amount of securities specifi cally Articles L. 225-129, L. 225-129-2 and L. 225-130 representing Company debt that may be issued pursuant thereto: to this resolution will be applied to the ceiling of €3 billion or the equivalent of this amount, set forth in the fi fteenth 1. delegates the authority to the Board of Directors, with resolution of this meeting and resolutions of the same type power to subdelegate under the conditions set forth by that may succeed these resolutions during the validity law and the Company bylaws, to undertake share capital period of this delegation, and that the par value of the increase, on one or several occasions, in the proportion securities representing debt will be applied to this amount; and at the times it deems appropriate, to consecutively or simultaneously incorporate premiums, reserves, profi ts or 4. sets the validity period of this delegation of authority to any other amounts that can be capitalized, by allocating twenty-six (26) months, from the date of this General bonus shares or increasing the par value of existing shares Meeting; or a combination of these two methods; 5. terminates the unused portion of the authorization 2. set the validity period of this delegation of authority to previously granted to the Board of Directors in the ninth twenty-six (26) months, from the date of this General resolution of the Combined Ordinary and Extraordinary Meeting; Shareholders’ General Meeting of July 15, 2008; 3. resolves that the maximum share capital increase that may 6. grants the Board of Directors all powers, with the power be thus performed shall not exceed the total amount of sums to subdelegate, to undertake the aforementioned issuances that may be incorporated, nor the ceiling of €220 million according to the terms and conditions it will decide on as or the equivalent of this amount, and this amount will be provided by law, specifi cally to: allocated to: ● determine the form and characteristics of the securities (i) the ceiling of €220 million set forth in (3.a) of the to be issued, fi fteenth resolution of this meeting or, if necessary, to ● approve the assessment of the contributions and the the amount of the ceiling potentially provided for by a allocation of any specifi c advantages, determine the resolution of the same type that may succeed it during number of shares and/or other securities to be issued, as the validity period of this delegation, and to well as their terms and conditions, and, if appropriate, the (ii) the overall ceiling of €392 million set forth in (3.a(ii)) of amount of the premium, the fi fteenth resolution of this meeting or, if applicable, ● suspend, if applicable, the exercise of rights attached to to the amount of the ceiling potentially provided for by a these shares if necessary, for a maximum period of three resolution of the same type that may succeed it during months in cases and within the limitations provided for by the validity period of this delegation; law and applicable regulations, 4. resolves that in the event the share capital is increased ● on its sole initiative, apply the fees of any issuance to by allocating bonus shares and pursuant to the provisions the amount of the related premiums and withhold the of Article L. 225-130 of the French Commercial Code, necessary sums from this amount to bring the legal the fractional rights will not be negotiable and that the reserve to a 10th of the new share capital after each corresponding securities will be sold, with the amounts increase, generated by the sale allocated to the rights holders under legal conditions; ● generally take any necessary measures, enter into any agreements, require any authorizations, undertake 5. terminates the unused portion of the authorization any formalities and do everything necessary to bring previously granted to the Board of Directors in the tenth the issuances considered to their proper conclusion or resolution of the Combined Ordinary and Extraordinary postpone them, and specifi cally record the share capital Shareholders’ General Meeting of July 15, 2008; increase(s) resulting from any issuance performed by 6. grants the Board of Directors all powers, with the power virtue of this delegation, modify the bylaws accordingly, to subdelegate, to undertake the aforementioned issuances request the listing of any securities issued by virtue of according to the terms and conditions it will decide as this delegation. provided by law, specifi cally to:

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● determine the dates, conditions and other characteristics the amount of the ceiling potentially provided for by a of the issuances, resolution of the same type that may succeed it during the validity period of this delegation, and these share ● generally take any necessary measures, enter into any capital increases will not be subject to the issue price agreements, require any authorizations, undertake rules set forth in the sixteenth resolution, and to any formalities and do everything necessary to bring the issuances considered to their proper conclusion or (ii) the overall ceiling of €392 million set forth in (3.a(ii)) of postpone them, and specifi cally record the share capital the fi fteenth resolution of this meeting, or if applicable, increase(s) resulting from any issuance performed by to the amount of the ceiling potentially provided for by a virtue of this delegation, modify the bylaws accordingly, resolution of the same type that may succeed it during request the listing of any securities issued by virtue of the validity period of this delegation; this delegation. 4. resolves that the maximum nominal amount of securities representing Company debt that may be issued pursuant Twenty-second resolution to this resolution will be applied to the ceiling of €3 billion (The purpose of this resolution is the delegation of authority to be or the equivalent of this amount, set forth in the fi fteenth granted to the Board of Directors to increase the share capital in resolution of this meeting and resolutions of the same type payment of security contributions as part of an exchange offer that may succeed these resolutions during the validity initiated by the Company) period of this delegation, and that the par value of the securities representing debt will be applied to this amount; The General Meeting, acting in accordance with the rules as to quorum and majority applicable to extraordinary general 5. formally notes that the Company shareholders shall not meetings, having considered the report of the Board of Directors have preferential subscription rights to shares and/or and the special report of the Statutory Auditors, and pursuant securities that are issued by virtue of this delegation, and a to the provisions of the French Commercial Code, specifi cally that these shareholders are eligible to pay the contributed Articles L. 225-129-2, L. 225-148, and L. 228-91 thereto: securities to an exchange offer initiated by the Company;

1. delegates the authority to the Board of Directors, with the 6. terminates the unused portion of the authorization power to subdelegate under the conditions set forth by previously granted to the Board of Directors in the eleventh law and the Company bylaws, to decide to issue common resolution of the Combined Ordinary and Extraordinary shares and/or securities on one or several occasions that Shareholders’ General Meeting of July 15, 2008; confer entitlement to Company shares, immediately and/ or in the future, at any time or on a set date, in payment 7. grants all powers to the Board of Directors, with the power of securities that are contributed under an exchange to subdelegate, to undertake the aforementioned issuances offer initiated in France or abroad, according to local rules according to the terms it decides as provided by law, (including any other operation having the effect of an specifi cally: exchange offer initiated by the Company on the securities of ● determine the dates, conditions and other characteristics another company whose securities are accepted for trading of the issuances, on a foreign regulated market, or which may be similar), ● by the Company on the securities of another company on its sole initiative, apply the fees of any issuance to accepted for trading on one of the markets set forth in the amount of the related premiums and withhold the Article L. 225 148 of the French Commercial Code; necessary sums from this amount to bring the legal reserve to a tenth of the new share capital after each 2. sets the validity period of this delegation of authority to increase, twenty-six (26) months, from the date of this General ● Meeting; generally take any necessary measures, enter into any agreements, require any authorizations, undertake 3. resolves that the maximum share capital increase eligible any formalities and do everything necessary to bring to be performed shall not exceed the ceiling of €220 million the issuances considered to their proper conclusion or or the equivalent of this amount, and this amount will be postpone them, and specifi cally record the share capital allocated to: increase(s) resulting from any issuance performed by (i) the ceiling of €220 million set forth in (3.a) of the virtue of this delegation, modify the bylaws accordingly, sixteenth resolution of this meeting or, if necessary, to request the listing of any securities issued by virtue of this delegation.

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Twenty-third resolution Twenty-fourth resolution (The purpose of this resolution is the delegation of authority to (The purpose of this resolution is the delegation of authority be granted to the Board of directors to issue mixed securities granted to the Board of Directors to increase the share capital representing debt) by issuing shares or securities conferring entitlement to share capital reserved for members of a savings plan with waiver of The General Meeting, acting in accordance with the rules as preferential subscription rights in favor of these employees) to quorum and majority applicable to extraordinary general meetings, having considered the report of the Board of Directors The General Meeting, acting in accordance with the rules as and the special report of the Statutory Auditors, and pursuant to quorum and majority applicable to extraordinary general to the provisions of the French Commercial Code, specifi cally meetings, having considered the report of the Board of Directors Article L. 228-92 thereto: and the special report of the Statutory Auditors, pursuant on the one hand to the provisions of Articles L. 225-129, L. 225-129 2 1. delegates the authority to the Board of Directors, with the to L. 225-129-6, L. 225-138, L. 225-138-1, L. 228-91 and power to subdelegate under the conditions set forth by L. 228-92 of the French Commercial Code, and on the other to law and the Company bylaws, to undertake an issuance on Articles L. 3332-18 and seq. of the French Labor Code: one or several occasions, immediately and/or in the future, at any time or on a set date, on the French market and/or 1. delegates the authority to the Board of Directors, with the international market, of any mixed securities representing power to subdelegate under the conditions set forth by law, creditor’s rights against the Company, at fi xed or variable to decide to increase the share capital on one or several rates, subordinated or not, for a defi nite or indefi nite term, occasions, by a maximum nominal amount of €28 million, by in euros, foreign currency or any other accounting unit issuing shares or securities conferring entitlement to share established based on a set of referenced currencies, and capital reserved to members of one or several company inclusive or exclusive of warrants that provide rights to savings plans (or other plan whereby Articles L. 3332-18 the allocation, acquisition or subscription of bonds, similar and seq. of the French Labor Code would reserve a share securities or other securities and securities granting such a capital increase to its members under equal conditions) creditor’s right against the Company; that would be created within the Group that includes the Company and the French or foreign companies within the 2. resolves that the maximum nominal amount of issuances if Company’s accounting scope of consolidation, pursuant to the Board of Directors uses this delegation of authority, will Article L. 3344-1 of the French Labor Code, and that (i) the be applied to the ceiling of €3 billion or the equivalent of this maximum par value of share capital increases through amount, set forth in the fi fteenth resolution of this meeting the issuance of new shares eligible to be performed and resolutions of the same type that may succeed these immediately or in the future by virtue of this delegation will resolutions during the validity period of this delegation, and be applied to the overall ceiling of €392 million set forth that the par value of the securities representing debt will be in (3.a(ii)) of the fi fteenth resolution of this meeting or, if applied to this amount; applicable, to the amount of the ceiling potentially provided 3. sets the validity period of this delegation of authority to for by a resolution of the same type that may succeed it twenty-six (26) months, from the date of this General during the validity period of this delegation, and (ii) the Meeting; maximum nominal amount of securities representing debt against the Company and conferring entitlement to its share 4. terminates the unused portion of the authorization capital, which may be issue by virtue of this delegation will previously granted to the Board of Directors in the fi fteenth be applied to the ceiling of €3 billion or the equivalent of this resolution of the Combined Ordinary and Extraordinary amount, set forth in the fi fteenth resolution of this meeting, Shareholders’ General Meeting of July 15, 2008; or if necessary, to the overall ceiling potentially provided 5. grants the Board of Directors all powers, with the power for by a resolution of the same type that may succeed said to subdelegate, to undertake the aforementioned issuances resolution during the validity period of this delegation; according to the conditions it will decide as provided by law. 2. sets the validity period of this delegation of authority to twenty-six (26) months, from the date of this General Meeting;

3. terminates the unused portion of the authorization previously granted to the Board of Directors in the twelfth resolution of the Combined Ordinary and Extraordinary Shareholders’ General Meeting of July 15, 2008;

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4. resolves that the issue price of new shares or securities or securities conferring entitlement to freely allocated conferring entitlement to the share capital will be share capital, determined under the conditions set forth in L. 3332-18 ● decide that the subscriptions may be performed directly and seq. of the French Labor Code and will be at least by the benefi ciaries who are members of an employee equal to 80% of the average share price listed on Euronext savings plan, or though a company mutual fund or other Paris for the 20 trading sessions preceding the date on structures or companies accepted by the applicable legal which the decision is made to set the opening day of the or regulatory provisions, period for subscribing the share capital increase reserved to members of a company savings plan (“Reference Price”); ● determine the conditions, specifi cally with regard to however, the General Meeting expressly authorizes the seniority, that benefi ciaries of the share capital increases Board of Directors, if it considers it appropriate, to reduce must satisfy, or eliminate the aforementioned discount, up to the legal ● decide the opening and closing dates of the subscriptions, and regulatory limitations, in order to comply with locally applicable legal, accounting, tax and corporate systems; ● set the amounts of issuances that will be performed by virtue of this delegation of authority and specifi cally 5. authorizes the Board of Directors to freely allocate to the issue price, dates, deadlines, terms and conditions benefi ciaries, in addition to shares or securities conferring for subscribing, paying, discharging, issuing and holding entitlement to share capital subscribable in cash, shares the securities (even retroactively) the reduction rules or securities granting rights to share capital to be issued applicable in cases of oversubscription as well as the or already issued, as a substitution for all or part of the other terms and conditions of issuance, within the legal discount based on the Reference Price and/or as a company and regulatory limitations in force, contribution, with the understanding that the benefi t created by this allocation shall not exceed the legal or regulatory ● in the event of an allocation of bonus shares or securities limitations pursuant to Articles L. 3332-18 and seq. and conferring entitlement to the share capital, to set L. 3332-11 and seq. of the French Labor Code; the nature, characteristics and number of shares and securities conferring entitlement to the share capital to 6. resolves to waive the aforementioned benefi ciaries’ be issued, the number to allocate to each benefi ciary, preferential subscription rights to shares and securities and to decide the dates, deadlines, terms and conditions conferring entitlement to share capital issued pursuant for allocating these shares or securities conferring to this delegation of authority, and, in the event shares or entitlement to the share capital within the legal and securities conferring entitlement to share capital are freely regulatory limitations in force, specifi cally, to choose allocated to the aforementioned benefi ciaries, the said either to substitute all or a portion of the allocation of shareholders furthermore waive any right to said shares or these shares or securities conferring entitlement to securities conferring entitlement to share capital, including the share capital with the aforementioned Reference- the portion of the reserves, profi ts, or premiums incorporated Price-based discounts provided above, or allocate the into the share capital pursuant to the free allocation of said equivalent of these shares to the total amount of the securities performed based on this resolution; subscription, or combine these two options, 7. authorizes the Board of Directors, under the conditions of this ● in the event new bonus shares are issued, to allocate to delegation, to sell shares to members of a company savings the reserves, if applicable, profi ts or issue premiums, the plan as provided in Article L. 3332-24 of the French Labor Code, amounts necessary to pay said shares, and the shares sold at a discount in favor of the members of one or several company savings plans set forth in this ● report the completion of share capital contributions up resolution will be allocated, up to the par value of the shares to the amount of the subscribed shares (following any thus sold, to the ceilings set forth in paragraph one above; reduction in the event of oversubscription),

8. resolves that the Board of Directors will have all powers to ● if necessary, allocate the fees for share capital increases implement this delegation, with the power to subdelegate to the resulting premiums and withhold the necessary under legal conditions, within the limitations and under the sums from this amount to bring the legal reserve to a conditions set forth above, specifi cally to: 10th of the new share capital resulting from these share capital increases, ● decide, within legal conditions, the list of companies for which members of one or several company savings plans ● enter into any agreements, directly or indirectly may subscribe shares or securities conferring entitlement carry out any operations through a broker, including to share capital thus issued and may benefi t from shares formalities resulting from share capital increases and the corresponding modifi cation of the bylaws and, generally

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order any agreement specifi cally to bring the issuances multiple formulas of the SUEZ ENVIRONNEMENT Group’s considered to their proper conclusion, take any measures international employee shareholding plan; and decisions and undertake any necessary formalities 5. resolves that the issue price of new shares will be equal to for the issuance, to list it on the market as well as with that of the shares issued as part of the share capital increase the fi nancial department for shares issued by virtue of in favor of employees who are members of a company this delegation as well as for exercising the attached or savings plan, pursuant to the twenty-fourth resolution of rights or rights resulting from the share capital increases this General Meeting, and will be at least equal to 80% of performed. the average share price listed on Euronext Paris for the 20 trading sessions preceding the date on which the decision Twenty-fi fth resolution is made to set the opening day of the period for subscribing (The purpose of this resolution is the delegation of authority to the share capital increase reserved for members granted to the Board of Directors to increase the share capital, of a company savings plan of SUEZ ENVIRONNEMENT with waiver of preferential subscription rights, in favor of Group (“Reference Price”); however, the General Meeting all entities whose sole purpose is to subscribe, hold and sell expressly authorizes the Board of Directors, if it considers shares of the Company or any other fi nancial securities within it appropriate, to reduce or eliminate the discount applied the context of the implementation of one of the multiple forms to the subscription price of the issue share pursuant to of the SUEZ ENVIRONNEMENT Group’s international employee the twenty-fourth resolution of this General Meeting, or, shareholding plan) if applicable, any resolution of the same type that may succeed it, up to the legal and regulatory limitations, in The General Meeting, acting in accordance with the rules as order to comply with locally applicable legal, accounting, to quorum and majority applicable to extraordinary general tax and corporate systems; meetings, having considered the report of the Board of Directors and the special report of the Statutory Auditors, and pursuant to 6. resolves that the Board of Directors may determine the the provisions of Articles L. 225-129, L. 225-129-2 to L. 225-129-6 subscription forms that will be presented to employees and L. 225-138 of the French Commercial Code: in each of the relevant countries, in accordance with restrictions of applicable local laws; and to choose the 1. delegates authority to the Board of Directors to decide to countries among those in which the Group has subsidiaries increase the share capital on one or several occasions, within the accounting scope of consolidation pursuant to by a maximum par value of €12 million per issuance, by a Article L. 3344-1 of the French Labor Code as well as those number of shares reserved to the category of benefi ciaries of the said subsidiaries whose employees are eligible to defi ned in paragraph fi ve below; participate in the operation; 2. resolves that the maximum nominal amount of Company’s 7. resolves that the amount of the share capital increase or share capital increase eligible to be performed immediately each share capital increase will be limited, if necessary, to or in the future by virtue of this delegation will be applied to the amount of each subscription received by the Company, the overall ceiling of €392 million set forth in (3.a (ii)) of the while adhering to applicable legal and regulatory provisions; fi fteenth resolution of this meeting, or if applicable, to the amount of the ceiling potentially provided for by a resolution 8. resolves that the Board of Directors will have all powers to of the same type that may succeed it during the validity implement this delegation, with the power to subdelegate period of this delegation; under legal conditions, within the limitations and under the conditions set forth above, specifi cally to: 3. resolves that the amount of each employee’s subscriptions may not exceed the limitations that will be provided for ● decide the list of benefi ciary(ies), with waiver of by the Board of Directors pursuant to this delegation, and, preferential subscription rights within the category in the event of excessive employee subscriptions, it will defi ned below, as well as the number of shares to be be reduced pursuant to the rules defi ned by the Board subscribed by the benefi ciaries or by each benefi ciary, of Directors; ● decide the opening and closing dates of the subscriptions, 4. resolves to waive preferential subscription rights to shares ● that would be issued pursuant to this resolution and to set the amounts of issues that will be performed by reserve the right to subscribe them to the category of virtue of this delegation of authority and specifi cally benefi ciaries that fi t the following characteristics: any the issue price, dates, deadlines, terms and conditions French or foreign company, whether or not it is a legal for subscribing, paying, discharging, issuing and holding entity, and whose sole purpose is to subscribe, hold and sell the securities (even retroactively) the reduction rules shares of the Company or any other fi nancial instrument applicable in cases of oversubscription as well as the within the context of the implementation of one of the other terms and conditions of issuance, within the legal and regulatory limitations in force,

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● report the completion of the share capital contributions 2. resolves that the total number of shares eligible to be freely up to the amount of the subscribed shares (following any allocated under this authorization shall not exceed 1% of reduction in the event of oversubscription), the share capital, as recorded on the date the Board of Directors makes the decision to allocate, and the allocation ● if necessary, allocate the fees for the share capital of bonus shares to corporate offi cers shall not exceed 5% increases to the resulting premiums and withhold the of the total amount granted, and the maximum nominal necessary sums from this amount to bring the legal amount of share capital increases eligible by virtue of this reserve to a 10th of the new share capital resulting from authorization will be applied to the overall ceiling of share these share capital increases, capital increases of €392 million set forth in (3.a(ii)) of the ● enter into any agreements, directly or indirectly carry out fi fteenth resolution of this meeting, or if necessary, to the any operations through a broker, including formalities amount of the ceiling potentially provided for by a resolution resulting from the share capital increases and the of the same type that may succeed it during the validity corresponding modifi cation of the bylaws and, generally period of this delegation; order any agreement specifi cally to bring the issuances 3. resolves that the allocation of Company shares to their considered to their proper conclusion, take any measures benefi ciaries will be fi nal after a vesting period of a minimum and decisions and undertake any necessary formalities of two years for all or a portion of the shares allocated, and for the issuance, to list it on the market as well as with with regard to corporate offi cers and managers, must be the fi nancial department for shares issued by virtue of subject to the Group’s performance over the entire vesting this delegation as well as for exercising the attached period and subject to benefi ciaries staying with the Group rights or rights resulting from the share capital increases according to the terms and conditions established by performed; the Board of Directors. The mandatory period for holding 9. resolves that the delegation granted to the Board of Company shares by benefi ciaries will be set at a minimum Directors by this resolution is valid for a period of eighteen of two years, starting with the defi nitive allocation of shares, (18) months as of the date of this meeting; and for allocated shares for which the vesting period is set at four years, the mandatory minimum period for holding 10. terminates the unused portion of the authorization shares may be eliminated such that said shares can be previously granted to the Board of Directors in the thirteenth freely transferrable as of their defi nitive allocation; resolution of the Combined Ordinary and Extraordinary Shareholders’ General Meeting of May 26, 2009. 4. resolves that in the event of the incapacity of a benefi ciary corresponding to the classifi cation under categories two or Twenty-sixth resolution three set forth in Article L. 341-4 of the French Social Security Code, the fi nal allocation of shares shall occur immediately, (The purpose of this resolution is the authorization to be granted and in the event of the death of the benefi ciary, his heirs to the Board of Directors to allocate bonus shares) may request the fi nal allocation of shares within six months The General Meeting, acting in accordance with the rules as of his death; to quorum and majority applicable to extraordinary general 5. resolves that the existing shares that may be allocated meetings, having considered the report of the Board of Directors pursuant to this resolution must be acquired by the and the special report of the Statutory Auditors: Company, either pursuant to Article L. 225-208 of the French 1. authorizes the Board of Directors pursuant to the provisions Commercial Code, or, if necessary, as part of a share buyback of Articles L. 225-197-1 to L. 225-197-6 of the French program pursuant to the provisions of Article L. 225-209 of Commercial Code, to undertake on one or several occasions the French Commercial Code; the bonus allocation of existing shares or shares to be 6. notes that in the event of an allocation of new bonus shares, issued, in favor of benefi ciaries or categories of benefi ciaries this authorization will imply, as and when the allocation it identifi es among members of the permanent staff of the of said shares is fi nalized, a share capital increase by Company or companies or organisations affi liated with incorporating reserves, profi ts or share premiums for the it under the conditions set forth in Article L. 225-197-2 of benefi ciaries of said shares and the corresponding waiving said Code and the corporate offi cers of the Company or of preferential subscription righs of the said shares by companies or organisations affi liated with it that satisfy the shareholders in favor of the benefi ciaries of said shares; conditions set forth in Article L. 225-197-1, II of said Code, under the conditions set forth below;

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SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 347 26 COMBINED ORDINARY AND EXTRAORDINARY SHAREHOLDER’S MEETING OF MAY 20, 2010 Resolutions

7. grants the Board of Directors all powers within the limitations ● if necessary, adjust the number of bonus shares allocated set forth above to implement this delegation, with the needed to preserve the rights of benefi ciaries, based on power to subdelegate under the conditions provided for by potential operations on the Company share capital under law, to implement this authorization and specifi cally to: the circumstances provided for in Article L. 225-181 of the French Commercial Code. The shares allocated in ● determine if the bonus shares are shares to be issued or application of these adjustments will be deemed allocated existing shares, on the same day as the initially allocated shares, ● determine the number of shares allocated to each ● determine the dates and terms of the allocations and benefi ciary it identifi es, generally undertake all necessary provisions and enter ● set the conditions and, if necessary, the criteria for into any agreements to bring the allocations considered allocating shares, specifi cally the minimum acquisition to their proper conclusion. period and the minimum holding period, The Board of Directors may also implement any other new ● increase, if necessary, the share capital by incorporating legal provisions that come into effect during the term of this reserves, profi ts or issue premiums to under take the authorization, the application of which would not require an issuance of bonus shares, express decision by the General Meeting; and

● allocate shares to the people mentioned in the fourth 8. set the validity period of this authorization to 24 months section of Article L. 225-185 of the French Commercial from the date of this meeting; Code, subject to the conditions provide for in 9. terminates the unused portion of the authorization Article L. 225-186-1 of said Code and, with regard to the previously granted to the Board of Directors in the shares thus allocated, decide either (i) that the bonus 11th resolution of the Combined Ordinary and Extraordinary shares granted shall not be sold by the interested parties Shareholders’ General Meeting of May 26, 2009. before they resign from their duties, or (ii) set the quantity of bonus shares granted that they must hold as registered Twenty-seventh resolution shares until they resign from their duties, (The purpose of this resolution is the delegation of powers for ● if necessary, provide for the option to postpone the dates formalities) of the fi nal allocation of shares and, for the same period, the mandatory term for holding said shares (such that the The General Meeting, acting in accordance with the rules as minimum holding period remains unchanged), to quorum and majority applicable to extraordinary general meetings grants all powers to the bearer of an original, a copied, or an extract of the minutes of this meeting to perform all fi lings and formalities required.

348 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 A APPENDIX

REPORT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS Z PREPARED PURSUANT TO ARTICLE L. 225-37 OF THE FRENCH COMMERCIAL CODE

In accordance with Article L. 225-37 of the French Commercial Frédérique Raoult and Thierry Mallet joined the Management Code, this report presents the composition of the Board of Committee on January 1 and October 1, 2009, respectively. Directors, the conditions under which the work of the Board is The biographies of the members of the Management Committee prepared and organized, as well as the internal control and risk are featured in section 14.1.3 of the Reference Document appearing management procedures put in place by the Company and the on the Company website (www.suez-environnement.com). limits on the powers of the Chief Executive Offi cer. The Company also has an Executive Committee made up of 1 COMPANY GOVERNANCE – COMPOSITION 15 members, a detailed description of which is available on OF THE BOARD OF DIRECTORS – CONDITIONS the Company website (www.suez-environnement.com). Its UNDER WHICH THE WORK OF THE BOARD composition was changed at the end of September 2009, due OF DIRECTORS AND SPECIAL COMMITTEES to changes in the Management Committee and the desire to IS PREPARED AND ORGANIZED tighten up the management teams. The Executive Committee meets in an expanded form, including all functional and SUEZ ENVIRONNEMENT COMPANY, (hereinafter SUEZ ENVIRONNEMENT) operational directors, once or twice a year. is a French corporation (société anonyme) with a Board of Directors. 1.1.2 Limit of the Chief Executive Offi cer’s powers: 1.1 General Management The Chief Executive Offi cer holds the widest powers to act on 1.1.1 Method of exercising general management: behalf of the Company, in all circumstances. He exercises those At its meeting of July 23, 2008, the Board of Directors opted for powers within the limit of the corporate purpose and subject the separation of the roles of Chairman of the Board of Directors to (i) the powers granted by law to Shareholders’ Meetings and to the Board of Directors, and (ii) internal limits on executive and Chief Executive Offi cer. powers. Mr. Gérard Mestrallet is Chairman of the Board and Mr. Jean-Louis In this respect, Article 3 of the Internal Regulations adopted by Chaussade holds the offi ce of Company Chief Executive Offi cer. the Board of Directors at its meeting of July 23, 2008 specifi es In order to successfully perform that assignment, the Chief the extent of the Chief Executive Offi cer’s authority as follows: Executive Offi cer was assisted in 2009 by a Management ● The Chief Executive Offi cer shall submit all signifi cant Committee which included, aside from the Chief Executive decisions concerning starting up operations abroad or Offi cer, Jean-Marc Boursier, Chief Financial Offi cer, Christophe exiting those operations to the Board of Directors for prior Cros, Waste Europe activities, Marie-Ange Debon, General authorization, as well as all signifi cant decisions likely to Secretary, Legal Counsel, Projects, Information Systems, Risk have an impact on the Group’s strategy or to alter its fi nancial and Audit, Bernard Guirkinger, coordination of Water, Research, structure or the scope of its activities. Sustainable Development and Institutional Relations activities, Thierry Mallet, International (since October 1, 2009), Denys ● The Chief Executive Offi cer shall also submit transactions Neymon, Human Resources Director, and Frédérique Raoult, involving a commitment of more than €350 million and A Communications. fi nancial debt transactions, disposals of all properties,

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business goodwill, receivables, and fi nancial instruments, as The composition of the Board at the date of issue of this well as all treaties, transactions or agreements to the extent report is as follows: that the latter amount to more than €1 billion, to the Board ● Directors appointed at the suggestion of GDF SUEZ: of Directors for prior approval. Gérard Mestrallet, Chairman of the Board, Jean-Louis ● The Chief Executive Offi cer is authorized to grant sureties, Chaussade, Chief Executive Offi cer, Jean-François Cirelli, approvals and guarantees for a maximum total amount of Gérard Lamarche, Alain Chaigneau, Dirk Beeuwsaert, Valérie €500 million, with an added secondary limit of €100 million Bernis, Jérôme Tolot, Patrick Ouart; per transaction; beyond these dual limits, the Chief Executive Offi cer shall be required to request the prior approval of the ● Directors appointed at the suggestion of Groupe Bruxelles Board of Directors. Lambert:

● Article 3 of the Internal Regulations of the Board of Directors Amaury de Sèze, Olivier Pirotte; provides that before any appointment to the offi ce of Group ● Director appointed at the suggestion of Areva: Chief Executive or any proposal to appoint a chairman of the head company of any of the Group’s business divisions, the Gérald Arbola; Board of Directors, which may delegate this consultative role ● Director appointed at the suggestion of CNP Assurances: to the Nominations and Compensation Committee, which is charged with reporting on this matter to the Board of Gilles Benoist; Directors, shall be consulted on a timely basis by the Chief ● Director appointed at the suggestion of Sofi na Executive Offi cer. Harold Boël, On December 17, 2009, as permitted by its Internal Regulations, the Board of Directors decided to delegate this duty to the ● Independent Directors. Nominations and Compensation Committee, stipulating that the Committee reports to the Board, after each meeting, on its work Lorenz d’Este, Nicolas Bazire, Guillaume Pepy and Ezra and decisions. Suleiman. Details of the Directors’ terms and roles may be found in 1.2 Composition of the Board of Directors section 14.1 of the Reference Document.

The Board of Directors consists of 18 directors appointed by The Composition of the Board changed in early 2010 following the Shareholders’ Meeting of July 15, 2008, effective July 22, the resignation as a Director of Mr Angel Simòn. On January 14, 2008, the date of SUEZ ENVIRONNEMENT’s Initial Public Offering. 2010, the Board of Directors formally acknowledged this Directors are appointed for terms of four years, i.e., until the resignation and appointed Mr. Patrick Ouart as replacement Shareholders’ Meeting convened to approve the fi nancial for the remaining duration of Mr. Angel Simon’s term, i.e., until statements for the fi scal year ending December 31, 2011. the close of the Ordinary Shareholders’ Meeting convened to As a result of the shareholders’ agreement signed June 5, 2008 approve the fi nancial statements for the fi scal year ending (hereinafter the Agreement), between GDF SUEZ, Areva, Caisse December 31, 2011. This replacement will be subject to approval des Dépôts et Consignations, CNP Assurances, Sofi na, Groupe by the Ordinary Shareholders’ Meeting of May 20, 2010. Bruxelles Lambert and SUEZ ENVIRONNEMENT COMPANY, The Board decided to implement a staggered schedule of nine directors are appointed at the suggestion of GDF SUEZ, renewals of directors’ terms, to avoid a block renewal of the and fi ve at the suggestion of the other shareholders who are entire Board of Directors at the Shareholders’ Meeting of 2012, signatories of the Agreement. Among those fi ve members, two as per the recommendation of the December 2008 AFEP-MEDEF are appointed at the suggestion of Groupe Bruxelles Lambert, Code. Implementation of this staggered schedule will be subject one at the suggestion of Areva, one at the suggestion of CNP to approval of the next Shareholders’ Meeting. Assurances and one at the suggestion of Sofi na. The Board also includes four independent members who are appointed jointly The independence status of certain directors was the subject by shareholders who are signatories of the Agreement, at the of a 2009 review by the Nominations and Compensation suggestion of the Chairman of the Board of Directors, after Committee. The Committee confi rmed the independence of consulting with the other directors. Messrs. Bazire, d’Este, Pepy and Suleiman. The Committee also

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examined the independent status of the directors appointed Finally, the Board renewed the annual maximum amount at the suggestion of the signatory shareholders of the June 5 authorized to the Chief Executive Offi cer with regard to surety, Shareholders’ Agreement, other than those appointed at the approvals and guarantees, and approved several projects proposal of GDF SUEZ. It was noted that some of these directors, involving guarantees of amounts greater than the Chief who were appointed at the suggestion of shareholders holding Executive Offi cer’s authorization threshold of €100 million. signifi cantly less than 10% of the Company’s share capital, Lastly, on several occasions it updated the work performed by had no relations with the Company, its group or management its committees. that might compromise their independence to exercise their Within the context of the work carried out by the Board judgment, other than that of the Agreement. It was noted that of Directors to improve the composition, functioning and although the Agreement provided for prior collaboration in organization of the Board of Directors and its relations with voting, it did not contain an explicit commitment on blocked committees, a self-assessment questionnaire was sent to the votes. The Committee, while keeping its independence criteria directors on November 17, 2009. The answers provided by the unchanged, concluded that it would continue its analysis of this directors to this questionnaire were the topic of a presentation issue in 2010. to the Nominations and Compensation Committee on January 27, 2010. The directors declared themselves satisfi ed, 1.3 Conditions for the preparation and organization of the tasks performed by the Board of Directors overall, by the functioning of the Board and its committees and the Special Committees during this fi rst year of the Company’s listing on the stock exchange, and by the governance as a listed company. They 1.3.1 Functioning and tasks of the Board of Directors sought to continue and consolidate the work of the committees, The Board of Directors operates under a set of internal by improving coordination between the committees and the regulations adopted at the Board meeting of July 23, 2008. The Board, and by increasing, as needed, the length or frequency of internal regulation may be consulted online at the Company’s certain committee meetings. They emphasized the diffi culty of website (www.suez-environnement.com). Moreover, the main ensuring the function, according to active collegiality, of a Board aspects of the internal regulations concerning the Board of of Directors comprising 18 members, but noted that certain Directors’ operations are described in section 21.2.2.1 of the current actions should allow for enhanced collegiality. Reference Document. 1.3.2 Special committees The Board meets as often as the interests of the Group require. The Board of Directors is assisted by four committees: the Audit In 2009, the Board met eight times, with an attendance rate and Financial Statements Committee, the Nominations and of 86%. Mr. Angel Simòn abstained on several occasions Compensation Committee, the Strategic Committee and the from participating in meetings of the Board of Directors, due Ethics and Sustainable Development Committee. specifi cally to the discussions that were held in 2009 on the taking of a controlling interest in Agbar, a company listed on AUDIT AND FINANCIAL STATEMENTS COMMITTEE: the Spanish market. The average attendance rate excluding Mr. The Audit and Financial Statements Committee consists of fi ve Angel Simòn would have been 91%. members, three of whom are independent, one is appointed from among the directors nominated by GDF SUEZ and one is The main issues discussed related to the Company’s results appointed from among the shareholders who are signatories of (examination of the annual, half-year and quarterly results), the Agreement. the Group’s fi nancing situation (debt, banking counterparties, available cash, EMTN Program), the plan to acquire control of all The composition of the Committee is as follows: Mr. Ezra of Agbar’s water and environmental activities, and development Suleiman, Chairman, Mr. Gérard Lamarche, Mr. Olivier Pirotte, projects such as the plan to respond to the call for bids from Monsieur Guillaume Pepy and Mr. Nicolas Bazire; Messrs. Ezra the State of Victoria, Australia, for a desalination plant, and the Suleiman, Guillaume Pepy and Nicolas Bazire are independent plan to respond to the call for bids from the Syndicat des Eaux directors. d’Ile de France (SEDIF) to delegate management of the drinking The Audit and Financial Statements Committee assists the water production and distribution service in Ile de France. Board of Directors in ensuring the accuracy and fairness of the The Board of Directors also considered a bonus share allocation SUEZ ENVIRONNEMENT COMPANY statutory and consolidated program for all personnel, which was approved in June 2009, fi nancial statements and the quality of the internal control and an initial program to allocate stock options and bonus procedures and information provided to shareholders and shares to managers, which was approved in December 2009. fi nancial markets. The Committee outlines all opinions and recommendations in the areas described below to the Board of Directors.

A

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The Board of Directors specifi cally entrusts the Committee with the As regards the internal audit of the Company, the Committee: following assignments, consistent with the assignments defi ned ● evaluates the effi ciency and quality of the Group’s internal for the Audit Committee by the Decree of December 8, 2008. audit systems and procedures; As regards fi nancial statements, the Committee: ● in collaboration with those responsible for the internal ● examines in advance and gives its opinion on the draft audit, examines the audit schedules and action plans in the annual, half-yearly, and, where applicable, quarterly fi nancial internal audit area, the conclusions drawn from them and statements before these are submitted to the Board of the recommendations arrived at and their follow-up, all Directors; without the presence of members of general management, if necessary; ● assesses the relevance and applicability of the accounting rules and principles used in drawing up the parent company ● is informed by general management, or by any other and consolidated fi nancial statements and prevents any means, of any complaints from third parties or any internal potential breach of those rules; information critical of the Company’s accounting documents or internal control procedures, as well as the procedures put ● requests details of any change in the scope of consolidation in place for this purpose and the remedies for such claims or and obtains all necessary explanations, if any; criticisms; and ● meets with the Statutory Auditors, general management, ● entrusts any assignment it deems necessary to the internal fi nance management, internal auditors, and any other audit team. member of management whenever it deems necessary; these hearings may take place, if applicable, without the As regards risks, the Committee: presence of members of general management; ● obtains regular updates on the Group’s fi nancial and cash ● examines, before publication, the draft annual or interim fl ow positions and on the Group’s main commitments and fi nancial statements, the activity and income report, and any risks; and fi nancial statements (including forecast fi nancial statements) ● examines the procedures in place for assessing and drawn up for the purpose of specifi c major transactions, as managing those risks. well as important fi nancial press releases before they are issued; The Audit and Financial Statements Committee met eight times, with an attendance rate of 87.50%. ● sees to the quality of procedures that enable compliance with stock exchange regulations; and The main topics addressed by the Committee were as follows: examination of the fi nancial statements as of December 31, ● is informed annually of the fi nancial strategy and conditions 2008, the half-yearly statements as of June 30, 2009 and the attached to the Group’s main fi nancial transactions. quarterly statements, the fi nancing and fi nancial debt situation, As regards the external audit of the Company, the Committee: and progress on the Compass cost optimization program.

● examines questions relating to the appointment, renewal, or The Committee also examined the 2008 annual report relating dismissal of the Company’s Statutory Auditors and the level to the internal audit, and approved the internal audit plans of fees to be set in carrying out their legally prescribed audit for 2009 and 2010. assignments; The Committee analyzed and monitored the progress of the ● oversees the rules of using the Statutory Auditors for tasks internal control plans defi ned with the Group’s major entities. other than the auditing of fi nancial statements and, more The Committee analyzed the risk mapping prepared by generally, ensures compliance with the principles that management and measures taken to manage the risks that guarantee the independence of the Statutory Auditors; were identifi ed. The Committee regularly updates major cases ● pre-approves any assignment entrusted to the Statutory of litigation underway. Auditors outside the audit; The Committee also approved in advance the tasks assigned to ● carries out an annual examination, alongside the Statutory the Statutory Auditors outside their audit responsibilities. Auditors, of the levels of audit fees paid by the Company The Statutory Auditors took part in meetings of the Audit and and the Group to entities from the network to which Financial Statements Committee. the Statutory Auditors belong, their audit schedule, the conclusions reached by the latter, their recommendations, NOMINATIONS AND COMPENSATION COMMITTEE and the follow-up of these recommendations; and The Nominations and Compensation Committee consists of ● arbitrates, where necessary, disagreements that may arise three members, two of whom are appointed from among the between the Statutory Auditors and general management in independent directors and one from among directors representing the context of these tasks. the shareholders who are signatories of the Agreement.

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The composition of the Committee is as follows: Mr. Lorenz STRATEGIC COMMITTEE d’Este, Chairman, Mr. Ezra Suleiman and Mr. Amaury de Sèze; The Strategic Committee consists of eight members, two of Messrs. d’Este and Suleiman are independent directors. whom are appointed from among the independent directors, three from among the directors nominated by GDF SUEZ and The Nominations and Compensation Committee is assigned the three from among the directors representing shareholders who following tasks by the Board of Directors: are signatories of the Agreement. ● regularly review the principles and criteria for the The composition of the Strategic Committee is as follows: independence of the directors; Messrs. Gérard Mestrallet, Chairman, Nicolas Bazire, Gilles ● examine all applications for appointments to a seat on the Benoist, Alain Chaigneau, Guillaume Pepy, Olivier Pirotte, Harold Board of Directors or as an observer, where applicable, and Boël, and Gérard Lamarche; Messrs. Guillaume Pepy and Nicolas form an opinion and/or make a recommendation on those Bazire are independent directors. applications to the Board of Directors; The Strategic Committee gives its opinion and makes ● prepare, as and when necessary, recommendations for recommendations to the Board of Directors regarding: the successor to the Chief Executive Offi cer and, where ● applicable, to the Chairman of the Board of Directors; and the strategic objectives set by the Board of Directors or suggested by the Chief Executive Offi cer; and ● set annual targets for the Chief Executive Offi cer, which ● will subsequently serve as a benchmark for appraising his all projects for external and internal growth, divestments, performance and determining that part of his compensation strategic agreements, alliances, or partnerships submitted to that is linked to performance. the Board of Directors.

The Committee is consulted on appointments to positions on Upon presentation of a report by the Chief Executive Offi cer, the the Board of Directors, as well as on any compensation issues Committee carries out a strategy review once a year which it involving these appointees. During changes affecting members submits, as and when needed, to the Board of Directors. of the Management Committee, the Chief Executive Offi ce In 2009, the Strategic Committee met twice, with an attendance consults the Committee Chairman prior to any decision, and rate of 87.50%, and examined the Company’s global strategy, even prior to engaging in the replacement process and the its research and innovation policy, as well as various strategic consultation of candidates. development projects, specifi cally the project to acquire control The Nominations and Compensation Committee is also all of Agbar’s water and environmental activities responsible for: ETHICS AND SUSTAINABLE DEVELOPMENT COMMITTEE: ● making recommendations to the Board of Directors This committee consists of three members, two of whom are on compensation, retirement and employee benefi t appointed from among the independent directors and one arrangements, benefi ts in kind, and other cash entitlements, from among the directors representing shareholders who are including, from time to time, the allocation of stock subscription signatories of the Agreement. or purchase options of the Company, as well as the allocation of bonus shares for the Chairman, Chief Executive Offi cer, The Committee is composed as follows: Mr. Guillaume Pepy, Executive Vice Presidents and any other members of the Chairman, Mr. Gérald Arbola and Mr. Lorenz d’Este; Messrs. Board of Directors who are also employees; and Guillaume Pepy and Lorenz d’Este are independent directors.

● making recommendations to the Board of Directors on the The Ethics and Sustainable Development Committee oversees compensation of Board Members and observers, if applicable. compliance with the individual and collective values on which the Group bases its actions, and the rules of conduct to which In 2009, the Nominations and Compensations Committee met all employees must adhere. seven times with an attendance rate of 90.5%. These values include the Group’s special responsibility for The main issues addressed by the Committee were the safeguarding and improving the environment and sustainable compensation of the Chief Executive Offi cer (compensation, development. The Group ensures that the necessary procedures retirement plan, compensation for loss of offi ce, unemployment are in place for: coverage, and mutual and health insurance), the compensation of the twenty principal directors, resolutions relative to stock ● updating the charters in force within the Group and ensuring options, the allocation of bonus shares, directors’ fees, the their circulation and application; independent status of directors, organizational changes ● ensuring that foreign subsidiaries implement their own code presented by the Chief Executive Offi cer, the evaluation of the adapted to the domestic legal and regulatory framework of Board of Directors and issues of governance, in accordance the country where they carry out their business; with the delegation assigned to it by the Board of Directors, the global bonus share allocation plans, and the stock option and ● carrying out training programs intended to accompany the bonus share plans. circulation of the Group’s charters; and A

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● obtaining from the various Group companies information on 1.7 Factors likely to have an impact in the event the solutions they have selected for issues presented to their of a tender offer own Committee. Factors likely to have an impact in the event of a tender offer, In 2009, the Committee met three times, with an attendance as listed in Article L. 225-100-3 of the French Commercial Code, rate of 100%. are set forth in sections 18.1, 18.3 and 21 of the 2009 Reference Document. The main topics addressed by the Committee were the Annual Report on Ethics relating to ethical procedures and actions, ethical warning measures, the Group health and safety 2 INTERNAL CONTROL PROCEDURES IMPLEMENTED BY THE COMPANY policy, internal procedures (ethical charter, and Sponsorship and Marketing), and sustainable development issues (2008 2.1 Group objectives and standards in the area assessment, internal control over environmental matters, of internal control environmental “risk” insurance).

Each meeting of these various committees was the subject of 2.1.1 Objectives a report to the Board of Directors and, as applicable, a decision The aim of the internal control procedures implemented within or recommendation in the areas of expertise of the Board SUEZ ENVIRONNEMENT is to provide reasonable assurance in of Directors. terms of meeting the following objectives:

● compliance with applicable laws and regulations; 1.4 Principles and rules agreed by the Board of Directors for determining compensation ● reliability of accounting and fi nancial information. and benefi ts of any kind awarded to the Generally speaking, internal control contributes to the corporate offi cers safeguarding of assets and optimization of their operations. Like This point is dealt with in detail in section 15 of the Reference any control system, it can only provide reasonable assurance Document. that the risks of error or fraud are completely under control or have been eliminated. We note that on October 28, 2008, the Board of Directors indicated its desire to comply in all points with the AFEP- 2.1.2 Standards MEDEF recommendation on the principles and rules applied to calculate compensation and benefi ts of any kind awarded to the In order to strengthen existing internal control, Company’s corporate offi cers. SUEZ ENVIRONNEMENT has rolled out a Group internal control program since the end of 2004, within the general framework of 1.5 Corporate governance code the criteria defi ned by GDF SUEZ. That program was developed according to the “COSO” model promoted by the Committee The Company follows the recommendations for corporate of Sponsoring Organizations of the Treadway Commission and governance defi ned by the French Association of Private complies with the principles described within the reference Companies (AFEP) and the Movement for the Companies of framework supplemented by the application guide published by France (MEDEF) in the AFEP-MEDEF corporate governance code the French Financial Market Authority (AMF). of December 2008.

These recommendations are followed to the extent that their 2.2 Monitoring of operations and internal control principles are compatible with the organization, scale, means 2.2.1 Monitoring of operations and shareholder structure of the Company as well as the shareholder agreement of June 5, 2008. In terms of monitoring of operations, the Group’s organization is based upon the following principles, which form the general 1.6 Specifi c terms relating to shareholder control framework in force within SUEZ ENVIRONNEMENT:

participation in Shareholders’ Meetings ● the Board of Directors determines the Company’s strategic The terms for shareholder participation in Shareholders’ objectives and oversees their implementation, and has Meetings are set forth in the Company bylaws under Heading tasked the Audit and Financial Statements Committee with VI, Shareholders’ Meetings, Articles 20 to 23. (among other assignments) monitoring the internal control and risk management systems (See 2.2.2);

● the Chief Executive Offi cer implements the strategic objectives decided upon by the Board of Directors;

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● the mission of the Management Committee, an advisory and 2.2.2 Monitoring and assessment of internal control decision-making body that consists of the Chief Executive The Group’s internal control monitoring organization is based on Offi cer, three executive offi cers in charge of Water, Waste the following principles: and International activities, the Director of Human Resources, ● the Chief Financial Offi cer, the General Secretary and the the mission of the Audit and Financial Statements Committee Director of Communications, is to examine the Group’s (as provided for in the Board of Director’s Internal Regulation) principal decisions and guidelines; is to assess the effi ciency of the Group’s internal control systems and examine the procedures applied to assess and ● the mission of the Executive Committee, which consists manage the Group’s signifi cant risks (pursuant to the Order of the Management Committee and the Business Unit of December 8, 2008, the transposition into French law of managers, is to coordinate management actions; the 8th European Directive).

● the mission of the Operations Committee, chaired by a ● the internal control systems are implemented under the member of the Management Committee assisted by a responsibility of the SUEZ ENVIRONNEMENT Management representative of certain of the functional departments, Committee; that responsibility is rolled out to the Business is to evaluate major development or divestment plans for Unit managers and the management teams of the operating commitment decision and to analyze the performance of subsidiaries. The Chief Executive Offi cers and Chief Finance specifi c projects in progress; Offi cers of the main operating subsidiaries confi rm, via an annual letter of affi rmation, their responsibility for ● the Treasury Committee, chaired by the Chief Financial Offi cer, is the management body for fi nancial risks; implementing an effi cient internal control system within their organization. ● the Group is organized around three main sectors (Water ● Europe, Waste Europe and International); these are in turn the internal control system is implemented in a manner divided into nine Business Units to which the Group’s consistent with the risks identifi ed in the Group’s activities operating subsidiaries are linked. through a risk-mapping process managed by the Group’s Chief Risk Offi cer. The Business Unit managers and the management teams ● of the operating subsidiaries are responsible, within their the functional departments defi ne their own internal control area of responsibility, for conducting business within the procedures, referenced in the Management Book circulated framework of the strategic objectives set by the Board of within each of the entities controlled by the Group. Directors and the Management Committee. ● the Internal Control Department, which is attached to the Business Unit operations and performance are monitored at Finance Department, manages the Group’s internal control monthly business reviews, in which a representative of the program; its mission is to analyze and improve the internal Management Committee, the Business Unit managers and control system, in collaboration with the Group’s main the functional departments involved all take part. subsidiaries and functional departments. Its actions are supported by a network of internal control correspondents ● the functional departments assist the Management and managers in charge of key processes identifi ed within Committee with controlling and managing operations and the main subsidiaries controlled by the Group and trained to act in support of the Business Units according to principles the Group’s internal control principles and methods. and procedures applicable within the entire Group. Within the framework of the Group’s internal control The functional departments include the Human Resources program, a matrix of the main processes has been drawn Department, the Finance Department, the General up, specifi cally covering the general control environment, Secretary (which includes the Legal Department, the corporate governance, legal and regulatory compliance, Internal Audit Department, the Investments and Risk setting and monitoring of objectives, managing commitments, Department, the Projects Department and the Information assessing and managing risks, producing and communicating Systems Department), the Communications Department, accounting and fi nancial information, managing information the Operations Research and Environment Department, systems, managing legal affairs, fi nancial management, the Strategy Department, the International Development tax management, external communications and managing Department and the France Development Department. operating processes: sales management, purchases management, asset management and contract management. The principles for the conduct and the actions of Group managers and employees are circulated in the form of internal codes For each process, the standard risks and control objectives drafted in coordination with GDF SUEZ. These are mainly: the considered necessary for maintaining an effi cient internal Ethics Charter, the guideline for handling confi dential information, control system have been identifi ed. Internal control the code of conduct for fi nance offi cers, the ethics guide for procedures are generally specifi c to the business and commercial relationships and the environmental charter. organization of each of the entities. A

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The Group’s internal control program is based on dedicated management processes within the different subsidiaries. A communication and training tools, including an intranet risk mapping process for the entire Group has been in place system which enables: for several years. Risks are identifi ed, classifi ed by category (strategic, fi nancial, operational), assessed (according to ● the circulation of the standard control objectives, signifi cance and frequency), and quantifi ed when possible. The ● the description, updating and annual self-assessment method for handling them is then analyzed, and fed into action of control activities by the process owners for each key plans at different levels of the company. This process includes process identifi ed within the main subsidiaries. steps to select signifi cant individual risks and, if applicable, aggregate homogeneous risks; specifi cally, it enables an ● internal audit annual summary of the Group’s major risks to be drawn up. The mission of the Internal Audit Department, which is This summary is validated by the Management Committee and attached to the General Secretary, is specifi cally to ensure presented to the Audit and Financial Statements Committee. that the Group has an effi cient internal control system and For 2009, the Audit Committee was also informed of the Group’s manages its risks properly. To that end, when preparing its exposure to risks connected to the fi nancial and economic crisis. annual audit plan, it specifi cally consults the Group’s Internal The subsidiaries maintain responsibility for implementing the Control Department and the Chief Risk Offi cer. The audit most appropriate risk management policy for their particular plan is then validated by the Management Committee, and activities. However, certain cross-divisional risks are directly presented for approval to the Audit and Financial Statements managed by the functional departments involved: Committee. ● within the General Secretary: In developing an opinion on the reliability of the internal control system, the Internal Audit Department performs ● the Legal Department analyzes and manages the Group’s audit missions aimed at evaluating the design and operating legal risks; this monitoring is based on periodic reporting effectiveness of internal control procedures within the Group, from the network of lawyers in the subsidiaries and in particularly by testing key control activities identifi ed in each SUEZ ENVIRONNEMENT, of the main subsidiaries. It makes recommendations upon ● the Investments and Risks Department takes part in completion of each mission, monitors implementation, and the analysis of the main projects of the Group and its reports regularly to the Management Committee and Audit subsidiaries (investments, acquisitions, disposals, etc.) and Financial Statements Committee. The Internal Audit jointly with the Planning and Control Department and the Department comprises several teams of auditors, including Legal Department, a central team based at SUEZ ENVIRONNEMENT, which intervenes across the Group’s entire scope of consolidation. ● the Information Systems Department analyzes and manages risks relating to information systems in order to ● external audit guarantee availability, completeness, and confi dentiality Assessment and analysis of internal controls within of information, the Group are performed in close coordination with ● the Insurance Department, in conjunction with the SUEZ ENVIRONNEMENT’s Statutory Auditors. The latter are subsidiaries, is the contracting authority for the Group’s informed, among other matters, of the results of the internal insurance programs for industrial and environmental audit tests. damage, business interruptions, and liability (third-party, 2.3 Implementation of internal control objectives professional, etc.). Specifi cally, it monitors risks of fi re and machinery breakdown, by implementing an annual 2.3.1 Assessment and management of risks prevention and protection program for the Group’s key sites; The Group has adopted an integrated corporate risk management ● within the Finance Department: policy which aims to provide a complete overview of the risk portfolio through the use of methods and tools common to all ● the Treasury and Financial Operations Department subsidiaries and functional departments. analyzes, jointly with the subsidiaries, the Group’s main fi nancial risks (rates, currencies, commodities, liquidity Coordination of this integrated approach is the responsibility of and banking counterparties), and implements measures the Chief Risk Offi cer, reporting to the General Secretary. He is for controlling those risks, supported by a network of Risk Offi cers, who are responsible for seamlessly and consistently rolling out risk assessment and

356 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 APPENDIX Report of the Chairman of the Board of Directors prepared pursuant to Article L. 225-37 of the French Commercial Code

● the Planning and Control Department performs a critical ● the General Secretary, acting as the Group’s ethics offi cer, is analysis of the actual and forecast fi nancial performance responsible for seeing to compliance with the Ethics Program, of the subsidiaries via monthly monitoring of operating which aims to prevent or detect any behaviors contrary to and fi nancial indicators. The Department prepares the the Group’s ethical rules. The SUEZ ENVIRONNEMENT Charter Group’s short-term and medium-term fi nancial forecasts of Ethics has been updated and circulated (after approval and participates in the analysis of the development by the Board of Directors and the Ethics and Sustainable projects of the Group and its subsidiaries, Development Committee) within the Group, accompanied by its practical guide. The Group’s ethics offi cer relies on ● the mission of the Tax Department is to identify, analyze a network of ethics offi cers appointed within each of the and manage the Group’s tax risks; major subsidiaries; these ethics offi cers are responsible for ● the Operations Research and Environment Department ensuring the roll-out and effectiveness of the Ethics Program studies and monitors environmental risks and coordinates within their subsidiary and for implementing internal and the actions needed to improve control of those risks and external investigation procedures for any issue brought compliance with environmental requirements; it studies to their attention which may potentially be in breach of operating risks linked to the Group’s production systems and the Group’s Ethics rules. Each year, the ethics offi cers and assists subsidiaries in solving operating problems at their chief executive offi cers of the main subsidiaries send a sites; it draws up and circulates best practices as well as an letter of compliance and a report on their activities to the operating benchmark; it fi nds solutions for a certain number Group General Secretary within the framework of the Ethics of emerging risks by developing appropriate research Program. The Group General Secretary accounts for the programs; activities of the Ethics Program to the Ethics and Sustainable Development Committee. ● the Department of Human Resources analyzes the main labor risks and needs in terms of skills and develops action The General Secretary has put in place and circulated plans to recruit local talent and develop skills. procedures within the Group aimed at complying with its obligations on inside information and parties in possession Within the Human Resources Department, the Health and of such information; Safety Department monitors and ensures the prevention of occupational illnesses and accidents related to the Group’s ● the Finance Department ensures that SUEZ ENVIRONNEMENT businesses. The crisis management process is entrusted is compliant in accounting, fi nancial and tax terms. It carries de facto to the Health and Safety Department; this process out regulatory fi nancial reporting duties; extends beyond covering events of an accidental nature ● the Human Resources Department ensures that the labor to take into account all events which may trigger a crisis; legislation and regulations in force are respected and it ensures that alert and crisis management procedures carries out regulatory labor reporting duties. It implements are put in place at the level of the subsidiaries and of SUEZ ENVIRONNEMENT’s policies in terms of labor policies, SUEZ ENVIRONNEMENT, in the aim of fostering a culture of particularly those relating to health and safety; prevention at all levels, which will, additionally, increase the quality and continuity of operations; ● the Department of Operations Research and Environment sees that SUEZ ENVIRONNEMENT is compliant on ● the Communications Department analyzes and manages environmental issues. risks to image and reputation, and prepares and implements appropriate crisis communication plans, in collaboration 2.3.3 Internal control procedures relating with the subsidiaries. The best practices charter of the to the preparation, treatment and circulation SUEZ ENVIRONNEMENT communications network reminds of accounting and fi nancial information employees of the confi dential nature of the information held (I) ACCOUNTING STANDARDS AND PROCEDURES by some of their colleagues and to take into account the new obligations for circulating information. The main procedures implemented for drawing up the statutory and consolidated fi nancial statements are based on:

2.3.2 Compliance with laws and regulations ● the GDF SUEZ accounting policies manual issued by the Compliance with laws and regulations is the responsibility of Center for Expertise in Accounting Standards [Centre the Business Units managers, the management of the operating d’Expertise Normes Comptables] (CENC), applied within subsidiaries and the functional departments in their respective SUEZ ENVIRONNEMENT and accessible via intranet to all areas of competence. For example, certain cross-divisional of the Group’s fi nance professionals. It is updated regularly compliance objectives are managed by the functional teams based on changes in IFRS standards; and concerned:

A

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 357 A APPENDIX Report of the Chairman of the Board of Directors prepared pursuant to Article L. 225-37 of the French Commercial Code

● the SUEZ ENVIRONNEMENT closing instructions, adapted (IV) SETTING OBJECTIVES AND STEERING from the GDF SUEZ instructions and circulated before every Within the Finance Department, the Planning and Control phase of the consolidation process by the Consolidation Department steers the process for preparing fi nancial forecasts and Accounting Department. These instructions cover the and budget instruction notes intended for each Business Unit, closing assumptions (exchange rates, discount rates and specifi cally the macro-economic assumptions to be applied and tax rates), processes involving specifi c issues (e.g., pensions, the fi nancial and non-fi nancial indicators to be measured the impairment tests and off-balance sheet items), the scope following fi scal year through the various forecast reviews. of consolidation, the timetable for submitting information, The Planning and Control Department manages the Business items relating to closing that require particular attention, Review process. The aim of these meetings, which are held changes in the chart of accounts and signifi cant new monthly during the year, is to set objectives and fi nancial standards introduced. forecasts, analyze fi nancial and business performance, and (II) PREPARATION OF ACCOUNTING AND FINANCIAL monitor the Business Units’ risk management. INFORMATION The consolidated Group budget is presented to the Audit and Responsibilities for preparing accounting and fi nancial Financial Statements Committee and then to the Board of information are assigned at every organizational level of the Directors for approval. Group. They include setting up and maintaining effi cient internal control systems. The Chief Executive Offi cer of SUEZ ENVIRONNEMENT sends each Business Unit a budget letter outlining its annual Within the Finance Department: quantitative and qualitative objectives. ● the Consolidation and Accounting Department steers the During the year, the fi nancial forecasts of the Business Units and Group fi nancial statements production process, which the Group are updated twice a year and more if necessary. includes producing and controlling the statutory and consolidated fi nancial statements of SUEZ ENVIRONNEMENT The Planning and Control Department produces monthly as well as producing forecast reports and monthly management reports based on the Group’s consolidated consolidated fi nancial reports. This work is carried out with monthly fi nancial reports, including an analysis of the the input of the accounting and management control teams business and signifi cant operating and fi nancial events for each of each of the consolidated subsidiaries. Each party involved Business Unit. performs checks to enable the circulation, assimilation and correct application of Group accounting standards (V) FINANCIAL COMMUNICATION and procedures in their area of responsibility. Those a) Preparation and approval of the annual report responsibilities are confi rmed by the Chief Executive Offi cers Within the Finance Department, the Consolidation and and Chief Finance Offi cers of each of the consolidated Accounting Department is in charge of preparing the Reference subsidiaries via an annual letter of affi rmation. Document fi led with the AMF and, jointly with the General The Consolidation and Accounting Department is responsible Secretary, heads a dedicated steering committee whose for relations with the AMF accounting department. mission is:

● to coordinate the process for submitting and validating the ● the Planning and Control Department is responsible for analyzing the consolidated fi nancial statements, forecast information appearing in the Reference Document, by all reports and monthly consolidated fi nancial reports, as well functional departments involved;

as for producing the Medium-Term Plan. ● to ensure that regulations and the AMF recommendations on fi nancial communication are applied. (III) MANAGEMENT OF ACCOUNTING AND FINANCIAL INFORMATION SYSTEMS b) Preparation and approval of press releases The Group and its subsidiaries use a single, standardized The Communications Department and the Financial software consolidation application managed by GDF SUEZ, Communication Department within the Finance Department are which allows for securing and standardizing the preparation responsible for communicating all information likely to have an process for forecast reports, monthly reports and account impact on the SUEZ ENVIRONNEMENT share price. closings. Since the Group was listed on the stock exchange, the The information systems which contribute to the preparation Communication Department and the Financial Communication of accounting and fi nancial information for each of the Department have implemented procedures aimed at ensuring Group’s subsidiaries are managed by the latter and are their the reliability of the regulatory information communicated responsibility. outside the Group.

358 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 APPENDIX Report of the Chairman of the Board of Directors prepared pursuant to Article L. 225-37 of the French Commercial Code

2.4 Development areas 2010 ● progressive integration into the Group internal control program of the newly acquired companies; SUEZ ENVIRONNEMENT’s internal control system is evolving and is subject to adaptation according to changes in the environment. ● as well as smaller-scale entities according to a specifi c New internal control procedures were implemented during fi scal approach targeting the main risks. year 2008 in the context of the Group’s Initial Public Offering. The analysis of the internal control system introduced in 2009 Improvements to the internal control system will continue to be within the Agbar group, in applying the SUEZ ENVIRONNEMENT made in coming fi scal years, specifi cally through: Group methodology, will be continued and further defi ned in 2010. ● defi nition of a specifi c internal control plan prepared with the Gérard Mestrallet management of each key subsidiary, the progress of which is reported to the Audit Committee; Chairman of the Board of Directors

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SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 359 A APPENDIX Report of the Chairman of the Board of Directors prepared pursuant to Article L. 225-37 of the French Commercial Code

360 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 B APPENDIX

STATUTORY AUDITORS’ REPORT, PREPARED IN ACCORDANCE WITH ARTICLE L. 225-235 OF THE FRENCH COMMERCIAL CODE (CODE DE COMMERCE), ON THE REPORT PREPARED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS OF SUEZ ENVIRONNEMENT COMPANY

To the Shareholders, Our role is:

In our capacity as Statutory Auditors of SUEZ ENVIRONNEMENT ● to report on any matters as to the information contained in COMPANY and in accordance with Article L. 225-235 of the the chairman’s report in respect of the internal control and French commercial code (Code de Commerce), we hereby risk management procedures relating to the preparation and report on the report prepared by the chairman of the Board of processing of the accounting and fi nancial information, and Directors of your company in accordance with Article L. 225-37 ● to confi rm that the report also includes the other information of the French commercial code (Code de Commerce) for the required by Article L. 225-37 of the French commercial code year ended December 31, 2009. (Code de Commerce). It should be noted that our role is not It is the chairman’s responsibility to prepare and submit for the to verify the fairness of this other information. board of directors’ approval a report on internal control and risk We conducted our work in accordance with professional management procedures implemented by the company and to standards applicable in France. provide the other information required by Article L. 225-37 of the French commercial code (Code de Commerce) relating to matters such as corporate governance.

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SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 361 B APPENDIX Report of the Chairman of the Board of Directors prepared pursuant to Article L. 225-37 of the French Commercial Code

INFORMATION ON INTERNAL CONTROL AND RISK MANAGEMENT PROCEDURES RELATING TO THE PREPARATION AND PROCESSING OF ACCOUNTING AND FINANCIAL INFORMATION

Professional standards require that we perform the necessary ● determining if any material weaknesses in the internal control procedures to assess the fairness of the information provided procedures relating to the preparation and processing of in the chairman’s report in respect of the internal control and the accounting and fi nancial information that we would risk management procedures relating to the preparation and have identifi ed in the context of our assignment have been processing of the accounting and fi nancial information. appropriately disclosed in the chairman’s report.

These procedures consist mainly in: On the basis of our work, we have no matters to report on the information relating to the company’s internal control ● obtaining an understanding of the internal control and risk and risk management procedures relating to the preparation management procedures relating to the preparation and and processing of the accounting and fi nancial information processing of the accounting and fi nancial information on contained in the report prepared by the chairman of the board which the information presented in the chairman’s report is of directors in accordance with Article L. 225-37 of the French based and of the existing documentation; commercial code (Code de Commerce). ● obtaining an understanding of the work involved in the preparation of this information and of the existing documentation;

OTHER INFORMATION

We confi rm 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 Neuilly-sur-Seine, March 19, 2010

The statutory auditors

French original signed by

MAZARS ERNST & YOUNG et Autres Thierry Blanchetier Philippe Castagnac Charles-Emmanuel Chosson Pascal Macioce

362 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 G GLOSSARY

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-Transfer) Contract under which a private company is responsible for project fi nancing and for the design, Contract construction and operation of the site for a fi xed period, after which the property is transferred to the co-contractor. DB (Design-Build) Contract A building contract for a system for delivering the fi nished 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, Certifi cate based on ISO 14001 certifi cation and an environmental declaration certifi ed by European Management and Audit System inspectors, approved by the European Commission and published.

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 calorifi c 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. ISO 14001 International standard aimed at verifying a company’s procedural organization and methods of the organizational units, as well as the effi cient set-up of an environmental policy and related environmental objectives. Leachate Water that percolates through the waste stored in landfi lls 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 fi lter or sieve that retains particles of different sizes depending on its type and the diameter of its holes. 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. PFI - Private Finance Initiative Financing mechanism which appeared in Great Britain in 1992, whereby a private company fi nances 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 Partnership Financing mechanism by which the local authority calls upon private service providers to fi nance and manage installations that provide or contribute to the provision of a public service.

G

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 363 G GLOSSARY

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 fi xed period. The company is paid directly by customers and fi nances 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 so-called “relevant” activities. In fact, certain activities within the scope of fi nancial consolidation may not be considered relevant for environmental reporting purposes due to their core activity. The fi nancial holding company, and commercial, broking, trading, marketing and sales activities are not considered relevant. 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 effl uent. Sludge consists of water and dry material. Properties of sludge vary widely depending on their origin. They depend on the nature of the effl uent and the type of treatment applied. Soil amendment/conditioning Process aimed at improving the physical properties of soil by incorporating material which, without 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 specifi cally to reclassify the interests held by SUEZ 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. 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 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.); and offi ce and computer equipment, or gray products (computers, printers, scanners, telephones, etc.).

364 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 N NOTE ON METHODOLOGY

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 collection The number of residents served by the group’s collection activities corresponds to the number activities of residents 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 consolidated subsidiaries. Employees of companies consolidated by proportional integration or the equity method (for example, Agbar employees or 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 integration, 100% of its employee data is included, regardless of the percentage of share capital held.

N

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 365 N NOTE ON METHODOLOGY

366 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 CT CONCORDANCE TABLE

For each category set forth in Appendix III of European Commission Regulation number 809/2004 of April 29, 2004, this concordance table shows the numbers of the section or sections which contain information on each category in this document.

CT

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 367 CT CONCORDANCE TABLE Report of the Chairman of the Board of Directors prepared pursuant to Article L. 225-37 of the French Commercial Code

Mentions relating to the management report Reference Document Articles L. 225-100 Clause 2, L. 225-102, L. 225-102-1, L. 232-1-II, R. 225-102, L. 225-100-3 Section

I – ACTIVITY OF THE COMPANY AND ITS SUBSIDIARIES AND/OR CONTROLLED COMPANIES, AND OUTLOOK Status and business of the Company, and if applicable, its subsidiaries and controlled companies by business Section 6 division during the previous fi scal year, and of the entity formed by the companies in the scope of consolidation. Income from the Company’s business, subsidiaries and controlled companies by business division (summary Sections 9, 20.1 analysis of accounting documents, at least for the most signifi cant items): Revenues, operating costs, income and 20.3 from continuing operations, net income). Objective and exhaustive analysis of business development, the Company’s income and fi nancial situation and, Sections 6, 9, 10 and specifi cally, its debt position in terms of business volume. 20.1 Analysis of key non-fi nancial performance indicators relating to the Company’s specifi c business and particularly Sections 6, 17 information relating to environmental or employee issues. Description of the main risks and uncertainties faced by the Company, as well as indications of the use of Sections 4.1.3 fi nancial instruments when such information is relevant to changes in assets and liabilities, the fi nancial situation and 4.2.4 and parties entitled to a share in Company profi ts. Price, credit, liquidity, cash fl ow risk, risk of exchange rate fl uctuations, risks incurred in the event of exchange Sections 4.1.3 rate fl uctuations and lower exchange rates, indication of the motives which led to involvement in the market. and 4.2.4 Research and development activities. Section 11 Foreseeable development of the Company’s situation, the status of all companies making up the scope Section 6.3.4 of consolidation, and future outlook. Important events occurring between the closing date of the fi scal year and publication of the report Sections 20.1, note 27 and between the closing date and the date the consolidated fi nancial statements were drawn up. and 20.7 II – PRESENTATION AND INCLUSION OF THE FINANCIAL STATEMENTS IN THE MANAGEMENT REPORT

Changes made to the presentation of the annual fi nancial statements or the valuation methods selected. Section 20.3 Amount of non-tax deductible expenses. Global amount of sumptuary expenditures and the corresponding tax (Article 223 of the French General Tax Code). Reintegration into taxable income of certain general expenses by global number or expense category. Income for the fi scal year and proposed allocation of that income. Sections 20.3, 20.5 Reminder of total dividends paid during the last three fi scal years, including tax credit. and 26 III – SUBSIDIARIES AND INTERESTS

Status of interests acquired in companies whose headquarters are on French soil and accounting for over 1/20, Section 20.3 1/10, 1/5, 1/3, 1/2 or 2/3 of the share capital or voting rights of those companies. Status of controlling interests in companies whose headquarters are on the French Republic territory. Sections 9.1.2, 9.3.1, 9.3.2, 5.2.2, and 20.1 note 2.1 IV – INFORMATION REGARDING SHARE CAPITAL, RECIPROCAL SHAREHOLDINGS AND TREASURY SHARES

Name of the companies controlled and proportion of the share capital the latter hold in the Company Sections 18.1 and 21 (treasury shares). 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 Section 18 of the share capital or voting rights at shareholders’ meetings. V – EMPLOYEE PROFIT-SHARING IN THE SHARE CAPITAL AT THE LAST DAY OF THE FISCAL YEAR (ARTICLE L. 225-102) Percentage of the Company’s share capital held by employees. Sections 17.3, 17.4 Status of employee profi t-sharing in the share capital of the Company at the last day of the fi scal year. and 18.1 Mention of the proportion of share capital represented by shares held by employees of the Company and employees of related companies. Agreements between shareholders which may result in a reduction in the transfer of shares and the exercise Sections 17.3, 18.1 of voting rights. and 18.3

368 SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 CONCORDANCE TABLE Report of the Chairman of the Board of Directors prepared pursuant to Article L. 225-37 of the French Commercial Code

Mentions relating to the management report Reference Document Articles L. 225-100 Clause 2, L. 225-102, L. 225-102-1, L. 232-1-II, R. 225-102, L. 225-100-3 Section

VI – STOCK OPTIONS AND BONUS SHARE ALLOCATIONS

Stock options and bonus share allocations. Sections 15.1.1, 17.3, 17.4, and 20.1 note 23 VII – GENERAL MANAGEMENT INFORMATION – CORPORATE OFFICERS

List of positions and titles held in all companies by each of the corporate offi cers. Section 14 Choices regarding the role of executive management. Section 14.1.2 Status of corporate offi cers: appointment, renewal, notifi cation of replacement. Section 16

Compensation: Section 15 Description of fi xed, variable and exceptional rights making up compensation packages and benefi ts, as well as the criteria by which they are calculated or the circumstances under which they were established. Detail of commitments of all kinds made by the company to its corporate offi cers and particularly any compensation item, indemnities or benefi ts payable or likely to be payable upon taking, leaving or changing such positions or subsequent to that event. Further details on the mechanisms for determining such obligations as well as their amounts if included in the agreements. VIII – MISCELLANEOUS INFORMATION

Summary of resolutions submitted at the annual shareholders’ meeting. Section 26 Injunctions or fi nancial sanctions for anti-competitive practices issued by the anti-trust commission. Section 20.6.1 Information on plants classifi ed as high-risk. Sections 4.1.2, 4.2.2, - policy for preventing risk of technological accidents implemented by the Company, 4.2.6 - ability of the Company to cover third-party liability to property and people resulting from the operation of its plants, - means implemented by the Company to ensure the management of victim indemnifi cation in the event of a technology accident in which the Company’s responsibility is engaged. Total attendance fees received by members of the board of directors over the past fi scal year. Section 15.1.3. IX – COMPANY AND ENVIRONMENTAL INFORMATION

Social information. Section 17 Environmental information. Section 6.8 X – STATUTORY AUDITORS

Mandates awarded to the Statutory Auditors. Section 2 XI – DOCUMENTS TO BE ATTACHED AS AN APPENDIX TO THE MANAGEMENT REPORT AND/OR TO BE CIRCULATED TO SHAREHOLDERS Income statement for the last fi ve fi scal years. Section 20.3 and note 4.5 Report of the Board of Directors. Section 26 Report of the Chairman of the Board of Directors. Appendix A Report of the Statutory Auditors on the annual fi nancial statements including the latter’s declaration Section 20.4 on the exactness and fairness of the information contained in the management report on the compensation of corporate offi cers. Inventory of marketable securities held in portfolios at the end of the fi scal year. Section 20.3, Note 4.6 Summary table: Section 21 - on the status of the delegation of authority and currently valid powers granted to the Board of Directors or Executive Committee by the Shareholders’ Meeting in terms of capital increases; - on the use made of that delegation in the past fi scal year. Report on share purchase transactions pre-approved by the Shareholders’ Meeting in the context of a buyback Section 21.1 program. CT

SUEZ ENVIRONNEMENT - REFERENCE DOCUMENT 2009 369

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SUEZ ENVIRONNEMENT COMPANY 1, RUE D’ASTORG 75008 PARIS, FRANCE TEL. +33 (0)1 58 18 50 56 FAX +33 (0)1 58 18 51 68 WWW.SUEZ-ENVIRONNEMENT.COM